SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

# FORM 10-QSB

|x |  | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ---------------------------------------------------------------------------------

For the quarterly period ended September 30, 2004

or

|o |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ----------------------------------------------------------------------------------------

For the transition period from _____________ to ___________
Commission file number 0-29222

AVAX TECHNOLOGIES, INC.
(Exact name of small business issuer as specified in its charter)

|Delaware                                                       |  | 13-3575874                           | 
|-------------------------------------------------------------- |  | ------------------------------------ | 
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.) | 
|2000 Hamilton Street                                           | 
|Suite 204                                                      | 
|Philadelphia, Pennsylvania                                     |  | 19130                                | 
|(Address of principal executive offices)                       |  | (Zip Code)                           | 

Registrants telephone number, including area code:   (215) 241-9760

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

Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $.004 per share

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.xYes   oNo

As of November 11, 2004, 36,071,568 shares of the Registrants common
stock, par value $.004 per share, were outstanding.

Documents incorporated by reference:   None.

Transitional Small Business Disclosure Format:oYesxNo

Page 1

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# AVAX TECHNOLOGIES, INC.

# Table of Contents

|                               |  | Page                                                                                            
|------------------------------ |  | ------------------------------------------------------------------------------------------------
|                               |  |                                                                                                 
|PART I  FINANCIAL INFORMATION
|                              
|Item 1.                        |  | Financial Statements                                                                            
|                               |  | Consolidated BALANCE SHEETS  As of December 31, 2003     and September 30, 2004 (Unaudited)    
|                               |  | Consolidated STATEMENTS OF OPERATIONS AND COMPREHENSIVE     LOSS (Unaudited)                   
|                               |  | For the Three Months and Nine Months Ended September 30, 2004                                   
|                               |  | and 2003 and for the Period from January 12, 1990     (Incorporation) through September 30, 2004
|                               |  | Consolidated STATEMENTS OF CASH FLOWS (Unaudited)                                              
|                               |  | For the Nine Months Ended September 30, 2004 and 2003 and                                       
|                               |  | for the Period from January 12, 1990 (Incorporation)     through September 30, 2004             
|                               |  | Notes to Consolidated Financial Statements                                                      
|                              
|Item 2.                        |  | Managements Discussion and Analysis or Plan of Operation                                       
|                              
|Item 3.                        |  | Controls and Procedures                                                                         
|                              
|PART II  OTHER INFORMATION   
|                              
|Item 6.                        |  | Exhibits                                                                                        
|                              
|Signatures                     |  |                                                                                                 

Page 2

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# PART I  FINANCIAL INFORMATION

# Item 1.   Financial Statements.

AVAX Technologies, Inc. and Subsidiaries
(a development stage company)
Consolidated Balance Sheets

|                                                                                | December 31,2003 |  | September 30,2004
|------------------------------------------------------------------------------- | ---------------- |  | -----------------
|(Unaudited)                                                                    
|Assets                                                                          |                  |  |                  
|Current assets:                                                                 |                  | 
|Cash and cash equivalents                                                       |                  |  | $                
|Marketable securities                                                           |                  |  |                  
|Accounts receivable                                                             |                  |  |                  
|Inventory                                                                       |                  |  |                  
|Prepaid expenses and other current assets                                       |                  |  |                  
|                                                                                |                  |  |                  
|Total current assets                                                            |                  |  |                  
|Property and equipment, at cost                                                 |                  |  |                  
|Less accumulated depreciation                                                   |                  |  |                  
|                                                                                |                  |  |                  
|Net property and equipment                                                      |                  |  |                  
|Research and development tax credit receivable                                  |                  |  |                  
|Goodwill                                                                        |                  |  |                  
|                                                                                |                  |  |                  
|Total assets                                                                    |                  |  | $                
|                                                                                |                  |  |                  
|Liabilities and stockholders equity                                            |                  | 
|Current liabilities:                                                            |                  | 
|Accounts payable and accrued liabilities                                        |                  |  | $                
|Deferred revenue                                                                |                  |  |                  
|Loans payable  Convertible notes (Face amount $950,000)                        |                  |  |                  
|Loans payable  ANVAR grant payable                                             |                  |  |                  
|                                                                                |                  |  |                  
|Total current liabilities                                                       |                  |  |                  
|Stockholders equity:                                                           |                  | 
|Preferred stock, $.01 par value:                                                |                  | 
|Authorized shares  5,000,000, including Series B  300,000 shares and Series C |                  | 
| 120,000 shares                                                                |                  | 
|Series B convertible preferred stock:                                          
|Issued and outstanding shares  0                                               |                  |  |                  
|Series C convertible preferred stock:                                           |                  | 
|Issued and outstanding shares  36,750 (liquidation preference  $3,675,000)    |                  |  |                  
|Common stock, $.004 par value:                                                  |                  | 
|Authorized shares  50,000,000 at December 31, 2003 and 150,000,000 at          |                  | 
|September 30, 2004                                                              |                  | 
|Issued and outstanding shares  18,080,071 at December 31, 2003 and            
|36,071,568 at September 30, 2004                                                |                  |  |                  
|Additional paid-in capital                                                      |                  |  |                  
|Subscription receivable                                                         |                  |  |                  
|Accumulated other comprehensive income                                          |                  |  |                  
|Deficit accumulated during the development stage                                |                  |  |                  
|                                                                                |                  |  |                  
|Total stockholders equity                                                      |                  |  |                  
|                                                                                |                  |  |                  
|Total liabilities and stockholders equity                                      |                  |  | $                
|                                                                                |                  |  |                  

See accompanying notes.

Page 3

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AVAX Technologies, Inc. and Subsidiaries
(a development stage company)
Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)

