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

FORM 10-QSB

(Mark One)



|[x] |  | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934      
|--- |  | ---------------------------------------------------------------------------------------
|   
|    |  | For the quarterly period ended September 30, 2000                                      
|   
|[ ] |  | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT                        
|   
|    |  | For the transition period _________ to _________                                       
|   
|    |  | ANTEX BIOLOGICS INC.

(Exact name of small business issuer as specified in its charter)

|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Delaware                                                       |  | 52-1563899                       
|                                                               |  |                                  
|(State or other jurisdiction of incorporation
or organization) |  | (IRS Employer Identification No.)

| |  | 300 Professional Drive, Gaithersburg, MD 20879
(Address of principal executive offices)
| |  | ---------------------------------------------------------------------------------------
|
| |  | (301) 590-0129
(Issuers telephone number)                                             
|
| |  | (Former name, former address and former fiscal year, if changed since last report)     

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

APPLICABLE ONLY TO CORPORATE USERS

State the number of shares outstanding of each of the issuers classes of
common equity, as of the latest practicable date.

10,978,243 shares of Antex Biologics Inc. Common Stock, $.01 par value, were
outstanding as of October 20, 2000.

Transitional Small Business Disclosure Format (check one):

Yes ____             No  X





---



ANTEX BIOLOGICS INC.

FORM 10-QSB
QUARTER ENDED SEPTEMBER 30, 2000INDEX

|                              |                                                                                                               |  |                                                                                                                                                                                   |       |  |       | 
|----------------------------- | ------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----- |  | ----- | 
|Part I. Financial Information |                                                                                                               |  | Page No.                                                                                                                                                                          |      
|                              |                                                                                                               |  |                                                                                                                                                                                   |      
|                              | Item 1.   Financial Statements                                                                                |  |                                                                                                                                                                                   |       | 
|                             
|                             
|                             
|                             
|                              |                                                                                                               |  | Consolidated Balance Sheets at December 31, 1999 and
September 30, 2000 (Unaudited)                                                                                               |       |  | 3     | 
|                             
|                             
|                             
|                             
|                              |                                                                                                               |  | Consolidated Statements of Operations (Unaudited) for the
three months ended September 30, 1999 and 2000                                                                          |       |  | 4     | 
|                             
|                             
|                             
|                             
|                              |                                                                                                               |  | Consolidated Statements of Operations (Unaudited) for the
nine months ended September 30, 1999 and 2000 and the period
August 3, 1991 (inception) to September 30, 2000           |       |  | 5     | 
|                             
|                             
|                             
|                             
|                              |                                                                                                               |  | Consolidated Statements of Stockholders Equity (Deficit)
for the period August 3, 1991 (inception) to December 31, 1999
and the nine months ended September 30, 2000 (Unaudited) |       |  | 6-7   | 
|                             
|                             
|                             
|                             
|                              |                                                                                                               |  | Consolidated Statements of Cash Flows (Unaudited) for the
nine months ended September 30, 1999 and 2000 and the period
August 3, 1991 (inception) to September 30, 2000           |       |  | 8-9   | 
|                             
|                             
|                             
|                             
|                              |                                                                                                               |  | Notes to Consolidated Financial Statements                                                                                                                                        |       |  | 10-16 | 
|                             
|                             
|                             
|                             
|                              | Item 2.   Managements Discussion and Analysis of Financial Condition
and               Results of Operations |  |                                                                                                                                                                                   | 16-18 | 
|                             
|                             
|                             
|                             
|Part II. Other Information   
|                             
|                             
|                             
|                             
|                              | Item 2.   Changes in Securities                                                                               |  |                                                                                                                                                                                   | 18    | 
|                             
|                             
|                             
|                             
|                              | Item 6.   Exhibits and Reports on Form 8-K                                                                    |  |                                                                                                                                                                                   | 18    | 
|                             
|                             
|                             
|                             
|Signatures                    |                                                                                                               |  | 19                                                                                                                                                                                |      
|                             
|                             
|                             
|                             
|Exhibits                      |                                                                                                               |  | 20                                                                                                                                                                                |      

2



---



PART I: FINANCIAL INFORMATION

Antex Biologics Inc.
(a development stage enterprise)

Consolidated Balance Sheets

|                                     |                                                                                                                                                            |                                |           |              |           |               |            |             |            | 
|------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------ | --------- | ------------ | --------- | ------------- | ---------- | ----------- | ---------- | 
|                                     |                                                                                                                                                            |                                |           | December 31, |           | September 30,
|                                     |                                                                                                                                                            |                                |           | 1999         |           | 2000         
|                                     |                                                                                                                                                            |                                |           |              |           |              
|                                     |                                                                                                                                                            |                                |           |              |           |               |            | (Unaudited)
|Assets                              
|                                    
|                                    
|                                    
|                                    
|Current assets:                     
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                                                                                                            | Cash and cash equivalents      |           | $            | 1,706,275 |               |            | $           | 12,319,036 | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                                                                                                            | Accounts and other receivables |           |              | 104,766   |               |            |             | 93,876     | 
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                                                                                                            | Prepaid expenses               |           |              | 62,087    |               |            |             | 115,938    | 
|                                     |                                                                                                                                                            |                                |           |              |           |               |            |            
|Total current assets                 |                                                                                                                                                            |                                | 1,873,128 |              |           |               | 12,528,850 |            
|                                    
|                                    
|                                    
|                                    
|Property and equipment, net          |                                                                                                                                                            |                                | 734,051   |              |           |               | 821,840    |            
|                                    
|                                    
|                                    
|                                    
|Restricted cash                      |                                                                                                                                                            |                                | 146,600   |              |           |               | 146,600    |            
|                                    
|                                    
|                                    
|                                    
|Other                                |                                                                                                                                                            |                                | 27,291    |              |           |               | 27,291     |            
|                                     |                                                                                                                                                            |                                |           |              |           |               |            |            
|                                     |                                                                                                                                                            | $                              | 2,781,070 |              |           | $             | 13,524,581 |            
|                                     |                                                                                                                                                            |                                |           |              |           |               |            |            
|Liabilities and stockholders equity
|                                    
|                                    
|                                    
|                                    
|Current liabilities:                
|                                    
|                                    
|                                    
|                                    
|                                     | Accounts payable and accrued expenses                                                                                                                      |                                | $         | 297,171      |           |               | $          | 368,750     |           
|                                    
|                                    
|                                    
|                                    
|                                     | Deferred research and development revenue                                                                                                                  |                                |           | 558,156      |           |               |            | 634,756     |           
|                                    
|                                    
|                                    
|                                    
|                                     | Deferred gain on equipment                                                                                                                                 |                                |           | 49,590       |           |               |            | 49,590      |           
|                                     |                                                                                                                                                            |                                |           |              |           |               |            |            
|Total current liabilities            |                                                                                                                                                            |                                | 904,917   |              |           |               | 1,053,096  |            
|                                    
|                                    
|                                    
|                                    
|Deferred gain on equipment           |                                                                                                                                                            |                                | 103,419   |              |           |               | 66,225     |            
|                                    
|                                    
|                                    
|                                    
|Other                                |                                                                                                                                                            |                                | 44,701    |              |           |               | 23,524     |            
|                                     |                                                                                                                                                            |                                |           |              |           |               |            |            
|Total liabilities                    |                                                                                                                                                            |                                | 1,053,037 |              |           |               | 1,142,845  |            
|                                     |                                                                                                                                                            |                                |           |              |           |               |            |            
|Commitments and contingencies       
|                                    
|                                    
|                                    
|                                    
|Stockholders equity:               
|                                    
|                                    
|                                    
|                                    
|                                     | Preferred stock, $.01 par value; 5,000,000 shares
    authorized; Series A convertible preferred stock -
    none and 61,212 shares issued and outstanding |                                |           |             |           |               |            | 612         |           
|                                    
|                                    
|                                    
|                                    
|                                     | Common stock, $.01 par value; 95,000,000 shares
    authorized; 5,891,798 and 10,960,118 shares
    issued (Note 2)                                        |                                |           | 58,918       |           |               |            | 109,601     |           
|                                    
|                                    
|                                    
|                                    
|                                     | Additional paid-in capital                                                                                                                                 |                                |           | 20,147,578   |           |               |            | 35,479,131  |           
|                                    
|                                    
|                                    
|                                    
|                                     | Deficit accumulated during the development stage                                                                                                           |                                |           | (18,478,463  | )         |               |            | (23,207,608 | )         
|                                     |                                                                                                                                                            |                                |           |              |           |               |            |            
|Total stockholders equity           |                                                                                                                                                            |                                | 1,728,033 |              |           |               | 12,381,736 |            
|                                     |                                                                                                                                                            |                                |           |              |           |               |            |            
|                                     |                                                                                                                                                            | $                              | 2,781,070 |              |           | $             | 13,524,581 |            
|                                     |                                                                                                                                                            |                                |           |              |           |               |            |            

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

3



---



Antex Biologics Inc.
(a development stage enterprise)

