U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB
================================================================================
         |X|      ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
                  EXCHANGE ACT OF 1934
                  For the fiscal year ended: DECEMBER 31, 1998

         | |      TRANSITION  REPORT  PURSUANT  TO SECTION 13 OR 15(d) OF THE
                  SECURITIES  EXCHANGE  ACT OF 1934
                  For  transition  period from ______ to ______
================================================================================
                       Commission File Number: 33-17922-C

                              IMMUNE RESPONSE, INC.
                 ----------------------------------------------
                 (Name of small business issuer in its charter)

COLORADO                                                              84-0950197
-------------------------------                                       ----------
(State or other jurisdiction of                                 (I.R.S. Employer
incorporation or organization)                            Identification Number)

              7315 EAST PEAKVIEW AVENUE, ENGLEWOOD, COLORADO 80111
              ----------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                    Issuer's telephone number: (303) 796-8139

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

      Securities registered under Section 12 (g) of the Exchange Act: NONE
--------------------------------------------------------------------------------
Check  whether the Issuer (1) filed all reports  required to be filed by Section
13 or 15 (d) of the  Exchange  during  the past 12 months  (or for such  shorter
period that the Registrant was required to file such reports) , and (2) has been
subject to such filing requirements for the past 90 Days: Yes /X/ No / /

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-K in this form, and no disclosure will 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 l0-KSB or any  amendment to
this Form 1Q-KSB: /X/

Issuer's revenues for its most recent fiscal year:   $421

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant  is  not  applicable  as  the  Registrant's   securities  which  were
previously  listed in the National  Quotation Bureau "Pink Sheets" stopped being
listed as of January 1992 and therefore  the  Registrant is unable to provide an
aggregate market value for its securities.

The issuer had 2,949,700 shares of common stock outstanding as of May 17, 1999.

Documents incorporated by reference: NONE

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

                              IMMUNE RESPONSE, INC.
                                   FORM 10-KSB

This Report may contain  certain  "forward-looking"  statements  as such term is
defined  in the  Private  Securities  Litigation  Reform  Act of  1995 or by the
Securities and Exchange Commission in its rules, regulations and releases, which
represent the  Registrant's  expectations or beliefs,  including but not limited
to, statements  concerning the Registrant's  operations,  economic  performance,
financial condition, growth and acquisition strategies,  investments, and future
operational  plans. For this purpose,  any statements  contained herein that are
not  statements  of  historical  fact  may  be  deemed  to  be   forward-looking
statements.  Without  limiting the  generality of the  foregoing,  words such as
"may", "will", "expect", "believe", "anticipate", "intent", "could", "estimate",
"might", or "continue" or the negative or other variations thereof or comparable
terminology  are  intended  to  identify   forward-looking   statements.   These
statements by their nature involve substantial risks and uncertainties,  certain
of which are beyond the  Registrant's  control,  and actual  results  may differ
materially  depending on a variety of important factors,  including  uncertainty
related to the Registrant's  operations,  mergers or acquisitions,  governmental
regulation, the value of the Registrant's assets and any other factors discussed
in  this  and  other  Registrant   filings  with  the  Securities  and  Exchange
Commission.

                                     PART I
                                     ------


ITEM 1. DESCRIPTION OF BUSINESS

(a) Business Development

         (1) Immune Response,  Inc. was incorporated in the State of Colorado on
May 24, 1984 as Med-Mark Technologies, Inc. for the purpose of marketing medical
products.  When the Registrant was unable to obtain suitable products, it ceased
operations and remained  inactive from July 1985 until November 10, 1986 when it
changed its name to Immune Response, Inc. From November 1986 until May 1991, the
Registrant was a biomedical  firm engaged in three levels of activity - clinical
testing, clinical research and basic research.

         While the Registrant  established and operated the Clinical Testing and
Research Division until May 1991, the Board of Directors,  following an analysis
of the results of the Division's operations, determined that the operations were
not commercially  viable and that it was highly unlikely the Division would ever
be profitable.  Accordingly,  on May 10, 1991,  the  Registrant  entered into an
Asset Purchase Agreement with Infinity Laboratories,  Inc. ("Infinity") pursuant
to which it sold to  Infinity  all of the  Registrant's  assets  relating to its
laboratory services. This sale was approved by the Registrant's  stockholders at
a Special Meeting of Shareholders held on June 3, 1991. The Registrant suspended
its biomedical  activities  following this  transaction and has been essentially
inactive   since  such  time   except  for   evaluating   alternative   business
opportunities.

         On January 8, 1996,  the  Registrant  announced that it had executed an
agreement to merge with Ocurest  Laboratories,  Inc.  ("Ocurest")  of Palm Beach
Gardens, Florida. Concurrent with executing the merger agreement, the Registrant
made a secured loan to Ocurest in the amount of $125,000.  On February 23, 1996,

                                      -1-
<PAGE>

the Registrant announced the mutual termination of its merger agreement. As part
of the mutual termination agreement, Ocurest repaid the aforementioned loan with
interest.  In addition,  Ocurest  agreed to pay the Registrant a fee of $10,000,
with  interest,  upon the  successful  completion of its planned  initial public
offering which fee was paid during the fourth quarter of 1996.

         On  February  10,  1997  at an  Annual  Meeting  of  Stockholders,  the
Registrant's  shareholders  approved a one for one  hundred (1 for 100)  reverse
stock split  whereby  every one hundred  shares of the  Registrant's  $.000l par
value common stock were  converted to one share of $.000l par value common stock
and approved a reduction in the number of authorized  shares from 950,000,000 to
25,000,000  effective March 3, 1997. As a result, the Registrant's issued shares
were decreased from  312,470,000 to 3,124,700 and outstanding  shares  decreased
from 294,970,000 to 2,949,700.

         (2)(3) During the year ended  December 31, 1998, the Registrant has not
been involved in any bankruptcy,  receivership or similar  proceedings;  has not
undergone material reclassification,  merger or consolidation;  has not acquired
or disposed of any  material  amount of assets  otherwise  than in the  ordinary
course of business;  and has not  experienced any material change in its mode of
conducting business.

(b) Business of Issuer

         (1)(2)(3)  The  Registrant  is currently an inactive  company  which is
evaluating  alternative business  opportunities.  The Registrant's only non-cash
asset is certain shares of the common stock of IntraNet Solutions, Inc. IntraNet
provides  integrated  solutions for the management and  distribution of business
critical  information  contained in  documents  using  proprietary  and standard
internet  technologies through web based internet software,  electronic document
management and on-demand printing. Following the merger and a subsequent 4 for 1
reverse-split  declared by IntraNet on October 15,  1996,  the  Registrant  owns
1,489 shares of IntraNet common stock.

         In each of the past several years, the Registrant has evaluated several
business   opportunities  which  included  preliminary   investigation  and  due
diligence.  Following  the  initial  review it was  determined  that none of the
opportunities  fit the Registrant's  criteria for a viable merger or acquisition
partner.   While  the  Registrant  is  not  limiting  its  search  for  business
opportunities  to one  industry  group or sector,  the  Registrant's  management
believes  that a viable  merger or  acquisition  candidate  should  provide  the
possibility  for  short  and  long  term  stockholder  value  by  providing  the
opportunity  for  a  liquid  market  for  the  Registrant's  common  stock.  The
Registrant is presently seeking a candidate with a product or service, which may
be in the  development  stage,  that is  proprietary  and  which  possesses  the
possibility  for both a short-term  liquid  market for the  Registrant's  common
stock as well as long-term maximization of stockholder value.

         (4) As the Registrant is currently  inactive,  the Registrant  does not
directly compete with any company, individual or organization.

         (5) The Registrant does not require raw materials.

