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

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### FORM 10-QSB

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

For the quarterly period ended September 30, 2005

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

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

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

|Delaware                                                       |  | 13-3575874                           | 
|-------------------------------------------------------------- |  | ------------------------------------ | 
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.) | 

2000 Hamilton Street
Suite 204
Philadelphia, Pennsylvania 19130
(Address of principal executive offices)

(215) 241-9760
(Issuers telephone number)

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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.
xYes   oNo

Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
oYes   xNo

State the number of shares
outstanding of each of the issuer's classes of common equity, as of the latest
practicable date: 61,414,998 shares of common stock as of November 9, 2005.

Transitional Small Business
Disclosure Format:oYes   xNo





Page 1

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# AVAX TECHNOLOGIES, INC.

# Table of Contents

|                               |                                                                                                                                                                                                                                          | Page                                                     
|------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------
|                              
|PART I  FINANCIAL INFORMATION
|                              
|Item 1.                        |                                                                                                                                                                                                                                          | Financial Statements                                     
|                               | Consolidated BALANCE SHEETS    As of December 31, 2004 and September 30, 2005 (Unaudited)                                                                                                                                               |                                                          
|                               | Consolidated STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)   For the Three Months and Nine Months Ended September 30, 2005 and 2004 and   for the Period from January 12, 1990 (Incorporation) through September 30, 2005 |                                                          
|                               | Consolidated STATEMENTS OF CASH FLOWS (Unaudited)    For the Nine Months Ended September 30, 2005 and 2004 and   for the Period from January 12, 1990 (Incorporation) through September 30, 2005                                        |                                                          
|                               | Notes to Consolidated Financial Statements                                                                                                                                                                                               |                                                          
|                              
|Item 2.                        |                                                                                                                                                                                                                                          | Managements Discussion and Analysis or Plan of Operation
|                              
|Item 3.                        |                                                                                                                                                                                                                                          | Controls and Procedures                                  
|                              
|PART II  OTHER INFORMATION    |                                                                                                                                                                                                                                         
|                              
|Item 4.                        |                                                                                                                                                                                                                                          | Submission of Matters to a Vote of Security Holders      
|                              
|Item 6.                        |                                                                                                                                                                                                                                          | Exhibits and Reports on Form 8-K                         
|                              
|Signatures                     | Page 21                                                                                                                                                                                                                                 

Page 2

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Table of Contents

# PART I  FINANCIAL INFORMATION

|Item 1. | Financial Statements.
|------- | ---------------------

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

|                                                                             | December 31,
2004 |  | September 30,
2005
|---------------------------------------------------------------------------- | ----------------- |  | ------------------
|                                                                             |                   |  |                   
|
|Assets                                                                       |                   |  |                   
|Current assets:                                                              |                   | 
|Cash and cash equivalents                                                    |                   |  | $                 
|Accounts receivable                                                          |                   |  |                   
|Inventory                                                                    |                   |  |                   
|VAT receivable                                                               |                   |  |                   
|Prepaid expenses and other current assets                                    |                   |  |                   
|                                                                             |                   |  |                   
|Total current assets                                                         |                   |  |                   
|Property and equipment, at cost                                              |                   |  |                   
|Less accumulated depreciation                                                |                   |  |                   
|                                                                             |                   |  |                   
|Net property and equipment                                                   |                   |  |                   
|Research and development tax credit receivable                               |                   |  |                   
|Goodwill                                                                     |                   |  |                   
|                                                                             |                   |  |                   
|Total assets                                                                 |                   |  | $                 
|                                                                             |                   |  |                   
|Liabilities and stockholders equity                                         |                   | 
|Current liabilities:                                                         |                   | 
|Accounts payable and accrued expenses                                        |                   |  | $                 
|Deferred revenue                                                             |                   |  |                   
|Loans payable  ANVAR grant payable                                          |                   |  |                   
|                                                                             |                   |  |                   
|Total current liabilities                                                    |                   |  |                   
|Stockholders equity:                                                        |                   | 
|Preferred stock, $.01 par value:                                             |                   | 
|Authorized shares  5,000,000, including Series B  300,000 shares and       |                   | 
|Series C  120,000 shares                                                    |                   | 
|Series B convertible preferred stock:                                        |                   | 
|Issued and outstanding shares  0                                            |                   | 
|Series C convertible preferred stock:                                        |                   | 
|Issued and outstanding shares  36,750 (liquidation preference  $3,675,000) |                   |  |                   
|Common stock, $.004 par value:                                               |                   | 
|Authorized shares  150,000,000 at December 31, 2004 and at                  |                   | 
|September 30, 2005                                                           |                   | 
|Issued and outstanding shares  36,071,568 at December 31, 2004 and          |                   | 
|61,414,998 at September 30, 2005                                             |                   |  |                   
|Additional paid-in capital                                                   |                   |  |                   
|Subscription receivable                                                      |                   |  |                   
|Accumulated other comprehensive income                                       |                   |  |                   
|Deficit accumulated during the development stage                             |                   |  |                   
|                                                                             |                   |  |                   
|Total stockholders equity                                                   |                   |  |                   
|                                                                             |                   |  |                   
|Total liabilities and stockholders equity                                   |                   |  | $                 
|                                                                             |                   |  |                   

See accompanying notes.