Consolidated Statements of Operations
(Unaudited)

|                                            |                                          |   |                    |           |      |   |            |            |  
|------------------------------------------- | ---------------------------------------- | - | ------------------ | --------- | ---- | - | ---------- | ---------- | -
|                                            |                                          |   | Three Months      
|                                            |                                          |   | Ended September 30
|                                            |                                          |   |                   
|                                            |                                          |   | 1999               |           | 2000
|                                            |                                          |   |                    |           |     
|Revenues                                    |                                          | $ | 597,419            |           |      | $ | 57,093     |           
|                                            |                                          |   |                    |           |      |   |            |           
|Expenses:                                  
|                                           
|                                           
|                                           
|                                           
|                                            | Research and development                 |   |                    | 941,668   |      |   |            | 1,386,723  |  
|                                           
|                                           
|                                           
|                                           
|                                            | General and administrative               |   |                    | 342,840   |      |   |            | 618,745    |  
|                                            |                                          |   |                    |           |      |   |            |           
|Total expenses                              |                                          |   | 1,284,508          |           |      |   | 2,005,468  |           
|                                            |                                          |   |                    |           |      |   |            |           
|Loss from operations                        |                                          |   | (687,089           | )         |      |   | (1,948,375 | )         
|                                           
|                                           
|                                           
|                                           
|Other income (expense):                    
|                                           
|                                           
|                                           
|                                           
|                                            | Interest income                          |   |                    | 27,726    |      |   |            | 216,823    |  
|                                           
|                                           
|                                           
|                                           
|                                            | Expense recorded on issuance of warrants |   |                    |          |      |   |            | (189,616   | )
|                                            |                                          |   |                    |           |      |   |            |           
|Net loss                                    |                                          |   | (659,363           | )         |      |   | (1,921,168 | )         
|                                           
|                                           
|                                           
|                                           
|Non-cash dividend accretion                 |                                          |   |                   |           |      |   | (735,000   | )         
|                                            |                                          |   |                    |           |      |   |            |           
|Net loss applicable to common stockholders  |                                          | $ | (659,363           | )         |      | $ | (2,656,168 | )         
|                                            |                                          |   |                    |           |      |   |            |           
|Loss per common share:                     
|                                           
|                                           
|                                           
|                                           
|                                            | Basic and diluted                        |   | $                  | (0.12     | )    |   | $          | (0.25      | )
|                                            |                                          |   |                    |           |      |   |            |           
|Weighted average common shares outstanding:
|                                           
|                                           
|                                           
|                                           
|                                            | Basic and diluted                        |   |                    | 5,412,429 |      |   |            | 10,683,660 |  
|                                            |                                          |   |                    |           |      |   |            |           

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

4



---



Antex Biologics Inc.
(a development stage enterprise)

Consolidated Statements of Operations
(Unaudited)

|                                            |                            |                                                 |            |                    |         |                |            |                    |          |   |             |            |            |  
|------------------------------------------- | -------------------------- | ----------------------------------------------- | ---------- | ------------------ | ------- | -------------- | ---------- | ------------------ | -------- | - | ----------- | ---------- | ---------- | -
|                                            |                            |                                                 |            | Nine Months        |         | August 3, 1991
|                                            |                            |                                                 |            | Ended September 30 |         | (inception)   
|                                            |                            |                                                 |            |                    |         | to            
|                                            |                            |                                                 |            | 1999               |         | 2000           |            | September 30, 2000
|                                            |                            |                                                 |            |                    |         |                |            |                   
|Revenues                                    |                            | $                                               | 2,251,207  |                    |         | $              | 213,964    |                    |          | $ | 16,796,228  |           
|                                            |                            |                                                 |            |                    |         |                |            |                    |          |   |             |           
|Expenses:                                  
|                                           
|                                           
|                                           
|                                           
|                                            | Research and development   |                                                 |            | 3,085,117          |         |                |            | 3,694,872          |          |   |             | 25,572,230 |           
|                                           
|                                           
|                                           
|                                           
|                                            | General and administrative |                                                 |            | 1,257,235          |         |                |            | 1,578,305          |          |   |             | 13,173,816 |           
|                                            |                            |                                                 |            |                    |         |                |            |                    |          |   |             |           
|Total expenses                              |                            |                                                 | 4,342,352  |                    |         |                | 5,273,177  |                    |          |   | 38,746,046  |           
|                                            |                            |                                                 |            |                    |         |                |            |                    |          |   |             |           
|Loss from operations                        |                            |                                                 | (2,091,145 | )                  |         |                | (5,059,213 | )                  |          |   | (21,949,818 | )         
|                                           
|                                           
|                                           
|                                           
|Other income (expense):                    
|                                           
|                                           
|                                           
|                                           
|                                            |                            | Interest income                                 |            |                    | 109,576 |                |            |                    | 564,828  |   |             |            | 1,899,681  |  
|                                           
|                                           
|                                           
|                                           
|                                            |                            | Expense recorded on issuance of warrants        |            |                    |        |                |            |                    | (234,760 | ) |             |            | (737,300   | )
|                                           
|                                           
|                                           
|                                           
|                                            |                            | Cost of treasury shares in excess
of fair value |            |                    |        |                |            |                    |         |   |             |            | (1,711,814 | )
|                                           
|                                           
|                                           
|                                           
|                                            |                            | Interest expense                                |            |                    |        |                |            |                    |         |   |             |            | (708,357   | )
|                                            |                            |                                                 |            |                    |         |                |            |                    |          |   |             |           
|Net loss                                    |                            |                                                 | (1,981,569 | )                  |         |                | (4,729,145 | )                  |          |   | (23,207,608 | )         
|                                           
|                                           
|                                           
|                                           
|Non-cash dividend accretion                 |                            |                                                 |           |                    |         |                | (1,592,500 | )                  |          |   | (1,592,500  | )         
|                                            |                            |                                                 |            |                    |         |                |            |                    |          |   |             |           
|Net loss applicable to common stockholders  |                            | $                                               | (1,981,569 | )                  |         | $              | (6,321,645 | )                  |          | $ | (24,800,108 | )         
|                                            |                            |                                                 |            |                    |         |                |            |                    |          |   |             |           
|Loss per common share:                     
|                                           
|                                           
|                                           
|                                           
|                                            | Basic and diluted          |                                                 | $          | (0.38              | )       |                | $          | (0.70              | )       
|                                            |                            |                                                 |            |                    |         |                |            |                   
|Weighted average common shares outstanding:
|                                           
|                                           
|                                           
|                                           
|                                            | Basic and diluted          |                                                 |            | 5,252,640          |         |                |            | 9,082,525          |         
|                                            |                            |                                                 |            |                    |         |                |            |                   

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

5



---



Antex Biologics Inc.
(a development stage enterprise)

Consolidated Statements of Stockholders Equity (Deficit)

For the Period August 3, 1991 (Inception) to December 31, 1999
and the Nine Months Ended September 30, 2000 (Unaudited)

|                                                                                        |                                                              |  |                 |       |              |   |        |    |           |  |           |           |  |   |        |        | 
|--------------------------------------------------------------------------------------- | ------------------------------------------------------------ |  | --------------- | ----- | ------------ | - | ------ | -- | --------- |  | --------- | --------- |  | - | ------ | ------ | 
|                                                                                        |                                                              |  | Preferred Stock |       | Common Stock
|                                                                                        |                                                              |  |                
|                                                                                        |                                                              |  | Shares          |       | Par Value    |   | Shares |    | Par Value
|                                                                                        |                                                              |  |                
|Initial capitalization ($.20 per share), as previously reported                         |                                                              |  |                |       |              | $ |       |    |           |  | 390,830   |           |  | $ | 3,908  |       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Adjustment to reflect one-for-five reverse split of common shares                       |                                                              |  |                |       |              |   |       |    |           |  | (312,664  | )         |  |   | (3,126 | )     
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Net loss                                                                                |                                                              |  |                |       |              |   |       |    |           |  |          |           |  |   |       |       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        |                                                              |  |                
|Balance at December 31, 1991                                                            |                                                              |  |                |       |              |   |       |    |           |  | 78,166    |           |  |   | 782    |       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Sale of common stock for cash, January 1992 ($23.05 per share)                          |                                                              |  |                |       |              |   |       |    |           |  | 8,686     |           |  |   | 87     |       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Sale of common stock for cash, February 1992 ($34.50 per share)                         |                                                              |  |                |       |              |   |       |    |           |  | 23,160    |           |  |   | 231    |       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Issuance of common stock for
services, March 1992 to July 1992    ($10.00 per share)    |                                                              |  |                |       |              |   |       |    |           |  |          |           |  |   |       |       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Conversion of notes
payable into preferred stock, September 1992    ($22.40 per share)  |                                                              |  | 22,740          |       |              |   | 227    |    |           |  |          |           |  |   |       |       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Sale of preferred stock for
cash, September 1992    ($22.40 per share)                  |                                                              |  | 17,866          |       |              |   | 179    |    |           |  |          |           |  |   |       |       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Issuance of preferred stock upon exercise of warrants, September 1992                  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | ($9.60 per share)                                            |  |                 | 9,380 |              |   |        | 94 |           |  |           |          |  |   |        |       | 
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Issuance of common stock for
cash ($5.00 per share) and services     ($5.00 per share),
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | October 1992                                                 |  |                 |      |              |   |        |   |           |  |           | 15,000    |  |   |        | 150    | 
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Conversion of preferred stock into common stock, December 1992                          |                                                              |  | (49,986         | )     |              |   | (500   | )  |           |  | 49,986    |           |  |   | 500    |       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Sale of common stock and warrants for cash, December 1992 ($24.18 per unit,            
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | net of offering costs of $1,396,893 or $5.82 per unit)       |  |                 |      |              |   |        |   |           |  |           | 240,000   |  |   |        | 2,400  | 
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Net loss                                                                                |                                                              |  |                |       |              |   |       |    |           |  |          |           |  |   |       |       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        |                                                              |  |                
|Balance at December 31, 1992                                                            |                                                              |  |                |       |              |   |       |    |           |  | 414,998   |           |  |   | 4,150  |       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Sale of common stock and warrants for cash, January 1993 ($26.34 per unit, net         
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | of offering costs of $131,723 or $3.66 per unit)             |  |                 |      |              |   |        |   |           |  |           | 36,000    |  |   |        | 360    | 
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Compensation and consulting expense in connection with options granted                  |                                                              |  |                |       |              |   |       |    |           |  |          |           |  |   |       |       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Net loss                                                                                |                                                              |  |                |       |              |   |       |    |           |  |          |           |  |   |       |       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        |                                                              |  |                
|Balance at December 31, 1993                                                            |                                                              |  |                |       |              |   |       |    |           |  | 450,998   |           |  |   | 4,510  |       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Net loss                                                                                |                                                              |  |                |       |              |   |       |    |           |  |          |           |  |   |       |       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        |                                                              |  |                
|Balance at December 31, 1994                                                            |                                                              |  |                |       |              |   |       |    |           |  | 450,998   |           |  |   | 4,510  |       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Sale of common stock and warrants for cash, March and April 1995 ($39,972 per          
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | unit, net of offering costs of $706,971 or $10,028 per unit) |  |                 |      |              |   |        |   |           |  |           | 2,014,326 |  |   |        | 20,143 | 
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Registration of common stock and warrants, October 1995 ($1,525 per unit)               |                                                              |  |                |       |              |   |       |    |           |  |          |           |  |   |       |       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Net loss                                                                                |                                                              |  |                |       |              |   |       |    |           |  |          |           |  |   |       |       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        |                                                              |  |                
|Balance at December 31, 1995                                                            |                                                              |  |                |       |              |   |       |    |           |  | 2,465,324 |           |  |   | 24,653 |       

