**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549


___________________________________





**FORM
      10-Q**





(Mark
      One)





**x**
            QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934





For
      the
      quarterly period ended June 30, 2008





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





For
      the
      transition period from _____________ to ___________


Commission
      file number  0-29222





**AVAX
      TECHNOLOGIES, INC.**


(Exact
      name of registrant as specified in its charter)





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





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





**(215)
      241-9760**


(Registrant’s
      telephone number, including area code)





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





Indicate
      by check mark whether the Registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer or a smaller reporting company.
      See
      definition of  “large accelerated filer,” “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act. (Check
      one):





Large
                Accelerated filero
            Accelerated
                fileroNon-accelerated
                filero
              (do
                not check if a smaller reporting company)
            Smaller
                reporting companyx




Indicate
      by check mark whether the Registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).    Yes  ̈ No x





On
      August
      14, 2008, there were 142,605,753 shares of the Registrant’s common stock, par
      value $.004 per share, issued and outstanding .










**AVAX
      TECHNOLOGIES, INC.**


**Table
      of Contents**




**Page****PART
                I - FINANCIAL INFORMATION**Item
                1.
            Financial
                Statements
            
            3Consolidated
                Balance Sheet - As of June 30, 2008 (Unaudited) and December 31,
                2007
            
            3Consolidated
                Statements of Operations and Comprehensive Loss (Unaudited) For the
                Three
                Months and Six Months Ended June 30, 2008 and 2007 and for the Period
                from
                January 12, 1990 (Incorporation) to June 30, 2008
            
            4Consolidated
                Statements of Cash Flows (Unaudited) For the Six Months Ended June
                30,
                2008 and 2007 and for the Period from January 12, 1990
                (Incorporation) to June 30, 2008
            
            5Notes
                to Consolidated Financial Statements
            
            7Item
              2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            
            13Item
              3.
            Quantitative
                and Qualitative Disclosures about Market Risk
            
            17Item
              4T.
            Controls
                and Procedures
            
            17**PART
                II - OTHER INFORMATION**Item
                1.
            Legal
                Proceedings
            
            19Item 1A.
            Risk
                Factors
            
            19Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            
            19Item
                3.
            Defaults
                Upon Senior Securities
            
            19Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            
            19Item
                5.
            Other
                Information
            
            19Item
                6.
            Exhibits
            
            19Signatures
            
            20




2





**PART
      I - FINANCIAL INFORMATION**





**Item
      1.**  **Financial
      Statements.**


AVAX
      Technologies, Inc. and Subsidiaries


***(a
      development stage company)***


**June 30,**
              **2008**
              **(unaudited)**
            
            **December 31,**
              **2007****Assets**Current
                assets:Cash
            
            $
            1,346,161
            
            $
            5,903,207Accounts
                receivable
            
            
            5,543
            
            
            131,387Inventory
            
            
            5,775
            
            
            11,520VAT
                receivable
            
            
            65,794
            
            
            82,896Prepaid
                expenses and other current assets
            
            
            468,517
            
            
            317,105Total
                current assets
            
            
            1,891,790
            
            
            6,446,115Property,
                plant and equipment, at cost
            
            
            4,438,187
            
            
            4,247,706Less
                accumulated depreciation
            
            
            3,735,755
            
            
            3,505,051Net
                property, plant and equipment
            
            
            702,432
            
            
            742,655Goodwill
            
            
            188,387
            
            
            188,387Total
                assets
            
            $
            2,782,609
            
            $
            7,377,157**Liabilities
                and stockholders’ equity (deficit)**Current
                liabilities:Accounts
                payable
            
            $
            1,399,647
            
            $
            2,091,674Accrued
                expenses
            
            
            513,480
            
            
            551,777Accrued
                and withheld payroll taxes and liabilities
            
            
            429,631
            
            
            699,603Deferred
                revenue
            
            
            257,321
            
            
            250,000ANVAR
                advances
            
            
            432,138
            
            
            400,691Total
                current liabilities
            
            
            3,032,217
            
            
            3,993,745Stockholders’
                equity*:*Preferred
                stock, $.01 par value:Authorized
                shares – 5,000,000, including Series C – 120,000 sharesSeries
                C convertible preferred stock:Issued
                and outstanding shares – 33,500 at June 30, 2008 and December 31, 2007
                (liquidation preference - $3,350,000)
            
            
            335
            
            
            335Common
                stock, $.004 par value:Authorized
                shares 500,000,000 at June 30, 2008 and December 31, 2007
              Issued
                and outstanding shares –141,574,997 at June 30, 2008 and December 31, 2007
            
            
            566,300
            
            
            566,300Additional
                paid-in capital
            
            
            86,909,550
            
            
            86,657,058Subscription
                receivable
            
            
            (422
            )
            
            (422
            )Accumulated
                other comprehensive income
            
            
            336,094
            
            
            414,971Deficit
                accumulated during the development stage
            
            
            (88,061,465
            )
            
            (84,254,830
            )Total
                stockholders’ equity (deficit)
            
            
            (249,608
            )
            
            3,383,412Total
                liabilities and stockholders’ equity (deficit)
            
            $
            2,782,609
            
            $
            7,377,157





*See
      accompanying notes.*




3





AVAX
      Technologies, Inc. and Subsidiaries


***(a
      development stage company)***


Consolidated
      Statements of Operations and Comprehensive Loss


*(Unaudited)*


**Three months ended**
                **June 30,**
              
              **Six months ended**
                **June 30,**
              
              **Period from**
                **January 12, 1990**
                **(Incorporation) to**
                **June 30,****2008**
              
              **2007**
              
              **2008**
              
              **2007**
              
              **2008**Revenue:Gain
                  from sale of the Product
              
              $
              –
              
              $
              –
              
              $
              –
              
              $
              –
              
              $
              1,951,000Product
                  and contract service revenue
              
              
              91,135
              
              
              58,769
              
              
              206,775
              
              
              203,316
              
              
              7,022,869Grant
                  revenue
              
              
              5,295
              
              
              –
              
              
              9,773
              
              
              –
              
              
              215,885Total
                  revenue
              
              
              96,430
              
              
              58,769
              
              
              216,548
              
              
              203,316
              
              
              9,189,754Costs
                  and expenses:Research
                  and development
              
              
              1,228,394
              
              
              1,041,708
              
              
              2,360,238
              
              
              2,051,497
              
              
              54,607,978Acquired
                  in process research and development
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              4,420,824Write
                  down of acquired intellectual property and other
                  intangibles
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              3,416,091Amortization
                  of acquired intangibles
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              715,872Selling,
                  general and administrative
              
              
              754,335
              
              
              623,274
              
              
              1,718,072
              
              
              1,094,193
              
              
              39,677,453Total
                  operating loss
              
              
              (1,886,299
              )
              
              (1,606,213
              )
              