                                      -2-
<PAGE>

         (6) The Registrant's  business is not dependent upon a single customer,
or a few  customers,  the loss of any one or more of which would have a material
adverse effect on the Registrant.

         (7) The Registrant holds no patents or trademarks,  and has no interest
in any franchises, concessions, royalty agreements or labor contracts.

         (8)(9)  The  Registrant  currently  is not  subject  to any  government
regulations which affect its business.

         (10)  During  the last two years the  Registrant  spent no  amounts  on
Registrant-sponsored or customer-sponsored research and development activities.

         (11) The  Registrant  is not  subject  to any  federal,  state or local
provisions  which have been  enacted  or adopted  regulating  the  discharge  of
materials into the  environment  or otherwise  relating to the protection of the
environment.

         (12) The  Registrant's  executive  officers are the Company's  only two
employees  and serve on an as needed  basis.  The  Registrant  currently  has no
full-time employees.


ITEM 2. DESCRIPTION OF PROPERTY

(a) Description of Principal Plants and other Property

         The  Registrant's  principal  office is located  at 7315 East  Peakview
Avenue,  Englewood,  Colorado 80111.  The Registrant is provided space on a rent
free basis by a significant stockholder.

(b) Investment Policies

         The Registrant  currently  does not invest in real estate,  real estate
mortgages,  or  securities  of  persons  who  primarily  engage  in real  estate
activities.

(c) Description of Real Estate and Operating Data

         The  Registrant  does not own real  property,  the book  value of which
amounts to ten percent or more of the total assets of the Registrant.


ITEM 3. LEGAL PROCEEDINGS

         The  Registrant   currently  is  not  a  party  to  any  pending  legal
proceeding.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         The  Registrant  did not submit any  matters to a vote of its  security
holders during the fourth quarter ended December 31, 1998.

                                      -3-
<PAGE>

                                     PART II
                                     -------


ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

(a) Market Information

         The Registrant's  Units,  Common Stock and Warrants have been traded as
Units  on  the  over-the-counter   market  since  July,  1988.  Trading  in  the
Registrant's  securities was reported by the National  Quotation  Services "Pink
Sheets" until January 1992 when the Registrant's securities ceased being listed.
As a result,  there has been no known trading in the Registrant's  Units, Common
Stock or Warrants for the years 1997 or 1998.

(b) Holders

         The number of record holders of the Registrant's Common Stock as of May
17, 1999, was  approximately  600 according to the Registrant's  transfer agent.
This figure excludes an  indeterminate  number of stockholders  whose shares are
held in "street" or "nominee" name.

(c) Dividends

         Holders of shares of Common  Stock of the  Registrant  are  entitled to
dividends  when and if declared by the  Registrant's  Board of Directors  out of
funds legally available  therefor.  The Registrant has not paid any dividends on
its Common Stock and currently  intends to retain  earnings,  if any, to finance
the development and expansion of its business. Future dividend policy is subject
to the  discretion  of the Board of  Directors  and will depend upon a number of
factors,  including but not limited to future earnings, capital requirements and
the financial condition of the Registrant.


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS

         This Report may contain  certain  "forward-looking"  statements as such
term is defined in the Private  Securities  Litigation  Reform Act of 1995 or by
the Securities and Exchange  Commission in its rules,  regulations and releases,
which  represent the  Registrant's  expectations  or beliefs,  including but not
limited  to,  statements  concerning  the  Registrant's   operations,   economic
performance,   financial   condition,   growth   and   acquisition   strategies,
investments,  and future  operational  plans.  For this purpose,  any statements
contained  herein that are not statements of historical fact may be deemed to be
forward-looking  statements.  Without  limiting the generality of the foregoing,
words  such as  "may",  "will",  "expect",  "believe",  "anticipate",  "intent",
"could", "estimate",  "might", or "continue" or the negative or other variations
thereof or  comparable  terminology  are  intended to  identify  forward-looking
statements.  These  statements  by their nature  involve  substantial  risks and
uncertainties,  certain of which are beyond the Registrant's control, and actual
results  may differ  materially  depending  on a variety of  important  factors,
including  uncertainty  related  to  the  Registrant's  operations,  mergers  or
acquisitions,  governmental regulation, the value of the Registrant's assets and
any other  factors  discussed  in this and  other  Registrant  filings  with the
Securities and Exchange Commission.

                                       -4-
<PAGE>

(a) Plan of Operation

         Although the Registrant has virtually no operating  overhead costs as a
result of its current inactive  status,  certain funds are necessary for payment
of legal and accounting costs related to keeping the Registrant current with its
regulatory  filings  as well  as  certain  minimal  general  and  administrative
expenses.  In  previous  years,  the  Registrant  relied on loans  from  related
entities in order to meet its operating expenses as described more fully in Part
III. Item 12, Certain Relationships and Related Transactions.

         With the sales of a majority of the Registrant's investment in IntraNet
in previous  years,  as well as the 1,489 shares still  available for sale,  the
Registrant has the capital necessary to fund its limited business activities for
the near future as it continues the search for alternate business opportunities.
While the  Registrant  currently  does not  expect  the level and  amount of its
expenses will change  significantly  during 1999 as compared to 1998, should the
Registrant identify and pursue a business opportunity, the Registrant can expect
increased  expenses  resulting from legal and other costs.  Such a change in the
Registrant's  business status as a result of identifying a business  opportunity
which the  Registrant's  Board of Directors  feels would be  beneficial  for the
Registrant and its stockholders may require  securing  additional  financing the
amount and source of which cannot presently be determined.

         The   Registrant  is  not   currently   engaged  in  any  research  and
development,  does  not  anticipate  the  purchase  or  sale  of  any  plant  or
significant  equipment,  nor does it  anticipate  any  changes  in the number of
employees,  which would have any material  effect on the financial  condition of
the Registrant.

(b) Management's Discussion and Analysis of Financial Condition
    and Results of Operations

         Total revenue for the year ended December 31, 1998 was $421 as compared
to $3,181 for 1997 a decrease of 87%.  All of the revenue for 1997 was  produced
by interest  income as was a majority  during 1998.  This income was earned from
short-term  investments  on the  Registrant's  cash  position  which  income  is
expected to decrease as the  Registrant's  cash  position  decreases.  While the
Registrant still holds 1,489 shares of IntraNet, no sales were made during 1998.
Total expenses for 1998 were $9,068 as compared to $32,872 during 1997. Expenses
decreased  72%  in  1998  over  1997  as  a  result  of  decreased  general  and
administrative  expenses  which are comprised  almost  exclusively  of legal and
accounting  expense.  The Registrant also booked no interest expense during 1998
as a result of the Registrant  extinguishing  all notes payable during 1997. The
Registrant recorded a net loss for the year ended December 31, 1998 of $8,647 as
compared to $29,691 for the year ended December 31, 1997.

         The gain on the sale of the IntraNet shares in previous years accounted
for significant  increases in the  Registrant's  profitability  for those years.
While the Registrant has an additional 1,489 IntraNet shares remaining for sale,
once these shares are sold, the Registrant will have no significant assets other
than its cash  balances and  currently  has no other means from which to produce
future  income.  As a result,  the  revenues  and net loss  produced  in 1998 is
expected  to  continue  in 1999 in the  absence  of  sales  of the  Registrant's
IntraNet shares or a change in the Registrant's inactive business status.

                                      -5-
<PAGE>

         The  Company's  net worth at December 31, 1998 was a deficit of $11,691
compared  to a deficit  of $2,206  at the year  ended  December  31,  1997.  The
Registrant's net worth will continue to decrease in the absence of a significant
level of revenues which will offset its minimal operating expenses.