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                                                                        |                                                              |   |                 |           |       |   |             |   | 
|--------------------------------------------------------------------------------------- | ------------------------------------------------------------ | - | --------------- | --------- | ----- | - | ----------- | - | 
|                                                                                        |                                                              |   |                 |           |       |   |            
|                                                                                        |                                                              |   |                 |           |       |   | Deficit    
|                                                                                        |                                                              |   |                 |           |       |   | Accumulated
|                                                                                        |                                                              |   |                 |           |       |   | During the 
|                                                                                        |                                                              |   | Additional      |          
|                                                                                        |                                                              |   | Paid-In Capital |           | Stage
|                                                                                        |                                                              |   |                
|Initial capitalization ($.20 per share), as previously reported                         |                                                              | $ | 74,093          |           |       | $ |            |  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Adjustment to reflect one-for-five reverse split of common shares                       |                                                              |   | 3,126           |           |       |   |            |  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Net loss                                                                                |                                                              |   |                |           |       |   | (941,145    | )
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        |                                                              |   |                
|Balance at December 31, 1991                                                            |                                                              |   | 77,219          |           |       |   | (941,145    | )
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Sale of common stock for cash, January 1992 ($23.05 per share)                          |                                                              |   | 199,913         |           |       |   |            |  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Sale of common stock for cash, February 1992 ($34.50 per share)                         |                                                              |   | 799,769         |           |       |   |            |  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Issuance of common stock for
services, March 1992 to July 1992    ($10.00 per share)    |                                                              |   | 383,014         |           |       |   |            |  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Conversion of notes
payable into preferred stock, September 1992    ($22.40 per share)  |                                                              |   | 508,882         |           |       |   |            |  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Sale of preferred stock for
cash, September 1992    ($22.40 per share)                  |                                                              |   | 400,010         |           |       |   |            |  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Issuance of preferred stock upon exercise of warrants, September 1992                  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | ($9.60 per share)                                            |   |                 | 89,906    |       |   |             |  | 
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Issuance of common stock for
cash     ($5.00 per share) and services ($5.00 per share),
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | October 1992                                                 |   |                 | 149,850   |       |   |             |  | 
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Conversion of preferred stock into common stock, December 1992                          |                                                              |   |                |           |       |   |            |  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Sale of common stock and warrants for cash, December 1992 ($24.18 per unit,            
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | net of offering costs of $1,396,893 or $5.82 per unit)       |   |                 | 5,800,827 |       |   |             |  | 
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Net loss                                                                                |                                                              |   |                |           |       |   | (2,415,723  | )
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        |                                                              |   |                
|Balance at December 31, 1992                                                            |                                                              |   | 8,409,390       |           |       |   | (3,356,868  | )
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Sale of common stock and warrants for cash, January 1993 ($26.34 per unit, net         
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | of offering costs of $131,723 or $3.66 per unit)             |   |                 | 947,917   |       |   |             |  | 
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Compensation and consulting expense in connection with options granted                  |                                                              |   | 64,011          |           |       |   |            |  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Net loss                                                                                |                                                              |   |                |           |       |   | (2,725,902  | )
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        |                                                              |   |                
|Balance at December 31, 1993                                                            |                                                              |   | 9,421,318       |           |       |   | (6,082,770  | )
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Net loss                                                                                |                                                              |   |                |           |       |   | (3,040,032  | )
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        |                                                              |   |                
|Balance at December 31, 1994                                                            |                                                              |   | 9,421,318       |           |       |   | (9,122,802  | )
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Sale of common stock and warrants for cash, March and April 1995 ($39,972 per          
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | unit, net of offering costs of $706,971 or $10,028 per unit) |   |                 | 2,797,887 |       |   |             |  | 
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Registration of common stock and warrants, October 1995 ($1,525 per unit)               |                                                              |   | (107,530        | )         |       |   |            |  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Net loss                                                                                |                                                              |   |                |           |       |   | (3,131,059  | )
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        |                                                              |   |                
|Balance at December 31, 1995                                                            |                                                              |   | 12,111,675      |           |       |   | (12,253,861 | )

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                                                                        |                                                              |  |                |   |      |   |       |   |  |   |            |           | 
|--------------------------------------------------------------------------------------- | ------------------------------------------------------------ |  | -------------- | - | ---- | - | ----- | - |  | - | ---------- | --------- | 
|                                                                                        |                                                              |  | Treasury Stock
|                                                                                        |                                                              |  |               
|                                                                                        |                                                              |  | Shares         |   | Cost |   | Total
|                                                                                        |                                                              |  |               
|Initial capitalization ($.20 per share), as previously reported                         |                                                              |  |               |   |      | $ |      |   |  | $ | 78,001     |          
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Adjustment to reflect one-for-five reverse split of common shares                       |                                                              |  |               |   |      |   |      |   |  |   |           |          
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Net loss                                                                                |                                                              |  |               |   |      |   |      |   |  |   | (941,145   | )        
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        |                                                              |  |               
|Balance at December 31, 1991                                                            |                                                              |  |               |   |      |   |      |   |  |   | (863,144   | )        
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Sale of common stock for cash, January 1992 ($23.05 per share)                          |                                                              |  |               |   |      |   |      |   |  |   | 200,000    |          
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Sale of common stock for cash, February 1992 ($34.50 per share)                         |                                                              |  |               |   |      |   |      |   |  |   | 800,000    |          
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Issuance of common stock for
services, March 1992 to July 1992    ($10.00 per share)    |                                                              |  |               |   |      |   |      |   |  |   | 383,014    |          
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Conversion of notes
payable into preferred stock, September 1992    ($22.40 per share)  |                                                              |  |               |   |      |   |      |   |  |   | 509,109    |          
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Sale of preferred stock for
cash, September 1992    ($22.40 per share)                  |                                                              |  |               |   |      |   |      |   |  |   | 400,189    |          
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Issuance of preferred stock upon exercise of warrants, September 1992                  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | ($9.60 per share)                                            |  |                |  |      |   |       |  |  |   |            | 90,000    | 
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Issuance of common stock for
cash ($5.00 per share) and services     ($5.00 per share),
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | October 1992                                                 |  |                |  |      |   |       |  |  |   |            | 150,000   | 
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Conversion of preferred stock into common stock, December 1992                          |                                                              |  |               |   |      |   |      |   |  |   |           |          
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Sale of common stock and warrants for cash, December 1992 ($24.18 per unit,            
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | net of offering costs of $1,396,893 or $5.82 per unit)       |  |                |  |      |   |       |  |  |   |            | 5,803,227 | 
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Net loss                                                                                |                                                              |  |               |   |      |   |      |   |  |   | (2,415,723 | )        
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        |                                                              |  |               
|Balance at December 31, 1992                                                            |                                                              |  |               |   |      |   |      |   |  |   | 5,056,672  |          
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Sale of common stock and warrants for cash, January 1993 ($26.34 per unit, net         
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | of offering costs of $131,723 or $3.66 per unit)             |  |                |  |      |   |       |  |  |   |            | 948,277   | 
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Compensation and consulting expense in connection with options granted                  |                                                              |  |               |   |      |   |      |   |  |   | 64,011     |          
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Net loss                                                                                |                                                              |  |               |   |      |   |      |   |  |   | (2,725,902 | )        
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        |                                                              |  |               
|Balance at December 31, 1993                                                            |                                                              |  |               |   |      |   |      |   |  |   | 3,343,058  |          
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Net loss                                                                                |                                                              |  |               |   |      |   |      |   |  |   | (3,040,032 | )        
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        |                                                              |  |               
|Balance at December 31, 1994                                                            |                                                              |  |               |   |      |   |      |   |  |   | 303,026    |          
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Sale of common stock and warrants for cash, March and April 1995 ($39,972 per          
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | unit, net of offering costs of $706,971 or $10,028 per unit) |  |                |  |      |   |       |  |  |   |            | 2,818,030 | 
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Registration of common stock and warrants, October 1995 ($1,525 per unit)               |                                                              |  |               |   |      |   |      |   |  |   | (107,530   | )        
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Net loss                                                                                |                                                              |  |               |   |      |   |      |   |  |   | (3,131,059 | )        
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        |                                                              |  |               
|Balance at December 31, 1995                                                            |                                                              |  |               |   |      |   |      |   |  |   | (117,533   | )        

(continued)

The accompanying notes are an integral part of these financial statements

6



---



Antex Biologics Inc.
(a development stage enterprise)

Consolidated Statements of Stockholders Equity (Deficit)