|                                             | Three Months Ended September 30, |  | Nine Months Ended September 30, |            | Period FromJanuary 12, 1990(Incorporation)
|-------------------------------------------- | -------------------------------- |  | ------------------------------- | ---------- | ------------------------------------------
|
|Revenue:                                     |                                  |  |                                 |            |                                           
|Gain from sale of the Product                |                                  |  | $                               |           |                                           
|Product and contract service revenue         |                                  |  |                                 | 369,690    |                                           
|                                             |                                  |  |                                 |            |                                           
|Total revenue                                |                                  |  |                                 | 369,690    |                                           
|Costs and expenses:                          |                                  | 
|Research and development                     |                                  |  |                                 | 734,772    |                                           
|Acquired in process research and development |                                  |  |                                 |           |                                           
|Write down of acquired intellectual property |                                  | 
|and other intangibles                        |                                  |  |                                 |           |                                           
|Amortization of acquired intangibles         |                                  |  |                                 |           |                                           
|Selling, general and administrative          |                                  |  |                                 | 417,080    |                                           
|                                             |                                  |  |                                 |            |                                           
|Total operating loss                         |                                  |  |                                 | (782,162   | )                                         
|Other income (expense):                      |                                  | 
|Interest income                              |                                  |  |                                 | 1,121      |                                           
|Interest expense                             |                                  |  |                                 |           |                                           
|Other, net                                   |                                  |  |                                 |           |                                           
|                                             |                                  |  |                                 |            |                                           
|Total other income (loss)                    |                                  |  |                                 | 1,121      |                                           
|                                             |                                  |  |                                 |            |                                           
|Loss from continuing operations              |                                  |  |                                 | (781,041   | )                                         
|Loss from discontinued operations            |                                  |  |                                 |           |                                           
|                                             |                                  |  |                                 |            |                                           
|Net loss                                     |                                  |  |                                 | (781,041   | )                                         
|Amount payable for liquidation preference    |                                  |  |                                 |           |                                           
|                                             |                                  |  |                                 |            |                                           
|Net loss attributable to common stockholders |                                  |  | $                               | (781,041   | )                                         
|                                             |                                  |  |                                 |            |                                           
|                                            
|Loss per common share  basic and diluted    |                                  |  | $                               | (.04       | )                                         
|                                             |                                  |  |                                 |            |                                           
|Weighted average number of common shares     |                                  | 
|outstanding                                  |                                  |  |                                 | 18,080,071 |                                           
|                                             |                                  |  |                                 |            |                                           
|                                            
|Net loss                                     |                                  |  | $                               | (781,041   | )                                         
|Foreign currency translation gain            |                                  |  |                                 | 8,346      |                                           
|                                             |                                  |  |                                 |            |                                           
|Net comprehensive loss                       |                                  |  | $                               | (772,695   | )                                         
|                                             |                                  |  |                                 |            |                                           

See accompanying notes.

Page 4

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AVAX Technologies, Inc. and Subsidiaries
(a development stage company)
Consolidated Statements of Cash Flows
(Unaudited)

|                                                         | Nine Months Ended September 30, |  | Period FromJanuary 12, 1990(Incorporation)
|-------------------------------------------------------- | ------------------------------- |  | ------------------------------------------
|
|Operating activities                                     |                                 |  |                                           
|Net loss                                                 |                                 |  | $                                         
|Adjustments to reconcile net loss to net cash used in    |                                 | 
|operating activities:                                    |                                 | 
|Depreciation and amortization                            |                                 |  |                                           
|Amortization of discount on convertible notes payable    |                                 |  |                                           
|Amortization of deferred gain on joint venture           |                                 |  |                                           
|Equity in net loss of joint venture                      |                                 |  |                                           
|Extraordinary gain related to negative goodwill on       |                                 | 
|consolidated subsidiary                                  |                                 |  |                                           
|Cumulative effect of change in accounting                |                                 |  |                                           
|Compensatory stock issue                                 |                                 |  |                                           
|Minority interest in net loss of consolidated subsidiary |                                 |  |                                           
|Acquired in-process research and development charge      |                                 |  |                                           
|Write down of acquired intellectual property and other  
|intangibles                                              |                                 |  |                                           
|Gain from sale of the Product                            |                                 |  |                                           
|Gain on sale of intellectual property                    |                                 |  |                                           
|Accretion of interest on common stock receivable         |                                 |  |                                           
|Accretion of interest on amount payable to              
|preferred stockholders and former officer                |                                 |  |                                           
|Loss (Gain) on sale or abandonment of furniture and      |                                 | 
|equipment                                                |                                 |  |                                           
|Issuance of common stock or warrants for services        |                                 |  |                                           
|Changes in operating assets and liabilities:             |                                 | 
|Accounts receivable                                      |                                 |  |                                           
|Inventory                                                |                                 |  |                                           
|Prepaid expenses and other current assets                |                                 |  |                                           
|Accounts payable and accrued liabilities                 |                                 |  |                                           
|Deferred revenue                                         |                                 |  |                                           
|Research and development tax credit receivable           |                                 |  |                                           
|Amount payable to former officer                         |                                 |  |                                           
|                                                         |                                 |  |                                           
|Net cash used in operating activities                    |                                 |  |                                           
|                                                        
|Investing activities                                     |                                 | 
|Purchase of marketable securities and short-term         |                                 | 
|investments                                              |                                 |  |                                           
|Proceeds from sale of marketable securities              |                                 |  |                                           
|Proceeds from sale of short-term investments             |                                 |  |                                           
|Purchases of furniture and equipment                     |                                 |  |                                           
|Proceeds from sale of furniture and equipment            |                                 |  |                                           
|Organization costs incurred                              |                                 |  |                                           
|Cash acquired in acquisition of control of joint venture |                                 |  |                                           
|                                                         |                                 |  |                                           
|Net cash provided by (used in) investing activities      |                                 |  |                                           

Page 5

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AVAX Technologies, Inc. and Subsidiaries
(a development stage company)
Consolidated Statements of Cash Flows (continued)
(Unaudited)

|                                                         | Nine Months Ended September 30, |  | Period FromJanuary 12, 1990(Incorporation)
|-------------------------------------------------------- | ------------------------------- |  | ------------------------------------------
|
|Financing activities                                     |                                 |  |                                           
|Proceeds from issuance of notes payable to related party |                                 |  | $                                         
|Principal payments on notes payable to related party     |                                 |  |                                           
|Proceeds from loans payable and the related issuance of 
|warrants                                                 |                                 |  |                                           
|Principal payments on loans payable                      |                                 |  |                                           
|Payments for fractional shares from reverse splits and  
|preferred stock conversions                              |                                 |  |                                           
|Financing costs incurred                                 |                                 |  |                                           
|Payments received on subscription receivable             |                                 |  |                                           
|Shareholder capital contribution                         |                                 |  |                                           
|Proceeds received from exercise of stock warrants        |                                 |  |                                           
|Elimination of the consolidated accounting treatment     |                                 | 
|for joint venture                                        |                                 |  |                                           
|Capital contribution through sale of interest in        
|consolidated subsidiaries                                |                                 |  |                                           
|Net proceeds received from issuance of preferred and     |                                 | 
|common stock                                             |                                 |  |                                           
|                                                         |                                 |  |                                           
|Net cash provided by financing activities                |                                 |  |                                           
|                                                        
|Effect of exchange rate changes on cash                  |                                 |  |                                           
|                                                         |                                 |  |                                           
|                                                        
|Net increase (decrease) in cash and cash equivalents     |                                 |  |                                           
|                                                        
|Cash and cash equivalents at beginning of period         |                                 |  |                                           
|                                                         |                                 |  |                                           
|                                                        
|Cash and cash equivalents at end of period               |                                 |  | $                                         
|                                                        
|                                                         |                                 |  |                                           
|                                                        
|Supplemental disclosure of cash flow information         |                                 | 
|Interest paid                                            |                                 |  | $                                         
|                                                         |                                 |  |                                           
|Non-cash activity:                                       |                                 | 
|Conversion of accounts payable into notes payable        |                                 |  | $                                         
|                                                         |                                 |  |                                           
|Common stock warrants issued in conjunction with         |                                 | 
|convertible notes payable                                |                                 |  | $                                         
|                                                         |                                 |  |                                           
|Conversion of bridge loans into common stock             |                                 |  | $                                         
|                                                         |                                 |  |                                           
|Payment of interest on bridge loans with common stock    |                                 |  | $                                         
|                                                         |                                 |  |                                           

See accompanying notes.