         The financial  results  incurred during 1998 are indicative of what can
be expected for 1999 should the Registrant  continue as an inactive company.  In
the absence of the Registrant identifying and implementing  alternative business
opportunities, the Registrant will most likely incur further losses.

         As of December  31, 1998,  the  Registrant  had made no other  material
commitments for capital expenditures.


ITEM 7. FINANCIAL STATEMENTS

         The financial statements are listed under Item 13.


ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
        AND FINANCIAL DISCLOSURE

         There have been no changes in or disagreements  with accountants during
the most recent two fiscal years.



                                    PART III
                                    --------

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
        COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT OF THE REGISTRANT

(a) IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS
                                                                  Length
                                                                  of
Name                   Age       Offices held                     Service
----                   ---       ------------                     -------
Joseph W. Hovorka      69        President, Treasurer,            Since 1987
                                 Principal Executive,
                                 Financial and Accounting
                                 Officer and Director

Thomas B. Olson        33        Secretary and Director           Since 1990

         The  directors of the  Registrant  are elected to hold office until the
next annual meeting of the shareholders  and until their  respective  successors
have been elected and  qualified.  Officers of the Registrant are elected by the
Board of Directors and hold office until their  successors  are duly elected and
qualified.

         No  arrangement  exists between any of the above officers and directors
pursuant  to which  any one of those  persons  was  elected  to such  office  or
position.

                                      -6-
<PAGE>

         JOSEPH W. HOVORKA. Mr. Hovorka has served as the Registrant's President
since  February  1990 and has been a Vice  President,  Treasurer  and a director
since September 1987. Mr. Hovorka has been President,  Chief Executive  Officer,
Treasurer  and a director  of  Proconnextions,  Inc.  since  August 1990 and the
Treasurer  and a  director  of Sports  Card  Connection,  Inc.,  a  wholly-owned
subsidiary of ProConnextions, Inc., since November 1990 ProConnextions, Inc. and
Sports Card Connection,  Inc. are privately-held  companies which were formed to
buy, trade and sell sports memorabilia. From 1989 to 1993, Mr. Hovorka served as
President,  Chief  Operating  Officer,  and  Treasurer  and  was a  director  of
William's Controls, Inc., a publicly-held manufacturer of pneumatic,  electronic
and  hydraulic  controls  for trucks,  buses,  mining,  construction  and refuse
collection vehicles.  Mr. Hovorka also served as President and was a director of
Enercorp,  Inc., a  publicly-held  investment  company from July 1986 until June
1993.  From  September  1990 until June 1993 Mr. Hovorka served as President and
was a director of Ajay Sports, Inc., a publicly-traded manufacturer of golf bags
and accessories. Mr. Hovorka had been engaged in commercial and business banking
for over thirty years. Mr. Hovorka devotes only such time as is necessary to the
affairs of the Registrant.

         THOMAS B. OLSON.  Mr. Olson has been a Director since 1988 and has been
Secretary of the Registrant since 1994. Since 1988, Mr. Olson has been Secretary
of Equitex,  Inc., a publicly held holding company which is a stockholder of the
Registrant.  Mr. Olson has attended  Arizona State University and the University
of Colorado at Denver.  Mr. Olson  devotes only such time as is necessary to the
affairs of the Registrant.

(b) Significant Employees

         None

(c) Family Relationships

         Not applicable

(d) Involvement in Certain Legal Proceedings

         Not applicable


Section 16(a) Beneficial Ownership Reporting Compliance

         Section 16 (a) of the  Securities  Exchange Act of 1934  ("Section 16")
requires the Registrant's officers,  directors and persons who own more than ten
percent of the Registrant's voting securities to file reports of their ownership
and changes in such ownership with the Securities and Exchange  Commission  (the
"Commission"). Commission regulations also require that such persons provide the
Registrant with copies of all Section 16 reports they file.

         Based  solely  upon  its  review  of  such  reports   received  by  the
Registrant,  or written  representations from certain persons that they were not
required to file any reports under  Section 16, the  Registrant  believes  that,
during 1996, its officers and directors have complied with all Section 16 filing
requirements.

                                      -7-
<PAGE>

ITEM 10. EXECUTIVE COMPENSATION

(a) General

         While Mr.  Hovorka  is to  receive a salary of  $18,000  per year,  Mr.
Hovorka has agreed to suspend  payment or accrual of such salary during 1998, as
well as each of the previous five years,  until such time as the Registrant is a
viable  operating  company as may be  determined  by the  Registrant's  Board of
Directors.  Mr. Olson currently  receives no salary in his capacity as Secretary
of the  Registrant.  Both Mr. Hovorka and Mr. Olson are eligible to receive $400
for each Board of Directors meeting they attend,  however,  Messrs.  Hovorka and
Olson  suspended  payment and  accrual of such fees  during  1998 until  further
notice (See also Item 10. (f) Compensation of Directors).

(b) Summary Compensation Table

         The following table sets forth information regarding  compensation paid
to the officers of the Registrant during the years ended December 31, 1998, 1997
and 1996.

                           SUMMARY COMPENSATION TABLE

                             Annual Compensation ($$)
                             ------------------------
(a)                         (b)                (c)
Name & Principal                             Salary
Position                    Year               ($)
---------                   ----             -------
Joseph W. Hovorka           1998             18,000 (1)
President, Treasurer
Principal Executive
Officer and Accounting
Officer

Joseph W. Hovorka           1997             18,000 (1)

Joseph W. Hovorka           1996             18,000 (1)
----------
(1) Although Mr. Hovorka is to receive a salary of $18,000 per year, Mr. Hovorka
has agreed to suspend  payment or accrual of such salary as noted in Item 10 (a)
above.

(c) Option/SAR Grants Table

         The Registrant  made no grants of stock options or SARs during the year
ended December 31, 1998.

(d) Option/SAR Exercises and Fiscal Year-End Option/SAR Value Table

         The Registrant had no stock options or SARs outstanding during the year
ended December 31, 1998.

(e) Long Term Incentive Plans -- Awards in Last Fiscal Year

                                      -8-
<PAGE>

         The Registrant has no long term incentive  plans,  and consequently had
made no such awards.

(f) Compensation of Directors

         (1) Standard Arrangements

         Each member of the Registrant's Board of Directors, Messrs. Hovorka and
Olson,  are to receive $400 for each Board of Directors  meeting attended either
in person or by telephone.  For the year ended December 1997,  Messrs.  Hovorka,
Olson and a previous  director each received  $1,600 for the four meetings held.
During 1998, Messrs.  Hovorka and Olson each received $800 for two meetings held
and agreed to suspend  payment  or  accrual  of any  future  fees until  further
notice.  Each member of the Board of Directors also receives  reimbursement  for
expenses incurred in attending the meetings.

         (2) Other Arrangements

         There  are no  other  arrangements  with  respect  to  compensation  of
directors other than those explained in Item 10. (f)(l) above.

(g) Employment  Contracts and  termination  of Employment and  Change-in-Control
Arrangements

         No employment contract or change-in-control  arrangements are currently
in effect for either of the Registrant's two executive officers.

(h) Report on Repricing of Options/SARs

         No options or SARs were repriced  during the fiscal year ended December
31, 1998.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The  following  table  contains  information  at May 17, 1999 as to the
beneficial  ownership of shares of the Registrant's  common stock by each person
who, to the knowledge of the Registrant at that date,  was the beneficial  owner
of five percent or more of the outstanding  shares of the class, each person who
is a director or executive  officer of the Registrant and all persons as a group
who  are  executive  officers  and  directors  of the  Registrant  and as to the
percentage  of  outstanding  shares so held by them at May 17,  1999.  All share
amounts  below  reflect the one for one hundred (1 for 100) reverse  stock split
approved by the Registrant's stockholders effective March 3, 1997.