              (3,861,762
              )
              
              (2,942,374
              )
              
              (93,648,464
              )Other
                  income (expense):Interest
                  income
              
              
              11,204
              
              
              84,565
              
              
              52,849
              
              
              94,878
              
              
              6,257,440Interest
                  expense
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              (812,067
              )Other,
                  net
              
              
              1,885
              
              
              –
              
              
              2,278
              
              
              –
              
              
              145,471Total
                  other income , net
              
              
              13,089
              
              
              84,565
              
              
              55,127
              
              
              94,878
              
              
              5,590,844Loss
                  before income taxes
              
              
              (1,873,210
              )
              
              (1,521,648
              )
              
              (3,806,635
              )
              
              (2,847,496
              )
              
              (88,057,620
              )Income
                  taxes
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Loss
                  from continuing operations
              
              
              (1,873,210
              )
              
              (1,521,648
              )
              
              (3,806,635
              )
              
              (2,847,496
              )
              
              (88,057,620
              )Loss
                  from discontinued operations
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              (3,845
              )Net
                  loss
              
              
              (1,873,210
              )
              
              (1,521,648
              )
              
              (3,806,635
              )
              
              (2,847,496
              )
              
              (88,061,465
              )Amount
                  payable for liquidation preference
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              (1,870,033
              )Net
                  loss attributable to common stockholders
              
              $
              (1,873,210
              )
              $
              (1,521,648
              )
              $
              (3,806,635
              )
              $
              (2,847,496
              )
              $
              (89,931,498
              )Loss
                  per common share – basic and dilutedLoss
                  from continuing operations
              
              $
              (0.01
              )
              $
              (0.01
              )
              $
              (0.03
              )
              $
              (0.03
              )Loss
                  from discontinued operations
              
              
              –
              
              
              –
              
              
              –
              
              
              –Net
                  loss
              
              $
              (0.01
              )
              $
              (0.01
              )
              $
              (0.03
              )
              $
              (0.03
              )Weighted-average
                  number of common shares outstanding
              
              
              141,530,614
              
              
              130,037,855
              
              
              141,555,545
              
              
              95,915,992Net
                  loss
              
              $
              (1,873,210
              )
              $
              (1,521,648
              )
              $
              (3,806,635
              )
              $
              (2,847,496
              )Foreign
                  currency translation adjustment
              
              
              16,961
              
              
              (5,963
              )
              
              16,961
              
              
              (40,200
              )Comprehensive
                  loss
              
              $
              (1,856,249
              )
              $
              (1,527,611
              )
              $
              (3,789,674
              )
              $
              (2,887,696
              )





*See
      accompanying notes.*




4





AVAX
      Technologies, Inc. and Subsidiaries


***(a
      development stage company)***


Consolidated
      Statements of Cash Flows


*(Unaudited)*


**Six months ended June 30,**
            
            **Period from**
              **January 12, 1990**
              **(Incorporation) to**
              **June 30,****2008**
            
            **2007**
            
            **2008****Operating
                activities**Net
                loss
            
            $
            (3,806,635
            )
            $
            (2,847,496
            )
            $
            (88,061,465
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Depreciation
                and amortization
            
            
            131,257
            
            
            146,731
            
            
            5,215,984Amortization
                of discount on convertible notes payable
            
            
            –
            
            
            –
            
            
            142,500Extraordinary
                gain related to negative goodwill on consolidated
                subsidiary
            
            
            –
            
            
            –
            
            
            (902,900
            )Cumulative
                effect of change in accounting
            
            
            –
            
            
            –
            
            
            (186,295
            )Amortization
                of deferred gain on joint venture
            
            
            –
            
            
            –
            
            
            (1,805,800
            )Equity
                in net loss of joint venture
            
            
            –
            
            
            –
            
            
            1,703,763Employee
                Stock Option Expense
            
            
            252,492
            
            
            63,810
            
            
            600,188Minority
                interest in net loss of consolidated subsidiary
            
            
            –
            
            
            –
            
            
            (80,427
            )Acquired
                in-process research and development charge
            
            
            –
            
            
            –
            
            
            4,420,824Write
                down of acquired intellectual property and other
                intangibles
            
            
            –
            
            
            –
            
            
            3,416,091Compensatory
                stock issue
            
            
            –
            
            
            –
            
            
            25,000Gain
                on sale of the Product
            
            
            –
            
            
            –
            
            
            (1,951,000
            )Gain
                on sale of intellectual property
            
            
            –
            
            
            –
            
            
            (787
            )Accretion
                of interest on common stock receivable
            
            
            –
            
            
            –
            
            
            (449,000
            )Accretion
                of interest on amount payable to preferred stockholders and Former
                Officer
            
            
            –
            
            
            –
            
            
            449,000Loss
                on sale of furniture and equipment
            
            
            –
            
            
            –
            
            
            246,254Issuance
                of common stock or warrants for services
            
            
            –
            
            
            –
            
            
            423,289Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            126,247
            
            
            142,136
            
            
            143,475Inventory
            
            
            6,165
            
            
            (1,210
            )
            
            36,929Prepaid
                expenses and other current assets
            
            
            (119,211
            )
            
            (820
            )
            
            (275,242
            )Research
                and development tax credit receivable
            
            
            –
            
            
            –
            
            
            320,488Accounts
                payable and accrued liabilities
            
            
            (1,040,646
            )
            
            359,732
            
            
            1,162,421Deferred
                revenue
            
            
            6,788
            
            
            287,835
            
            
            217,080Amount
                payable to Former Officer
            
            
            –
            
            
            –
            
            
            80,522Net
                cash used in operating activities
            
            $
            (4,443,543
            )
            $
            (1,849,282
            )
            $
            (75,109,108
            )**Investing
                activities**Purchases
                of marketable securities
            
            
            –
            
            
            –
            
            
            (351,973,210
            )Proceeds
                from sale of marketable securities
            
            
            –
            
            
            –
            
            
            344,856,738Proceeds
                from sale of short-term investments
            
            
            –
            
            
            –
            
            
            7,116,472Purchases
                of furniture and equipment
            
            
            (64,895
            )
            
            (29,175
            )
            
            (3,794,960
            )Proceeds
                from sale of furniture and equipment
            
            
            –
            
            
            –
            
            
            51,119Cash
                acquired in acquisition of control of joint venture
            
            
            –
            
            
            –
            
            
            991,634Organization
                costs incurred
            
            
            –
            
            
            –
            
            
            (622,755
            )Net
                cash used in investing activities
            
            $
            (64,895
            )
            $
            (29,175
            )
            $
            (3,374,962
            )





5





AVAX
      Technologies, Inc. and Subsidiaries


***(a
      development stage company)***


Consolidated
      Statements of Cash Flows (continued)


