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 September 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 filer o	Accelerated filer o
Non-accelerated filer o (do not check if a smaller reporting company)	Smaller reporting company x

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 November 17, 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	3

	Consolidated Balance Sheet - As of September 30, 2008 (Unaudited) and December 31, 2007	3

	Consolidated Statements of Operations and Comprehensive Loss (Unaudited) For the Three Months and Nine Months Ended September 30, 2008 and 2007 and for the Period from January 12, 1990 (Incorporation) to September 30, 2008	4

	Consolidated Statements of Cash Flows (Unaudited) For the Nine Months Ended September 30, 2008 and 2007 and for the Period from January 12, 1990 (Incorporation) to September 30, 2008	5

	Notes to Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	17

Item 4T.	Controls and Procedures	18

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	19

Item 1A.	Risk Factors	19

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	19

Item 3.	Defaults Upon Senior Securities	19

Item 4.	Submission of Matters to a Vote of Security Holders	19

Item 5.	Other Information	19

Item 6.	Exhibits	19

Signatures		20

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

AVAX Technologies, Inc. and Subsidiaries

(a development stage company)

	September 30, 2008 (unaudited)			December 31, 2007
Assets
Current assets:
Cash	$	344,946		$	5,903,207
Accounts receivable		-			131,387
Inventory		3,647			11,520
VAT receivable		43,572			82,896
Prepaid expenses and other current assets		148,428			317,105
Total current assets		540,593			6,446,115
Property, plant and equipment, at cost		4,305,107			4,247,706
Less accumulated depreciation		3,666,933			3,505,051
Net property, plant and equipment		638,174			742,655
Goodwill		188,387			188,387
Total assets	$	1,367,154		$	7,377,157

Liabilities and stockholders’ equity (deficit)
Current liabilities:
Accounts payable	$	1,415,825		$	2,091,674
Accrued expenses		573,555			551,777
Accrued wages		631,537			459,488
Accrued and withheld payroll tax liabilities		192,089			240,115
Deferred revenue		253,384			250,000
ANVAR advances		386,394			400,691
Total current liabilities		3,452,784			3,993,745
Stockholders’ equity:
Preferred stock, $.01 par value:
Authorized shares - 5,000,000, including Series C – 120,000 shares
Series C convertible preferred stock:
Issued and outstanding shares - 33,500 at September 30, 2008 and December 31, 2007 (liquidation preference - $3,350,000)		335			335
Common stock, $.004 par value:
Authorized shares 500,000,000 at September 30, 2008 and December 31, 2007 Issued and outstanding shares -141,574,997 at September 30, 2008 and December 31, 2007		566,300			566,300
Additional paid-in capital		86,976,416			86,657,058
Subscription receivable		(422	)		(422	)
Accumulated other comprehensive income		304,583			414,971
Deficit accumulated during the development stage		(89,932,842	)		(84,254,830	)
Total stockholders’ equity (deficit)		(2,085,630	)		3,383,412
Total liabilities and stockholders’ equity (deficit)	$	1,367,154		$	7,377,157

See accompanying notes.

AVAX Technologies, Inc. and Subsidiaries

(a development stage company)

Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

	Three months ended September 30,						Nine months ended September 30,						Period from January 12, 1990 (Incorporation) to September 30,
	2008			2007			2008			2007			2008
Revenue:
Gain from sale of the Product	$	–		$	–		$	–		$	–		$	1,951,000
Product and contract service revenue		195,471			95,877			402,246			299,193			7,218,340
Grant revenue		4,334			–			14,107			–			220,219
Total revenue		199,805			95,877			416,353			299,193			9,389,559
Costs and expenses:
Research and development		1,034,206			1,350,907			3,394,444			3,402,404			55,642,184
Acquired in process research and development		–			–			–			–			4,420,824
Write down of acquired intellectual property and other intangibles		–			–			–			–			3,416,091
Amortization of acquired intangibles		–			–			–			–			715,872
Selling, general and administrative		1,043,666			719,286			2,761,739			1,813,479			40,721,120
Total operating loss		(1,878,067	)		(1,974,316	)		(5,739,830	)		(4,916,690	)		(95,526,532	)
Other income (expense):
Interest income		6,850			108,085			59,699			202,963			6,264,290
Interest expense		–			–			–			–			(812,067	)
Other, net		(160	)		–			2,119			–			145,312
Total other income , net		6,690			108,085			61,818			202,963			5,597,535
Loss before income taxes		(1,871,377	)		(1,866,231	)		(5,678,012	)		(4,713,727	)		(89,928,997	)
Income taxes		–			–			–			–			–
Loss from continuing operations		(1,871,377	)		(1,866,231	)		(5,678,012	)		(4,713,727	)		(89,928,997	)
Loss from discontinued operations		–			–			–			–			(3,845	)
Net loss		(1,871,377	)		(1,866,231	)		(5,678,012	)		(4,713,727	)		(89,932,842	)
Amount payable for liquidation preference		–			–			–			–			(1,870,033	)
Net loss attributable to common stockholders	$	(1,871,377	)	$	(1,866,231	)	$	(5,678,012	)	$	(4,713,727	)	$	(91,802,875	)
Loss per common share – basic and diluted
Loss from continuing operations	$	(0.01	)	$	(0.01	)	$	(0.04	)	$	(0.04	)
Loss from discontinued operations		–			–			–			–
Net loss	$	(0.01	)	$	(0.01	)	$	(0.04	)	$	(0.04	)
Weighted-average number of common shares outstanding		141,555,545			141,496,737			141,574,997			111,276,536
Net loss	$	(1,871,377	)	$	(1,866,231	)	$	(5,678,012	)	$	(4,713,727	)
Foreign currency translation adjustment		(31,511	)		(5,963	)		(110,388	)		(44,333	)
Comprehensive loss	$	(1,902,888	)	$	(1,872,194	)	$	(5,788,400	)	$	(4,758,060	)

See accompanying notes.

AVAX Technologies, Inc. and Subsidiaries

(a development stage company)

Consolidated Statements of Cash Flows

(Unaudited)

	Nine months ended September 30,						Period from January 12, 1990 (Incorporation) to September 30,
	2008			2007			2008
Operating activities
Net loss	$	(5,678,012	)	$	(4,713,727	)	$	(89,932,842	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		208,212			222,593			5,292,939
Amortization of discount on convertible notes payable		–			–			142,500
Extraordinary 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		–			–			1,703,763
Employee Stock Option Expense		319,358			144,511			667,054
Minority interest in net loss of consolidated subsidiary		–			–			(80,427	)
Acquired in-process research and development charge		–			–			4,420,824
Write down of acquired intellectual property and other intangibles		–			–			3,416,091
Compensatory stock issue		–			–			25,000
Gain 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		–			–			449,000
Loss on sale of furniture and equipment		–			–			246,254
Issuance of common stock or warrants for services		–			–			423,289
Changes in operating assets and liabilities:
Accounts receivable		131,387			154,881			148,615
Inventory		7,738			(2,947	)		38,502
Prepaid expenses and other current assets		203,356			56,094			47,325
Research and development tax credit receivable		–			–			320,488
Accounts payable and accrued liabilities		(515,002	)		881,576			1,688,065
Deferred revenue		3,509			287,835			213,801
Amount payable to Former Officer		–			–			80,522
Net cash used in operating activities	$	(5,319,454	)	$	(2,969,184	)	$	(75,985,019	)

Investing activities
Purchases of marketable securities		–			–			(351,973,210	)
Proceeds from sale of marketable securities		–			–			344,856,738
Proceeds from sale of short-term investments		–			–			7,116,472
Purchases of furniture and equipment		(114,548	)		(123,706	)		(3,844,613	)
Proceeds from sale of furniture and equipment		–			–			51,119
Cash acquired in acquisition of control of joint venture		–			–			991,634
Organization costs incurred		–			–			(622,755	)
Net cash used in investing activities	$	(114,548	)	$	(123,706	)	$	(3,424,615	)

