<PAGE>   1

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

                                 FORM 10-K/A


                     ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)

                        OF THE SECURITIES EXCHANGE ACT OF 1934

                      For the Fiscal Year Ended December 31, 1997

                              Commission File No. 0-26770

                                     NOVAVAX, INC.
                (Exact name of registrant as specified in its charter)

                 DELAWARE                             22-2816046
      (State or other jurisdiction of             (I.R.S. Employer
      incorporation or organization)              Identification No.)

  8320 GUILFORD ROAD, COLUMBIA, MARYLAND                21046
 (Address of principal executive offices)             (Zip Code)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (301) 854-3900

           Securities registered pursuant to Section 12(b) of the Act:


    Title of Each Class:            Name of each exchange on which registered:
COMMON STOCK ($.01 PAR VALUE)               AMERICAN STOCK EXCHANGE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                                      None


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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. 
                             ------

The aggregate market value of 9,501,996 shares of the registrant's Common Stock,
par value $.01 per share, held by non-affiliates of the registrant at March 20,
1998, as computed by reference to the closing price of such stock, was
approximately $42,758,982.

The number of shares of the registrant's Common Stock, par value $.01 per share,
outstanding at March 20, 1998 was 12,060,443 shares.

DOCUMENTS INCORPORATED BY REFERENCE: Portions of the 1998 Novavax, Inc. Proxy
Statement are incorporated by reference into Part III of this Report.



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PART I


ITEM 1. BUSINESS

Novavax, Inc. ("Novavax" or the "Company") is a biopharmaceutical, drug delivery
company focused on the research and development of proprietary topical and oral
drug delivery technologies and the applications of those technologies. The
Company's technology platforms involve the use of proprietary microscopic
organized lipid structures as vehicles for the delivery of a wide variety of
drugs and other therapeutic products, including certain hormones, anti-bacterial
and anti-viral products and vaccine adjuvants.

   The Company recently formed two operating divisions, NOVAVAX PHARMACEUTICAL
DIVISION (the "PHARMACEUTICAL DIVISION") and NOVAVAX BIOLOGICS DIVISION (the
"BIOLOGICS DIVISION"). This reorganization is intended to streamline operations
and give each business division dedicated resources, stronger focus, and tighter
management. The PHARMACEUTICAL DIVISION utilizes a range of microencapsulation
technologies to develop novel biopharmaceuticals, often reformulating existing,
approved drugs for topical delivery in cosmetic-like cream formulations. Its
strong technology provides a basis for development of novel products while
utilizing resources with little short term opportunity for immediate revenue.
The BIOLOGICS DIVISION is a revenue center focused on vaccines, adjuvants and
anti-infectives. It has business objectives focused on generating contract
revenues and providing research for the PHARMACEUTICALS DIVISION. The BIOLOGICS
DIVISION has historically entered into contractual arrangements which usually
provide upfront and milestone payments as compensation during development
contracts. These contracts may also provide for potential license and royalty
fees. Currently the BIOLOGICS DIVISION is working under contract on several
governmental and private sector programs in the fields of vaccines and
biological defense systems. These contracts include development of an adjuvant
for an immunotherapeutic against the human papilloma virus for a British vaccine
company and a subcontractor agreement from University of Michigan who is
supplying anti-infective defense systems against biological warfare agents for
the U.S. military. They are anticipated to generate approximately $.5 million
in revenue in 1998 with potential revenue opportunities beyond 1998.

   The Company has three lead pharmaceutical product candidates: ESTRASORB, a
topical estrogen cream, ANDROSORB, a topical testosterone cream and Helicore, an
oral, non-antibiotic, anti-bacterial preparation for the treatment of
Helicobacter pylori infection. These products are in various phases of clinical
development. The Company has completed animal and human safety studies for both
ESTRASORB and ANDROSORB and has other clinical studies underway. Currently,
several formulations of Helicore are in animal and human safety studies.

   Although the Company began development of its pharmaceutical product
candidates later than, and as byproducts of its vaccine research and
development, its primary emphasis is now on these pharmaceutical product
candidates for the following reasons:

   - Much larger potential markets

   - Measurements of clinical efficacy are more easily defined
 
   - The Company's belief that resources should be focused on few initiatives
     that may offer the best potential return on investment.