*(Unaudited)*





**Six months ended June 30,**
            
            **Period from**
              **January 12, 1990**
              **(Incorporation)**
              **to**
              **June
                30,****2008**
            
            **2007**
            
            **2008****Financing
                activities**Proceeds
                from issuance of notes payableto
                related party
            
            $
            –
            
            $
            –
            
            $
            957,557Principal
                payments on notes payable to related party
            
            
            –
            
            
            –
            
            
            (802,000
            )Proceeds
                from loans payable and the related issuance of warrants
            
            
            –
            
            
            –
            
            
            2,314,000Principal
                payments on loans payable
            
            
            –
            
            
            –
            
            
            (1,389,000
            )Payments
                for fractional shares from reverse splits and preferred stock
                conversions
            
            
            –
            
            
            –
            
            
            (76
            )Financing
                costs incurred
            
            
            –
            
            
            –
            
            
            (90,000
            )Shareholder
                capital contribution
            
            
            –
            
            
            –
            
            
            93,637Payments
                received on subscription receivable
            
            
            –
            
            
            –
            
            
            4,542Proceeds
                received from exercise of stock warrants
            
            
            –
            
            
            –
            
            
            76,892Elimination
                of consolidated accounting treatment for joint venture
            
            
            –
            
            
            –
            
            
            (2,511,701
            )Capital
                contribution through sale of interest in consolidated
                subsidiary
            
            
            –
            
            
            –
            
            
            2,624,000Net
                proceeds received from issuance of preferred and common
                stock
            
            
            –
            
            
            9,318,359
            
            
            78,170,851Net
                cash provided by financing activities
            
            
            –
            
            
            9,318,359
            
            
            79,448,702Effect
                of exchange rate changes on cash
            
            
            (48,608
            )
            
            (39,380
            )
            
            381,529Net
                increase (decrease) in cash
            
            
            (4,557,046
            )
            
            7,400,522
            
            
            1,346,161Cash
                at beginning of period
            
            
            5,903,207
            
            
            1,484,570
            
            
            –Cash
                at end of period
            
            $
            1,346,161
            
            $
            8,885,092
            
            $
            1,346,161**Supplemental
                disclosure of cash flow information**Interest
                Paid
            
            $
            –
            
            $
            –
            
            $
            197,072Non-cash
                activity:Issuance
                of restricted stock compensation
            
            $
            –
            
            $
            –
            
            $
            25,000Common
                stock warrants issued with convertible notes
            
            $
            –
            
            $
            –
            
            $
            142,500Conversion
                of bridge loan into common stock
            
            $
            –
            
            $
            –
            
            $
            950,000Payment
                of interest with common stock
            
            $
            –
            
            $
            –
            
            $
            23,275





*See
      accompanying notes.*




6





**AVAX
      Technologies, Inc. and Subsidiaries**


***(a
      development stage company)***


Notes
      to
      Consolidated Financial Statements *(Unaudited)*





**1.
      Description of Business**





AVAX
      Technologies, Inc. and its subsidiaries (the “Company” or “AVAX”) is a
      development stage biopharmaceutical company.





In
      November 1995, the Company sold its leading product under development, an
      over-the-counter nutritional, dietary, medicinal and/or elixorative food
      supplement or drug and all of the related patents and other intellectual
      property. The agreement was for $2.4 million in shares of common stock of
      Interneuron Pharmaceuticals, Inc. (“IPI”), a public company, the parent of the
      purchaser of the product (the “Stock”). Certain common stockholders of the
      Company were also common stockholders of IPI. Pursuant to the terms of the
      agreement, the purchase price, payable in two equal installments in December
      1996 and 1997, was fixed, and the number of shares of the Stock would vary
      depending on the quoted market price of the Stock at such time. Because the
      Stock was receivable in two equal annual installments, the gain from the sale
      of
      the product, $1,951,000, was calculated by discounting the value of the Stock
      receivable using a discount rate of 15%.





Also
      in
      November 1995, the Company entered into a license agreement with Thomas
      Jefferson University (“TJU”) to develop, commercially manufacture and sell
      products embodying immunotherapeutic vaccines for the treatment of malignant
      melanoma and other cancers (the “Invention”) *(see
      Note 4* ).





In
      December 1996, the Company entered into a license agreement with Rutgers
      University (“Rutgers”) to develop, commercially manufacture and sell products
      embodying a series of compounds for the treatment of cancer and infectious
      diseases. During September 2004, the Company and Rutgers agreed to cancel the
      license agreement and all of the Company’s obligations associated with the
      license agreement.





In
      February 1997, the Company entered into a license agreement with Texas A&M
      University to develop, commercially manufacture and sell products embodying
      a
      series of compounds for the treatment of cancer (the “Texas A&M Compounds”) *(see
      Note 4* ).





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 (“M-Vax”), 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 M-Vax
      in
      Australia, and determined 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 with its principal operating facility in Lyon, 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. The Company’s June 30, 2008 consolidated balance sheet includes
      approximately $516,707 in net assets related to these subsidiaries.





The
      Company’s business is subject to significant risks consistent with biotechnology
      companies that are developing products for human therapeutic use. These risks
      include, but are not limited to, uncertainties regarding research and
      development, access to capital, obtaining and enforcing patents, receiving
      regulatory approval, and competition with other biotechnology and pharmaceutical
      companies. The Company is seeking to continue to finance its operations with
      a
      combination of equity and debt financing and, in the longer term, revenues
      from
      product sales, if any. However, there can be no assurance that it will
      successfully develop any product or, if it does, that the product will generate
      any sufficient revenues or that the Company will continue to have the finances
      available to support its operations.




7





**2.
      Basis of Presentation**





The
      financial information for the three-month and six-month periods ended June
      30,
      2008 and 2007, 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 8 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 six-month periods ended June 30, 2008 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, 2007 included in the Company’s Annual Report on Form
      10-K.





The
      consolidated financial statements have been prepared assuming that the Company
      will continue as a going concern. For the year ended December 31, 2007, the
      Company incurred a net loss of $6,413,648 and a use of cash in operating
      activities of $4,731,897. For the six months ended June 30, 2008, the Company
      incurred a net loss of $3,806,635 and a use of cash in operating activities
      of
      $4,443,543. The Company’s cash requirements were satisfied through a private
      placement of common stock in April 2007, maintaining balances in accounts
      payable and accrued expenses on terms in excess of those afforded in commercial
      practice and customer agreements and through the use of available cash. However,
      the Company does not have sufficient resources to maintain its existing plan
      of
      operations throughout 2008. These conditions raise substantial doubt about
      the
      Company’s ability to continue as a going concern. Management anticipates that
      additional debt or equity financing will be required to fund ongoing operations
      in 2008. The Company is currently negotiating to raise additional capital or
      secure revenue sources to fund current operations. However, there is no
      assurance that the Company will successfully obtain the required capital or
      revenues or, if obtained, the amounts will be sufficient to fund ongoing
      operations in 2008. The inability to secure additional capital could have a
      material adverse effect on the Company, including the possibility that the
      Company could have to cease operations. Management has considered the impact
      of
      the going concern status in its evaluation of the recoverability and
      classification of its assets and liabilities.