AVAX Technologies, Inc. and Subsidiaries

(a development stage company)

Consolidated Statements of Cash Flows (continued)

(Unaudited)

	Nine months ended September 30,						Period from January 12, 1990 (Incorporation) to September 30,
	2008			2007			2008
Financing activities
Proceeds from issuance of notes payableto related party	$	–		$	–		$	957,557
Principal payments on notes payable to related party		–			–			(802,000	)
Proceeds from loans payable and the related issuance of warrants		–			–			2,314,000
Principal 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		–			–			93,637
Payments received on subscription receivable		–			–			4,542
Proceeds received from exercise of stock warrants		–			–			76,892
Elimination of consolidated accounting treatment for joint venture		–			–			(2,511,701	)
Capital contribution through sale of interest in consolidated subsidiary		–			–			2,624,000
Net proceeds received from issuance of preferred and common stock		–			9,318,359			78,170,851
Net cash provided by financing activities		–			9,318,359			79,448,702
Effect of exchange rate changes on cash		(124,259	)		(26,468	)		305,878
Net increase (decrease) in cash		(5,558,261	)		6,199,002			344,946
Cash at beginning of period		5,903,207			1,484,570			–
Cash at end of period	$	344,946		$	7,683,572		$	344,946

Supplemental disclosure of cash flow information
Interest Paid	$	–		$	–		$	197,072
Non-cash activity:
Issuance of restricted stock compensation	$	–		$	–		$	25,000
Common stock warrants issued with convertible notes	$	–		$	–		$	142,500
Conversion of bridge loan into common stock	$	–		$	–		$	950,000
Payment of interest with common stock	$	–		$	–		$	23,275

See accompanying notes.

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 September 30, 2008 consolidated balance sheet includes approximately $153,547 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. The Company does not anticipate generating cash flows from operations. 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.

2. Basis of Presentation

The financial information for the three-month and nine-month periods ended September 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 nine-month periods ended September 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 nine months ended September 30, 2008, the Company incurred a net loss of $5,678,012 and a use of cash in operating activities of $5,319,454. The Company’s cash requirements through September 30, 2008, 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 beyond the end of 2008. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Currently, the liabilities on the Company’s balance sheet exceed the assets. 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 or thereafter. The inability to secure additional capital would have a material adverse effect on the Company, including the possibility that the Company would have to sell a portion or all of its assets, cease operations or seek bankruptcy relief. If the Company discontinues its operations, it will not have sufficient funds to pay any amounts to its shareholders.

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 August 31, 2008 or the funds are to be payable back to the collaboration partner. The Company is currently working with the collaborative partner to review new product protocols and production methodologies that may allow the Philadelphia manufacturing facility to produce products by the end of the first quarter 2009. No new agreement has been signed and none of the funds have been returned to the collaborative partner.

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 September 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, Accrued Wages, and Accrued and Withheld Payroll Tax Liabilities

The Company provides for accrued expenses and accrued wages based upon its contractual obligations, as calculated by the Company, for all claims made for payment to the Company. Accrued expenses primarily consist of unbilled obligations for the Company’s clinical trials, legal and other professional services. Accrued wages primarily consist of senior management deferred salaries and bonus, employee vacation costs and severance costs for a former executive. Accrued and withheld payroll tax liabilities primarily consists of quarterly employee and employee payroll tax obligations of the Company’s foreign subsidiary.

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 $89,714,715 and the adjusted net loss would be $89,718,560.

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.

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 nine months ended September 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 nine month periods ended September 30, 2008, no options or warrants were issued. The estimated weighted average fair value of warrants granted as of September 30, 2007 was calculated based on the following assumptions:

	Three and Nine Months Ended September 30, 2007
Expected term (in years)		4.00
Volatility		75.4	%
Risk-free interest rate		3.52	%
Expected dividends		0

Compensation expense of $230,945 and $76,227 was charged to administrative expenses for the nine months ended September 30, 2008 and 2007, respectively, while $88,413 and $68,284 was charged to research and development expenses related to stock options outstanding and not vested for the same periods, respectively. As of September 30, 2008, total compensation cost related to non-vested stock options not yet recognized is $552,438 and is expected to be allocated to expenses over a weighted-average period of 15 months.