Page 6

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AVAX Technologies, Inc. and Subsidiaries
(a development stage company)
Notes to Consolidated Financial Statements(Unaudited)
For the Nine Months ended September 30, 2004 and 2003

# 1.   Organization and Summary of Significant Accounting Policies

AVAX Technologies, Inc. (the Company) is a development stage
biopharmaceutical company.

In November 1995, the Company sold its leading product under development, an
over-the-counter nutritional food supplement and all of the related patents and other intellectual property (the Product).

Also in November 1995, the Company entered into a license agreement with
Thomas Jefferson University (TJU) to develop, commercially manufacture and sell products embodying immunotherapeutic vaccines for
the treatment of malignant melanoma and other cancers (the Invention).

In December 1996, the Company entered into a license agreement with Rutgers
University (Rutgers) to develop, commercially manufacture and sell products embodying a series of compounds for the treatment of
cancer and infectious diseases (the Compounds).

In February 1997, the Company entered into a license agreement with Texas
A&M to develop, commercially manufacture and sell products embodying a series of compounds for the treatment of cancer (the
Texas A&M Compounds).

In November 1999, the Company entered into a definitive joint venture
agreement with Australia Vaccine Technologies (AVT) (formerly Neptunus International Holdings Limited), a
pharmaceutical group in Australia, under the subsidiary name, AVAX Holdings Australia Pty Limited (AVAX Holdings).
Under the joint venture agreement, AVAX Holdings, through its affiliated entities AVAX Australia Pty Limited and AVAX Australia
Manufacturing Pty Limited (the Joint Venture Companies), was organized for the purpose of manufacturing and marketing
M-Vax, an immunotherapy for the post-surgical treatment of Stage 3 and 4 melanoma, in Australia and New Zealand. In January 2002,
the Joint Venture Companies repurchased 90% of AVTs interest in the two joint venture companies resulting in AVAX owning a
95% interest in the net equity of both joint venture companies. The Company was seeking but was unable to obtain a timely
governmental reimbursement for the costs of treatment with the AC Vaccine in Australia, and decided to discontinue operations in
Australia in order to focus the cash resources of the Company on its U.S. and European operations. In September 2002, the Company
announced that it would be discontinuing its operations in Australia and in December 2002 the Company completed the liquidation of
its Australian subsidiary.

In August 2000, the Company completed its acquisition of GPH, S.A.
(Holdings) and Genopoietic S.A. (Genopoietic) each a French societe anonyme based in Paris, France.
Holdings and Genopoietic were organized in 1993 to develop gene therapy applications and market gene therapy treatments for
cancer. The Company currently performs contract manufacturing and research activities at its facilities located in Lyon, France.

In February 2004, the Company, through its wholly owned subsidiary
Genopoietic, entered into a joint manufacturing alliance agreement with OPISODIA SAS (OPI) for the joint manufacture
of each companys products and for the provision of contract manufacturing services to other companies. Pursuant to the
contract Genopoietic manages the activities of the joint manufacturing alliance. See Note 3.

# Basis of Presentation

The financial information as of September 30, 2004 and for the three-month
and nine-month periods ended September 30, 2004 and 2003 contained herein is unaudited. The Company believes this information
has been prepared in accordance with accounting principles generally accepted in the United States for interim financial
information and Article 10 of Regulation S-X. The Company also believes this information includes all adjustments (consisting only
of normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the
periods then ended. The results of operations for the three-month and nine-month periods ended September 30, 2004 are not
necessarily indicative of the results of operations that may be expected for the entire year.

The accompanying financial statements and the related notes should be read in
conjunction with the Companys audited financial statements for the year ended December 31, 2003 included in the
Companys annual report on Form 10-KSB.

Page 7

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# AVAX Technologies, Inc. and Subsidiaries
(a development stage company)

The Company expects that it will need to raise capital by the end of 2004 or
within the first two months of 2005 to fund planned operations and product development. Although the Company raised additional
capital from the sale of its common stock in May 2004 (see note 5), the Companys operations will continue to require
additional funding to continue fully its development plans for its technologies. There can be no assurance that the Company will
be able to raise sufficient capital to fund these activities. The inability to secure additional funding could have a material
adverse effect on the Company, including the possibility that the Company could have to curtail its operations significantly or
cease operations altogether.

The Companys business is subject to significant risks consistent with
biotechnology companies that are developing novel products for human therapeutic use. These risks include, but are not limited to,
uncertainties associated with research and development of novel drug and biotechnology products, ensuring access to capital,
obtaining and enforcing patents, receiving regulatory approval from competent governmental authorities in the markets of interest,
and competing with other biotechnology and pharmaceutical companies. However, there can be no assurance that it will successfully
develop any product or, if it does, that the product will generate any or sufficient revenues.

# Reclassifications

Certain prior year and cumulative expenses for legal costs for patents have
been reclassified from research and development expenses to general and administrative expenses, to conform to current year
presentation.

# Principles of Consolidation

The accompanying consolidated financial statements include the accounts of
AVAX Technologies, Inc., and its subsidiaries. All significant intercompany balances and transactions have been eliminated.

In 1999, the Joint Venture Companies were included in the consolidated
financial statements of the Company. Due to additional investment by AVT in the Joint Venture Companies in 2000, whereby AVT
acquired a 50% ownership interest, and AVTs substantial and active involvement in the operations of the Joint Venture
Companies late in 2000, the Company no longer exercised control over the Joint Venture Companies. As such, the Joint Venture
Companies accounts were not included in the consolidated financial statements of the Company for the years ended December 31, 2001
and 2000. During January 2002, the Joint Venture Companies repurchased 90% of AVTs interest in each company in exchange for
cash consideration of approximately $1,860,000 AUD (approximately $970,000 US). This resulted in AVAX Holdings owning a 95%
interest in the Joint Venture Companies as of the date of the transaction, giving AVAX Holdings control of the companies and
requiring the results of AVAX Holdings and its majority owned subsidiaries be consolidated into the Companys consolidated
results.

# Revenue

The Companys revenues are related to the provision of contract services
and the sale of its product, the AC Vaccine for the treatment of melanoma. Contract service revenue is recognized in installments
based upon the contractual agreement entered into with clients (see Note 3). Product revenues represent fees received or payable
to the Company related to the manufacture and sale of the vaccine. Product revenue is recognized when the vaccine is received by
the hospital administering the vaccine. Royalties related to product sales are recorded 60 days after the product is received for
administration to the patient in accordance with the product distribution agreement.