**3.
      Significant Accounting Policies**





**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.





**Foreign
      Currency Translation**





Holdings
      and Genopoietic use the Euro as their functional currency as required by the
      European Union. In accordance with Statement of Financial Accounting Standards
      (SFAS) No. 52, “Foreign Currency Translation,” the financial statements of these
      entities have been translated into U.S. dollars, the functional currency of
      the
      Company and its other wholly-owned subsidiaries and the reporting currency
      herein, for purposes of consolidation.





**Use
      of Estimates**





The
      preparation of consolidated financial statements in conformity with accounting
      principles generally accepted in the United States requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenues and expenses
      during the reporting period. Actual results could differ from those
      estimates.





**Revenue
      Recognition**





The
      Company’s revenues are related to the provision of contract services and 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. Product revenues represent
      fees
      received or payable to the Company related to the manufacture and sale of the
      vaccine. Product revenue is recognized when the vaccine is received by the
      hospital administering the vaccine.





The
      Company records as deferred revenue amounts received in advance of the provision
      of services in accordance with contracts or grants. Deferred revenue primarily
      consisted of $250,000 received pursuant to a clinical development and
      manufacturing agreement for which activities needed to be completed by May
      31,
      2008 which had been extended to early August, 2008 in order to earn the half
      the
      funds. Pursuant to the agreement, if the Company’s manufacturing facility in
      Philadelphia, PA is not able to produce products pursuant to the agreement,
      then
      $125,000 of the funds received will default to the collaboration
      partner. **** The
      due
      date for the obligation has passed but the other party has not demanded
      repayment of the obligation. If the facilities are not able to produce products
      pursuant to the agreement by August 31, 2008, then the remaining $125,000 will
      default and be payable back to the collaboration partner.




8





**Accounts
      Receivable**





Accounts
      receivable are stated at the amount management expects to collect from
      outstanding balances. Management provides for probable uncollectible accounts
      through a charge to earnings and a credit to a valuation allowance based on
      its
      assessment of the current status of individual accounts. Balances that are
      still
      outstanding after management has used reasonable collection efforts are written
      off through a charge to the valuation allowance and a credit to accounts
      receivable. There was no valuation allowance at June 30, 2008. The Company
      generally does not charge interest on accounts receivable.





**Concentrations
      of Credit Risk**





Financial
      instruments that potentially subject the Company to credit risk are principally
      cash and accounts receivable. Cash consists of checking accounts, money market
      accounts and a certificate of deposit. The Company places its cash with its
      principal bank that is a high credit quality financial institution. Cash
      deposits generally are in excess of the FDIC insurance limits. Credit limits,
      ongoing credit evaluations, and account monitoring procedures are utilized
      to
      minimize the risk of loss from accounts receivable. Collateral is generally
      not
      required.





**Fair
      Value of Financial Instruments**





The
      carrying amount of accounts receivable, accounts payable and accrued liabilities
      are considered to be representative of their respective fair values due to
      their
      short-term nature.





**Inventories**





Inventories
      are stated at the lower of cost, determined using the first-in, first-out
      method, or market. The Company’s inventories include raw materials and supplies
      used in research and development activities.





**Accrued
      Expenses**





The
      Company provides for accrued expenses based upon its contractual obligation,
      as
      calculated by the Company, for all claims made for payment to the Company.





**Depreciation**





Depreciation
      is computed using the straight-line method over the estimated useful lives
      of
      furniture and equipment, which range from three to ten years. Depreciation
      for
      the Company’s manufacturing facility and related equipment are computed using
      the straight-line method over estimated useful lives of 5 to 10 years. Leasehold
      improvements related to the building are being amortized using the straight-line
      method over the actual life of the lease.





**Goodwill**





The
      Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets”, on
      January 1, 2002. This accounting standard requires that goodwill and
      indefinite lived assets no longer be amortized but instead be tested at least
      annually for impairment, and expensed against earnings when the implied fair
      value of a reporting unit, including goodwill, is less than its carrying amount.
      The Company performed its annual goodwill impairment test in accordance with
      SFAS No. 142 and determined that the carrying amount of goodwill was
      reasonable.





Prior
      to
      the adoption of SFAS No. 142, the Company had recorded cumulative amortization
      of $113,032. If SFAS No. 142 had been applied to earlier periods, the adjusted
      loss from continuing operations would be $87,944,588 and the adjusted net loss
      would be $87,948,433.





**Research
      and Development Costs**





Research
      and development costs, including payments related to research and license
      agreements, are expensed when incurred. Contractual research expenses are
      recorded pursuant to the provisions of the contract under which the obligations
      originate. Research and development costs include all costs incurred related
      to
      the research and development, including manufacturing costs incurred, related
      to
      the Company’s research programs. The Company is required to produce its products
      in compliance with current Good Manufacturing Practices (“cGMP”), which requires
      a minimum level of staffing, personnel and facilities testing and maintenance.
      Based upon its current staffing level required to be in compliance with cGMP,
      the Company has excess capacity. Utilizing this excess capacity, revenue is
      generated through contract manufacturing engagements. Costs for production
      of
      products will be capitalized and charged to cost of goods sold only after the
      Company has received approval to market the drug by a regulatory
      authority.




9





**Stock-Based
      Compensation**




Effective
      January 1, 2006, the Company has adopted SFAS 123R, “Share-Based Payment.”
SFAS 123R establishes standards for the accounting for transactions in
      which an entity exchanges its equity instruments for goods or services and
      requires that the compensation cost relating to share-based payment transactions
      be recognized in financial statements, measured by the fair value of the equity
      or liability instruments issued, adjusted for estimated forfeitures. The Company
      transitioned to SFAS 123R using the modified-prospective methods, under which
      prior periods have not been revised for comparative purposes. The valuation
      provisions of SFAS 123R apply to new grants and to grants that were outstanding
      as of the effective date and are subsequently modified. Estimated compensation
      for grants that were outstanding as of the effective date will be recognized
      over the remaining service period using the compensation cost previously
      estimated for our SFAS 123 pro forma disclosures. Recognized stock-based
      compensation expense for the three and six months ended June 30, 2008 includes
      compensation expense for share-based payment awards granted prior to, but not
      yet vested as of December 31, 2005, based on the grant date fair value
      estimated in accordance with the pro forma provisions of SFAS 123 and
      compensation expense for the share-based payment awards granted subsequent
      to
      December 31, 2005 based on the grant date fair value estimated in
      accordance with the provisions of SFAS 123R.