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 nine months ended September 30, 2008, is as follows:

	Options and Warrants		Weighted-Average Exercise Price
Outstanding at beginning of period		122,331,693	$	0.19
Granted		850,000	$	0.11
Exercised		—		—
Forfeited		50,000	$	0.91
Outstanding at end of period		123,131,693	$	0.19
Exercisable at end of period		114,497,917	$	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 nine 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 September 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		3.25		8,058,050		0.33
$0.150 - $0.190		90,915,400		3.67		90,434,150		3.66
$0.285 - $0.330		2,347,792		3.14		2,125,394		3.08
$0.340 - $0.390		5,682,293		1.09		5,682,293		1.09
$0.410 - $0.470		7,603,030		1.51		7,603,030		1.51
$0.890 - $0.906		230,000		0.09		230,000		0.09
$2.940		240,000		0.09		240,000		0.09
$8.240		125,000		3.08		125,000		3.08
		123,131,693				114,497,917

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.

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 is 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 Texas A&M. 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. In October 2008, the Company settled the suit for $25,000 plus interest on the unpaid balance, payable over four months beginning in November 2008.

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 September 30, 2008 balance of $386,394 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 will be required to be repaid to ANVAR, the Company maintains the full amount of the obligation as a current liability.

6. Subsequent Events

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 the report on Form 10-K dated December 31, 2007, filed with the SEC on April 15, 2008. In October, 2008 the Company settled the suit for $25,000 plus interest on the unpaid balance payable over four months beginning in November, 2008.

On October 24, 2008, the Company closed a bridge financing of $1,291,000 of convertible promissory notes and warrants to purchase an aggregate of 12,910,000 shares of the Company’s common stock (the “Bridge Financing”) with certain insiders and accredited investors for the purpose of providing working capital for the next few months as disclosed in the report on Form 8-K filed with the SEC on October 30, 2008. The notes that the Company sold are due on December 31, 2008. Even with closing the Bridge Financing, the Company will need to raise substantial additional funds immediately if it is to continue as a going concern. If the Company is successful in raising sufficient additional capital, it should allow it to develop products, obtain regulatory approval for 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 the Company or to its stockholders.

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 substantial capital, and the uncertainty of our prospects of raising such capital or reaching a meaningful level of revenues.

Uncertainty of attracting and retaining highly skilled personnel to fulfill important roles in the Company, including a new Chief Medical Officer in the United States.

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.

Our financial obligations under our existing contracts and arrangements and our ability to meet such commitments.

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.”

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 $5,678,012 for the nine months ended September 30, 2008. We have a cumulative net loss of $89,932,842 as of September 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. Currently, our liabilities on our balance sheet exceed our assets. We closed a bridge financing of $1,291,000 of convertible promissory notes and warrants to purchase an aggregate of 12,910,000 shares of the Company’s common stock (the “Bridge Financing”) with certain insiders and accredited investors for the purpose of providing working capital for the next few months. The notes that the Company sold are due on December 31, 2008. Even with closing the 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 substantial additional capital, it should allow us to develop products, seek to 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 able to raise substantial additional financing, it will be difficult for the Company to continue operations as they exist. We will be forced to sell all or a portion of our assets, cease operations or seek bankruptcy relief. If we discontinue our operations, we will 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 lack of finances, difficulty of obtaining financing on favorable terms or at all, 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.

Results of Operations for the Three and Nine Months Ended September 30, 2008 compared with the comparable periods ended September 30, 2007

Revenue

Revenue recognized for the three and nine months ended September 30, 2008 were $199,805 and $416,353, respectively, compared with revenue of $95,877 and $299,193, respectively, for the same periods in 2007. The increase in revenues for the three and nine months ended September 30, 2008 was due to higher manufacturing reimbursements related to compassionate use treatments and higher revenues realized from contract manufacturing.