# Conversion of Warrants

In the first quarter of 2004, holders of warrants to purchase 338,400 shares
of common stock, which were issued in connection with the December 2003 bridge financing, elected to exercise these warrants. Upon
exercise of the warrants, the Company issued 338,400 shares of its common stock in exchange for cash in the amount of $48,391.

# 2.   Joint Venture Agreement

In November 1999, the Companys subsidiary AVAX Australia Holdings, Pty
Limited entered into a joint venture agreement with AVT related to commercialization and sale of the AC Vaccine Technology in
Australia and New Zealand. Pursuant to the joint venture agreement, the Company created two operating companies, AVAX Australia
Pty Limited and AVAX Australia Manufacturing Pty Limited, and AVT contributed $4 million Australia Dollars giving them a 20%
equity interest in the joint venture.

Page 8

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# AVAX Technologies, Inc. and Subsidiaries
(a development stage company)

During 2000, AVT, through a subsidiary, contributed an additional $6 million
Australian Dollars, raising AVTs total ownership percentage in the joint venture to 50%. Due to the ownership percentage
maintained by AVT and their substantial and active involvement in the management and decision making processes of the joint
venture, the Company determined that it no longer maintained a controlling interest in the operations of the joint venture.
Accordingly, the Company began to account for its investment in the joint venture using the equity method of accounting in late
2000.

At the time of the change from the consolidation method to the equity method,
there existed a difference between the Companys cost of its 50% investment in the joint venture and the net book value of
the underlying assets. This difference, which amounted to approximately $2.7 million, resulted from the Companys
contribution of technology and related licensing rights, which had little recorded value, and AVTs cash investments of $10
million Australian Dollars. The resulting deferred gain was being amortized to income over three years.

During January 2002, Joint Venture Companies repurchased 90% of AVTs
outstanding shares for cash consideration of approximately $1.8 million Australia Dollars. After closing the transaction AVAX
Holdings owned a 95% equity interest in the Joint Venture Companies.

AVAX accounted for its investment in the Australian Joint Venture Companies
using the equity method up through the date of the repurchase of AVT shares. At the date of that transaction, the Company had
recorded on its books an investment in joint venture (net of unamortized deferred gain) of approximately $12,282. As a result of
the transaction, AVAXs 95% equity in the Joint Venture Companies had a book value of approximately $1,101,400. Of this
difference, $902,900, which represented the deferred gain as of December 31, 2001, was recognized as a cumulative effect of change
in accounting in the three months ended June 30, 2002. The remaining difference of $186,295 was recognized as an extraordinary
gain related to negative goodwill in the consolidated subsidiary. As discussed further below, these amounts are both included in
the loss from discontinued operations in the 2002 consolidated statement of operations.

In September 2002 the Company made the decision to discontinue the operations
of the Joint Venture Companies. With the adoption of Statement of Financial Accounting Standards (SFAS) No. 144, the Australian
operations are required to be accounted for and presented in the accompanying financial statements as a discontinued operation.

The Company liquidated, through sale, all of the long-lived assets of the
joint venture companies prior to December 31, 2002. Proceeds received on the sale of the assets of the Company at the time were
$40,919 while the cost basis of the assets was $247,210, resulting in a net loss on the disposition of the assets of $206,291,
which is included in the loss from discontinued operations.

On December 13, 2002 a liquidator was appointed to oversee the dissolution of
the joint venture companies. The combined assets of the joint venture companies included in the September 30, 2004 consolidated balance
sheet consists of cash of $53,649 and recorded liabilities of $88,341. Other long-term liabilities related to leasehold
obligations were not recorded as obligations as they will not be required to be met pursuant to the liquidation proceedings.

# 3.   Contractual Joint Manufacturing Alliance

In February 2004 the Company entered into a manufacturing alliance with
OPISODIA, SAS, a French pharmaceutical company (OPI) that will provide approximately $1,500,000 (US) funding per year from OPI for
the combined French facilities of the Company and OPI for 2004 and 2005, which are under the management of Genopoietic, the
Companys French subsidiary. Pursuant to the contract the total manufacturing expenses incurred are allocated to OPI based
upon a pre-determined allocation of the total number of personnel available to work on the OPI contract. Proceeds received from
OPI as a result of the alliance for the nine months ended September 30, 2004 were $1,105,596 expenses allocated and were recorded
as revenue to the extent the proceeds received were equal to the amount of expenses allocable to OPI. Amounts received in excess
of expenses allocated to the OPI contract for the period ended September 30, 2004 were $89,182 and were recorded in deferred
revenue in the accompanying consolidated balance sheet. The allocation of the expenses is based upon the allocation of the number
of employees of the alliance available to work on the manufacture of OPIs products. The expenses allocated to the OPI
contract do not represent additional costs incurred in performing work under the OPI contract but instead represent the expenses
that are allocated to the contract pursuant to the negotiated contractual terms. This expense allocation does not represent costs
incurred by the Company in performing the contract.

Page 9

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# AVAX Technologies, Inc. and Subsidiaries
(a development stage company)

# 4.   Stock Based Compensation

SFAS No. 123, Accounting for Stock-Based Compensation, (SFAS
No. 123), as amended by SFAS No. 148, Accounting for Stock-Based Compensation  Transition and
Disclosure, prescribes accounting and reporting standards for all stock-based compensation plans, including employee stock
options, restricted stock, employee stock purchase plans and stock appreciation rights. SFAS No. 123 requires compensation
expense to be recorded (i) using the fair value method or (ii) using accounting rules prescribed by Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees, (APB 25) and related interpretations, with
pro forma disclosure of what net income and earnings per share would have been had the Company adopted the fair value method.

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the option or warrant vesting period. The effects of applying SFAS No. 123 for pro forma
disclosure are not likely to be representative of the effects on reported net income or losses for future years. The
Companys pro forma information follows:

|                                                 | Three Months Ended Sept. 30, |  | Nine Months Ended Sept. 30,
|------------------------------------------------ | ---------------------------- |  | ---------------------------
|
|Net loss as reported                             |                              |  | $                          
|Stock based compensation expense as              |                              | 
|reported                                         |                              |  |                            
|Stock based compensation expenses                |                              | 
|under fair value method                          |                              |  |                            
|                                                 |                              |  |                            
|Pro forma net loss attributable to               |                              | 
|common stockholders                              |                              |  | $                          
|                                                 |                              |  |                            
|Pro forma net loss per share  basic and diluted |                              |  | $                          
|                                                 |                              |  |                            
|Net loss per share as reported                   |                              |  | $                          
|                                                 |                              |  |                            

# 5.   Private Placement of Equity Securities

On May 21, 2004, the Company closed the private placement of 10,166,667
shares of the Companys common stock plus warrants to purchase 1,525,000 shares of common stock at $0.35 per share (Series A
warrants) and warrants to purchase 1,525,000 shares of common stock at $0.39 per share (Series B warrants). Gross proceeds from
the offering were $3,050,000.