For the Period August 3, 1991 (Inception) to December 31, 1999
and the Nine Months Ended September 30, 2000 (Unaudited)

|                                                                                  |                                                                        |  |                 |        |              |   |        |     |           |  |            |           |  |   |         |        | 
|--------------------------------------------------------------------------------- | ---------------------------------------------------------------------- |  | --------------- | ------ | ------------ | - | ------ | --- | --------- |  | ---------- | --------- |  | - | ------- | ------ | 
|                                                                                  |                                                                        |  | Preferred Stock |        | Common Stock
|                                                                                  |                                                                        |  |                
|                                                                                  |                                                                        |  | Shares          |        | Par Value    |   | Shares |     | Par Value
|                                                                                  |                                                                        |  |                
|Issuance of exchange option, May 1996 ($1.85 per share, net of costs of $351,082) |                                                                        |  |                |        |              | $ |       |     |           |  |           |           |  | $ |        |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Issuance of common stock upon exercise of Class B Warrants and stock options,    
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | May to August 1996 ($2.50 per share, net of related costs of $214,811) |  |                 |       |              |   |        |    |           |  |            | 2,030,612 |  |   |         | 20,306 | 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Net income                                                                        |                                                                        |  |                |        |              |   |       |     |           |  |           |           |  |   |        |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                        |  |                
|Balance at December 31, 1996                                                      |                                                                        |  |                |        |              |   |       |     |           |  | 4,495,936  |           |  |   | 44,959  |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Issuance of common stock upon exercise of stock options, October 1997             |                                                                        |  |                |        |              |   |       |     |           |  | 125        |           |  |   | 1       |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Net loss                                                                          |                                                                        |  |                |        |              |   |       |     |           |  |           |           |  |   |        |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                        |  |                
|Balance at December 31, 1997                                                      |                                                                        |  |                |        |              |   |       |     |           |  | 4,496,061  |           |  |   | 44,960  |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Forfeiture of escrowed shares, May 1998                                           |                                                                        |  |                |        |              |   |       |     |           |  | (58,332    | )         |  |   | (583    | )     
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Cashless exercise of Placement Agents unit purchase option, September 1998      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | ($121,430 per unit)                                                    |  |                 |       |              |   |        |    |           |  |            | 1,409,742 |  |   |         | 14,097 | 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Issuance of common stock for services, October 1998 ($1.45 per share)             |                                                                        |  |                |        |              |   |       |     |           |  | 10,000     |           |  |   | 100     |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Net loss                                                                          |                                                                        |  |                |        |              |   |       |     |           |  |           |           |  |   |        |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                        |  |                
|Balance at December 31, 1998                                                      |                                                                        |  |                |        |              |   |       |     |           |  | 5,857,471  |           |  |   | 58,574  |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Exercise of exchange option, September 1999                                       |                                                                        |  |                |        |              |   |       |     |           |  | 719,053    |           |  |   | 7,191   |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Issuance of amended and restated warrant, September 1999                          |                                                                        |  |                |        |              |   |       |     |           |  |           |           |  |   |        |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Cancellation of treasury stock, September 1999                                    |                                                                        |  |                |        |              |   |       |     |           |  | (684,726   | )         |  |   | (6,847  | )     
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Net loss                                                                          |                                                                        |  |                |        |              |   |       |     |           |  |           |           |  |   |        |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                        |  |                
|Balance at December 31, 1999                                                      |                                                                        |  |                |        |              |   |       |     |           |  | 5,891,798  |           |  |   | 58,918  |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Issuance of common stock upon exercise of stock options                           |                                                                        |  |                |        |              |   |       |     |           |  | 5,706      |           |  |   | 56      |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Sale of preferred stock, common stock, and warrants for cash, March 2000         
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | ($3.30 per unit, net of offering costs of $211,862)                    |  |                 | 44,545 |              |   |        | 445 |           |  |            | 3,743,573 |  |   |         | 37,436 | 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Consulting expense in connection with warrants issued (April and August 2000)     |                                                                        |  |                |        |              |   |       |     |           |  |           |           |  |   |        |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Cashless exercise of SmithKlines warrant, May 2000 ($1.85 per warrant)           |                                                                        |  |                |        |              |   |       |     |           |  | 773,154    |           |  |   | 7,732   |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Cancellation of treasury stock, July 2000                                         |                                                                        |  |                |        |              |   |       |     |           |  | (74,113    | )         |  |   | (741    | )     
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Issuance of common stock for warrants, August 2000                                |                                                                        |  |                |        |              |   |       |     |           |  | 620,000    |           |  |   | 6,200   |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Issuance of preferred stock as compensation in private placement, August 2000     |                                                                        |  | 16,667          |        |              |   | 167    |     |           |  |           |           |  |   |        |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Dividend accretion on preferred Series A                                          |                                                                        |  |                |        |              |   |       |     |           |  |           |           |  |   |        |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Compensation expense in connection with options granted                           |                                                                        |  |                |        |              |   |       |     |           |  |           |           |  |   |        |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Net loss for the period                                                           |                                                                        |  |                |        |              |   |       |     |           |  |           |           |  |   |        |       
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                        |  |                
|Balance at September 30, 2000                                                     |                                                                        |  | 61,212          |        |              | $ | 612    |     |           |  | 10,960,118 |           |  | $ | 109,601 |       
|                                                                                  |                                                                        |  |                

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                                                                  |                                                                        |   |                 |            |       |   |             |   | 
|--------------------------------------------------------------------------------- | ---------------------------------------------------------------------- | - | --------------- | ---------- | ----- | - | ----------- | - | 
|                                                                                  |                                                                        |   |                 |            |       |   | Deficit    
|                                                                                  |                                                                        |   |                 |            |       |   | Accumulated
|                                                                                  |                                                                        |   |                 |            |       |   | During the 
|                                                                                  |                                                                        |   |                 |            |       |   |            
|                                                                                  |                                                                        |   | Additional      |           
|                                                                                  |                                                                        |   | Paid-In Capital |            | Stage
|                                                                                  |                                                                        |   |                
|Issuance of exchange option, May 1996 ($1.85 per share, net of costs of $351,082) |                                                                        | $ | 979,166         |            |       | $ |            |  
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Issuance of common stock upon exercise of Class B Warrants and stock options,    
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | May to August 1996 ($2.50 per share, net of related costs of $214,811) |   |                 | 4,841,413  |       |   |             |  | 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Net income                                                                        |                                                                        |   |                |            |       |   | 535,435     |  
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                        |   |                
|Balance at December 31, 1996                                                      |                                                                        |   | 17,932,254      |            |       |   | (11,718,426 | )
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Issuance of common stock upon exercise of stock options, October 1997             |                                                                        |   | 428             |            |       |   |            |  
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Net loss                                                                          |                                                                        |   |                |            |       |   | (442,676    | )
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                        |   |                
|Balance at December 31, 1997                                                      |                                                                        |   | 17,932,682      |            |       |   | (12,161,102 | )
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Forfeiture of escrowed shares, May 1998                                           |                                                                        |   | 583             |            |       |   |            |  
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Cashless exercise of Placement Agents unit purchase option, September 1998      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | ($121,430 per unit)                                                    |   |                 | 2,981,577  |       |   |             |  | 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Issuance of common stock for services, October 1998 ($1.45 per share)             |                                                                        |   | 14,400          |            |       |   |            |  
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Net loss                                                                          |                                                                        |   |                |            |       |   | (2,833,687  | )
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                        |   |                
|Balance at December 31, 1998                                                      |                                                                        |   | 20,929,242      |            |       |   | (14,994,789 | )
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Exercise of exchange option, September 1999                                       |                                                                        |   | (7,191          | )          |       |   |            |  
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Issuance of amended and restated warrant, September 1999                          |                                                                        |   | 502,540         |            |       |   |            |  
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Cancellation of treasury stock, September 1999                                    |                                                                        |   | (1,277,013      | )          |       |   |            |  
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Net loss                                                                          |                                                                        |   |                |            |       |   | (3,483,674  | )
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                        |   |                
|Balance at December 31, 1999                                                      |                                                                        |   | 20,147,578      |            |       |   | (18,478,463 | )
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Issuance of common stock upon exercise of stock options                           |                                                                        |   | 8,742           |            |       |   |            |  
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Sale of preferred stock, common stock, and warrants for cash, March 2000         
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | ($3.30 per unit, net of offering costs of $211,862)                    |   |                 | 15,044,048 |       |   |             |  | 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Consulting expense in connection with warrants issued (April and August 2000)     |                                                                        |   | 234,760         |            |       |   |            |  
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Cashless exercise of SmithKlines warrant, May 2000 ($1.85 per warrant)           |                                                                        |   | 1,422,603       |            |       |   |            |  
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Cancellation of treasury stock, July 2000                                         |                                                                        |   | (1,429,594      | )          |       |   |            |  
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Issuance of common stock for warrants, August 2000                                |                                                                        |   | (6,200          | )          |       |   |            |  
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Issuance of preferred stock as compensation in private placement, August 2000     |                                                                        |   | (167            | )          |       |   |            |  
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Dividend accretion on preferred Series A                                          |                                                                        |   |                |            |       |   |            |  
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Compensation expense in connection with options granted                           |                                                                        |   | 57,361          |            |       |   |            |  
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Net loss for the period                                                           |                                                                        |   |                |            |       |   | (4,729,145  | )
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                        |   |                
|Balance at September 30, 2000                                                     |                                                                        | $ | 35,479,131      |            |       | $ | (23,207,608 | )
|                                                                                  |                                                                        |   |                