Page 3

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

|                                                     | Three Months Ended September 30, |  | Nine Months Ended
September 30, |            | Period From
January 12, 1990
(Incorporation)
To September 30,
|---------------------------------------------------- | -------------------------------- |  | ------------------------------- | ---------- | -------------------------------------------------------------
|
|                                                     |                                  |  |                                 |            |                                                              
|Revenue:                                             |                                  |  |                                 |            |                                                              
|Gain from sale of the Product                        |                                  |  | $                               |           |                                                              
|Product and contract service revenue                 |                                  |  |                                 | 289,675    |                                                              
|                                                     |                                  |  |                                 |            |                                                              
|Total revenue                                        |                                  |  |                                 | 289,675    |                                                              
|                                                    
|Costs and expenses:                                  |                                  | 
|Research and development                             |                                  |  |                                 | 550,398    |                                                              
|Acquired in process research and development         |                                  |  |                                 |            |                                                              
|Write down of acquired intellectual property         |                                  | 
|and other intangibles                                |                                  |  |                                 |           |                                                              
|Amortization of acquired intangibles                 |                                  |  |                                 |           |                                                              
|Selling, general and administrative                  |                                  |  |                                 | 601,616    |                                                              
|                                                     |                                  |  |                                 |            |                                                              
|Total operating loss                                 |                                  |  |                                 | (862,339   | )                                                            
|Other income (expense):                              |                                  | 
|Interest income                                      |                                  |  |                                 | 3,404      |                                                              
|Interest expense                                     |                                  |  |                                 |           |                                                              
|Other, net                                           |                                  |  |                                 |           |                                                              
|                                                     |                                  |  |                                 |            |                                                              
|Total other income (loss)                            |                                  |  |                                 | 3,404      |                                                              
|                                                     |                                  |  |                                 |            |                                                              
|Loss from continuing operations                      |                                  |  |                                 | (858,935   | )                                                            
|Loss from discontinued operations                    |                                  |  |                                 |           |                                                              
|                                                     |                                  |  |                                 |            |                                                              
|Net loss                                             |                                  |  |                                 | (858,935   | )                                                            
|Amount payable for liquidation preference            |                                  |  |                                 |           |                                                              
|                                                     |                                  |  |                                 |            |                                                              
|Net loss attributable to common stockholders         |                                  |  | $                               | (858,935   | )                                                            
|                                                     |                                  |  |                                 |            |                                                              
|                                                    
|Loss per common share  basic and diluted            |                                  |  | $                               | (.02       | )                                                            
|                                                     |                                  |  |                                 |            |                                                              
|Weighted average number of common shares outstanding |                                  |  |                                 | 36,071,568 |                                                              
|                                                     |                                  |  |                                 |            |                                                              
|                                                    
|Net loss                                             |                                  |  | $                               | (858,935   | )                                                            
|Foreign currency translation gain (loss)             |                                  |  |                                 | 5,095      |                                                              
|                                                     |                                  |  |                                 |            |                                                              
|Net comprehensive loss                               |                                  |  | $                               | (853,840   | )                                                            
|                                                     |                                  |  |                                 |            |                                                              

See accompanying notes.

Page 4

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

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

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

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

See accompanying notes.

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

Notes to Consolidated Financial Statements (Unaudited)
For the Nine Months ended September 30, 2005 and 2004

# 1.      Organization and Summary of Significant Accounting Policies

AVAX Technologies, Inc. with its
subsidiaries (the Company) is a development stage biopharmaceutical company.

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

Also in November 1995, the Company
entered into a license agreement with Thomas Jefferson University (TJU) to
develop, commercially manufacture and sell products embodying immunotherapeutic vaccines
made from the patients own tumor (AC Vaccine) for the treatment of
malignant melanoma and other cancers (the Invention) (see Note 5).

In February 1997, the Company entered
into a license agreement with Texas A&M to develop, commercially manufacture and sell
products embodying a series of compounds for the treatment of cancer (the Texas
A&M Compounds) (see Note 5).

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

In August 2000, the Company completed
its acquisition of GPH, S.A. (Holdings) and Genopoietic S.A.
(Genopoietic) each a French societe anonyme based in Paris, France. Holdings
and Genopoietic were organized in 1993 to develop gene therapy applications and market
gene therapy treatments for cancer. The Company has designated the Lyon, France operations
facility as its primary source facility for the production of vaccines to be used in
clinical trials. In addition, the Company currently performs contract manufacturing and
research activities at its facilities located in Lyon, France.