   Consistent with prudent use of the Company's limited cash resources, the
clinical development programs for oral active vaccine immunization programs,
ECOVAX 0157J and Shigella flexneri 2a, were suspended late in 1996 in favor of
the development of its three lead pharmaceutical product candidates. The Company
submitted dose ranging clinical study plans for both ESTRASORB and Helicore to
the FDA in 1997. The Company has the potential, dependent on future capital, to
develop other human pharmaceutical products utilizing its proprietary drug
delivery platform technologies. It has several such products in various stages
of pre-clinical development.

   Novavax, Inc. was incorporated in Delaware in 1987. On December 12, 1995,
the Company's former parent, IGI, Inc. ("IGI") distributed its majority
interest in Novavax to the IGI stockholders (the "Distribution"). Until then,
Novavax had been the human pharmaceuticals subsidiary of IGI. The Company's
principal executive offices are located at 8320 Guilford Road, Columbia,
Maryland, 21046.
   

THE NOVAVAX TECHNOLOGY PLATFORMS

Novavax has developed proprietary topical and oral drug delivery technologies
using organized lipid structures (collectively, the "Novavax Technologies"). To
date, the Company has utilized its technologies in the development of
Novasome(R) lipid vesicles and micellar nanoparticles, which are sub-micron size
lipid structures that also possess encapsulation capabilities. These structures
may help with targeted delivery and controlled release. The Company believes its
technologies may allow for a more cost-effective delivery of a wide variety of
drugs and other therapeutics than phospholipid liposomes and other delivery
vehicles. Its technologies may be preferred over other transdermal delivery
systems because of the reduction in side effects, primarily skin irritation.
Additionally, future applications may show advantages over injectable delivery
technologies which are invasive, inconvenient and sometimes painful.

   Most commercial liposomes are composed of delicate phospholipids. Due to
their inherent lack of stability and carrying capacity limitations, a limited
number of drugs may be used with phospholipid liposomes. While capable of
encapsulating certain (principally water soluble) drugs, phospholipid liposomes
have a number of significant disadvantages including their expense and the need
to use potentially hazardous organic solvents in their manufacture. In addition,
the standard, multi-step phospholipid manufacturing process yields relatively
small quantities of liposomes.



8

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Novasome lipid vesicles

Novasome lipid vesicles are proprietary, organized, lipid structures in which
drugs or other materials may be encapsulated for delivery into the body
topically or orally. Novasome lipid vesicles are made using the Company's
patented manufacturing process from a variety of readily available chemicals
called amphiphiles, which include fatty alcohols and acids, ethoxylated fatty
alcohols and acids, glycol esters of fatty acids, glycerol fatty acid mono and
diesters, ethoxylated glycerol fatty acid esters, glyceryl ethers, fatty acid
diethanolamides and dimethyl amides, fatty acyl sarcosinates, and alkyds as well
as phospholipids. The Company entered into a licensing agreement with IGI, the
Company's former parent, in December 1995 entitling IGI to the exclusive use of
the Novavax Technologies in certain fields. Currently, IGI uses Novasome lipid
vesicles in a wide variety of cosmetic applications, including products sold by
Estee Lauder and Revlon. The Company retains rights to Novasome lipid vesicle
technologies for use in human pharmaceuticals except for topical dermatological
products for localized usage at the delivery zone.


Micellar Nanoparticles

Micellar nanoparticles ("MNPs") are submicron-sized, water miscible lipid
structures that have different structural characteristics and are generally
smaller than Novasome lipid vesicles. MNPs, like Novasome lipid vesicles, are
derived from amphiphile molecules.

   Novavax scientists have demonstrated the ability to incorporate alcohol
soluble drugs and pesticides, vaccine adjuvants, proteins, whole viruses,
flavors, fragrances and colors into MNPs. MNPs have the ability to entrap
ethanol or methanol soluble drugs and to deliver certain of these drugs through
intact skin. The MNP formulations used for the transdermal delivery of drugs
have cosmetic properties like creams and lotions. There may be inherent
advantages over injectable delivery systems which are invasive and inconvenient
and over patch transdermal delivery systems which often cause skin irritation.