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                                                                  |                                                                        |   |                |         |      |   |            |            |   |   |            |            | 
|--------------------------------------------------------------------------------- | ---------------------------------------------------------------------- | - | -------------- | ------- | ---- | - | ---------- | ---------- | - | - | ---------- | ---------- | 
|                                                                                  |                                                                        |   | Treasury Stock
|                                                                                  |                                                                        |   |               
|                                                                                  |                                                                        |   | Shares         |         | Cost |   | Total     
|                                                                                  |                                                                        |   |               
|Issuance of exchange option, May 1996 ($1.85 per share, net of costs of $351,082) |                                                                        | $ |               |         |      | $ |           |            |   | $ | 979,166    |           
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Issuance of common stock upon exercise of Class B Warrants and stock options,    
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | May to August 1996 ($2.50 per share, net of related costs of $214,811) |   |                |        |      |   |            |           |   |   |            | 4,861,719  | 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Net income                                                                        |                                                                        |   |               |         |      |   |           |            |   |   | 535,435    |           
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                        |   |               
|Balance at December 31, 1996                                                      |                                                                        |   |               |         |      |   |           |            |   |   | 6,258,787  |           
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Issuance of common stock upon exercise of stock options, October 1997             |                                                                        |   |               |         |      |   |           |            |   |   | 429        |           
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Net loss                                                                          |                                                                        |   |               |         |      |   |           |            |   |   | (442,676   | )         
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                        |   |               
|Balance at December 31, 1997                                                      |                                                                        |   |               |         |      |   |           |            |   |   | 5,816,540  |           
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Forfeiture of escrowed shares, May 1998                                           |                                                                        |   |               |         |      |   |           |            |   |   |           |           
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Cashless exercise of Placement Agents unit purchase option, September 1998      
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | ($121,430 per unit)                                                    |   |                | 684,726 |      |   |            | (1,283,860 | ) |   |            | 1,711,814  | 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Issuance of common stock for services, October 1998 ($1.45 per share)             |                                                                        |   |               |         |      |   |           |            |   |   | 14,500     |           
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Net loss                                                                          |                                                                        |   |               |         |      |   |           |            |   |   | (2,833,687 | )         
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                        |   |               
|Balance at December 31, 1998                                                      |                                                                        |   | 684,726        |         |      |   | (1,283,860 | )          |   |   | 4,709,167  |           
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Exercise of exchange option, September 1999                                       |                                                                        |   |               |         |      |   |           |            |   |   |           |           
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Issuance of amended and restated warrant, September 1999                          |                                                                        |   |               |         |      |   |           |            |   |   | 502,540    |           
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Cancellation of treasury stock, September 1999                                    |                                                                        |   | (684,726       | )       |      |   | 1,283,860  |            |   |   |           |           
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Net loss                                                                          |                                                                        |   |               |         |      |   |           |            |   |   | (3,483,674 | )         
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                        |   |               
|Balance at December 31, 1999                                                      |                                                                        |   |               |         |      |   |           |            |   |   | 1,728,033  |           
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Issuance of common stock upon exercise of stock options                           |                                                                        |   |               |         |      |   |           |            |   |   | 8,798      |           
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Sale of preferred stock, common stock, and warrants for cash, March 2000         
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  | ($3.30 per unit, net of offering costs of $211,862)                    |   |                |        |      |   |            |           |   |   |            | 15,081,929 | 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Consulting expense in connection with warrants issued (April and August 2000)     |                                                                        |   |               |         |      |   |           |            |   |   | 234,760    |           
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Cashless exercise of SmithKlines warrant, May 2000 ($1.85 per warrant)           |                                                                        |   | 74,113         |         |      |   | (1,430,335 | )          |   |   |           |           
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Cancellation of treasury stock, July 2000                                         |                                                                        |   | (74,113        | )       |      |   | 1,430,335  |            |   |   |           |           
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Issuance of common stock for warrants, August 2000                                |                                                                        |   |               |         |      |   |           |            |   |   |           |           
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Issuance of preferred stock as compensation in private placement, August 2000     |                                                                        |   |               |         |      |   |           |            |   |   |           |           
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Dividend accretion on preferred Series A                                          |                                                                        |   |               |         |      |   |           |            |   |   |           |           
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Compensation expense in connection with options granted                           |                                                                        |   |               |         |      |   |           |            |   |   | 57,361     |           
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Net loss for the period                                                           |                                                                        |   |               |         |      |   |           |            |   |   | (4,729,145 | )         
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                                                                        |   |               
|Balance at September 30, 2000                                                     |                                                                        |   |               |         |      | $ |           |            |   | $ | 12,381,736 |           
|                                                                                  |                                                                        |   |               

The accompanying notes are an integral part of these financial statements

7



---



Antex Biologics Inc.
(a development stage enterprise)

Consolidated Statements of Cash Flows
(Unaudited)

|                                                                                        |                                                                                                                                                       |   |                    |          |                |   |                    |         |   |   |             |           |  
|--------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------------------ | -------- | -------------- | - | ------------------ | ------- | - | - | ----------- | --------- | -
|                                                                                        |                                                                                                                                                       |   | Nine Months        |          | August 3, 1991
|                                                                                        |                                                                                                                                                       |   | Ended September 30 |          | (inception)   
|                                                                                        |                                                                                                                                                       |   |                    |          | to            
|                                                                                        |                                                                                                                                                       |   | 1999               |          | 2000           |   | September 30, 2000
|                                                                                        |                                                                                                                                                       |   |                    |          |                |   |                   
|Operating activities                                                                   
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Net loss                                                                                |                                                                                                                                                       | $ | (1,981,569         | )        |                | $ | (4,729,145         | )       |   | $ | (23,207,608 | )        
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Adjustments to reconcile net loss to net
    cash used in development stage activities:
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | Depreciation and amortization of
        property and equipment, net of
        amortization of deferred gain on
        sale/leaseback and equipment |   |                    | 88,300   |                |   |                    | 145,081 |   |   |             | 569,727   |  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | Amortization of deferred credits                                                                                                                      |   |                    | (21,177  | )              |   |                    | (21,177 | ) |   |             | (464,828  | )
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | Expense recorded on cashless exercise
        of common stock options and warrants                                                                    |   |                    |         |                |   |                    |        |   |   |             | 1,711,814 |  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | Writedown of construction in progress                                                                                                                 |   |                    |         |                |   |                    |        |   |   |             | 174,400   |  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | Expense recorded on issuance and/or
        vesting of common stock, warrants
        and options                                                     |   |                    |         |                |   |                    | 292,121 |   |   |             | 1,340,295 |  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Changes in operating assets and liabilities:                                           
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | Accounts and other receivables                                                                                                                        |   |                    | (510,356 | )              |   |                    | 10,890  |   |   |             | (93,876   | )
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | Prepaid expenses                                                                                                                                      |   |                    | 18,761   |                |   |                    | (53,851 | ) |   |             | 304       |  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | Other assets                                                                                                                                          |   |                    |         |                |   |                    |        |   |   |             | (27,291   | )
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | Accounts payable and accrued expenses                                                                                                                 |   |                    | (123,804 | )              |   |                    | 71,579  |   |   |             | (38,258   | )
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | Deferred research and development                                                                                                                     |   |                    | (342,016 | )              |   |                    | 76,600  |   |   |             | 634,756   |  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | Due from affiliate                                                                                                                                    |   |                    |         |                |   |                    |        |   |   |             | 420,448   |  
|                                                                                        |                                                                                                                                                       |   |                    |          |                |   |                    |         |   |   |             |          
|Net cash used in development stage activities                                           |                                                                                                                                                       |   | (2,871,861         | )        |                |   | (4,207,902         | )       |   |   | (18,980,117 | )        
|                                                                                        |                                                                                                                                                       |   |                    |          |                |   |                    |         |   |   |             |          
|Investing activities                                                                   
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Purchase of property and equipment                                                      |                                                                                                                                                       |   | (410,140           | )        |                |   | (270,064           | )       |   |   | (1,450,153  | )        
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Increase in restricted cash                                                             |                                                                                                                                                       |   |                   |          |                |   |                   |         |   |   | (146,600    | )        
|                                                                                        |                                                                                                                                                       |   |                    |          |                |   |                    |         |   |   |             |          
|Net cash used in investing activities                                                   |                                                                                                                                                       |   | (410,140           | )        |                |   | (270,064           | )       |   |   | (1,596,753  | )        
|                                                                                        |                                                                                                                                                       |   |                    |          |                |   |                    |         |   |   |             |          

The accompanying notes are an integral part of these financial statements.                             
            (Continued)

8



---



Antex Biologics Inc.
(a development stage enterprise)

Consolidated Statements of Cash Flows (continued)
(Unaudited)