Prior
      to
      the adoption of SFAS 123R, the Company applied the intrinsic-value-based method
      of accounting prescribed by Accounting Principles Board Opinion (“APB”) 25,
“Accounting for Stock Issued to Employees,” and related interpretations, to
      account for its fixed-plan stock options to employees. Under this method,
      compensation cost was recorded only if the market price of the underlying stock
      on the date of grant exceeded the exercise price. SFAS 123, “Accounting for
      Stock-Based Compensation,” established accounting and disclosure requirements
      using a fair-value-based method of accounting for stock-based employee
      compensation plans. As permitted by SFAS 123, the Company elected to continue
      to
      apply the intrinsic-value-based method of accounting described above, and
      adopted only the disclosure requirements of SFAS 123, as amended by SFAS No.
      148, “Accounting for Stock-Based Compensation, Transition and Disclosure.” The
      fair-value-based method used to determine historical pro forma amounts under
      SFAS 123 was similar in most respects to the method used to determine
      stock-based compensation expense under SFAS 123R. However, in its pro forma
      disclosures, the Company accounted for option forfeitures as they occurred,
      rather than based on estimates of future forfeitures.





The
      Company maintains three employee stock option plans and a director stock option
      plan, and has issued non-qualified stock options to an executive officer and
      a
      director outside of the existing stock option plans, which non-plan option
      grants have been approved by the Board of Directors and the stockholders of
      the
      Company. These plans are more fully discussed in our Annual Report on Form
      10-K
      filed for the year ended December 31, 2007. In addition, the Company issues
      warrants to consultants at the discretion of the Board of Directors of the
      Company. The Company accounts for warrants granted to consultants in accordance
      with Emerging Issues Task Force Issue 96-18, “Accounting for Equity Instruments
      That Are Issued to Other Than Employees for Acquiring, or in Conjunction with
      Selling, Goods or Services.” The Company determines the value of stock warrants
      utilizing the Black-Scholes option-pricing model.





Compensation
      costs for fixed awards with pro rata vesting are allocated to periods on the
      straight-line basis. For the three and six month periods ended June 30, 2007,
      no
      options or warrants were issued. The estimated weighted average fair value
      of
      warrants granted as of June 30, 2008 was calculated based on the following
      assumptions:





**Three Months Ended**
              **June 30, 2008**
            
            **Six Months Ended**
              **June 30, 2008**Expected
                term (in years)
            
            
            5.00
            
            
            5.00Volatility
            
            
            71.5
            %
            
            73.5
            %Risk-free
                interest rate
            
            
            3.18
            %
            
            2.86
            %Expected
                dividends
            
            
            0
            
            
            0




Compensation
      expense of $191,619 and $35,076 was charged to administrative expenses for
      the
      six months ended June 30, 2008 and 2007, respectively, while $60,873 and $28,734
      was charged to research and development expenses related to stock options
      outstanding and not vested for the same periods, respectively. As of
      June 30, 2008, total compensation cost related to non-vested stock options
      not
      yet recognized is $542,685 and is expected to be allocated to expenses over
      a
      weighted-average period of 18 months.




10





**Options
      and Warrants Outstanding**




In
      addition to options and warrants granted for compensatory purposes, the Company
      also issues warrants from time to time in conjunction with financing
      transactions. A summary of applicable stock option and warrant activity and
      related information for the six months ended June 30, 2008, is as
      follows:


**Options
                  and**
                **Warrants**
              
              **Weighted-Average**
                **Exercise Price**Outstanding
                  at beginning of period
              
              
              122,331,693
              
              $
              0.19Granted
              
              
              850,000
              
              $
              0.11Exercised
              
              
              —
              
              
              —Forfeited
              
              
              50,000
              
              $
              0.91Outstanding
                  at end of period
              
              
              123,131,693
              
              $
              0.19Exercisable
                  at end of period
              
              
              114,228,471
              
              $
              0.19




The
      fair
      value of option grants is estimated at the date of grant using the Black-Scholes
      model. The options and warrants expire at various times through July 2017.
      The
      weighted-average exercise price of warrants granted during the first six months
      of 2008 was $0.11.




The
      fair
      value of option grants is estimated at the date of grant using the Black-Scholes
      model. The following table shows the options and warrants outstanding by strike
      price with the average expected remaining term of the instruments, in years,
      as
      of June 30, 2008.





**Exercise
                Price Range**
            
            **Options & Warrants**
              **Outstanding**
            
            **Weighted-Average**
              **Remaining Term**
            
            **Vested Options &**
              **Warrants**
            
            **Weighted-Average**
              **Remaining Term**$0.090
                - $0.143
            
            
            15,988,178
            
            
            3.50
            
            
            8,042,425
            
            
            0.57$0.150
                - $0.190
            
            
            90,915,400
            
            
            3.93
            
            
            90,252,900
            
            
            3.91$0.285
                - $0.330
            
            
            2,347,792
            
            
            3.39
            
            
            2,052,823
            
            
            3.31$0.340
                - $0.390
            
            
            5,682,293
            
            
            1.34
            
            
            5,682,293
            
            
            1.34$0.410
                - $0.470
            
            
            7,603,030
            
            
            1.76
            
            
            7,603,030
            
            
            1.76$0.890
                - $0.906
            
            
            230,000
            
            
            0.34
            
            
            230,000
            
            
            0.34$2.940
            
            
            240,000
            
            
            0.34
            
            
            240,000
            
            
            0.34$8.240
            
            
            125,000
            
            
            3.34
            
            
            125,000
            
            
            3.34123,131,693
            
            
            
            
            
            114,228,471





**Earnings
      Per Share**





Net
      loss
      per share is based on net loss divided by the weighted average number of shares
      of common stock outstanding during the respective periods. Diluted earnings
      per
      share information is not presented, as the effects of stock options, warrants
      and other convertible securities would be anti-dilutive for the periods
      presented.





**4.**  **License
      and Research Agreements**





In
      November 1995, the Company entered into an agreement with TJU for the exclusive
      worldwide license to develop, manufacture and sell the Invention *(see
      Note 1)* .
      In
      consideration for the license agreement, the Company paid cash of $10,000 and
      issued an aggregate of 458,243 shares of common stock to TJU and the scientific
      founder (the “Scientist”).