NOVAVAX PRODUCT CANDIDATES

Topical Drug Delivery

The Company is using its micellar nanoparticle technology in the development of
ESTRASORB, a cream designed for the delivery of 17b estradiol (estrogen) through
the skin. Estrogen replacement therapy is currently used worldwide by menopausal
women to prevent osteoporosis, cardiovascular disease and other menopausal
symptoms (e.g. "hot flashes"). Current estrogen replacement products include
oral tablets or, more recently, transdermal patches. Oral estrogen tablets,
however, have been associated with side effects primarily resulting from
fluctuating blood hormone levels. Because of these side effects, transdermal
patches for estrogen replacement were developed. While these patches help reduce
blood hormone fluctuations, they may cause skin irritation and patient
inconvenience associated with wearing and changing an external patch.

   The Company believes that ESTRASORB may offer several advantages over
existing therapies used for estrogen replacement. ESTRASORB is a cream that may
be applied to the skin much like a topical cosmetic-like cream. The Company
believes ESTRASORB will be able to deliver a continuous amount of estrogen to
the patient without the fluctuations in blood hormone levels associated with
oral tablets. In addition, ESTRASORB does not contain materials that may cause
skin irritation associated with transdermal patches.

   In 1995, the Company completed preclinical testing of ESTRASORB in a primate
model. Results of this study demonstrated that ESTRASORB can be utilized to
deliver estradiol through intact skin with maintenance of therapeutic serum
estradiol levels for six days after a single topical application. Based on these
results, the Company initiated a Phase I human clinical trial of ESTRASORB
involving 10 symptomatic menopausal women. In this study, each woman received a
single topical application of ESTRASORB. This study was completed in the fourth
quarter of 1996 with no significant adverse experiences noted. The Company
completed two additional human clinical studies with ESTRASORB. The first is a
multiple-dose, dose ranging, pharmacokinetic study begun in the second quarter
of 1997. The second is a multiple-dose, pharmacokinetic, placebo controlled
study was started in third quarter of 1997. These studies demonstrated no skin
irritation and delivery of therapeutic levels of the drug.

   In September, 1996, the Company completed the animal testing of ANDROSORB
(testosterone) in its MNP transdermal drug delivery platform. In these tests,
peak blood levels of testosterone were approximately three times higher than
testosterone dissolved in ethanol. After a single topical cream application,
peak serum levels of testosterone were as high as 35 nanograms per milliliter
and persisted in the therapeutic range for 48 hours. The Company completed the
human safety studies and submitted the results to the FDA in the third quarter
of 1997. A multiple-dose, pharmacokinetic human study began in the third quarter
of 1997 and was completed in the first quarter of 1998. This study demonstrated
no skin irritation and delivery of therapeutic levels of the drug.

   Testosterone replacement therapy is currently used by males who are
testosterone deficient as a result of either primary or secondary hypogonadism.
Testosterone in males is required to maintain sexual function and libido,
maintain lean body mass, increase hemoglobin synthesis and maintain bone
density. Current testosterone replacement therapy products include deep
intramuscular injections or transdermal patches. The injections require frequent
visits to a physician and may be associated with pain at the injection site and
abscess. The transdermal patches may cause skin irritation and patient
inconvenience associated with wearing and changing two to three external patches
per day.

   The Company believes that ANDROSORB may offer several advantages over current
testosterone replacement therapies. ANDROSORB is a lotion that may be applied to
the skin. This would eliminate the need for intramuscular injections. In
addition, ANDROSORB does not contain materials that may cause the skin
irritation associated with transdermal patches.


                                                                               9

<PAGE>   4

   All clinical trials to date, for both ESTRASORB and ANDROSORB, have been
conducted with product formulations that have been refrigerated. The Company is
currently developing and evaluating several other formulations, along with
packaging alternatives, that will not be refrigerated and will have a two year
shelf life. Clinical trials to determine that therapeutic blood levels of the
drug are delivered with these formulations are expected to be completed by the
end of the third quarter in 1998. These formulations are believed to have
commercial and patient compliance advantages over refrigerated product
formulations. The Company anticipates most future clinical trials to be with
formulations that require no refrigeration.                           
 