# 6.   Conversion of Bridge Notes into Common Stock

On May 21, 2004, in compliance with the Note Purchase Agreements entered into
in December, 2003, the Company converted the principal ($950,000) and interest ($23,275) on the bridge notes into common stock at
an exercise price of $0.13 per share resulting in the issuance of 7,486,430 shares of the Companys common stock with a par
value of $0.004 per share.

# 7.   License and Research Agreements

The Company previously received correspondence from Rutgers University
stating their belief that the Company was not in compliance with the license agreement and their position that the Companys
rights under the license agreement had been canceled. The Company was in arrears on certain payments under the research agreement
while awaiting certain correspondence and documentation that the Company was entitled to under the agreement. In addition, certain
patents fees, which had been accrued in the consolidated balance sheet, were disputed by the Company, for which there was no
resolution. In third quarter 2004, the Company reached an agreement with Rutgers to terminate all license and other agreements
with Rutgers for a one-time payment by the Company to Rutgers of an immaterial amount.

Page 10

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# Item 2.   Managements Discussion and Analysis or Plan of Operation.

# CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

In this Report, in other filings with the SEC and in press releases and other
public communications throughout the year, the Company makes, or will make statements that plan for or anticipate the future.
These forward-looking statements include statements about the future of biotechnology products and the biopharmaceutical industry,
statements about AVAXs future business plans and strategies, and other statements that are not historical in nature. These
forward-looking statements are based on the Companys current expectations.

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

| |  |  | AVAXs history of operating losses, its continuing cash
requirements, its continuing need to raise more money, and the uncertainty of the Companys future profitability and ability
to sustain operations.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Because of the Companys limited cash and financial
resources, there is substantial doubt about its ability to continue as a going concern.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Uncertainty relating to AVAXs ability to enter into contract
manufacturing agreements that can provide sufficient revenue to cover all or any substantial part of the operating expenses of the
Company.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Uncertainty about whether the Companys products will again
begin or successfully complete the long, complex and expensive clinical trial and regulatory approval process for approval of new
drugs in the U.S. or France.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Uncertainty about whether the Companys AC Vaccine technology
can be developed to produce safe, effective and commercially viable products, and if so, whether the Companys AC Vaccine
products will be commercially accepted and profitable.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | The Companys difficulty or inability to compete with other
clinical trials and treatment regimens for patients and clinical sites for the Companys planned clinical trials.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | The expenses, delays, uncertainties and complications typically
encountered by development stage biopharmaceutical businesses, many of which are beyond the Companys control.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | The Companys financial and development obligations and its
responsibility to meet requisite research funding levels under its license and research agreements in order to protect AVAXs
rights to its products and technologies.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Each of the other factors discussed in the Companys Annual
Report on Form 10-KSB for the year ended December 31, 2003, under Item 1  Description of Business  Risk
Factors and in its Registration Statement on Form SB-2 (Registration No. 333-118334) filed with the SEC on November 8, 2004,
under Risk Factors.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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# PLAN OF OPERATION

# General

Since our inception, we have concentrated our efforts and resources on the
development and commercialization of biotechnology and pharmaceutical products and technologies. We have been unprofitable since
our founding and have incurred a cumulative net loss of $68,007,430 as of September 30, 2004. We incurred net losses of $2,683,424
and $1,858,062 for the nine months ended September 30, 2004 and 2003, respectively. We expect to continue to incur operating
losses, primarily due to the expenses associated with our product development efforts in Europe, the cost of maintaining our
manufacturing facility in the United States, and activities related to planned reestablishment of our clinical trials for M-Vax
and O-Vax, pre-clinical studies.

Our ability to survive as an operating company depends upon, among other
things, our ability to raise additional capital to allow us to develop products, obtain regulatory approval for our proposed
products, and enter into agreements for product development, manufacturing and commercialization. Our M-Vax and O-Vax products do
not currently generate any material revenue, and we may never achieve significant revenues or profitable operations from the sale
of M-Vax, O-Vax, or any other products that we may develop.

We presently anticipate that our current cash resources, including the net
proceeds of the private placement that we closed in May 2004, will be sufficient to fund operations only through the end of 2004
and possibly into the first quarter of 2005, depending upon how aggressively we implement our development plans. We have only a
limited ability to generate revenues from operations, and any revenues we generate are almost certain to be substantially less
than our operating expenses. Accordingly, unless we raise additional equity capital by the end of 2004 or early in 2005, we will
likely cease operations.

The major challenge for us and others in the biopharmaceutical industry are
the significant costs, time delays and uncertainties related to efforts to obtain regulatory approval to market drug products in
the U.S. and foreign countries. We have encountered a number of these challenges in our efforts to develop the AC Vaccine into
marketable products including the following:

| |  |  | the FDA clinical hold of our AC Vaccine clinical trials in 2001
and the resultant substantial expenses and delays in resolving the FDA concerns and refiling new INDs for a revised AC Vaccine;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | manufacturing challenges relating to the production of a vaccine
from the patients own cancer cells, such as the sterility issues we previously experienced at our Philadelphia facility;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | our failure to develop a market for the AC Vaccine in Australia
notwithstanding substantial expenditures of time and money to do so;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------

| |  |  | our inability to agree with the FDA on an acceptable potency assay
(which is a biological measure of the drugs active ingredients) of our product prior to administration of the vaccine which
will be required for later stage clinical trials and commercial approval of the vaccine;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | our inability to generate any meaningful revenues from any other
products or services while we work to develop our lead products and technologies; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | the cutbacks in our development plans and programs due to the
limited cash resources in recent years, which is not likely to change unless we are able to raise substantial additional capital.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Notwithstanding these setbacks, we believe that the potential efficacy and
viability of the AC Vaccine technology is still substantial and is, in many respects, of greater probability today than it was
three years ago. We base this optimism in our lead products on the following:

| |  |  | As a result of the FDA clinical hold, we concluded that (1) it
would no longer be feasible to continue the clinical development of the original AC Vaccine using the established manufacturing
format (referred to as the fresh vaccine product format), and (2) a revised product format needed to be established,
tested and reviewed by the FDA. Through these research and development activities we re-engineered the manufacturing steps for the
production and distribution of the AC Vaccine, referred to as the frozen vaccine technology, which we believe has
substantial advantages over the former fresh product.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | After years of frustration and lack of acceptance of the AC
Vaccine technology among the oncology community in Australia, which resulted in us abandoning our efforts in Australia, we are
experiencing meaningful new acceptance of the AC Vaccine technology in Europe, particularly in France and Spain, among keys
members of the oncology community.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | In France, AFSSAPS has published regulations specific to the
regulation of cell and gene therapies (which includes the AC Vaccine technology). Based upon prior clinical results achieved with
the fresh vaccine, these regulations create a potential new regulatory path for the approval of M-Vax in France.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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Our continued belief in the AC Vaccine technology is, however, tempered by
our continuing inability to raise sufficient capital to implement an aggressive product development effort. As a result, for the
past two years, our primary focus has been on reducing costs, raising additional capital, taking the least expensive steps
possible to maintain positive momentum in product development, and clinical advancement of the technology. The infusion of
significant additional capital would not assure success in developing a marketable product in Europe or in the U.S., but it would
allow us to accelerate the plan of operation described below. Our continuing most significant challenge is the limited capital
resources of the Company.