|                                                                                 |                                                                                                                |   |                    |            |                |   |                    |           |  |   |            |           | 
|-------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------- | - | ------------------ | ---------- | -------------- | - | ------------------ | --------- |  | - | ---------- | --------- | 
|                                                                                 |                                                                                                                |   | Nine Months        |            | August 3, 1991
|                                                                                 |                                                                                                                |   | Ended September 30 |            | (inception)   
|                                                                                 |                                                                                                                |   |                    |            | to            
|                                                                                 |                                                                                                                |   | 1999               |            | 2000           |   | September 30, 2000
|                                                                                 |                                                                                                                |   |                    |            |                |   |                   
|Financing activities                                                            
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Net proceeds from sales of common stock
    and warrants and the exchange option |                                                                                                                | $ |                   |            |                | $ | 15,081,929         |           |  | $ | 26,688,099 |          
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Net proceeds from exercise of warrants
    and stock options                     |                                                                                                                |   |                   |            |                |   | 8,798              |           |  |   | 4,870,946  |          
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Proceeds from sale and leaseback agreement                                       |                                                                                                                |   |                   |            |                |   |                   |           |  |   | 2,164,792  |          
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Principal repayments on sale and leaseback
    agreement                         |                                                                                                                |   |                   |            |                |   |                   |           |  |   | (2,164,792 | )        
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Proceeds from issuance of notes payable                                          |                                                                                                                |   |                   |            |                |   |                   |           |  |   | 500,000    |          
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Proceeds from sale of preferred stock                                            |                                                                                                                |   |                   |            |                |   |                   |           |  |   | 400,189    |          
|                                                                                 |                                                                                                                |   |                    |            |                |   |                    |           |  |   |            |          
|Net cash provided by financing activities                                        |                                                                                                                |   |                   |            |                |   | 15,090,727         |           |  |   | 32,459,234 |          
|                                                                                 |                                                                                                                |   |                    |            |                |   |                    |           |  |   |            |          
|Net increase (decrease) in cash and cash
    equivalents                         |                                                                                                                |   | (3,282,001         | )          |                |   | 10,612,761         |           |  |   | 11,882,364 |          
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Cash and cash equivalents at beginning
    of period                             |                                                                                                                |   | 4,856,479          |            |                |   | 1,706,275          |           |  |   | 436,672    |          
|                                                                                 |                                                                                                                |   |                    |            |                |   |                    |           |  |   |            |          
|Cash and cash equivalents at end of period                                       |                                                                                                                | $ | 1,574,478          |            |                | $ | 12,319,036         |           |  | $ | 12,319,036 |          
|                                                                                 |                                                                                                                |   |                    |            |                |   |                    |           |  |   |            |          
|Supplemental cash flows disclosures:                                            
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Cashless exercise of common stock
        options and warrants                                                 |   | $                  |           |                |   | $                  | 1,430,335 |  |   | $          | 4,426,009 | 
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Treasury stock acquired from cashless
        exercise of common stock options
        and warrants/(canceled) |   | $                  | (1,283,860 | )              |   | $                  |          |  |   | $          |          | 
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Notes payable and accrued interest
        converted to preferred stock                                        |   | $                  |           |                |   | $                  |          |  |   | $          | 509,109   | 
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Sale and leaseback of property and
        equipment                                                           |   | $                  |           |                |   | $                  |          |  |   | $          | 2,099,175 | 
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Capitalized equipment                                                                                          |   | $                  | 50,015     |                |   | $                  |          |  |   | $          | 247,957   | 
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Deferred compensation                                                                                          |   | $                  | (264,920   | )              |   | $                  |          |  |   | $          |          | 
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|                                                                                 | Interest paid                                                                                                  |   | $                  |           |                |   | $                  |          |  |   | $          | 699,248   | 

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

9



---



Antex Biologics Inc.
(a development stage enterprise)

Notes to Consolidated Financial Statements
For the Nine-Month Periods Ended September 30, 1999 and 2000
(Unaudited)



|1. |  | Business
|-- |  | --------

Antex Biologics Inc. (the Company) is a biopharmaceutical company
committed to developing and marketing novel products to prevent and treat
infections and related diseases. With respect to its human bacterial vaccine
research and development, the Company currently has strategic alliances with
SmithKline Beecham, Aventis Pasteur and the United States Navy.

The Consolidated Balance Sheet as of September 30, 2000, the Consolidated
Statements of Operations for the three-month and nine-month periods ended
September 30, 1999 and 2000 and for the period August 3, 1991 (inception) to
September 30, 2000, the Consolidated Statement of Stockholders Equity
(Deficit) for the period January 1, 2000 to September 30, 2000, and the
Consolidated Statements of Cash Flows for the nine-month periods ended
September 30, 1999 and 2000 and for the period August 3, 1991 (inception) to
September 30, 2000 have been prepared without audit. However, such financial
statements reflect all adjustments (consisting solely of normal recurring
adjustments) that are, in the opinion of management, necessary for a fair
presentation of the consolidated financial position of Antex Biologics Inc. and
its subsidiary at September 30, 2000, and the consolidated results of their
operations and their cash flows for the periods referred to above.

Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These financial statements should
be read in conjunction with the financial statements and notes thereto for the
fiscal year ended December 31, 1999 included in the Companys Annual Report on
Form 10-KSB.

Certain reclassifications were made to the 1999 financial statements to
conform to the 2000 presentation.

The results of operations for the period ended September 30, 2000 are not
necessarily indicative of the operating results anticipated for the fiscal year
ending December 31, 2000.

Since inception, the Companys revenues have been generated solely in
support of its research and development activities and as of September 30,
2000, the Companys research and products are not sufficiently developed to
enable the Company to generate sufficient revenues on an ongoing basis. As a
result, the Company is considered to be in the development stage.

10



---



2. Reverse Stock Split

At the 1999 Annual Meeting, the stockholders approved resolutions
authorizing the Board of Directors, at its discretion, to effect, by amendment
of the Certificate of Incorporation prior to the 2000 Annual Meeting, a reverse
stock split of the Companys common stock in the range of one-for-four to
one-for-ten. On July 7, 2000, the Board of Directors approved resolutions to
implement a one-for-five reverse stock split (the Reverse Stock Split). The
Reverse Stock Split became effective at the end of the day on July 19, 2000.

Under the terms of the Reverse Stock Split, each five shares of the
Companys common stock held at the close of business on July 19, 2000 was
combined into one fully paid and nonassessable share of common stock. The
number of shares of preferred stock (5,000,000) and the number of shares of
common stock (95,000,000) that the Company is authorized to issue under its
Certificate of Incorporation were not changed as a result of the Reverse Stock
Split.

The accompanying financial statements have been restated to reflect the
Reverse Stock Split.



|3. |  | Strategic Alliance
|-- |  | ------------------

In 1996, the Company entered into definitive agreements with SmithKline
Beecham Corporation and SmithKline Beecham Biologicals Manufacturing s.a.
(SmithKline) which established a corporate joint venture, MicroCarb Human
Vaccines Inc. (MCHV), to develop and commercialize human bacterial vaccines
utilizing the Companys proprietary technologies. At August 31, 1999, the
agreements provided for the following: the option by SmithKline to provide
annual funding of research and development activities for future years; an
exchange option granted by the Company to SmithKline enabling SmithKline to
convert its 26.25% equity interest in MCHV for 719,052 (pre-split 3,595,264)
shares of the Companys common stock, under specified conditions; and a warrant
granted by the Company to SmithKline enabling SmithKline to acquire up to
1,146,160 (pre-split 5,730,802) shares of the Companys common stock, under
specified conditions. The agreements also provided for SmithKline to make
milestone payments and pay royalties to MCHV; and for SmithKline to reimburse
the Company for expenses the Company incurred for agreed upon production lots
of vaccines for clinical trials, the conduct of agreed upon clinical trials,
and agreed upon prosecution and maintenance of the Companys patents and patent
applications. As further stipulated in the agreements, SmithKline was
responsible for conducting additional clinical trials, manufacturing, and sales
and distribution.

Effective September 1, 1999, the agreements were terminated and/or amended
and the Company entered into an Omnibus Agreement with SmithKline Beecham plc
and SmithKline Beecham Biologicals Manufacturing s.a. (SB) and MCHV. Under
the provisions of the Omnibus Agreement and several related documents, the
following occurred: SmithKlines equity interest in MCHV was converted into
719,052 (pre-split 3,595,264) shares of the Companys common stock and MCHV was
merged into the Company; a new license agreement was executed; and the Company
granted an amended and restated warrant to SB to purchase 773,154 (pre-split
3,865,769) shares of common stock at an exercise price of $1.85 (pre-split

11



---



$.37) per share exercisable on or before September 1, 2003 (the SB Warrant).
The issuance of the warrant resulted in the recognition of a noncash expense of
$502,540 in 1999, as determined by using the Black-Scholes valuation model.

The new license agreement covers prophylactic and/or therapeutic vaccines
for certain designated infectious diseases and provides for the reversion to
the Company of all other technology rights previously licensed to SmithKline.
The terms of the license agreement provide for the following: funding for
research and development of $1,333,334 for the period July 1, 1999 to December
31, 1999 with SB having the option to provide annual funding of research and
development activities in the future; milestone payments and royalties; and,
subject to mutual agreement in the future, the reimbursement by SB of expenses
incurred by the Company for production lots of vaccines, the conduct of
clinical trials, and the prosecution and maintenance of the Companys patents
and patent applications pertaining to the licensed technology. As further
stipulated in the agreement, SB will be responsible for conducting clinical
trials, manufacturing, and sales and distribution for the licensed vaccines.

The SB Warrant also provided that the number of shares of common stock
purchasable by SB would increase by an additional 173,237 (pre-split 866,189)
shares, provided that SB made the scheduled research and development funding
payment of $666,667 on or before October 1, 1999. The payment was received
subsequent to October 1, 1999, and accordingly, no increase occurred. SB
subsequently notified the Company it disagrees that the delay in receipt of the
payment should have negated SBs right to the increase. The Company and SB are
in discussions on this matter and the ultimate outcome is unknown.

In 2000, SB effected a cashless exercise of the entire amended and
restated warrant that was not in dispute, resulting in the issuance to SB in
May 2000 of 699,041 (pre-split 3,495,204) shares of its common stock.

The Company recognized revenue related to human bacterial vaccine research
and development and qualifying reimbursable expenses pursuant to these
agreements of $547,419 and $41,093 for the three-month periods ended September
30, 1999 and 2000, and of $2,201,207, $147,966 and $12,510,070 for the
nine-month periods ended September 30, 1999 and 2000, and for the period August
3, 1991 (inception) to September 30, 2000, respectively.



|4. |  | Financing
|-- |  | ---------

On March 15, 2000, the Company completed a private placement resulting in
gross proceeds to the Company of $15,293,790. Pursuant to the terms of the
private placement, the Company offered and sold 3,743,573 (pre-split
18,717,864) A Units and 4,454,545 B Units, in each case at a price of $3.30
(pre-split $0.66) per Unit, on an as if converted basis, as applicable.

Each A Unit post-split consists of one share of common stock and five
Class A Warrants. Each Class A Warrant has a five-year term and is exercisable
immediately upon issuance to purchase 1/5 of a share of common stock at an
exercise price of $1.50 (or $7.50 per share). At the election of the Company,
the Class A Warrants may be redeemed, upon 30 days prior written

12



---



notice to the holders, at a redemption price of $0.10 per warrant, if (i) after
September 15, 2001, the average market price of the common stock exceeds $37.50
(pre-split $7.50) per share for 20 consecutive trading days or (ii) after March
15, 2002, the average market price of the common stock exceeds $22.50
(pre-split $4.50) per share for 20 consecutive trading days.