# Basis of Presentation

The financial information as of
September 30, 2005 and for the three-month and nine-month periods ended September 30,
2005 and 2004 contained herein is unaudited. The Company believes this information has
been prepared in accordance with accounting principles generally accepted in the United
States for interim financial information and Article 10 of Regulation S-X. The Company
also believes this information includes all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the financial position, results of
operations and cash flows for the periods then ended. The results of operations for the
three-month and nine-month periods ended September 30, 2005 are not necessarily
indicative of the results of operations that may be expected for the entire year.

The accompanying financial statements
and the related notes should be read in conjunction with the Companys audited
financial statements for the year ended December 31, 2004 included in the Companys
annual report on Form 10-KSB.

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

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# Principles of Consolidation

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

In 1999, the Joint Venture Companies
were included in the consolidated financial statements of the Company. Due to additional
investment by AVT in the Joint Venture Companies in 2000, whereby AVT acquired a 50%
ownership interest, and AVTs substantial and active involvement in the operations of
the Joint Venture Companies late in 2000, the Company no longer exercised control over the
Joint Venture Companies. During January 2002, the Joint Venture Companies repurchased 90%
of AVTs interest in each company in exchange for cash consideration of approximately
$1,860,000 AUD (approximately $970,000 US). This resulted in AVAX Holdings owning a 95%
interest in the Joint Venture Companies as of the date of the transaction, giving AVAX
Holdings control of the companies and requiring the results of AVAX Holdings and its
majority owned subsidiaries be consolidated into the Companys consolidated results.

# Revenue

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

# 2.      Joint Venture Agreement

In November 1999, the Companys
subsidiary AVAX Australia Holdings, Pty Limited entered into a joint venture agreement
with AVT related to commercialization and sale of the AC Vaccine Technology in Australia
and New Zealand. Pursuant to the joint venture agreement, the Company created two
operating companies, AVAX Australia Pty Limited and AVAX Australia Manufacturing Pty
Limited, and AVT contributed $4,000,000 (AUD) giving them a 20% equity interest in the
joint venture.

During 2000, AVT, through a
subsidiary, contributed an additional $6,000,000 (AUD), raising AVTs total ownership
percentage in the joint venture to 50%. Due to the ownership percentage maintained by AVT
and their substantial and active involvement in the management and decision making
processes of the joint venture, the Company determined that it no longer maintained a
controlling interest in the operations of the joint venture. Accordingly, the Company
began to account for its investment in the joint venture using the equity method of
accounting in late 2000.

At the time of the change from the
consolidation method to the equity method, there existed a difference between the
Companys cost of its 50% investment in the joint venture and the net book value of
the underlying assets. This difference, which amounted to approximately $2,700,000,
resulted from the Companys contribution of technology and related licensing rights,
which had little recorded value, and AVTs cash investments of $10,000,000 (AUD). The
resulting deferred gain was being amortized to income over three years.

During January 2002, Joint Venture
Companies repurchased 90% of AVTs outstanding shares for cash consideration of
approximately $1,800,000 (AUD). After closing the transaction AVAX Holdings owned a 95%
equity interest in the Joint Venture Companies.

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

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

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

On December 13, 2002 a liquidator was
appointed to oversee the dissolution of the joint venture companies. The combined assets
of the joint venture companies included in the September 30, 2005 consolidated
balance sheet consists of cash of $53,649 and recorded liabilities of $88,341. Other
long-term liabilities related to leasehold obligations were not recorded as obligations as
they will not be required to be met pursuant to the liquidation proceedings.

# 2.      Contractual Joint Manufacturing Alliance

In February 2004 the Company entered
into a manufacturing alliance with OPISODIA, SAS, a French pharmaceutical company (OPI).
The agreement required annual funding from OPI of approximately $1,500,000 (US) for each
of 2004 and 2005, and placed the existing OPI facilities and personnel under the direction
of Genopoeitics management. The funding from OPI covered a majority of the
manufacturing costs of the combined French facilities in 2004 and was expected to cover a
majority of the manufacturing costs in 2005. Pursuant to the contract, the total
manufacturing expenses incurred are allocated to OPI based upon a pre-determined
allocation of the total number of personnel available to work on the OPI contract. As of
the end of May 2005, the Company and OPI orally agreed to terminate the current
arrangement.

Proceeds received from OPI as a
result of the alliance for the nine months ended September 30, 2005 were $554,914.
Expenses were $554,914 allocated to OPI and were recorded as revenue to the extent the
proceeds received were equal to the amount of expenses allocable to OPI. The expenses
allocated to the OPI contract do not represent additional costs incurred in performing
work under the OPI contract but instead represent the expenses that are allocated to the
contract pursuant to the negotiated contractual terms. This expense allocation does not
represent costs incurred by the Company in performing the contract.