                                      -9-
<PAGE>

Name and address                Amount and Nature of         Percent
of beneficial owner           Beneficial Ownership (1)       of Class
-------------------           ------------------------       --------
Joseph W. Hovorka                          -0-                  0.0%
7315 East Peakview Avenue
Englewood, Colorado 80111

Thomas B. Olson                       100,000 (2)               3.4%
7315 East Peakview Avenue
Englewood, Colorado 80111

Henry Fong                            477,500 (3)              16.2%
7315 East Peakview Avenue
Englewood, Colorado 80111

All officers and directors            100,000 (2)               3.4%
as a group (three persons)
--------
(1) The beneficial owners exercise sole voting and investment power.

(2) Includes  100,000  shares  owned by Equitex,  Inc. of which Mr. Olson is the
Secretary. Mr. Olson disclaims beneficial ownership of these securities.

(3) Includes  100,000  shares  owned by Equitex,  Inc. of which  Mr. Fong is the
President. Mr. Fong disclaims beneficial ownership of these securities.

(c) Changes in Control

         The  Registrant  does not know of any  arrangements,  the  operation of
which  may,  at a  subsequent  date,  result  in a  change  in  control  of  the
Registrant.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

(a) Transactions with Management and Others

         The  Registrant  currently  utilizes  approximately  150 square feet of
office  space  in  Greenwood  Executive  Park,  6400  South  Quebec,  Englewood,
Colorado,  from Equitex,  Inc., a stockholder of the Registrant,  on a rent free
month-to-month  basis.  The Registrant's  Secretary and Director,  Mr. Olson, is
also Secretary of Equitex, Inc.

         In years prior to 1996, Equitex, Inc., a significant stockholder of the
Registrant of which the Registrant's Secretary is also an officer, loaned to the
Registrant  a total of  $76,100.  These  loans were due on demand and carried an
interest rate of 10% per annum.  During 1997,  the entire  principal  balance of
these loans was repaid by the Registrant  leaving  $22,453 in interest due as of
December 31, 1998.

(b) Information Which May be Excluded

         Not applicable

(c) Parents of Registrant

         Not applicable

(d) Transactions with Promoters

         Not applicable


                                      -10-
<PAGE>

                                     PART IV
                                     -------

ITEM 13. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K

(a) The  following  documents  are  filed as a part of this  report  immediately
following the signature page.

    1. Financial Statements and Supplementary Data

    Report of Independent Certified Public Accountants.......................F-1
    Balance Sheet at December 31, 1998.......................................F-2
    Statements of Changes in Stockholders' Equity for the
      period from inception (May 14, 1984) to December 31, 1984
      and for the years ended December 31, 1985 through
      December 31, 1998......................................................F-3
    Statements of Operations for the years ended December 31, 1998
      and 1997 and the period from inception (May 14, 1984) to
      December 31, 1998.....................................................F-11
    Statements of Cash Flows for the years ended December 31, 1997
      and 1997 and the period from inception (May 14, 1984)
      to December 31, 1998..................................................F-12
    Notes to Financial Statements...........................................F-14

    2. Financial Statement Schedules

             Not applicable

    3. Exhibits

    3.1  Articles of  Incorporation  (1)
    3.2  Bylaws (1)
   21.1  Subsidiaries (1)
--------
(1)Incorporated by reference from the like numbered exhibits filed with the
   Registrant's Registration Statement on Form S-l8, No.33-17922-C

(b) Reports on Form 8-K

         No  Reports on Form 8-K were  filed  during the period  covered by this
report.

                                      -11-
<PAGE>

                                   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.


Date:    June 3, 1999
                                       IMMUNE RESPONSE, INC.
                                       (Registrant)





                                       By: /S/ JOSEPH W. HOVORKA
                                           -----------------------------------
                                           Joseph N. Hovorka, 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.


Date: June 3, 1999                         /S/ JOSEPH W. HOVORKA
                                           ----------------------------------
                                           Joseph W. Hovorka, President,
                                           Treasurer and Director
                                           (Principal Executive, Financial,
                                           and Accounting Officer)




Date: June 3, 1999                         /S/ THOMAS B. OLSON
                                           ----------------------------------
                                           Thomas B. Olson, Secretary
                                           and Director

<PAGE>
               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors
Immune Response, Inc.

We have  audited the  accompanying  balance  sheet of Immune  Response,  Inc. (a
development stage company) as of December 31, 1998 and the related statements of
operations,  changes in  stockholders'  equity  (deficit) and cash flows for the
years ended  December 31, 1998 and 1997 and for the period from  inception  (May
14,  1984)  to  December  31,  1998.   These   financial   statements   are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position of Immune  Response,  Inc. (a
development  stage  company)  at  December  31,  1998  and  the  results  of its
operations  and its cash flows for the years ended  December  31, 1998 and 1997,
and for the  period  from  inception  (May 14,  1984) to  December  31,  1998 in
conformity with generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will  continue as a going  concern.  As discussed in Note 8, the Company
has minimal capital  resources  presently  available to meet  obligations  which
normally  can be  expected  to be  incurred  by  similar  companies,  and has an
accumulated  deficit of  ($924,145)  at December 31, 1998.  These  factors raise
substantial  doubt about the Company's  ability to continue as a going  concern.
Management's  plans in regard to these matters are also described in Note 8. The
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.



                                       Davis & Co., CPAs, P.C.
                                       Certified Public Accountants
Englewood, Colorado
March 23, 1999

                                       F-1
<PAGE>

                              IMMUNE RESPONSE, INC.
                          (A Development Stage Company)
                                  Balance Sheet
                                December 31, 1998






ASSETS
Current assets
    Cash and cash equivalents ..................................      $   9,195

    Investment - available for sale securities
         (cost of $3,958) ......................................          7,259
                                                                      ---------


                                                                      $  16,454


LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
    Accounts payable - related entity ..........................      $   3,742
    Accounts payable - other ...................................          1,950

    Interest payable - related entity ..........................         22,453
                                                                      ---------
                                                                         28,145


Stockholders' equity (deficit)
    Common stock, $.0001 par value; 25,000,000
       shares authorized; 3,124,700 shares
       issued; 2,949,700 shares outstanding ....................            312

    Additional paid-in capital .................................        908,841

    Unrealized gain on available for sale securities ...........          3,301
    Deficit accumulated during the
       development stage .......................................       (924,145)
       Less:  treasury stock, at cost
       (175,000 shares) ........................................           --
                                                                      ---------
                                                                        (11,691)


                                                                      $  16,454
                                                                      =========

The accompanying notes are a part of this statement.

                                       F-2
<PAGE>

                              IMMUNE RESPONSE, INC.
                          (A Development Stage Company)
                      Statement of Changes in Stockholders'
                 Equity (Deficit) For the Period From Inception
                 (May 14, 1984) to December 31, 1984 and for the
             Years Ended December 31, 1985, 1986, 1987, 1988, 1989,
            1990, 1991, 1992, 1993, 1994, 1995, 1996, 1997 and 1998

<TABLE>
<CAPTION>
                                                                              ADDITIONAL
                                                      COMMON STOCK             PAID-IN
                                                  SHARES         AMOUNT        CAPITAL
                                               ------------   ------------   ------------
<S>                                            <C>            <C>            <C>
Shares of common stock issued to
    officers and directors during
    the formation of the Company
    in exchange for services valued
    at $.0001 per share ....................        900,000   $         90   $       --

Shares of common stock issued during
    the formation of the Company in
    exchange for cash of $.10 per
    share to unrelated individuals .........        140,000             14         13,986

Net loss for the period from inception
    (May 14, 1984) to Dec. 31, 1984
                                               ------------   ------------   ------------
Balance at December 31, 1984 ...............      1,040,000            104         13,986

Net loss for the year ended
    December 31, 1985
                                               ------------   ------------   ------------
Balance at December 31, 1985 ...............      1,040,000            104         13,986

Shares of common stock issued
    to unrelated individuals in
    December 1986 in exchange
    for cash of:
        $.05 per share .....................        140,000             14          6,986
        $.005 per share ....................         15,000              1             74

Net loss for the year ended
    December 31, 1986
                                               ------------   ------------   ------------
Balance at December 31, 1986 ...............      1,195,000            119         21,046

Shares of common stock issued
    to unrelated individuals in
    exchange for cash of:
        $.05 per share in:
           April 1987 ......................         20,000              2            998
           May 1987 ........................        100,000             10          4,990
           June 1987 .......................        100,000             10          4,990
        $.025 per share in:
           April 1987 ......................        100,000             10          2,490
</TABLE>

The accompanying notes are a part of this statement.