11





Under
      the
      terms of the license agreement, the Company is obligated to (i) pay certain
      milestone payments as follows: $10,000 upon initiation of the first clinical
      trial that is approved by the Food and Drug Administration (“FDA”) or comparable
      international agency, $10,000 upon the first filing of a New Drug Application
      (“NDA”) with the FDA or comparable international agency, and $25,000 upon
      receipt by the Company of approval from the FDA or comparable international
      agency to market products, (ii) enter into a research agreement to fund a study
      to be performed by TJU for the development of the technology related to the
      Invention (the “Study”) at approximately $220,000 per annum for the first three
      years, and (iii) following the third year, spend an aggregate of $500,000 per
      year (which includes costs incurred pursuant to the research agreement plus
      other internal and external costs) on the development of the Invention until
      commercialized in the United States. If following the third year, the Company
      files for United States marketing approval through a Company sponsored NDA,
      the
      Company may elect to spend less than $500,000 per year on the development of
      the
      Invention during the period of time the NDA is under review by the FDA. During
      2000, a payment of $25,000 was made to TJU pursuant to the license agreement.
      In
      addition, the Company is obligated to pay royalties on its worldwide net revenue
      derived from the Invention and a percentage of all revenues received from
      sub-licensees of the Invention **.**





The
      research agreement with TJU mentioned above was to continue until completion
      of
      the study, although it is terminable, upon notice by either party to the other,
      at any time. The Company has maintained the appropriate level of spending on
      the
      development of the Invention in accordance with the license
      agreement.




In
      February 1997, the Company licensed from Texas A&M University (“Texas
      A&M”) an issued U.S. patent and certain U.S. and foreign patent applications
      relating to a series of novel cancer-fighting anti-estrogen compounds that
      may
      be **** especially
      effective against hormone-dependent tumors. The development of the anti-estrogen
      compounds is no longer a part of the Company‘s plan of operation. The Company
      has been notified by Texas A&M that Texas A&M considers the Company to
      be in violation of the license agreement and that the Company’s rights under the
      license agreement have been revoked. The Company disputes the contention by
      Texas A&M and the Company is attempting to return the technology to the
      University. Texas A&M has filed a lawsuit against the Company seeking
      reimbursement from the Company for certain patent expenses incurred by the
      university from the Company.  Although the disputed amount is fully accrued
      in the attached financial statements, the Company continues to dispute certain
      amounts that are claimed by the university. ****





**5.**  **ANVAR
      Advances**





Genopoietic
      receives financial support from a French governmental agency (“ANVAR”). These
      advances are subject to conditions specifying that non-compliance with such
      conditions could result in the forfeiture of all or a portion of the future
      amounts to be received, as well as the repayment of all or a portion of amounts
      received to date. If certain products are commercialized, the June 30, 2008
      balance of $432,138 is repayable based on an annual royalty equal to 47% of
      the
      revenue related to the project. As such, the total amount of advances received
      was recorded as a liability in the accompanying consolidated balance sheet.
      In
      case of failure or partial success, as defined in the agreement, $96,378 is
      payable. The due date for the obligation has passed but the grantor agency
      has
      not demanded repayment of the obligation. Due to the uncertainty regarding
      the
      amount that to will be required to be repaid to ANVAR, the Company maintains
      the
      full amount of the obligation as a current liability.




12





**Item
      2.**  **Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations.**





**Cautionary
      Statement Regarding Forward-Looking Statements**





In
      this
      report, in other filings with the Securities and Exchange Commission (“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 involve risks and uncertainties, including, among other things:
      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. Many of these statements are found in
      this “Management’s Discussion and Analysis of Financial Condition and Results of
      Operations.”





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
      include:





·
            Our
                history of operating losses, our continuing cash requirements, our
                immediate need to raise capital in the third quarter of 2008 and
                substantial capital thereafter, 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.





·
            Difficulties
                arising from our competition with other companies conducting 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-K
                for the
                year ended December 31, 2007, under Item 1A – “Risk
                Factors.”





13





**GENERAL**





Since
      our
      inception, we have primarily concentrated our efforts and resources on the
      development and commercialization of individualized vaccine therapies and other
      technologies for the treatment of cancer. These efforts require that we expend
      money in the development and clinical testing of our products.





We
      have
      been unprofitable since our founding and we fund our losses primarily through
      equity offerings of equity and debt. We incurred net losses of $6,413,648 and
      $5,355,500 for the 12 months ended December 31, 2007 and 2006, respectively,
      and
      $3,806,635 for the six months ended June 30, 2008. We have a cumulative net
      loss
      of $89,931,498 as of June 30, 2008. We expect to continue to incur operating
      losses, primarily due to the expenses associated with our product development
      efforts, and the cost of maintaining our manufacturing facilities in Europe
      and
      the U.S.





Our
      ability to continue as an operating company depends upon our immediate need
      to
      raise capital. We are in discussions with investors for a proposed bridge
      financing (the “Bridge Financing”) for the purpose of raising funds for working
      capital for the next few months, but there can be no assurance that we will
      complete the Bridge Financing or that the terms of such financing will be
      favorable to us or our existing stockholders. To the extent that we issue
      securities that are not registered under the Securities Act of 1933, as amended
      (the “Act”) in connection with the proposed Bridge Financing, the securities may
      not be offered or sold in the United States absent registration or an applicable
      exemption from registration. Even if we complete a Bridge Financing, we will
      need to raise additional funds immediately if we are to continue as a going
      concern. If we are successful in raising sufficient additional capital, it
      should allow us to develop products, obtain regulatory approval for our proposed
      products, and enter into agreements for product development, manufacturing
      and
      commercialization. There is
      no assurance that additional capital can be raised in an amount which is
      sufficient for all such purposes, or on terms favorable to us or to our
      stockholders.




In
      the
      event that we do not complete the Bridge Financing or raise additional
      financing, it
      will
      be difficult for the Company to continue operations as they exist. We may be
      forced to shut down our operations or seek bankruptcy relief. If we
      discontinue our operations, we may not have sufficient funds to pay any
      amounts to our stockholders.





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
      challenges for others and us in the biopharmaceutical industry are the
      significant costs, time 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
                past 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 was required before
                we could
                commence our Phase III registration trial for
                M-Vax;


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


·
            the
                periodic cutbacks in our development plans and programs due to the
                limited
                cash resources from time to time in recent years and in particular,
                currently.





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.




14





***Results
      of Operations for the Three and Six Months Ended June 30, 2008 compared with
      the
      comparable periods ended June 30, 2007***





**Revenue**





Revenue
      recognized for the three and six months ended June 30, 2008 were $96,430 and
      $216,548, respectively, compared with revenue of $58,769 and $203,316,
      respectively, for the same periods in 2007. The increase in revenues for the
      three months ended June 30, 2008 was due to higher manufacturing
      reimbursements related to compassionate use treatments and higher revenues
      realized from contract manufacturing. The increase in revenues for the six
      months ended June 30, 2008 was due to a higher exchange rate in the current
      year.





**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.





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 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 catalogued 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 June 30, 2008 were $54,607,978. 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, risks associated with regulatory review and approval of
      clinical product candidates and the limited funds available, we are unable
      to
      estimate with any certainty the costs we will incur in the continued development
      of our product candidates for commercialization.