# 4.      Stock Based Compensation

SFAS No. 123, Accounting for
Stock-Based Compensation, prescribes accounting and reporting standards for all
stock-based compensation plans, including employee stock options, restricted stock,
employee stock purchase plans and stock appreciation rights. SFAS No. 123 requires
compensation expense to be recorded (i) using the new fair value method or (ii) using
existing accounting rules prescribed by Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, (APB 25) and related
interpretations, with pro forma disclosure of what net income and earnings per share would
have been had the Company adopted the new fair value method. SFAS No. 148 Accounting
for Stock Based Compensation  Transaction and Disclosures further established
accounting and disclosure requirements using a fair value based method of accounting for
stock based employee compensation plans. The Company has elected to continue to account
for its stock-based compensation plans in accordance with the provisions of APB 25 using
the intrinsic value method.

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

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

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In December 2004, the Financial
Accounting Standards Board (FASB) issued a revision of SFAS 123, which is referred to
as SFAS No. 123R, Share-Based Payment (SFAS 123R). SFAS 123R,
which supersedes APB 25, will require the Company to recognize compensation expense using
a fair-value based method for costs related to share-based payments, including stock
options and stock issued under the Companys employee stock plans, and record such
expense in the Companys financial statements. The pro forma disclosures previously
permitted under SFAS 123 will no longer be an alternative to financial statement
recognition. The Company will adopt SFAS 123R for the fiscal year beginning
January 1, 2006 and the Company is currently evaluating option valuation
methodologies and assumptions in light of SFAS 123R. Although the Company has not yet
determined whether the adoption of SFAS 123R will result in amounts that are comparable to
the current pro forma disclosures under SFAS 123 presented in this note, the Company does
expect the adoption to have a material adverse impact on the Companys results of
operations. The Companys current estimates of option values using the Black-Scholes
method may not be indicative of the valuation methodologies that the Company ultimately
adopts.

# 5.      License and Research Agreements

The Thomas Jefferson
University (TJU) License and Research Agreement

The Company entered into license and
research agreements with TJU for the AC Vaccine technology in November 1995. The TJU
License is a perpetual royalty-bearing license for the rights to the AC Vaccine
technology, and provides for certain payments upon the occurrence of certain milestones.
As partial consideration, the Company paid $10,000 to TJU for the TJU License, $10,000
upon initiation of the first clinical trial, and $25,000 upon receipt of approval from the
FDA (or comparable international agency) to market products relating to the AC Vaccine
technology (which payment was triggered by the Companys receipt of that regulatory
approval in Australia). The Company also issued to each of TJU and Dr. Berd, 229,121
shares of common stock, representing 7.5% (15% in the aggregate) of the total outstanding
voting securities at that time.

In addition to the milestone payments
the Company already made to TJU, the Company was obligated to pay TJU $10,000 upon the
first filing of a marketing application with the FDA (or comparable filing with a
comparable international agency). The Company paid this milestone payment to TJU upon the
commercialization of the AC Vaccine in Australia in 2001.

In connection with the TJU License,
the Company also entered into a Clinical Study and Research Agreement with TJU (the TJU
Research Agreement). Under the TJU License and the TJU Research Agreement, the Company
agreed to provide TJU with minimum sponsored research funding relating to the development
of additional immunotherapies based on the AC Vaccine technology. The Company renewed this
agreement for a three-year period through November 2004. The research conducted by Dr.
Berd and TJU under the TJU Research Agreement has pertained to applications of the AC
Vaccine technology beyond the core vaccine products being developed.

The Company is presently obligated
under the TJU License to spend a minimum of $500,000 per year on the development of the AC
Vaccine technology until commercialized in the United States. This spending includes
funding provided pursuant to the TJU Research Agreement, the internal expenditures and the
external expenditures incurred by the Company. If the Company files for FDA approval of a
Company-sponsored marketing application for the right to market an AC Vaccine product, the
Company may elect to spend less than $500,000 per year on the development of the AC
Vaccine technology during the period of time the marketing application is under review by
the FDA.

In 2004, the Company reached an
agreement with TJU to terminate the TJU Research Agreement and all of the Companys
obligations thereunder in exchange for a final payment to TJU of $300,000, $150,000 of
which was paid in July 2004 and the balance of which was paid in April 2005 in
satisfaction of all the Companys outstanding liabilities to TJU under the TJU
Research Agreement. The Company does not believe that the termination of this agreement
will have any meaningful effect upon the Company or the Companys ability to continue
the AC Vaccine development efforts.

The Company is also obligated to pay
royalties on net sales revenue and a percentage of all revenues received from sublicenses
relating to the AC Vaccine technology.

The Company bears the expense of
maintaining and defending the patents that are subject to the TJU License Agreement.