                                       F-3
<PAGE>

                              IMMUNE RESPONSE, INC.
                              (A Development Stage
                 Company) Statement of Changes in Stockholders'
                         Equity (Deficit) (Page 2 of 8)
                 For the Period From Inception (May 14, 1984) to
                    December 31, 1984 and for the Years Ended
                   December 31, 1985, 1986, 1987, 1988, 1989,
             1990, 1991, 1992, 1993, 1994, 1995, 1996, 1997 and 1998

<TABLE>
<CAPTION>
                                                                DEFICIT         TOTAL
                                                   UN-           ACCUMU.        STOCK-
                                                 REALIZED      DURING THE      HOLDERS'
                                                  GAINS       DEVELOPMENT       EQUITY
                                                 (LOSSES)         STAGE       (DEFICIT)
                                               ------------   ------------   ------------
<S>                                            <C>            <C>            <C>
Shares of common stock issued to
    officers and directors during
    the formation of the Company
    in exchange for services valued
    at $.0001 per share ....................   $              $              $         90

Shares of common stock issued during
    the formation of the Company in
    exchange for cash of $.10 per
    share to unrelated individuals .........                                       14,000

Net loss for the period from inception
    (May 14, 1984) to Dec. 31, 1984 ........                       (11,185)       (11,185)
                                               ------------   ------------   ------------
Balance at December 31, 1984 ...............                       (11,185)         2,905

Net loss for the year ended
    December 31, 1985 ......................                       (64,398)       (64,398)
                                               ------------   ------------   ------------
Balance at December 31, 1985 ...............                       (75,583)       (61,493)

Shares of common stock issued
    to unrelated individuals in
    December 1986 in exchange
    for cash of:
        $.05 per share .....................                                        7,000
        $.005 per share ....................                                           75

Net loss for the year ended
    December 31, 1986 ......................                       (17,557)       (17,557)
                                               ------------   ------------   ------------
Balance at December 31, 1986 ...............                       (93,140)       (71,975)

Shares of common stock issued
    to unrelated individuals
    in exchange for cash of:
        $.05 per share in:
           April 1987 ......................                                        1,000
           May 1987 ........................                                        5,000
           June 1987 .......................                                        5,000
        $.025 per share in:
           April 1987 ......................                                        2,500
</TABLE>

The accompanying notes are a part of this statement.

                                       F-4
<PAGE>

                              IMMUNE RESPONSE, INC.
                          (A Development Stage Company)
                      Statement of Changes in Stockholders'
                 Equity (Deficit) For the Period From Inception
                 (May 14, 1984) to December 31, 1984 and for the
             Years Ended December 31, 1985, 1986, 1987, 1988, 1989,
            1990, 1991, 1992, 1993, 1994, 1995, 1996, 1997 and 1998

<TABLE>
<CAPTION>
                                                                              ADDITIONAL
                                                      COMMON STOCK             PAID-IN
                                                  SHARES         AMOUNT        CAPITAL
                                               ------------   ------------   ------------
<S>                                            <C>            <C>            <C>
Shares of common stock issued
    in August 1987 in exchange
    for cash of $.05 per share to:
        Related parties ....................        275,000             28         13,722
        Others .............................        160,000             16          7,984

Shares of common stock issued in
    August 1987 to an officer
    and director in exchange
    for services valued at $.05
    per share ..............................        150,000             15   $      7,485

Net loss for the year ended
    December 31, 1987
                                               ------------   ------------   ------------
Balance at December 31, 1987 ...............      2,100,000            210         63,705

Shares of common stock issued in
    July 1988, pursuant to a public
    offering, for cash of $1 per
    share, net of costs of $199,761 ........        900,000             90        700,149

Shares of common stock issued to
    underwriter in July 1988,
    pursuant to public offering for
    cash of $.0001 per share ...............         28,800              3           --

Shares of common stock issued in
    October 1988, pursuant to
    exercise of Class B warrants,
    for cash of $2 per share ...............          3,000              1          5,999

Shares of common stock issued in
    October and November 1988,
    pursuant to exercise of Class A
    warrants, for cash of $1.50
    per share, net of costs of $100 ........         54,700              5         81,945

Net loss for the year ended
    December 31, 1988
                                               ------------   ------------   ------------
Balance at December 31, 1988 ...............      3,086,500            309        851,798
</TABLE>

The accompanying notes are a part of this statement.

                                       F-5
<PAGE>

                              IMMUNE RESPONSE, INC.
                              (A Development Stage
                 Company) Statement of Changes in Stockholders'
                         Equity (Deficit) (Page 2 of 8)
                 For the Period From Inception (May 14, 1984) to
                    December 31, 1984 and for the Years Ended
                   December 31, 1985, 1986, 1987, 1988, 1989,
             1990, 1991, 1992, 1993, 1994, 1995, 1996, 1997 and 1998

<TABLE>
<CAPTION>
                                                                DEFICIT         TOTAL
                                                   UN-           ACCUMU.        STOCK-
                                                 REALIZED      DURING THE      HOLDERS'
                                                  GAINS       DEVELOPMENT       EQUITY
                                                 (LOSSES)         STAGE       (DEFICIT)
                                               ------------   ------------   ------------
<S>                                            <C>            <C>            <C>
Shares of common stock issued
    in August 1987, in exchange
    for cash of $.05 per share to:
        Related parties ....................   $              $              $     13,750
        Others .............................                                        8,000

Shares of common stock issued
   in August 1987 to an officer
   and director in exchange for
   services valued at $.05 per share .......                                        7,500

Net loss for the year ended
    December 31, 1987 ......................                       (41,815)       (41,815)
                                               ------------   ------------   ------------
Balance at December 31, 1987 ...............                      (134,955)       (71,040)

Shares of common stock issued in
    July 1988, pursuant to a public
    offering, for cash of $1 per share,
    net of costs of $199,761 ...............                                      700,239

Shares of common stock issued to
    underwriter in July 1988,
    pursuant to public offering for
    cash of $.0001 per share ...............                                            3

Shares of common stock issued in
    October 1988, pursuant to
    exercise of Class B warrants,
    for cash of $2 per share ...............                                        6,000

Shares of common stock issued in
    October and November 1988, pursuant
    to exercise of Class A warrants,
    for cash of $1.50 per share, net
    of costs of $100 .......................                                       81,950

Net loss for the year ended
    December 31, 1988 ......................                      (102,626)      (102,626)
                                               ------------   ------------   ------------
Balance at December 31, 1988 ...............                      (237,581)       614,526
</TABLE>

The accompanying notes are a part of this statement.