   The Company has developed several other applications of its MNP transdermal
drug delivery technology platform. These product applications are in various
stages of pre-clinical testing. The Company believes its MNP and other
technologies are suitable for the delivery of ethanol soluble drugs.


Helicore Microbicidal Preparations

The Company has developed proprietary lipid structure formulations that it is
using in the development of a non-antibiotic anti-bacterial preparation for the
treatment of Helicobacter pylori ("H. pylori") infection in humans. H. pylori
was recognized in 1994 by the National Institutes of Health as a causative agent
of peptic ulcer disease, antral gastritis and certain types of gastric cancer.
It is estimated that 30-80 million adults in the U.S. are infected with H.
pylori. Each year the treatment of complications of H. pylori infections (i.e.,
peptic ulcer disease) in the U. S. alone costs in excess of five billion
dollars. Current therapies for the treatment of H. pylori include the use of
antibiotics alone or antibiotics in combination with drugs that inhibit acid
production in the stomach. Problems associated with such therapies include, but
are not limited to, cost, toxicity, failure to sufficiently eradicate all the
bacteria, and acquired resistance to the antibiotic.

   The Company began in 1995 to test formulations of Helicore in both animal
studies and human safety studies. Results from studies completed in 1996 were
submitted to the FDA. A multiple-dose, dose ranging study began in the second
quarter of 1997 is currently being completed. Additional pre-clinical studies on
various formulations are still in process.


Vaccine Adjuvants

Adjuvants are substances that make vaccines more effective. The Company believes
that certain of its organized lipid structures (e.g. Novasome lipid vesicles)
may provide effective and safe adjuvant carrier systems for a variety of
vaccines. The Company believes that Novasome lipid vesicles may be used as
vaccine adjuvants and protective carriers in a variety of circumstances,
including: (i) encapsulation and protection of delicate antigenic materials from
destruction by the body's normal enzymatic processes; (ii) encapsulation of
toxic materials, such as endotoxins and other potent toxins, for gradual
releases, thereby providing protection of the body from the toxin while
generating an immune response to the toxic antigen; (iii) presentation of small
peptide antigens to elicit a heightened cellular immune response. Additionally,
the Company has developed structures for delivery of biologically active
molecules like anti-sense, genes and proteins.

   The Company has several research contracts in place to provide vaccine
products, services and adjuvant technologies. These contracts include
development of an adjuvant for an immunotherapeutic against human Papilloma
Virus for a British vaccine company and a subcontract agreement with University
of Michigan who is supplying anti-infective defense systems against biological
warfare agents for the U.S. military. They are anticipated to generate
approximately $.5 million in revenue in 1998 with potential revenue
opportunities beyond 1998.
   

MANUFACTURING

The development and manufacture of the Company's products are subject to good
laboratory practices ("GLP") and good manufacturing practices ("GMP")
requirements prescribed by the FDA and to other standards prescribed by the
appropriate regulatory agency in the country of use. The Company has the ability
to produce quantities of Novasome lipid vesicles sufficient to support its
current needs. The Company also has the ability to produce quantities of
Novasome lipid vesicles and MNPs sufficient to support its needs for early-stage
clinical trials. It does not presently have FDA certified facilities capable of
producing the larger quantities of pharmaceutical products required for larger
scale clinical trials or commercial production. The Company will need to rely on
collaborators, licensees or contract manufacturers or acquire such manufacturing
facilities for later stage clinical trials and commercial production of its own
pharmaceuticals. There can be no assurance that the Company will be able to
obtain such facilities or manufacture such products in a timely fashion at
acceptable quality and prices, that it or its suppliers will be able to comply
with GLP or GMP, as applicable, or that it or its suppliers will be able to
manufacture an adequate supply of product.


MARKETING

The Company plans to market its pharmaceuticals for which it obtains regulatory
approvals either through joint ventures or corporate partnering arrangements.
The Company expects that such arrangements could include technology licenses,
research funding, milestone payments, collaborative product development,
royalties and equity investments in Novavax. Implementation of this strategy
will depend on many factors, including the market potential of its products and
technologies, the success in developing relationships with distributors or
marketing partners for the Company's products and the financial resources
available to the Company.