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The Texas A&M License and Research Agreement

The Company entered into license and
research agreements with Texas A&M University for a series of novel cancer-fighting
anti-estrogen compounds in February 1997. Under the Texas A&M License, the Company is
obligated to make milestone payments to Texas A&M as follows: $24,000 upon the
initiation of a specified toxicity evaluation, $12,000 upon completion of a toxicity
evaluation demonstrating acceptable toxicity levels, $12,000 upon the submission of an IND
to the FDA or its equivalent in a major market country, $5,000 upon the completion of the
first Phase I clinical investigations and $15,000 upon the FDAs granting of the
first NDA. In addition, the Company is required to achieve certain milestones toward
development of a licensed product within certain specified time frames.

In connection with the Texas A&M
License, in May 1997, the Company entered into a three-year Sponsored Research Agreement
with Texas A&M (the Texas A&M Research Agreement). Under the Texas A&M License
and the Texas A&M Research Agreement, the Company agreed to provide minimum yearly
funding of $108,750 for Texas A&Ms research. Texas A&M waived any up front
payment for the Texas A&M License in recognition of the three-year research funding
commitment. Currently there is no research agreement in place with Texas A&M. Due to
the inability to complete additional potential studies in evaluating the technology, the
Company is not planning additional studies.

Texas A&M contacted the Company,
stating that the Company is in default under the Texas A&M License. The Company
believes it has complied with all aspects of the license. While the Companys
management cannot determine the ultimate resolution of this matter at this time, the
management believes the liabilities established related to the Texas A&M License and
the Companys obligations under the Texas A&M License have been properly accrued
and recorded in the current financial statements.

The Company is also obligated to pay
royalties on any net sales revenue derived from these compounds and a percentage of net
sales revenues received from sublicenses of the compounds.

The Company bears the expense of
maintaining and defending the patents that are subject to the Texas A&M License.

# 6.      Private Placement of Equities Securities

On April 5, 2005, the Company closed
a private placement of 25,343,430 shares of common stock at a purchase price of $0.34 per
share with 12 accredited or institutional investors. The Company received gross proceeds
of approximately $8,616,000, and incurred offering-related expenses of $630,240 payable to
advisors and for legal fees related to the fundraising. In connection with the private
placement, the Company also issued to the investors warrants to purchase 3,801,515 shares
of common stock at a warrant exercise price of $0.41 per share, and warrants to purchase
3,801,515 shares of common stock at a warrant exercise price of $0.48 per share. All
warrants issued in this private placement expire on April 5, 2010.

On September 9, 2005, the
Securities and Exchange Commission (the SEC) declared effective the
registration statement on Form SB-2 (Registration No. 333-128009) filed by the Company,
covering the reoffer and resale by the holders thereof of the 32,946,460 shares of common
stock issued or issuable upon the exercise of warrants issued under the April 5, 2005
private placement. In accordance with SEC Rule 429, the prospectus forming a part of the
registration statement acts as a combined prospectus for both the reoffer and resale of
the 32,946,460 shares of common stock registered under the most recent registration
statement and the reoffer and resale of the 28,010,497 shares of common stock registered
under our previous registration statement on Form SB-2 (Registration No. 333-118334).

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

# CAUTIONARYSTATEMENT
REGARDING FORWARD-LOOKINGSTATEMENTS

In this report, in other filings with
the SEC and in press releases and other public communications throughout the year, AVAX
Technologies, Inc. (AVAX, the Company, we or
us) makes, or will make statements that plan for or anticipate the future.
These forward-looking statements include statements about the future of biotechnology
products and the biopharmaceutical industry, statements about our future business plans
and strategies, and other statements that are not historical in nature. These
forward-looking statements are based on our current expectations.

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

| |  | Our history of operating losses, our continuing cash requirements, our need to raise
additional capital in the first half of 2006, and the uncertainty of our prospects of
reaching a meaningful level of revenues.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | The business uncertainties arising from our decision to conduct all AC Vaccine
manufacturing activities at our Lyon, France facility and the logistical issues and risks
relating to shipping biologics from the U.S. and other countries to France and the vaccine
from France to patients in the U.S. and other countries.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Uncertainty about whether our products will successfully complete the long, complex and
expensive clinical trial and regulatory approval process for approval of new drugs in the
U.S. and certain European countries.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| |  | Our difficulty or inability to compete with other clinical trials and treatment regimens
for patients and clinical sites for our clinical trials.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------

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

| |  | Our financial and development obligations and our responsibility to meet requisite
research funding levels under our license agreements in order to protect our rights to our
products and technologies.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Each of the other factors discussed in our Annual Report on Form 10-KSB for the year ended
December 31, 2004, under Item 1  Description of Business  Risk
Factors.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

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# PLAN OFOPERATION

# General

Since our inception, we have
concentrated our efforts and resources on the development and commercialization of
biotechnology and pharmaceutical products and technologies. We have been unprofitable
since our founding and have incurred a cumulative net loss of $71,138,177 as of
September 30, 2005. We incurred net losses of $2,356,263 and $2,683,424 for the nine
months ended September 30, 2005 and 2004, respectively. We expect to continue to
incur operating losses, primarily due to the expenses associated with our product
development efforts, the cost of maintaining our manufacturing facilities in Europe and
the United States and activities related to the conduct of our clinical trials for the AC
Vaccine Technology in the United States and Europe.