                                       F-6
<PAGE>

                              IMMUNE RESPONSE, INC.
                          (A Development Stage Company)
                      Statement of Changes in Stockholders'
                 Equity (Deficit) For the Period From Inception
                 (May 14, 1984) to December 31, 1984 and for the
             Years Ended December 31, 1985, 1986, 1987, 1988, 1989,
            1990, 1991, 1992, 1993, 1994, 1995, 1996, 1997 and 1998

<TABLE>
<CAPTION>
                                                                              ADDITIONAL
                                                      COMMON STOCK             PAID-IN
                                                  SHARES         AMOUNT        CAPITAL
                                               ------------   ------------   ------------
<S>                                            <C>            <C>            <C>
Shares of common  stock  issued
    in January 1989,  pursuant to
    the  exercise of 10,300 "A"
    warrants at $1.50 per share,
    net of costs of $184 ...................         10,300              1         15,265

Shares of common stock issued
    January 1989, pursuant to the
    exercise of 27,900 "A" warrants
    at $1.50 per share, net of
    costs of $70 ...........................         27,900              3         41,777

Net loss for the year ended
    December 31, 1989
                                               ------------   ------------   ------------
Balance at December 31, 1989 ...............      3,124,700            312        908,841

Net loss for the year ended
    December 31, 1990
                                               ------------   ------------   ------------
Balance at December 31, 1990 ...............      3,124,700            312        908,841

Shares received from employee
    as part of June 1991 sale
    of laboratory assets ...................       (175,000)

Shares placed in treasury in
    June 1991 ..............................        175,000

Net loss for the year ended
    December 31, 1991
                                               ------------   ------------   ------------
Balance at December 31, 1991 ...............      3,124,700            312        908,841

Net loss for the year ended
    December 31, 1992
                                               ------------   ------------   ------------
Balance at December 31, 1992 ...............      3,124,700            312        908,841
</TABLE>

The accompanying notes are a part of this statement.

                                       F-7
<PAGE>

                              IMMUNE RESPONSE, INC.
                              (A Development Stage
                 Company) Statement of Changes in Stockholders'
                         Equity (Deficit) (Page 2 of 8)
                 For the Period From Inception (May 14, 1984) to
                    December 31, 1984 and for the Years Ended
                   December 31, 1985, 1986, 1987, 1988, 1989,
             1990, 1991, 1992, 1993, 1994, 1995, 1996, 1997 and 1998

<TABLE>
<CAPTION>
                                                                DEFICIT         TOTAL
                                                   UN-           ACCUMU.        STOCK-
                                                 REALIZED      DURING THE      HOLDERS'
                                                  GAINS       DEVELOPMENT       EQUITY
                                                 (LOSSES)         STAGE       (DEFICIT)
                                               ------------   ------------   ------------
<S>                                            <C>            <C>            <C>
Shares of common  stock  issued
    in January 1989, pursuant to
    the exercise of 10,300 "A"
    warrants at $1.50 per share,
    net of costs of $184 ...................   $              $                    15,266

Shares of common stock issued
    January 1989,  pursuant to the
    exercise of 27,900 "A" warrants
    at $1.50 per share, net of
    costs of $70 ...........................                                       41,780

Net loss for the year ended
    December 31, 1989 ......................                      (210,550)      (210,550)
                                               ------------   ------------   ------------
Balance at December 31, 1989 ...............                      (448,131)       461,022

Net loss for the year ended
    December 31, 1990 ......................                      (170,446)      (170,446)
                                               ------------   ------------   ------------
Balance at December 31, 1990 ...............                      (618,577)       290,576

Shares received from employee
    as part of June 1991 sale
    of laboratory assets

Shares placed in treasury in
    June 1991

Net loss for the year ended
    December 31, 1991 ......................                      (247,279)      (247,279)
                                               ------------   ------------   ------------
Balance at December 31, 1991 ...............                      (865,856)        43,297

Net loss for the year ended
    December 31, 1992 ......................                       (61,434)       (61,434)
                                               ------------   ------------   ------------
Balance at December 31, 1992 ...............                      (927,290)       (18,137)
</TABLE>

The accompanying notes are a part of this statement.

                                       F-8
<PAGE>

                              IMMUNE RESPONSE, INC.
                          (A Development Stage Company)
                      Statement of Changes in Stockholders'
                 Equity (Deficit) For the Period From Inception
                 (May 14, 1984) to December 31, 1984 and for the
             Years Ended December 31, 1985, 1986, 1987, 1988, 1989,
            1990, 1991, 1992, 1993, 1994, 1995, 1996, 1997 and 1998

<TABLE>
<CAPTION>
                                                                              ADDITIONAL
                                                      COMMON STOCK             PAID-IN
                                                  SHARES         AMOUNT        CAPITAL
                                               ------------   ------------   ------------
<S>                                            <C>            <C>            <C>
Net loss for the year ended
    December 31, 1993
                                               ------------   ------------   ------------
Balance at December 31, 1993 ...............      3,124,700   $        312   $    908,841

Net loss for the year ended
    December 31, 1994
                                               ------------   ------------   ------------
Balance at December 31, 1994 ...............      3,124,700            312        908,841

Unrealized gain on available for
    sale securities

Net income for the year ended
    December 31, 1995
                                               ------------   ------------   ------------
Balance at December 31, 1995 ...............      3,124,700            312        908,841

Unrealized gain on available
  for sale securities
Net income for the year ended
  December 31, 1996
                                               ------------   ------------   ------------
Balance at December 31, 1996 ...............      3,124,700            312        908,841

Unrealized gain (loss) on
    available for sale securities
Net loss for the year ended
    December 31, 1997

Balance at December 31, 1997 ...............      3,124,700            312        908,841

Unrealized gain (loss) on
    available for sale securities
Net loss for the year ended
    December 31, 1998

Balance at December 31, 1998 ...............      3,124,700   $        312   $    908,841
                                               ============   ============   ============
</TABLE>

The accompanying notes are a part of this statement.

                                       F-9
<PAGE>

                              IMMUNE RESPONSE, INC.
                              (A Development Stage
                 Company) Statement of Changes in Stockholders'
                         Equity (Deficit) (Page 2 of 8)
                 For the Period From Inception (May 14, 1984) to
                    December 31, 1984 and for the Years Ended
                   December 31, 1985, 1986, 1987, 1988, 1989,
             1990, 1991, 1992, 1993, 1994, 1995, 1996, 1997 and 1998

<TABLE>
<CAPTION>
                                                                DEFICIT         TOTAL
                                                   UN-           ACCUMU.        STOCK-
                                                 REALIZED      DURING THE      HOLDERS'
                                                  GAINS       DEVELOPMENT       EQUITY
                                                 (LOSSES)         STAGE       (DEFICIT)
                                               ------------   ------------   ------------
<S>                                            <C>            <C>            <C>
Net loss for the year ended
    December 31, 1993 ......................                       (40,873)       (40,873)
                                               ------------   ------------   ------------
Balance at December 31, 1993 ...............                      (968,163)       (59,010)

Net loss for the year ended
    December 31, 1994 ......................                       (95,355)       (95,355)
                                               ------------   ------------   ------------
Balance at December 31, 1994 ...............                    (1,063,518)      (154,365)

Unrealized gain on available for
    sale securities ........................         48,260                        48,260

Net income for the year ended
    December 31, 1995 ......................                       106,277        106,277
                                               ------------   ------------   ------------
Balance at December 31, 1995 ...............         48,260       (957,242)           171

Unrealized gain on available for
  sale securities ..........................        (44,028)                      (44,028)
Net income for the year ended
  December 31, 1996 ........................                        71,435         71,435
                                               ------------   ------------   ------------
Balance at December 31, 1996 ...............          4,232       (885,807)        27,578

Unrealized gain (loss) on
    available for sale securities ..........            (93)                          (93)
Net loss for the year ended
    December 31, 1997 ......................        (29,691)       (29,691)
                                               ------------   ------------   ------------

Balance at December 31, 1997 ...............          4,139       (915,498)        (2,206)

Unrealized gain (loss) on
    available for sale securities ..........           (838)                         (838)
Net loss for the year ended
    December 31, 1998 ......................                        (8,647)        (8,647)
                                               ------------   ------------   ------------

Balance at December 31, 1998 ...............   $      3,301   $   (924,145)  $    (11,691)
                                               ============   ============   ============
</TABLE>

The accompanying notes are a part of this statement.