During
      the three months ended June 30, 2008, research and development expenses
      increased 17.9% from $1,041,708 as of June 30, 2007 to $1,228,394 as of June
      30,
      2008. For the six-month period ended June 30, 2008, expenses increased 15.0%
      from $2,051,497 as of June 30, 2007 to $2,360,238 as of June 30, 2008. Expenses
      for the periods are broken out by region as follows:




15











**Three Months Ended**
              **June 30,**
            
            **Six Months Ended**
              **June 30,****2008**
            
            **2007**
            
            **2008**
            
            **2007**United
                States
            
            $
            583,693
            
            $
            584,380
            
            $
            1,071,558
            
            $
            1,052,191France
            
            
            644,701
            
            
            457,328
            
            
            1,288,680
            
            
            999,306$
            1,228,394
            
            $
            1,041,708
            
            $
            2,360,238
            
            $
            2,051,497





In
      the
      U.S., the expense increase in 2008 is the result of the launch of the Phase
      III
      registration study, MAVALDI, for M-Vax in the U.S., Europe and Israel. The
      increased research costs related to new site initiation **** fees **** plus
      costs incurred for the contract research organization. These increased expenses
      were partially offset by a decline in expenses for the Phase I/II study in
      M-Vax, which was completed during 2007. The increase in costs in France was
      due
      to higher salaries and taxes for new employees plus higher facility costs
      related to an increase in the amount of space.





**Selling,
      General and Administrative Expenses**





During
      the three months ended June 30, 2008, selling, general and administrative
      expenses increased approximately 21.0%, from $623,374 as of June 30, 2007 to
      $754,335, and for the six month period ended June 30, 2008, expenses increased
      approximately 57.0% from $1,094,193 as of June 30, 2007 to $1,718,073. Expenses
      for the periods are broken out by region as follows:





**Three Months Ended**
              **June 30,**
            
            **Six Months Ended**
              **June 30,****2008**
            
            **2007**
            
            **2008**
            
            **2007**United
                States
            
            $
            702,600
            
            $
            489,498
            
            $
            1,616,126
            
            $
            864,775France
            
            
            51,735
            
            
            133,776
            
            
            101,946
            
            
            229,418$
            754,335
            
            $
            623,274
            
            $
            1,718,072
            
            $
            1,094,193





In
      the
      U.S., the expense increase in 2008 is the result of higher salary costs and
      related expense for the Company’s new executive officer, salary increases for
      existing administrative staff and higher consulting costs to improving existing
      accounting and financial processes necessary for Sarbanes-Oxley 404 compliance
      by year end. In addition, there were increased legal costs including for
      securities and employment matters, financing efforts and patent counsel in
      connection with the filing and execution of ongoing patent expenses. Also,
      there
      were increased costs for travel, investor relations and public relations
      activities related to on-going financing activities. The decrease in
      administrative costs in France is due to one less administrative person in
      2008
      and less spending on marketing and logistics activities for Phase III Mvax
      clinical trials.





Other
      income, net decreased from $84,565 and $94,878 earned in the three and six
      months ended June 30, 2007, to $11,204 and $52,849 for the comparable periods
      in
      2008. The decrease is the function of lower interest rates with a lower average
      invested balance of cash.





Assuming
      we are successful in raising additional capital, we anticipate our spending
      over
      the next 12 months for research and development and selling, general and
      administrative expenses will increase as compared with 2008, as we continue
      to
      implement and accelerate the plan of operation described above.





***Liquidity
      and Capital Resources***





Our
      ability to continue as an operating company depends upon our immediate need
      to
      raise capital. We are in discussions with investors for a proposed Bridge
      Financing for the purpose of raising funds for working capital for the next
      few
      months, but there can be no assurance that we will complete the Bridge Financing
      or that the terms of such financing will be favorable to us or our existing
      stockholders. To the extent that we issue securities that are not registered
      under the Act in connection with the proposed Bridge Financing, the securities
      may not be offered or sold in the United States absent registration or an
      applicable exemption from registration. Even if we complete a Bridge Financing,
      we will need to raise additional funds immediately if we are to continue as
      a
      going concern. If we are successful in raising sufficient additional capital,
      it
      should allow us to develop products, obtain regulatory approval for our proposed
      products, and enter into agreements for product development, manufacturing
      and
      commercialization. There
      is
      no assurance that additional capital can be raised in an amount which is
      sufficient for all such purposes, or on terms favorable to us or to our
      stockholders.





Our
      current extremely limited cash resources require that we significantly curtail
      our efforts to enlist new clinical sites for the Phase III registration trial
      for M-Vax and to significantly slow the patient enrollment in that trial until
      we are successful in raising additional capital. We will use the proceeds of
      any
      offering primarily to fund the additional costs associated with enlisting
      clinical sites for and patient enrollment in the Phase III trial for M-Vax
      and
      to initiate the Phase II clinical trial for O-Vax (“O-Vax”),, the Company’s AC
      Vaccine for ovarian cancer, in the United States. To implement the current
      plan
      of operation described above for the balance of 2008 and into the first quarter
      of 2009, we need to raise substantial additional capital. If we are able to
      raise this additional capital, the key components of our plan of operation
      for
      the balance of 2008 and the first quarter of 2009 will include:




16


·
            Enrolling
                patients in our Phase III registration trial U.S. for M-Vax for the
                treatment of Stage 3 and 4 melanoma patients, which trial will proceed
                under the Special Protocol Assessment that we received from the U.S.
                FDA
                in October 2006.





·
            Continuing
                the treatment of melanoma patients outside the U.S. on a compassionate
                use
                basis with M-Vax.





·
            Initiating
                the launch of the O-Vax study with Cancer Treatment Centers of
                America.





·
            Continuing
                our discussions with the European Medical Evaluations Agency and
                AFSSAPs,
                the FDA equivalent regulatory bodies for the European Union and France,
                respectively, regarding the regulatory requirements for the AC Vaccine
                and
                its continued development in Europe and
                France.





·
            Initiating
                discussion with Japanese regulatory authorities regarding the regulatory
                approval process for autologous products like our AC Vaccines and
                the
                requirements for making M-Vax available for compassionate use in
                Japan.





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 dependent
      upon the availability of cash to implement that aspect of the plan and other
      factors beyond our control.





Even
      if
      we raise substantial additional capital in the near future, if our current
      and
      planned clinical trials for the AC Vaccine in the U.S. and Europe do not
      demonstrate continuing progress toward taking one or more products to market,
      our ability to raise additional capital in the future 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.





We
      conduct our capital raising efforts in U.S. dollars, while a significant portion
      of our revenues and expenses are generated and incurred in currencies other
      than
      U.S. dollars, mainly Euros. To the extent that we are unable to match revenues
      received in foreign currencies with costs paid in the same currency, exchange
      rate fluctuations in any such currency could have an adverse effect on our
      results of operations and cash flows.