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

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

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

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

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

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

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

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

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

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

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

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

| |  | In Switzerland, our distribution partner, ProVaccine AG, received import/export
authorization for M-Vax from the Federal Office of Public Health (the FOPH),
opening the way to begin commercial sales of M-Vax in Switzerland.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

# Research and Development
Expenses

Our research and development
activities focus primarily on clinical development and trials of our AC Vaccine technology
for the treatment of melanoma, ovarian cancer, lung cancer and other cancers. Our clinical
development program includes the development of techniques, procedures and tests that need
to be developed as part of the manufacturing of our biological product so that the product
can be evaluated and potentially approved by regulatory authorities. We are also
developing an anti-estrogen compound for the treatment of cancer, but we do not consider
this to be a major program.

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

Manufacturing costs included in this
category relate to the costs of developing, supporting and maintaining facilities and
personnel that produce clinical samples in compliance with current Good Manufacturing
Practices (cGMP). Our facilities and the personnel maintained for manufacturing are
currently at what we feel are the minimum required for compliance with cGMP. Based upon
the current capacity of our facilities, our personnel and our current and future planned
clinical trials, we have excess capacity for the production and testing of biological
products. We use this excess capacity to generate cash in the form of contract
manufacturing alliances. Because the incremental costs incurred to provide these services
are not material or quantifiable, they are not presented separately.

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

Research and development costs
incurred through September 30, 2005, were $42,144,266. Research and development costs
were $2,271,714 and $2,151,046, for the nine months ended September 30, 2005 and
2004, respectively. The majority of these costs relate to clinical research and
development of our AC Vaccine technology. Our management estimates that greater than 90%
of the periodic and cumulative research and development expenses incurred relate to our
one major program, the AC Vaccine. At this time, due to the risks inherent in the clinical
trial process, risks associated with the product and product characterization and risks
associated with regulatory review and approval of clinical product candidates, we are
unable to estimate with any certainty the costs we will incur in the continued development
of our product candidates for commercialization.

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# Plan of Operation

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

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

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

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

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

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

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

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On April 5, 2005, we closed a
private placement of 25,343,430 shares of common stock at a purchase price of $0.34 per
share with 12 accredited or institutional investors. We received gross proceeds of
approximately $8,616,000, and incurred offering-related expenses of approximately
$630,240. In connection with the private placement, we also issued to the investors
warrants to purchase 3,801,515 shares of common stock at a warrant exercise price of $0.41
per share, and warrants to purchase 3,801,515 shares of common stock at a warrant exercise
price of $0.48 per share. All warrants issued in this private placement expire on
April 5, 2010. We are using the proceeds of this private offering for general working
capital purposes, including funding our current plan of operation discussed below.

Current Plan of Operation.The
following is a summary of our plan of operation based on our current cash resources and
assuming no material capital infusion in the next 12 months.

In the past three years, we have laid
the foundation for a significantly more aggressive development plan that we have only
recently been able to begin to pursue. The steps that were taken in the last three years
to implement this plan include:

| |  | Continuing development work on the AC Vaccine.
| | - | ----------------------------------------------

| |  | Pre-Biological License Application (the BLA) filing meetings, preparation and
filing of the BLA and more recently, responding to comments received regarding the BLA for
use of M-Vax in the treatment of Stage III & IV melanoma patients.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

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

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

| |  | Hired Dr. David Berd as our full-time Medical Director to oversee directly the development of the AC Vaccine technology for
              us.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------

With this foundation and the net
proceeds from our April 2005 private placement of common stock and warrants, we are
pursuing the following plan of operation:

| |  | Recommence our clinical trial in the U.S. for the treatment of melanoma with the AC
Vaccine, using DTH as the endpoint. We have received all FDA approvals to recommence this
clinical trial, which began enrolling patients in June 2005.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Commence a Phase I-II clinical trial in non-small cell lung cancer in collaboration with
the University of Pennsylvania Cancer Center.
| | - | --------------------------------------------------------------------------------------------------------------------------------------

| |  | Continuing to pursue our BLA filing with AFSSAPS (the French counterpart of the FDA) for
the approval of commercial sale of the AC Vaccine for treatment of melanoma in France. We
anticipate that this will be an ongoing process through the fourth quarter of 2005.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| |  | Approach the FDA with clinical data generated from our clinical trials in the U.S., and
with the BLA French submission information, to determine the expected clinical programs
that we will need to complete to be in a position to submit clinical data for approval of
the vaccine in the U.S..
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Begin planning and implementation of later stage pivotal registration trials in the U.S.
for the appropriate indications.
| | - | -------------------------------------------------------------------------------------------------------------------------