# Research and Development Expenses

Our clinical trials were halted by the FDA in March 2001, and we have not
initiated new clinical programs with the AC Vaccine since that time. Research and development activities during the interim period
include re-engineering the manufacturing processes for production of the AC Vaccine, development of new tests required for the
appropriate identification, sterility and potency of the AC Vaccine, and validation of the techniques, personnel and procedures
that have been implemented. In addition, we have incurred research and development expenses in designing clinical trial protocols,
amending protocols and working with regulatory authorities in the U.S. and France to get clinical trials initiated for the AC
Vaccine.

Our research and development expenses consist primarily of cost associated
with the clinical trials of our product candidates, compensation and other expenses for research personnel, payments to
collaborators under contract research agreements, costs for our consultants and compensation, materials, maintenance and supplies
for the operation and maintenance of our biological clean room facilities which are necessary for the production of materials to
be used in clinical trials. All of the costs disclosed in this category of expense qualify as research and development expenses in
accordance with the guidance included in Statement of Financial Accounting Standards No. 2 Accounting for Research and
Development Costs.

Currently, the facilities and personnel maintained for manufacturing are the
minimum required to be in compliance with current Good Manufacturing Practices (cGMP). Based upon the current capacity of
facilities and personnel and the Companys current and future planned clinical trials, we presently have excess capacity in
our manufacturing facility in Lyon, France. We use the excess capacity in Lyon to generate cash flow in the form of contract
manufacturing alliances.

Contract manufacturing encompasses services we provide to other
bio-technology or pharmaceutical companies that are pursuing the clinical development of biological products. The engagements
generally consist of two components. The first component is process validation in which the contracting company provides
information on its product and the processes and techniques used to produce the product. Procedures are developed, documented and
cataloged for the cGMP production of the product using known and acceptable techniques, tests and materials. Small scale lots are
produced, techniques validated and feasibility of the production processes and tests validated. The end product of the first phase
of an engagement is a pilot batch of product and the necessary production formulation and techniques to be used to file an IND
with regulatory authorities for human clinical trials. The second phase of an engagement consists of the production of batches of
product to be used in human clinical trials. The typical engagement results in production of small batches of product to be used
in early stage (Phase 1 and 2) clinical trials.

We have incurred essentially no incremental additional expenses to perform
contract services for OPI. To maintain our existing clean room facility in Lyon, France requires a minimum level of personnel to
perform regulatory quality control and quality assurance functions. The personnel we utilize at our Lyon facility is the minimum
compliment that we believe is required to maintain the cGMP status of that facility. With this current established infrastructure,
we have had and continue to have excess capacity for the production of biological products. We are using this excess capacity to
provide the contract services to OPI, at essentially no additional expense to us.

The costs incurred to provide these services to OPI have not been broken out
from our research and development expenses as they have not been material to date. If contract manufacturing costs in future
periods are material, they will be broken out from research and development expenses and classified as costs of goods sold.

Our research and development activities are primarily focused on clinical
development and trials of our AC Vaccine technology for the treatment of melanoma and other cancers.

Research and development costs incurred through September 30, 2004 were
$42,470,560. Research and development costs were $2,151,046 and $1,356,338 for the nine months ended September 30, 2004 and 2003,
respectively. The majority of these costs relate to clinical research and development of our AC Vaccine technology. Our management
estimates that greater than 90% of the periodic and cumulative research and development expenses incurred relate to our one major
program, the AC Vaccine. At this time, due to the risks inherent in the clinical trial process, risks associated with the product
and product characterization and risks associated with regulatory review and approval of clinical product candidates, we are
unable to estimate with any certainty the costs we will incur in the continued development of our product candidates for
commercialization.

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# Plan of Operation

Background.   In November 1995, we acquired the rights
to the AC Vaccine technology pursuant to the TJU License. Assuming we can obtain the necessary funding, we intend to continue to
be engaged in the development and commercialization of our AC Vaccine products and our other products and compounds.

We experienced events during 2001 that significantly affected our operations.
In March and April 2001, we received first oral notification and then written confirmation from the FDA that clinical activities
for both our M-Vax and O-Vax autologous cancer vaccines were placed on clinical hold pending further review by the agency. The
written notification from the FDA confirming the clinical hold identified the specific issues that the FDA would like addressed,
which primarily dealt with the sterility of autologous tumors received by us at the Philadelphia facility and the assurance that
vaccines being provided to patients would meet FDA sterility guidelines.

In conjunction with the clinical hold, the FDA conducted an inspection of our
manufacturing facility in Philadelphia, which inspection was completed in May 2001. As a result of that facility inspection, we
received a Form 483, which is a finding of manufacturing facility deficiencies, to which we initially responded at the end of
June 2001. The issues raised in the Form 483 were essentially consistent with those in the clinical hold letter, with no new
significant areas of concern identified.

In developing our response to the FDA clinical hold letters and the Form 483,
we identified and began to implement a number of product development initiatives related to the AC Vaccine technology. As a
result, we determined certain product improvements to the vaccine could be instituted that would address certain concerns of the
FDA and make the vaccine more viable from a regulatory and commercial perspective. Throughout the remainder of 2001 and into 2002,
we continued to evaluate (1) the prospect of freezing the haptenized cells for distribution to the end user, (2) steps
that could be taken to help ensure that final released vaccines prepared by us are sterile and (3) tests to determine the
minimal number of cells necessary for the vaccine to be effective. Based upon the results of these efforts, we re-engineered the
manufacturing steps to create and release the vaccine technology to take advantage of these potential product improvements.

Based upon the changes to the product, the FDA recommended that we consider
preparing and filing new INDs for the frozen vaccine. At the recommendation of the FDA, we decided to place our original INDs for
M-Vax and O-Vax on inactive status, given the FDAs view that the revisions to the manufacturing process, necessary to
address the Agencys concerns, would result in a new product from a regulatory perspective and given the Agencys
recommendation that we file new INDs for indications utilizing the new product. Based upon the continuing interactions with the
FDA in 2002, we determined to file new INDs for the revised product format for the AC Vaccine for melanoma and ovarian cancer. Our
Philadelphia facility was validated and cleared to begin processing clinical samples for administration to patients in clinical
trials. Due to a lack of funding, however, we decided not to initiate the clinical trials and instituted further cost minimization
steps which resulted in additional management changes at the end of 2002.