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 September 30, 2008 were $55,642,184. 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 September 30, 2008, research and development expenses decreased 23.4% from $1,350,907 as of September 30, 2007 to $1,034,206 as of September 30, 2008. For the nine-month period ended September 30, 2008, expenses decreased 0.2% from $3,402,404 as of September 30, 2007 to $3,394,444 as of September 30, 2008. Expenses for the periods are broken out by region as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2008		2007		2008		2007
United States	$	520,778	$	902,386	$	1,592,336	$	1,954,577
France		513,428		448,521		1,802,108		1,447,827
	$	1,034,206	$	1,350,907	$	3,394,444	$	3,402,404

In the U.S., the expense decrease in 2008 is the result of the decline in expenses for the Phase I/II study in M-Vax, which was completed in 2007 and less contract research organization costs because of the delayed launch of the Phase III registration study, MAVALDI, for M-Vax in the U.S., Europe and Israel. The decreased research costs were partially offset by higher legal fees, annual salaries and taxes for existing staff and hiring an additional staff in anticipation of the launch of Phase III. The increase in costs in France was due to higher salaries and taxes for new employees, allocation of general manager costs plus higher facility costs related to an increase in the amount of space.

Selling, General and Administrative Expenses

During the three months ended September 30, 2008, selling, general and administrative expenses increased approximately 31.0%, from $719,286 as of September 30, 2007 to $942,416, and for the nine month period ended September 30, 2008, expenses increased approximately 46.7% from $1,813,479 as of September 30, 2007 to $2,660,489. Expenses for the periods are broken out by region as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2008		2007		2008		2007
United States	$	1,020,031	$	587,116	$	2,636,158	$	1,451,891
France		23,635		132,170		125,581		361,588
	$	1,043,666	$	719,286	$	2,761,739	$	1,813,479

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. In addition, there were increased legal costs for securities, employment and financing matters and for patent counsel in connection with the filing and execution of ongoing patent expenses. Also, there were increased costs for 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, allocation of general manager costs to research and development expenses and less spending on marketing and logistics activities for Phase III Mvax clinical trials.

Other income, net decreased from $108,085 and $202,963 earned in the three and nine months ended September 30, 2007, to $6,690 and $61,818 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 substantial 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

Currently, our liabilities on our balance sheet exceed our assets. Our ability to continue as an operating company depends upon our need to raise substantial additional capital immediately. We recently completed a Bridge Financing for the purpose of providing working capital. Even with closing the Bridge Financing, we will need to raise substantial additional funds immediately if we are to continue as a going concern. If we are successful in raising substantial additional capital, it should allow us to develop products, seek to 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 and for working capital and repayment of contractual obligations. 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:

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 December 31, 2008. Because we have no committed external sources of capital, and expect no significant product revenues for the foreseeable future, we will require substantial 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 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 long term financing as of the date of this report.

We closed the Bridge Financing with certain insiders of the Company and accredited investors for the purpose of providing working capital. Even with closing the Bridge Financing, we currently need to raise immediate substantial funds 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, seek to 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 able to raise additional funds, it will be difficult for the Company to continue operations as they exist. We may be forced to sell all or a portion of our assets, cease 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.

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 September 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 September 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:

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.

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 September 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 September 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.

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. In October, 2008 the Company settled the suit for $25,000 plus interest on the unpaid balance payable over four months beginning in November, 2008.

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 agreement’s term and conditions. The Company is defending the suit.

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.

4.1	Form of Warrant.

10.1	Form of Convertible Note and Warrant Purchase Agreement, by and between AVAX Technologies, Inc. and the Purchasers, dated October 24, 2008.

10.2	Form of Amendment to Convertible Note and Warrant Purchase Agreement, by and between AVAX Technologies, Inc. and the Purchasers, dated October 24, 2008.

10.3	Form of Note.

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

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: November 19, 2008

	By:	/s/ Francois Martelet
		Francois Martelet
		President and Chief Executive Officer
		(Principal Executive Officer and
		Principal Financial Officer)

AVAX TECHNOLOGIES INC 10-Q