                                      F-10
<PAGE>

                              IMMUNE RESPONSE, INC.
                          (A Development Stage Company)
                            Statements of Operations

<TABLE>
<CAPTION>
                                                                          FOR THE
                                                                          PERIOD
                                                                           FROM
                                                                         INCEPTION
                                                 FOR THE YEARS            (MAY 14,
                                              ENDED DECEMBER 31,          1984) TO
                                              1998           1997       DEC. 31, 1998
                                              ----           ----       -------------
<S>                                       <C>            <C>            <C>
Revenue
    Interest income ...................   $       408    $     3,181    $   125,677
    Laboratory test income ............          --             --           50,187
    Revenue from sale of marketing
        rights to related entity ......          --             --            7,004
    Miscellaneous income ..............            13           --           12,710
    Gain on sale of stock .............          --             --          192,189
    Debt forgiveness income ...........          --             --           35,147
                                          -----------    -----------    -----------
                                                  421          3,181        422,914
Expenses
    Write-off of deferred warrant
        registration costs ............          --             --           29,422
    Loss on sale of laboratory ........          --             --           74,710
    Realized loss on investment .......          --             --          178,668
    Laboratory supplies ...............          --             --           55,244
    Consulting fees to related entities          --             --           37,500
    Interest ..........................          --            1,079        138,306
    Abandoned license agreement costs .          --             --           50,000
    Research and development ..........          --             --           28,680
    Rent ..............................          --             --           79,232
    Services for stock ................          --             --            7,597
    Salary ............................          --             --          275,287
    Depreciation and amortization .....          --             --           34,848
    Bad debt expense ..................          --            9,619         17,971
    General and administrative ........         9,068         22,174        339,684
                                          -----------    -----------    -----------
                                                9,068         32,872      1,347,059
                                          -----------    -----------    -----------

        Net income (loss) .............   $    (8,647)   $   (29,691)   $  (924,145)
                                          ===========    ===========    ===========

        Net income (loss) per
          common share                    $       (--)   $     ( .01)   $      (.38)
                                          ===========    ===========    ===========

Weighted average number of
    common shares                           2,949,700      2,949,700      2,458,912
                                          ===========    ===========    ===========
</TABLE>

The accompanying notes are a part of this statement.

                                      F-11
<PAGE>

                              IMMUNE RESPONSE, INC.
                          (A Development Stage Company)
                            Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                          FOR THE
                                                                          PERIOD
                                                                           FROM
                                                                         INCEPTION
                                                 FOR THE YEARS            (MAY 14,
                                              ENDED DECEMBER 31,          1984) TO
                                              1998           1997       DEC. 31, 1998
                                              ----           ----       -------------
<S>                                       <C>            <C>            <C>
Cash flows from operating activities:
    Net income (loss) .................   $    (8,647)   $   (29,691)   $  (924,145)
    Adjustments to reconcile net income
        (loss) to net cash provided
        by operating activities:
    Depreciation ......................          --             --           34,848
    Abandoned license agreement costs .          --             --           50,000
    Services for stock ................          --             --            7,597
    Bad debt expense ..................          --            9,619         10,887
    Realized net gain on investments ..          --             --          (13,519)
    Write-off of deferred warrant
        registration costs ............          --             --           29,422
    Changes in assets and liabilities:
    (Increase) in notes
         receivable ...................          --             --         (287,102)
    (Increase) in interest
         receivable ...................          --           (1,268)          --
    Increase in accounts payable
        to related entity .............           515            284          3,742

    Increase (decrease) in accounts
         payable to directors .........          --             (400)          --
    Increase (decrease) accrued salary
         to officer ...................          --          (11,250)          --
    Increase (decrease) in interest
         payable to related entity ....          --          (21,821)        22,453
    Increase in accounts payable
         to others ....................         1,502            448          1,950
                                          -----------    -----------    -----------


    Net cash (used) by
         operating activities .........        (6,630)       (54,079)    (1,069,161)
                                          -----------    -----------    -----------

Cash flows from investing activities:
    Proceeds from sale of
         investment in MacGregor ......          --             --          298,070

    Purchase of certificate of deposit           --             --          (75,278)
    Redemption of certificates of deposit        --             --           75,278
    Capital expenditures ..............          --             --          (92,094)
    Disposal of laboratory assets .....          --             --           57,246
    Purchase of license agreement .....          --             --          (50,000)
    Acquisition of investment -
         related entity ...............          --             --           (7,000)
                                          -----------    -----------    -----------
    Net cash provided by
         investing activities .........          --             --          206,222
                                          -----------    -----------    -----------
</TABLE>

The accompanying notes are a part of this statement.                 (Continued)

                                      F-12
<PAGE>

                              IMMUNE RESPONSE, INC.
                          (A Development Stage Company)
                        Statements of Cash Flows (Page 2)

<TABLE>
<CAPTION>
                                                                          FOR THE
                                                                          PERIOD
                                                                           FROM
                                                                         INCEPTION
                                                 FOR THE YEARS            (MAY 14,
                                              ENDED DECEMBER 31,          1984) TO
                                              1998           1997       DEC. 31, 1998
                                              ----           ----       -------------
<S>                                       <C>            <C>            <C>
Cash flows from financing activities:
    Proceeds from issuance of note
      payable to bank .................   $      --      $      --      $    50,000
    Proceeds from issuance of notes
      payable to related entity
      and others ......................          --             --          144,964
    Payments to retire notes payable
      to bank .........................          --          (50,000)
    Payments to retire notes payable
      to others .......................          --             --          (68,864)
    Payments to retire notes payable
      to related entity ...............          --          (76,100)       (76,100)
    (Increase) in deferred warrant
      registration costs ..............          --             --          (29,422)
    Proceeds from issuance of common
      stock ...........................          --             --          901,556
                                          -----------    -----------    -----------
      Net cash provided  (used) by
         financing activities .........          --          (76,100)       872,134
                                          -----------    -----------    -----------

Net (decrease) increase in cash
    and cash equivalents ..............        (6,630)      (130,179)         9,195

Cash and cash equivalents at
    beginning of period ...............        15,825        146,004
                                          -----------    -----------    -----------
Cash and cash equivalents at
    end of period .....................   $     9,195    $    15,825    $     9,195
                                          ===========    ===========    ===========

Supplemental cash flow information:
    Interest received .................   $       408    $     1,663    $   125,677
                                          ===========    ===========    ===========
    Interest paid .....................   $      --      $    21,821    $   138,306
                                          ===========    ===========    ===========

Non-cash financing activities:
    Common stock issued for services ..   $      --      $      --      $     7,605
                                          ===========    ===========    ===========
Investment in common stock of
  related entity received in
  exchange for marketing rights .......   $      --      $      --      $     7,000
                                          ===========    ===========    ===========
Exchange of note receivable for
  investment in SAC ...................   $      --      $      --      $   281,506
                                          ===========    ===========    ===========
</TABLE>

The accompanying notes are a part of this statement.