Also during 2002, based upon a negative reaction by authorities in Australia
to an application for product reimbursement for M-Vax, we determined that we would be unable to support further the operation in
Australia and a decision was made to discontinue and liquidate the Australian joint venture companies. We had not received formal
rejection of our reimbursement application, but a panel of oncologists selected by the regulatory authority in Australia had
recommended against governmental reimbursement for M-Vax in Australia. Subsequent to our liquidation of the Australian entity, we
received formal notification of our rejection of reimbursement by the appropriate authorities. Our experience in Australia
demonstrated the importance of obtaining support for the technology among the leading oncologists within a particular country or
community, which we were never able to achieve in Australia during this period. The results of the Australian operation, which was
consolidated in our results beginning in the first quarter of 2002, are treated as a discontinued operation and its results are
separated from our results from continuing operations.

In November 2003, we completed a bridge financing of $950,000 (before
expenses of approximately $26,250), which provided funding for U.S. operations (and certain of our European costs) for the balance
of 2003 and the first half of 2004. Seven individual and institutional investors participated in the financing. On May 21, 2004,
we closed a private placement of our common stock for gross proceeds of $3.05 million. In conjunction with the closing of the
private placement, the $950,000 principal amount of the bridge notes and accrued interest in the amount of $23,275 were converted
into approximately 7,487,000 shares of common stock in accordance with the terms of the bridge notes.

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Current Plan of Operation.   The following is a summary
of our plan of operation based on our current cash resources and assuming no material capital infusion in the next six months.

We are currently engaged in contract manufacturing and the development and
commercialization of biotechnology and pharmaceutical products and technologies. These activities take advantage of the facilities
and personnel that we are required to maintain to ensure that we process our products in accordance with cGMP requirements. With
out current compassionate use and clinical activities planned, we anticipate that this excess capacity will exist into the near
and long term. In 2002, we entered into a contract manufacturing engagement at our Lyon, France facility, which was completed in
November 2003. In February 2004 we entered into a manufacturing alliance with OPI that is providing approximately $1,500,000 (US)
funding per year from OPI for our combined facilities for 2004 and 2005, which combined facilities are under the management of
Genopoietic, our French subsidiary. This funding commitment and certain other grant revenue, tax refunds and existing cash
resources in France, should be sufficient to fund the manufacturing operations of our French facilities in 2004 but are not
sufficient to fund our administrative, research and product development programs for France outlined below. The operation of our
Lyon facility is, however, dependent upon the timely payment by OPI of its funding commitments and our ability to collect certain
accounts receivable on our books. Through the filing of this report, OPI has timely made all required payments to us under this
manufacturing alliance. We continue to pursue additional contract manufacturing agreements in the U.S. and France, which would
provide us with additional revenue to fund our operations and the costs of the facilities while we continue to explore other
options to finance our product and technology development programs. We believe that we have developed significant expertise in
producing certain biological products for clinical and development purposes, and that this expertise can be marketed by us to
other companies and research institutions engaged in clinical trials and product development programs. In addition, we have
invested significant amounts to establish and maintain current Good Manufacturing Practices (cGMP) at our manufacturing facilities
in Philadelphia, Pennsylvania and Lyon, France. We believe that services provided by these facilities may be valuable to other
companies that wish to avoid the significant cash outlays associated with buying or building their own cGMP facilities.

Our plan of operation is to obtain one or more additional contract
manufacturing agreements that can generate sufficient revenue to allow us to maintain these two facilities and to cover certain of
our other operating expenses while we continue to explore financing and strategic options to develop the AC Vaccine technology and
our other product candidates. In addition to the funds we received in May 2004, we need to raise additional capital in 2004 or the
first two months of 2005 to continue research, product development and clinical development.

With the net proceeds from our private placement of common stock and warrants
closed on May 21, 2004, we are pursuing the following development plan. We have, throughout 2003 and particularly in the second
half of 2003 and the first quarter of 2004, laid the foundation for a significantly more aggressive development plan for our key
technologies that we have not been able to pursue during the past three years. The full implementation of this plan is contingent
upon additional funds beyond those we received in the May 2004 private placement. The steps that have already been taken to
implement this plan include:

| |  |  | Continuing development work on the AC Vaccine, particularly in
France.
| | - |  | ----------------------------------------------------------------------

| |  |  | Pre-Biological License Application (BLA) filing meetings and
follow-up contacts with representatives of AFSSAPS (the French counterpart of the FDA) regarding our planned filing of a BLA in
France for the AC Vaccine.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Two IND filings in France relating to the AC Vaccine for
indications other than melanoma.
| | - |  | -----------------------------------------------------------------------------------------

| |  |  | Alliance with OPI to place management of their French facility
under Genopoietic management control and to obtain funding of the combined facility manufacturing operations from OPI.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Established and maintained at our Lyon, France facility the
designation Establissment Pharmaceutique under applicable French regulations.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Commenced treatment of melanoma patients on a compassionate use
basis with our AC Vaccine.
| | - |  | ------------------------------------------------------------------------------------------

With this foundation, our plan of operation (assuming appropriate funding
levels) includes:

| |  |  | A planned BLA filing in France by the end of 2004 for the
marketing of M-Vax in France.
| | - |  | ---------------------------------------------------------------------------------------

| |  |  | Commence a planned bridging study with AC Vaccine for melanoma,
using the DTH endpoint, to augment the BLA filing by the end of 2004.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------

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| |  |  | Commence
clinical trials for the AC Vaccine in France for multiple indications upon approval of
our INDs upon receipt of authorization from AFSSAPS.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Continuing
to offer M-Vax on a compassionate use basis in Spain, France and Belgium, and to seek
approval of compassionate use in other European countries to broaden the acceptance of
the therapy within the European oncology community.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Prepare
to approach the FDA with clinical data generated from our trials in France, and with the
planned BLA French submission information, to determine the expected clinical programs
which will need to be completed to be in a position to submit clinical data for approval
of the vaccine in the United States. We have held informal discussions with the FDA and
have submitted to the FDA an amendment to our current INDs for melanoma.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We continually evaluate our plan of operations discussed above to determine
the manner in which we can most effectively utilize our limited cash resources. The timing of completion of any aspect of our plan
of operations is highly dependant upon the availability of cash to implement that aspect of the plan and other factors beyond our
control. The full implementation of this plan of operation is dependent upon us obtaining additional funding before the end of
2004 or early in 2005. We believe we have the facilities, the facility managers and technical staff, the scientific staff and
consultants in place to implement this plan. If we were able to obtain additional funding, we would undoubtedly make a minimal
number of additional key employment offers, to re-establish our executive ranks.

# Results of Operations

Three and Nine Months Ended September 30, 2004, Compared to Three and Nine
Months Ended September 30, 2003.

Revenues recognized in the first nine and three months of 2004 were
$1,144,935 and $289,675, respectively, compared with revenues of $981,305 and $369,690, respectively, for the same periods in
2003. The increase over the nine-month period results from the consistent revenue recognition in the current year related to the
OPI contract. The decrease realized in the current three-month period is due to the higher amount of revenue recognized in the
prior year period on a manufacturing contract that has since terminated.