Each B Unit consisted of (i) one-one hundredth (1/100) of a share of
Series A Convertible Preferred Stock and (ii) one Class B Warrant. Beginning
March 15, 2001 and after giving effect to the Reverse Stock Split, each one-one
hundredth (1/100) of a share of preferred stock is convertible, at the option
of the holder, into 1/5 of a share of common stock. The preferred stock has no
dividend rights, has no voting rights (except as required by law), and is
entitled to participate in a dissolution and liquidation of the Company with
the holders of common stock on an as converted basis. The Class B Warrants
were identical to the Class A Warrants, except that the Class B Warrants did
not become exercisable until March 15, 2001. Since each B Unit was sold at a
price of $3.30 (pre-split $0.66) on an as if converted basis when the common
stock on March 15, 2000 had a closing bid price of $13.75 (pre-split $2.75),
the Series A Convertible Preferred Stock is being accounted for giving effect
to its beneficial conversion features. In accordance with this accounting
treatment, the Company is recording a preferred stock dividend of $2,940,000
over the one-year period.

The redemption of the Class A Warrants is contingent upon the
effectiveness of a registration statement registering for resale the shares of
common stock issuable upon the exercise of the warrants. The Company filed
such a registration statement with the Securities and Exchange Commission for
this purpose, and is obligated to use its best efforts to have it declared
effective.

In connection with the financing, the Company paid total compensation of
consisting of: (i) 1,666,666 B Units; (ii) 3,409,091 Class C Warrants, each
having a five-year term and exercisable beginning March 15, 2001 to purchase
post-split 1/5 of a share of common stock at an exercise price of $0.66 (or
$3.30 per share); (iii) 3,409,091 Class D Warrants, each having a five-year
term and exercisable beginning March 15, 2001 to purchase post-split 1/5 of a
share of common stock at an exercise price of $1.50 (or $7.50 per share); and
(iv) $100,000. Neither the Class C Warrants nor the Class D Warrants are
redeemable by the Company.

Subsequent to the completion of the financing, in August 2000, the holder
of the 6,121,211 Class B Warrants and related entities together holding
1,155,303 Class A Warrants, 2,799,091 Class C Warrants, and 2,799,091 Class D
Warrants, exercisable in the aggregate to purchase 2,574,939 shares of the
Companys common stock, exchanged the warrants for an aggregate of 620,000
shares of the Companys common stock.



|5. |  | Operating Segments
|-- |  | ------------------

Prior to 1998, the Company devoted substantially all its efforts to a
single product segment, bacterial vaccines. In 1998, the Company established a
second reportable product segment, therapeutics. The therapeutics segment
focuses on research and development of drugs for infections and related
diseases. For 1999 and 2000, only direct costs and fixed asset acquisitions
were attributed to the therapeutics segment.

13



---



The following tables present information regarding the two segments for
the three-month and nine-month periods ended September 30, 1999 and 2000:

|                                  |  |                                       |          |              |  |       |          |             |  |   |          |   |  |   |          |  
|--------------------------------- |  | ------------------------------------- | -------- | ------------ |  | ----- | -------- | ----------- |  | - | -------- | - |  | - | -------- | -
|                                  |  | Three Months Ended September 30, 1999
|                                  |  |                                       |          |              |  |      
|                                  |  | Bacterial                             |          |              |  |       |          | Reconciling
|Category                          |  | Vaccines                              |          | Therapeutics |  | Items |          | Total      
|                                  |  |                                       |          |              |  |       |          |            
|Revenues                          |  | $                                     | 544,592  |              |  | $     |         |             |  | $ | 52,827   |   |  | $ | 597,419  |  
|                                 
|                                 
|                                 
|                                 
|Research and development
expenses |  | $                                     | 769,248  |              |  | $     | 172,420  |             |  | $ |         |   |  | $ | 941,668  |  
|                                 
|                                 
|                                 
|                                 
|Loss from operations              |  | $                                     | (224,656 | )            |  | $     | (172,420 | )           |  | $ | (290,013 | ) |  | $ | (687,089 | )
|                                 
|                                 
|                                 
|                                 
|Fixed asset acquisitions          |  | $                                     | 3,906    |              |  | $     |         |             |  | $ | 71,518   |   |  | $ | 75,424   |  

Reconciling items include reimbursable patent costs of $52,827; general and
administrative expenses, net of reimbursable patent costs, of $290,013; and
corporate fixed asset acquisitions and construction in progress expenditures of
$71,518.

|                                  |  |                                       |            |              |  |       |          |             |  |   |          |   |  |   |            |  
|--------------------------------- |  | ------------------------------------- | ---------- | ------------ |  | ----- | -------- | ----------- |  | - | -------- | - |  | - | ---------- | -
|                                  |  | Three Months Ended September 30, 2000
|                                  |  |                                       |            |              |  |      
|                                  |  | Bacterial                             |            |              |  |       |          | Reconciling
|Category                          |  | Vaccines                              |            | Therapeutics |  | Items |          | Total      
|                                  |  |                                       |            |              |  |       |          |            
|Revenues                          |  | $                                     | 16,000     |              |  | $     |         |             |  | $ | 41,093   |   |  | $ | 57,093     |  
|                                 
|                                 
|                                 
|                                 
|Research and development
expenses |  | $                                     | 1,183,936  |              |  | $     | 202,787  |             |  | $ |         |   |  | $ | 1,386,723  |  
|                                 
|                                 
|                                 
|                                 
|Loss from operations              |  | $                                     | (1,167,936 | )            |  | $     | (202,787 | )           |  | $ | (577,652 | ) |  | $ | (1,948,375 | )
|                                 
|                                 
|                                 
|                                 
|Fixed asset acquisitions          |  | $                                     | 2,190      |              |  | $     | 1,831    |             |  | $ | 26,835   |   |  | $ | 30,856     |  

Reconciling items include reimbursable patent costs of $41,093; general and
administrative expenses, net of reimbursable patent costs, of $577,652; and net
corporate fixed asset acquisitions and construction in progress transfers of
$26,835.

14



---



|                                  |  |                                      |           |              |  |       |          |             |  |   |          |   |  |   |            |  
|--------------------------------- |  | ------------------------------------ | --------- | ------------ |  | ----- | -------- | ----------- |  | - | -------- | - |  | - | ---------- | -
|                                  |  | Nine Months Ended September 30, 1999
|                                  |  |                                      |           |              |  |       |         
|                                  |  | Bacterial                            |           |              |  |       |          | Reconciling
|Category                          |  | Vaccines                             |           | Therapeutics |  | Items |          | Total      
|                                  |  |                                      |           |              |  |       |          |            
|Revenues                          |  | $                                    | 1,906,129 |              |  | $     |         |             |  | $ | 345,078  |   |  | $ | 2,251,207  |  
|                                 
|                                 
|                                 
|                                 
|Research and development
expenses |  | $                                    | 2,521,111 |              |  | $     | 564,006  |             |  | $ |         |   |  | $ | 3,085,117  |  
|                                 
|                                 
|                                 
|                                 
|Loss from operations              |  | $                                    | (614,982  | )            |  | $     | (564,006 | )           |  | $ | (912,157 | ) |  | $ | (2,091,145 | )
|                                 
|                                 
|                                 
|                                 
|Fixed asset acquisitions          |  | $                                    | 97,105    |              |  | $     | 9,371    |             |  | $ | 303,664  |   |  | $ | 410,140    |  

Reconciling items include reimbursable patent costs of $345,078; general and
administrative expenses, net of reimbursable patent costs, of $912,157; and
corporate fixed asset acquisitions and construction in progress expenditures of
$303,664.

|                                  |  |                                      |            |              |  |       |          |             |  |   |            |   |  |   |            |  
|--------------------------------- |  | ------------------------------------ | ---------- | ------------ |  | ----- | -------- | ----------- |  | - | ---------- | - |  | - | ---------- | -
|                                  |  | Nine Months Ended September 30, 2000
|                                  |  |                                      |            |              |  |       |         
|                                  |  | Bacterial                            |            |              |  |       |          | Reconciling
|Category                          |  | Vaccines                             |            | Therapeutics |  | Items |          | Total      
|                                  |  |                                      |            |              |  |       |          |            
|Revenues                          |  | $                                    | 65,998     |              |  | $     |         |             |  | $ | 147,966    |   |  | $ | 213,964    |  
|                                 
|                                 
|                                 
|                                 
|Research and development
expenses |  | $                                    | 3,063,922  |              |  | $     | 630,950  |             |  | $ |           |   |  | $ | 3,694,872  |  
|                                 
|                                 
|                                 
|                                 
|Loss from operations              |  | $                                    | (2,997,924 | )            |  | $     | (630,950 | )           |  | $ | (1,430,339 | ) |  | $ | (5,059,213 | )
|                                 
|                                 
|                                 
|                                 
|Fixed asset acquisitions          |  | $                                    | 131,895    |              |  | $     | 39,287   |             |  | $ | 98,882     |   |  | $ | 270,064    |  

Reconciling items include reimbursable patent costs of $147,966; general and
administrative expenses, net of reimbursable patent costs, of $1,430,339; and
net corporate fixed asset acquisitions and construction in progress transfers
of $98,882.



|6. |  | Earnings Per Share
|-- |  | ------------------

Basic earnings per share is computed by dividing net income (loss)
available to common shareholders by the weighted average number of common
shares outstanding during the period. Diluted earnings per share is computed
by dividing net income (loss) available to common shareholders by the weighted
average number of common shares outstanding after giving effect to all dilutive
potential common shares that were outstanding during the period. The Company
did not have any dilutive potential common shares during the three-month and
nine-month periods ended September 30, 1999 and 2000. The Company excluded
1,956,400 and 6,610,600 shares (post-split) for 1999 and 2000, respectively,
represented by warrants, stock options and/or convertible preferred stock from
the earnings per share calculation as they are anti-dilutive. Net loss as
reported was adjusted for a non-cash dividend accretion to determine the net
loss applicable to common shareholders for the computation of basic or diluted
earnings per share.