                                      F-13
<PAGE>

                              IMMUNE RESPONSE, INC.
                          (A Development Stage Company)
                          Notes to Financial Statements

Note 1:   SIGNIFICANT ACCOUNTING POLICIES
          Significant accounting policies are as follows:

a.        BUSINESS HISTORY
          Immune Response, Inc. ("the Company") was incorporated under the laws
of the State of Colorado on May 14, 1984 as Med Mark Technologies, Inc. and
was inactive during the period from July 1, 1985 to November 9, 1986.  On
November 10, 1986 the Company changed its name to Immune Response, Inc. and
resumed its organizational activities.

          The  Company  is in the  development  stage as more  fully  defined in
Statement No. 7 of the Financial  Accounting  Standards Board. Until the Company
sold its  laboratory  assets in May 1991,  the Company  performed  research  and
provided  testing  facilities for disorders of the immune  system.  Although the
Company  received  laboratory test income and revenue from the sale of marketing
rights in 1990 and early 1991,  the amounts  received  were  minimal and did not
represent  revenues from the Company's  principal planned line of business.  The
Company has been inactive since the sale of its lab assets in May 1991.

b.        INVESTMENTS
          Effective January 1, 1995, the Company adopted SFAS 115.  Accordingly,
the Company's  investment in equity securities of IntraNet  Solutions  (formerly
MacGregor Sports & Fitness) is classified as available-  for-sale securities and
is reported at fair value of $7,259 compared to historical  cost of $3,958.  The
unrealized gain of $3,301 is reported as a separate  component of  stockholders'
equity.

c.        SHARES ISSUED IN EXCHANGE FOR SERVICES
          The fair value of shares  issued for services  rendered to the Company
in exchange for stock was determined by the officers and directors.

d.        INCOME TAXES
          The  Company  has  made no  provision  for  income  taxes  because  of
financial  statement  and tax losses.  At December  31, 1998 the Company has net
operating loss carryforwards for book and tax purposes available as follows:
  YEAR OF EXPIRATION                    BOOK                TAX
         1999                          $61,200             $61,200
         2000                           14,400              14,400
         2001                           19,720              17,600
         2002                           41,800              41,800
         2003                          102,500             102,500
         2004                          210,300             209,100
         2005                          169,700             175,700
         2006                          247,000             174,400
         2007                           61,000              20,500
         2008                           40,900              36,900
         2009                           95,000              14,000
         2010                          (106,277)            44,000
         2011                          (71,436)            (70,802)
         2012                           29,691              38,517

         2013                            8,647               8,647
                                       -------             -------
                                       $924,145            $888,462
                                       =======             =======

                                      F-14
<PAGE>

                              IMMUNE RESPONSE, INC.
                          (A Development Stage Company)
                          Notes to Financial Statements


Note 1:   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

e.        NET INCOME (LOSS) PER COMMON SHARE
          The net loss per common  share is computed by dividing  the net income
(loss) by the  weighted  average  number of shares  outstanding  for each period
shown. All of the common stock issued prior to the public offering is considered
to be "cheap" stock in accordance with Staff  Accounting  Bulletin Topic 4d, and
is treated as outstanding since inception of the Company in the weighted average
number of shares computation.

f.        CASH EQUIVALENTS
          For the purpose of the statements of cash flows, the Company considers
all highly  liquid  investments  purchased  with an  original  maturity of three
months or less to be cash equivalents  provided they are not legally  restricted
as to withdrawal.

g.        RECLASSIFICATIONS
          Certain minor  reclassifications  have been made to the 1997 financial
statements to conform to the 1998 presentation.

h.        ESTIMATES
          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 the
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements and the reported  amounts of revenue and expenses  during the period.
Actual results could differ from those estimates.

Note 2:   INVESTMENT IN INTRANET SOLUTIONS (FORMERLY MACGREGOR SPORTS AND
          FITNESS, INC.)
          In January of 1994, the Company  converted its Class B preferred stock
of MacGregor Sports & Fitness into 133,904 shares of unrestricted  common stock.
This  conversion  was completed in April of 1994 resulting in the Company owning
167,360  unrestricted  shares of MacGregor's  common stock at December 31, 1994.
During the fourth quarter of 1995, the Company sold 133,904 of the shares in the
open market for $208,567. During January of 1996, the Company sold an additional
27,500 shares in the open market for $89,503 leaving 5,956 shares still owned by
the Company.

          MacGregor  successfully  merged with Technical  Publishing  Solutions,
Inc. on July 31, 1996 and the combined  entity was renamed  IntraNet  Solutions.
IntraNet provides integrated  solutions to large corporations for the management
and distribution of business critical  information  contained in documents using
proprietary  and  standard  internet  technologies.  In  October  1996  IntraNet
declared a 1-for-4  reverse stock split resulting in 1,489 shares still owned by
the Company at December 31, 1997 and 1998.

Note 3:   SALE OF STOCK TO PUBLIC
          On July 5, 1988 the Company  completed a sale of 900,000  units of its
$.0001 par value common stock in a public  offering.  Net proceeds from the sale
were $700,239 after deducting the Underwriter's commission of $90,000 and direct
offering costs of $109,761.

                                      F-15
<PAGE>

                              IMMUNE RESPONSE, INC.
                          (A Development Stage Company)
                          Notes to Financial Statements


Note 3:   SALE OF STOCK TO PUBLIC (CONTINUED)
          Each unit  consisted of one share of the Company's  common stock,  one
Class A common  stock  purchase  warrant and one Class B common  stock  purchase
warrant.  One Class A unit warrant  entitles the holder to purchase one share of
common stock at $1.50 per share. One Class B unit warrant entitles the holder to
purchase one share of common  stock at $2.00 per share.  The Class A and Class B
warrants expired on December 16, 1995.

          In October and November, 1988, Class A warrants to purchase a total of
54,700  shares of common stock of the Company were  exercised at $1.50 per share
for total proceeds of $81,950,  net of costs. In October,  1988 Class B warrants
to purchase  3,000  shares of common  stock were  exercised  at $2 per share for
total proceeds of $6,000. In January,  1989 Class A warrants to purchase a total
of 38,200  shares of common  stock of the Company  were  exercised  at $1.50 per
share for total proceeds of $57,046, net of costs.

          In connection with this public offering,  the Company also sold 28,800
shares of its common stock to the Underwriter for a total price of $288.
No warrants were exercised by the Underwriter.

          On February 10, 1997 the Company's  shareholders  approved a 1-for-100
reverse split whereby every one hundred shares of the Company's $.0001 par value
common stock were  converted to one share of $.0001 par value common stock.  The
shareholders  also approved a reduction in the number of authorized  shares from
950,000,000 to 25,000,000  effective  March 3, 1997. As a result,  the Company's
issued and  outstanding  shares at both December 31, 1997 and 1996, as restated,
were 3,124,700 and 2,949,700, respectively. The financial statements herein have
been adjusted to reflect the  1-for-100  reverse stock split back to the date of
inception.

Note 4:   RELATED PARTY TRANSACTIONS
          During   1998  and  1997,   the   Company   paid  $1,600  and  $2,000,
respectively, to each of its two directors (1998) and three directors (1997) for
their attendance in the meetings held in each year.

          During the year ended  December 31, 1995 and to the present date,  the
Company has utilized approximately 150 square feet of office space from Equitex,
Inc., a significant shareholder, on a rent free month-to-month basis.

Note 5:   CONTINGENCY
          The Company has minimal capital resources  presently available to meet
obligations which normally can be expected to be incurred by similar  companies,
and has an accumulated deficit of ($924,145) at December 31, 1998. These factors
raise  substantial  doubt  about the  Company's  ability to  continue as a going
concern.

          The Company has no  significant  fixed  commitments as of December 31,
1998 or the present date.  Management  believes that the remaining  minimal cash
flow  requirements   needed  to  pursue  potential  mergers  or  other  business
opportunities  can be met through use of the Company's  current cash balance and
additional sales of IntraNet stock.

                                      F-16