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We continually evaluate our plan of
operation discussed above to determine the manner in which we can most effectively utilize
our limited cash resources. The timing of completion of any aspect of our plan of
operations is highly dependant upon the availability of cash to implement that aspect of
the plan and other factors beyond our control. We believe we have the current cash
resources to pursue this plan of operation into the first half of 2006. The full
implementation of this plan of operation beyond that time is dependent upon us obtaining
additional funding in the first half of 2006. We believe we have the facilities, the
facility managers, the technical and scientific staff and consultants in place to
implement this plan.

We are currently engaged in contract
manufacturing and the development and commercialization of biotechnology and
pharmaceutical products and technologies. These activities take advantage of the
facilities and personnel that we are required to maintain to ensure that we process our
products in accordance with cGMP requirements. With our current compassionate use and
clinical activities planned, we anticipate that excess capacity will continue to exist at
our Lyon, France facility for the foreseeable future. In 2002, we entered into a contract
manufacturing engagement at our Lyon, France facility, which was completed in November
2003. In February 2004 we entered into a second manufacturing alliance that provided
approximately $1,500,000 (US) funding per year for 2004 and 2005. As of the end of May
2005, we orally agreed to terminate that manufacturing alliance.

We will continue to pursue additional
contract manufacturing agreements in the U.S. and France, which would provide us with
additional revenue to fund our operations and the costs of the facilities. We believe that
we have developed significant expertise in producing certain biological products for
clinical and development purposes, and that this expertise can be marketed by us to other
companies and research institutions engaged in clinical trials and product development
programs. In addition, we have invested significant amounts to establish and maintain
current Good Manufacturing Practices (cGMP) at our manufacturing facilities in
Philadelphia, Pennsylvania and Lyon, France. We believe that services provided by these
facilities may be valuable to other companies that wish to avoid the significant cash
outlays associated with buying or building their own cGMP facilities. Although we are not
currently conducting any clinical or pre-clinical development programs at our Philadelphia
facility, we would consider re-activating that facility if a sufficiently significant
opportunity presented itself.

# Results of Operations

Three and Nine Months Ended
September 30, 2005, Compared to Three and Nine Months Ended September 30, 2004.

Revenues recognized in the three and
nine months ended September 30, 2005 were $349,949 and $1,301,087, respectively, compared
with revenues of $289,675 and $1,144,935, respectively, for the same periods in 2004.
Revenue for the three and nine month periods increased slightly due to increased revenues
earned for compassionate use sales versus the prior year. The current quarter of 2005
included residual revenue recognized pursuant to the cancellation of the OPI agreement.

For the first nine months of 2005,
our research and development expenses increased to $2,271,714 from $2,151,046 for the same
nine months in 2004.Expenses for the periods are broken out by region as follows:

|              | Three Months Ended
September 30, |  | Nine Months Ended
September 30,
|------------- | -------------------------------- |  | -------------------------------
|              |                                  |  |                                
|
|              |                                  |  |                                
|United States |                                  |  | $                              
|France        |                                  |  |                                
|              |                                  |  |                                
|              |                                  |  | $                              
|              |                                  |  |                                

In the United States research
expenses increased for the three and nine month periods over the prior year. The increases
are due to the additional headcount in support of the clinical studies underway and costs
incurred in the execution of the melanoma and non-small cell lung cancer clinical studies.

Research expenses for the three and
nine month periods decreased in France. For the three month period certain costs related
to equipment validation and materials and supplies for the quarter were incurred in the
second quarter and expensed in accordance with our policy on research expenses. Year to
date research expenses in France were consistent with prior years.

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For the first nine months of 2005,
our selling, general and administrative expenses decreased to $1,473,657 from $1,551,404
for the same nine months in 2004. Expenses for the periods are broken out be region as
follows:

|              | Three Months Ended
September 30, |  | Nine Months Ended
September 30,
|------------- | -------------------------------- |  | -------------------------------
|              |                                  |  |                                
|
|              |                                  |  |                                
|United States |                                  |  | $                              
|France        |                                  |  |                                
|              |                                  |  |                                
|              |                                  |  | $                              
|              |                                  |  |                                

For the three and nine months periods
administrative expenses decreased from levels in 2004. Prior years expenses for the three
and nine months were higher due to costs associated with the preparation and filing of
registration statements in 2004 and additional non-recurring rental expenses incurred in
2004 associated with the closing of our office in Overland Park, Kansas and subsequent
termination of the lease obligation.