15



---



Item 2. Managements Discussion and Analysis of Financial Condition Results of Operation

The Company commenced operations in August 1991.

In 1996, the Company executed definitive agreements with SmithKline
Beecham which established a corporate joint venture, MicroCarb Human Vaccines
Inc., to develop and commercialize human bacterial vaccines utilizing the
Companys proprietary technologies. Effective September 1, 1999, these
agreements were terminated and/or amended and new definitive agreements were
entered into to develop and commercialize related human bacterial vaccines (see
Note 3 to the financial statements).

The strategic alliances with SmithKline Beecham and Aventis Pasteur are
consistent with one aspect of the Companys overall strategy which, since its
inception, has been to establish strategic partnerships and to focus on
researching technologies with the goal of developing novel products to prevent
and treat infections and related disorders. The Company is operating as a
development stage enterprise.

Results of Operations

Revenues for the third quarter of 2000 of $57,093 included $41,093 of
reimbursable patent expenses pursuant to the strategic alliance with SmithKline
Beecham. Revenues for the nine months ended September 30, 2000 totaled
$213,964 and included $147,966 of reimbursable patent expenses pursuant to the
SmithKline strategic alliance and $49,998 from a Small Business Technology
Transfer contract.

Revenues for the third quarter of 1999 totaled $597,419 and included the
recognition of human bacterial vaccine research and development support of
$488,113 and reimbursable expenses incurred of $59,306 pursuant to the
strategic alliance with SmithKline. Revenues for the nine months ended
September 30, 1999 totaled $2,251,207 and included the recognition of human
bacterial vaccine research and development support of $1,675,350 and
reimbursable expenses incurred of $525,857 pursuant to the SmithKline strategic
alliance.

The decreases in human bacterial vaccine research and development support
and reimbursable expenses were due to the substantial reduction in the services
requested by SmithKline Beecham and a reduction in reimbursable patent
expenses.

Research and development expenses increased 47.3% to $1,386,723 for the
third quarter of 2000 in comparison to $941,668 for the comparable period in
1999, and increased 19.8% to $3,694,872 for the nine months ended September 30,
2000 in comparison to $3,085,117 for the nine months ended September 30, 1999.
The increase in expenses for the third quarter of 2000 related to the costs
associated with conducting the Helicobacter pylorivaccine clinical trial,
which commenced in the second quarter of 2000, and to increases in
personnel-related expenditures. The increase in expenses for the nine months
ended September 30, 2000 related to the costs associated with conducting the
Helicobacter pylorivaccine clinical trial and to increases in
personnel-related expenditures and facility costs.

16



---



General and administrative expenses in the third quarter of 2000 increased
80.5% to $618,745 in comparison to $342,840 in the comparable period in 1999,
and increased 25.5% to $1,578,305 for the nine months ended September 30, 2000
in comparison to $1,257,235 for the comparable period in 1999. The increase in
expenses for the third quarter of 2000 related to increases in
personnel-related expenditures and investor relations efforts. The increase in
expenses for the nine months ended September 30, 2000 related to increases in
personnel-related expenditures, investor relations efforts and facility costs,
which were offset in part by decreases in patent and general legal fees.

The increase in interest income in the third quarter and first nine months
of 2000 reflects the increase in cash available for investing resulting from
the March 2000 equity financing.

The issuance of warrants as partial compensation for investor relations
consulting services resulted in the noncash expense in 2000.

Liquidity and Capital Resources

As a development stage company, the Companys operating activities have
been limited primarily to research and development involving its proprietary
technologies, and accordingly, have generated limited revenues.

For 2000, the Company will rely primarily upon the net proceeds of
approximately $15,000,000 from the private placement completed in March 2000 to
fund its operations (see Note 4 to the financial statements). During 2000 and
2001, the Company will continue to assess to which human bacterial vaccine
projects and antibacterials projects resources will be allocated. The Company
anticipates that its research and development expenses related to these
projects will be substantial for the foreseeable future. The Company intends to
pursue additional strategic alliances, technology licenses, and grants and
contracts to help fund its research and development expenses.

The Company currently anticipates that it will increase its total
employees and contract personnel from its 1999 year-end total of 28 to
approximately 35 by the 2000 year-end. The annual rent and pro-rata share of
building operating expenses and administrative charges for the Companys
facility are estimated at approximately $882,000 for 2000.

In order to sustain its research and development programs beyond 2001, as
well as to fund its future operations, the Company will continue to seek
additional financing. The Company has no lines of credit. In seeking
additional funding, the Company continues to examine a range of possible
transactions, including: additional strategic alliances; additional equity or
debt public offerings and private placements; the exercise of currently
outstanding warrants; additional grants and contracts; the sale and leaseback
of existing assets; and research and development funding from third parties.
However, there is no assurance that additional funds will be available from
these or any other sources or, if available, that, with the exception of the
warrants, the terms on which such funds can be obtained will be acceptable to
the Company.

17



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New Accounting Standards

The Financial Accounting Standards Board has issued a new standard.
Statement of Financial Accounting Standards No. 133 (SFAS 133), Accounting
for Derivative Instruments and Hedging Activities, which becomes effective for
years beginning after June 15, 2000, requires that every derivative instrument
be recorded in the balance sheet as either an asset or liability measured at
its fair value. The statement requires that changes in the derivatives fair
value be recognized in earnings unless specific hedge accounting criteria are
met. The Company believes that the effect of adoption of SFAS 133 will not be
material to the Companys financial statements.

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 (SAB No. 101), Revenue Recognition in Financial
Statements, which summarizes certain of the staffs views on revenue
recognition. The Companys revenue recognition policies have been and continue
to be in accordance with SAB No. 101.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

Statements contained herein that are not historical facts may be
forward-looking statements that are subject to a variety of risks and
uncertainties. There are a number of important factors that could cause actual
results to differ materially from those expressed in any forward-looking
statements made by the Company. These factors include, but are not limited to:
(i) the Companys ability to fund its future operations; (ii) the Companys
ability to successfully complete product research and development, including
preclinical and clinical studies and commercialization; (iii) the Companys
ability to obtain required governmental approvals; (iv) the Companys ability
to attract and/or maintain manufacturing, sales, distribution and marketing
partners; and (v) the Companys ability to develop and commercialize its
products before its competitors.

PART II: OTHER INFORMATION

Item 2. Changes In Securities

On August 10, 2000, holders of (i) the 6,121,211 Class B Warrants, (ii)
1,155,303 Class A Warrants, (iii) 2,799,091 Class C Warrants, and (iv)
2,799,091 Class D Warrants, exercisable in the aggregate to purchase 2,574,939
shares of the Companys common stock, pursuant to an agreement entered into
with the Company, exchanged the warrants for an aggregate of 620,000 shares of
the Companys common stock. The transaction was effected without registration
under the Securities Act of 1933, as amended (the 1933 Act) in reliance on
the exemption afforded by Section 3(a)(9) of the 1933 Act.

Item 6. Exhibits And Reports On Form 8-K

Exhibits

18



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|        |  |                                                                                                                                                                                                        
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
|No.     |  | Description                                                                                                                                                                                            
|        |  |                                                                                                                                                                                                        
|9.1     |  | Irrevocable Proxy and Standstill Agreement dated August 11,
2000 executed by Harbor Trust, the Blech Family Trust, Chassman
Graphics, Inc., The Biotech Consulting Group, Incorporated, and
David Blech
|       
|       
|       
|       
|10.1    |  | Employment Agreement dated as of July 31, 2000 by and between
the Company and Stephen N. Keith                                                                                                         
|       
|       
|       
|       
|27.1    |  | Financial Data Schedule                                                                                                                                                                                

Reports on Form 8-K

The Company filed a Form 8-K (Item 4) on July 11, 2000 disclosing that the
Company had engaged Richard A. Eisner & Company, LLP as its independent
accountants for calendar year 2000.

The Company filed a Form 8-K (Item 4) on July 31, 2000 disclosing that the
Company had implemented a one-for-five reverse stock split that was effective
at the end of the day on July 19, 2000.

SIGNATURES

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

|      |  |  |                  |  |  |  |     |  |  |                                                                
|----- |  |  | ---------------- |  |  |  | --- |  |  | ---------------------------------------------------------------
|      |  |  |                  |  |  |  |     |  |  | ANTEX BIOLOGICS INC.                                           
|     
|Date: |  |  | November 9, 2000 |  |  |  | By: |  |  | /s/V. M. Esposito                                              
|      |  |  |                  |  |  |  |     |  |  | V. M. Esposito, Chief Executive Officer                        
|     
|Date: |  |  | November 9, 2000 |  |  |  | By: |  |  | /s/Gregory C. Zakarian                                         
|      |  |  |                  |  |  |  |     |  |  | Gregory C. Zakarian, Treasurer and
     Chief Financial Officer

19



---



EXHIBIT INDEX

|        |  |                                                                                                                                                                                                        
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
|No.     |  | Description                                                                                                                                                                                            
|        |  |                                                                                                                                                                                                        
|9.1     |  | Irrevocable Proxy and Standstill Agreement dated August 11,
2000 executed by Harbor Trust, the Blech Family Trust, Chassman
Graphics, Inc., The Biotech Consulting Group, Incorporated, and
David Blech
|       
|       
|       
|       
|10.1    |  | Employment Agreement dated as of July 31, 2000 by and between
the Company and Stephen N. Keith                                                                                                         
|       
|       
|       
|       
|27.1    |  | Financial Data Schedule                                                                                                                                                                                

20