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 August 2008. 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 sought in this offering or attract
      contract-manufacturing relationships on acceptable terms, if at all and we
      may
      have to cease operations. We have begun to curtail certain initiatives and
      projects, including the deferral of senior management salaries, due to the
      fact
      we have not raised additional capital as of the date of this
      report.





In
      the
      event that we do not complete the Bridge Financing or raise additional
      financing, it will be difficult for the Company to continue operations as they
      exist. We may be forced to shut down our operations or seek bankruptcy
      relief. If we discontinue our operations, we may not have sufficient funds
      to pay any amounts to our stockholders.





**Item
      3.**  **Quantitative
      and Qualitative Disclosures About Market Risk.**





Not
      applicable as we are a smaller reporting company.





**Item
      4T. Controls and Procedures.**





**Conclusion
      Regarding the Effectiveness of Disclosure Controls and
      Procedures**





We
      maintain disclosure controls and procedures that are designed to ensure that
      information required to be disclosed in our reports filed or submitted pursuant
      to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is
      recorded, processed, summarized and reported within the time periods specified
      in the SEC’s rules and forms, and that information required to be disclosed by
      us is accumulated and communicated to management, including our President and
      Chief Executive Officer and our Executive Chairman to allow timely decisions
      regarding required disclosure.


17





Under
      the
      supervision and with the participation of our management, including our
      President and Chief Executive Officer and our Executive Chairman, we carried
      out
      an evaluation of the effectiveness of the design and operation of our disclosure
      controls and procedures pursuant to Exchange Act Rule 13a-15(e) and 15d-15(e)
      as
      of June 30, 2008. Based upon that evaluation, our President and Chief Executive
      Officer and our Executive Chairman concluded that our disclosure controls and
      procedures were not effective as of June 30, 2008, due to the material weakness
      described in our Management’s Report on Internal Control Over Financial
      Reporting previously reported in our Form 10-K for the year ended December
      31,
      2007. These included:





o
            Our
                lack of sufficient personnel at the U.S. headquarters in the accounting,
                treasury and financial reporting functions affected our ability to
                have
                adequate segregation of duties over financial transactions and adequate
                monitoring controls over the annual and quarterly financial close
                processes.




o
            The
                lack of segregation of duties often results in the same individual
                performing two or more of the following functions: initiation and
                authorization of financial transactions, recording of transactions,
                and
                custody of financial assets. The lack of segregation of duties also
                prevented us from satisfying important monitoring control objectives,
                such
                as authorization, completeness and accuracy, and reconciliation of
                accounting transactions and information.





In
      light
      of the material weaknesses, in preparing our consolidated financial statements
      as of and for the quarter ended June 30, 2008, we performed additional analyses
      and other post-closing procedures to ensure our consolidated financial
      statements included in this quarterly report fairly present, in all material
      respects, our financial condition, results of operations and cash flows for
      the
      fiscal years covered thereby in conformity with generally accepted accounting
      principles.





**Changes
      in Internal Control Over Financial Reporting**





There
      were no changes in our internal control over financial reporting, as such term
      is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during
      the
      three months ended June 30, 2008, that have materially affected, or are
      reasonably likely to materially affect, our internal control over financial
      reporting.





We
      plan
      to take corrective actions to remediate the material weaknesses noted above.
      Specifically, assuming we are successful in raising additional capital, we
      plan
      to hire additional qualified personnel to assist with various accounting and
      finance functions within the organization. We believe this new personnel will
      reduce the risk associated with our lack of segregation of duties and thus
      enhance our system of internal controls over financial reporting.





Management
      believes that the actions described above, when fully implemented, will be
      effective in remediation of the specific material weakness discussed
      above.





**Limitations
      of Effectiveness of Controls**





As
      of the
      date of this filing, we are satisfied that actions implemented to date and
      the
      planned actions described above will remediate the material weaknesses and
      deficiencies in the internal controls and information systems that have been
      identified. We note that, like other companies, any system of internal controls,
      however well designed and operated, can provide only reasonable assurance,
      and
      not absolute assurance, that the objectives of the internal control system
      will
      be met. The design of any control system is based, in part, upon the benefits
      of
      the control system relative to its costs. Because of the inherent limitations
      in
      all control systems, no evaluation of controls can provide absolute assurance
      that all control issues and instances of fraud, if any, within the Company
      have
      been detected. These inherent limitations include the realities that judgments
      in decision-making can be faulty, and that controls can be circumvented by
      the
      individual acts of some persons, by collusion of two or more people or by
      management override of control. In addition, over time, controls may become
      inadequate because of changes in conditions, or the degree of compliance with
      the policies or procedures may deteriorate. In addition, the design of any
      control system is based in part upon certain assumptions about the likelihood
      of
      future events. Because of the limitations inherent in a cost-effective control
      system, misstatements due to error or fraud may occur and may not be
      detected.




18





**PART
      II - OTHER INFORMATION**




**Item
      1. Legal Proceedings.**





On
      February 1, 2008, a suit was filed against us by Texas A&M University in the
      United States District Court of Brazos County, Texas as previously disclosed
      in
      our Form 10-K, filed with the SEC on April 15, 2008. Discovery
      efforts have begun and the Company is considering alternatives to resolve the
      suit.





On
      July
      16, 2008, a suit was filed against us by the University of Colorado in the
      Adams
      County, Colorado District Court. The lawsuit by the University of
      Colorado alleges that the Company is in breach of a clinical research
      contract by failing to reimburse the University of Colorado for approximately
      $84,000 in patient enrollment and treatment expenses. The Company has previously
      responded that it disputes the amount billed based on milestones and other
      treatment criteria per the terms and conditions of the agreement. No discovery
      has begun in this matter.




The
      Company is subject to various legal proceedings and claims that arise in the
      ordinary course of its business. We believe that the ultimate liability with
      respect to these actions will not have a material adverse effect on the
      Company’s financial position.





**Item
      1A. Risk Factors.**





Not
      applicable as we are a smaller reporting company.




**Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds.**





None.





**Item
      3. Defaults Upon Senior Securities.**





None.





**Item
      4. Submission of Matters to a Vote of Security Holders.**





None.





**Item
      5. Other Information.**





None.




**Item
      6.**  **Exhibits.**





31.1
            Certification
                of Principal Executive Officer and 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
            Certification
                of Principal Executive Officer and Principal Financial Officer pursuant
                to
                18 U.S.C. Section 1350. *





*
      Filed
      herewith


19


Signatures





Pursuant
      to the requirements of the Securities Exchange Act of 1934, the Registrant
      has
      duly caused this report to be signed on its behalf by the undersigned thereunto
      duly authorized.





AVAX
                Technologies, Inc.Date:August
                15, 2008By:
            /s/
                Francois MarteletFrancois
                MarteletPresident
                and Chief Executive Officer(Principal
                Executive Officer andPrincipal
                Financial Officer)




20