For the first nine months of 2004, the Companys research and
development expenses increased to $2,151,046 from $1,356,338 for the same nine months in 2003.Expenses for the periods are
broken out by region as follows:

|              | Three Months EndedSeptember 30, |  | Nine Months EndedSeptember 30,
|------------- | ------------------------------- |  | ------------------------------
|
|United States |                                 |  | $                             
|France        |                                 |  |                               
|              |                                 |  |                               
|              |                                 |  | $                             
|              |                                 |  |                               

In the United States, expenses for the nine-month period ended September
30, 2003 reflected an approximately $720,000 reversal of accruals resulting from the settlement of litigation related to prior
clinical activities. Without this reversal, research and development expenses in the first nine months of 2003 would have been
approximately $2,070,000, compared to approximately $2,151,000 for the same period in 2004. The overall expenses decreased in the
United States in 2004 due to lower headcount and the cancellation or expiration of research agreements. In France the increase in
2004 for nine-month expenses was due to the activities underway in preparing for the filing of the BLA with the French authorities
as well as pre-clinical activities underway that are necessary to commence clinical trials in France. In France, expenses were
consistent with the prior quarter, in which there was an increase in activities related to the BLA and clinical efforts.

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For the first nine months of 2004, the Companys selling, general and
administrative expenses increased to $1,551,404 from $1,501,944 for the same nine months in 2003. Expenses for the periods are
broken out by region as follows:

|              | Three Months EndedSeptember 30, |  | Nine Months EndedSeptember 30,
|------------- | ------------------------------- |  | ------------------------------
|
|United States |                                 |  | $                             
|France        |                                 |  |                               
|              |                                 |  |                               
|              |                                 |  | $                             
|              |                                 |  |                               

In the United States for the nine-month period the total decrease in expenses
is the result of declines in insurance expense and general operating expenses over the prior year. The increased expenses incurred
in the 2004 quarter over the previous years quarter is the result of increased costs associated with SEC filings related to
preparing and filing the registration statement to register for resale shares sold as part of the private placement in June 2004.

In France, selling, general and administrative expenses for the three- and
nine-month periods increased as a result of staff increases due to increased activities related to the compassionate use sales of
the vaccine in France and an increase in professional fees associated with finalizing and establishing the manufacturing alliance
during February 2004.

Interest expense for the nine months ended September 30, 2004 was $130,994
compared to no interest expense being recognized during the nine-month period ended September 30, 2003. The current year expense
includes interest accrued on the face amount of bridge loans plus amortization of the discount on the bridge loans issued in
December 2003. The loans subsequently matured and the notes and related accrued interest were converted into common stock.

The Company anticipates that, over the next 12 months, presuming it receives
funding or some other type of capital infusion, research and development expenses will increase as compared with 2003 due to
planned increases in the development activities related to the AC Vaccine.

# Liquidity and Capital Resources

We presently anticipate that our current resources plus the net proceeds of
the private placement that we closed on May 21, 2004 should be sufficient to fund operations through the end of 2004 and
possibly into the first quarter of 2005 depending upon how aggressively we implement our development plans discussed above. That
current operating plan includes anticipated expenses relating to (1) continuing patent costs associated with each of our
technologies, (2) continuing maintenance costs associated with the Philadelphia facility for utilization in production or contract
manufacturing, and (3) continuing costs associated with maintaining a cGMP-compliant facility in Lyon, France. We will need to
raise additional money or to initiate additional contract manufacturing relationships on terms favorable to us or enter into a
strategic alliance relationship by the end of 2004 to continue to maintain each of our manufacturing facilities and continue our
operations into 2005. If we are unable to raise additional money, secure additional contract manufacturing relationships or enter
into strategic alliances, we will have to curtail our development initiatives at the end of 2004 or early in 2005. The report of
independent auditors on the audit of our consolidated financial statements for the year ended December 31, 2003 contains an
explanatory paragraph about conditions raising substantial doubt about our ability to continue as a going concern.

If we do not commence new clinical trials for the AC Vaccine in the United
States or France in the near future, it is unlikely that we will be able to raise additional monies to fund our operations, in
which case we would likely cease operations. Likewise, if we resume clinical trials for one or more products, but those clinical
trials do not demonstrate continuing progress toward taking one or more products to market, either in the United States or in
Europe, our ability to raise additional capital to fund our product development efforts would likely be seriously impaired. The
ability of a biotechnology company, such as AVAX, to raise additional capital in the marketplace to fund its continuing
development operations is conditioned upon investor perception that the company is continuing to move its development products
ultimately toward regulatory approval and commercialization. If in the near term we do not resume clinical trials, or in the
future we do not demonstrate adequate progress in the development of one or more products, we will not be able to raise the
capital we need to continue our then-current business operations and business activities, and we would not likely have sufficient
liquidity or cash resources to continue operating.

Because our working capital requirements depend upon numerous factors,
including progress of our research and development programs, pre-clinical and clinical testing, timing and cost of obtaining
regulatory approvals, changes in levels of resources that we devote to the development of manufacturing and marketing
capabilities, competitive and technological advances, status of competitors, and our ability to establish collaborative
arrangements with other organizations, there can be no assurance that our current cash resources will be sufficient to fund our
operations through the end of 2004. Because we have no committed external

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sources of capital, and expect no significant product revenues for the
foreseeable future, we will require additional financing to fund future operations or will need to enter into contract
manufacturing relationships on terms favorable to us. There can be no assurance, however, that we will be able to obtain the
additional funds or attract contract manufacturing relationships that we will require on acceptable terms, if at all. If adequate
funds are not available we will likely cease operations in early 2005.

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# Item 3.   Controls and Procedures.

An evaluation was carried out
by the Companys chief executive and financial officer of the effectiveness of the design and operations of the
Companys disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)). Based upon that evaluation as of
the end of the period covered by this report, the chief executive and financial officer concluded that the Companys
disclosure controls and procedures are effective in timely alerting him to material information relating to the Company (including
its consolidated subsidiaries) required to be included in the Companys periodic filings with the SEC. There have been no
changes in the Companys internal controls over financial reporting during the quarter ended September 30, 2004, that have
materially affected, or are reasonably likely to materially affect, the Companys internal controls over financial reporting.

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# PART II  OTHER INFORMATION

# Item 6.   Exhibits.

| | 31.1 |  | Certifications of Principal Executive Officer of the Company under
Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
| | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------

| | 31.2 |  | Certifications of Principal Financial Officer of the Company under
Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
| | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------

| | 32.1 |  | Certifications of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350.
| | ---- |  | ---------------------------------------------------------------------------------------------------------

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Signatures

In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

|                          |                            |                         |  |                         | 
|------------------------- | -------------------------- | ----------------------- |  | ----------------------- | 
|                          |                            | AVAX Technologies, Inc.
|Date:   November 15, 2004 |                            | By:                     |  | /s/   Richard P. Rainey | 
|                          |                           
|                          | Richard P. RaineyPresident |                        

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