In Europe, the nine month expenses
increased while the three month expenses stayed in line with the prior years. In the third
quarter of 2004, administrative support services were increased with the sales and
marketing activities associated with the vaccine sales, which began in the third quarter
of 2004. For the nine month period there was an increase in legal and outside professional
fees associated with the operations in France.

No interest expense was recorded for
the nine months ended September 30, 2005, compared to $130,994 in the same period of
2004. Prior year interest was associated with interest accrued on the face amount of the
loans plus amortization of the discount on the bridge loans issued in December 2003. The
loans subsequently matured and the notes and related accrued interest were converted into
common stock in May 2004. No new notes were issued or outstanding in 2005.

We anticipate that in the next 12
months, presuming we receive funds or some other type of capital infusion, research and
development expenses will increase as compared with the first three quarters of 2005 due
to planned increases in the development activities related to the AC Vaccine.

# Liquidity and Capital
Resources

We presently anticipate that our
current resources, including the net proceeds of the private placement that we closed in
April 2005, should be sufficient to fund operations through the end of 2005 and into the
first half of 2006, depending upon how aggressively we implement our development plans
discussed above. That current operating plan includes anticipated expenses relating to (1)
continuing our clinical trials for M-Vax in the U.S., (2) costs associated with our BLA
submission for M-Vax in France in March 2005, (3) launching our clinical trials for
non-small cell lung cancer in the U.S., (4) continuing maintenance costs associated with
our Philadelphia facility for future utilization in production or contract manufacturing,
and (5) continuing costs associated with maintaining a cGMP-compliant facility in Lyon,
France. We will need to raise additional capital or initiate additional contract
manufacturing relationships on terms favorable to us in the first half of 2006 to continue
our operations through the end of 2006. If we are unable to raise additional capital,
secure additional contract manufacturing relationships or enter into strategic alliances,
we will have to curtail our development initiatives.

If our current and planned clinical
trials for the AC Vaccine in the United States or France do not demonstrate continuing
progress toward taking one or more products to market, our ability to raise additional
capital to fund our product development efforts would likely be seriously impaired. The
ability of a biotechnology company, such as AVAX, to raise additional capital in the
marketplace to fund its continuing development operations is conditioned upon the company
continuing to move its development products toward ultimate regulatory approval and
commercialization. If in the future we are not able to demonstrate adequate progress in
the development of one or more products, we will not be able to raise the capital we need
to continue our then-current business operations and business activities, and we will
likely not have sufficient liquidity or cash resources to continue operating.

Because our working capital
requirements depend upon numerous factors, including progress of our research and
development programs, pre-clinical and clinical testing, timing and cost of obtaining
regulatory approvals, changes in levels of resources that we devote to the development of
manufacturing and marketing capabilities, competitive and technological advances, status
of competitors, and our ability to establish collaborative arrangements with other
organizations, there can be no assurance that our current cash resources will be
sufficient to fund our operations beyond the first half of 2006. Because we have no
committed external sources of capital, and expect no significant product revenues for the
foreseeable future, we will require additional financing to fund future operations or will
need to enter into contract manufacturing relationships on terms favorable to us. There
can be no assurance, however, that we will be able to obtain the additional funds or
attract contract manufacturing relationships on acceptable terms, if at all. If additional
funds are not raised in the first half of 2006, we will have to curtail our initiatives by
the end of 2006.

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|Item 3. | Controls and Procedures.
|------- | ------------------------

An evaluation was carried out by our
chief executive and financial officers of the effectiveness of the design and operations
of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e).
Based upon that evaluation as of the end of the period covered by this report, the chief
executive and financial officers concluded that our disclosure controls and procedures are
effective in timely alerting him to material information relating to us (including its
consolidated subsidiaries) required to be included in our periodic filings with the SEC.
There have been no changes in our internal controls over financial reporting during the
quarter ended September 30, 2005, that have materially affected, or are reasonably
likely to materially affect, our internal controls over financial reporting.

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# PART II  OTHER INFORMATION

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

Our annual meeting of the
shareholders was held on September 13, 2005, at which the shareholders elected the
directors named below. The results of the voting at the annual meeting were as follows:

|Election of Directors | For        | Withhold
Authority
|--------------------- | ---------- | ------------------
|                      |            |                   
|John K.A. Prendergast | 33,050,719 | 0                 
|Edson D. de Castro    | 33,071,302 | 0                 
|Andrew W. Dahl        | 33,050,569 | 0                 
|Carl Spana            | 33,071,302 | 0                 

No other matters were submitted to a
vote of the shareholders at the annual meeting.

|Item 6. | Exhibits and
Reports on Form 8-K.
|------- | ---------------------------------

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

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

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

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Signatures

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

|                          | AVAX Technologies, Inc.   
|------------------------- | --------------------------
|Date:   November 14, 2005 | /s/   Richard P. Rainey   
|                          |                           
|                          | Richard P. RaineyPresident

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