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COMPETITION

A number of large companies, such as Novartis, Procter & Gamble, American Home
Products, Parke-Davis, Solvay Pharmaceuticals, SmithKline Beecham, Abbott
Laboratories, Ortho Pharmaceuticals and Mead Johnson Laboratories, produce and
sell estrogen preparations for clinical indications identical to those the
Company proposes to target. SmithKline Beecham currently markets a transdermal
testosterone patch and Novartis markets an estrogen transdermal patch. The
competition to develop FDA approved hormone replacement therapies is intense and
no assurance can be given that the Company's product candidates will be
developed into commercially successful products.

   Many companies, such as Merck, Merck-Astra, Glaxo-Wellcome, Procter & Gamble,
SmithKline Beecham, OraVax and others, are currently evaluating various
treatment programs for peptic ulcer disease and the treatment of H. pylori. Most
of the therapies under investigation today involve a combination of a currently
used ulcer treatment medication (e.g., Prilosec(R), Zantac(R) or Tagamet(R),) in
association with an antibiotic (e.g., amoxicillin, Flagyl(R) or Biaxin(R)). The
market for the development of treatment programs for peptic ulcer disease and H.
pylori infection is competitive and no assurance can be given that the Company's
H. pylori product candidates will be developed into commercially successful
products.

   A number of other companies have been working on vaccine adjuvants for use in
human vaccines. These include, but are not limited to, Chiron, Ribi Immunochem
Research, Cambridge Biotech, Iscotec, Proteus International and Biomira. The
competition to develop FDA-approved human vaccine adjuvants is intense and no
assurance can be given that the Company's adjuvant product candidates will be
developed into commercially successful products.

   Primary competitors in the development of lipid structure and vesicle
encapsulation technologies are The Liposome Company, Sequus Pharmaceuticals,
Nexstar Pharmaceuticals and L'Oreal, as well as other pharmaceutical, vaccine
and chemical companies. The Company believes that, except for L'Oreal, these
companies have focused their development efforts on pharmaceutical carrier
systems for the treatment of infections and certain cancers. To the Company's
knowledge, The Liposome Company, Sequus and Nexstar all base their lipid vesicle
technologies on phospholipids.

   Most of the Company's competitors are larger than the Company and have
substantially greater financial, marketing and technical resources. In addition,
many of these competitors have substantially greater experience than the Company
in developing, testing and obtaining FDA and other approvals of pharmaceuticals.
Furthermore, if the Company commences commercial sales of pharmaceuticals, it
will also be competing with respect to manufacturing efficiency and marketing
capabilities, areas in which it has limited or no experience. If any of the
competitors develop new encapsulation technologies that are superior to the
Company's Novasome and MNP technologies, the ability of the Company to expand
into the pharmaceutical and vaccine adjuvant markets will be materially and
adversely affected.

   Competition among products will be based, among other things, on product
efficacy, safety, reliability, availability, price and patent position. An
important factor will be the timing of market introduction of the Company's or
competitors' products. Accordingly, the relative speed with which the Company
can develop products, complete the clinical trials and approval processes and
supply commercial quantities of the products to the market is expected to be an
important competitive factor. The Company's competitive position will also
depend upon its ability to attract and retain qualified personnel, to obtain
patent protection or otherwise develop proprietary products or processes and to
secure sufficient capital resources for the often substantial period between
technological conception and commercial sales.


RESEARCH AND DEVELOPMENT

The Company's research is focused principally on the development and
commercialization of formulations for topical drug delivery and therapeutic
products, including antibacterial and anti-viral products and adjuvants for
vaccines. The Company intends to use third-party funding when available, through
collaborations, joint ventures or strategic alliances with other companies,
particularly potential distributors of the Company's products. Because of the
substantial funds required for clinical trials, the Company will have to obtain
additional financing for its future human clinical trials. No assurance can be
given that such financing will be available on terms attractive to the Company,
if at all.

   The Company bases its development decisions on development costs and
potential return on investment, regulatory considerations, and the interest,
sponsorship and availability of funding from third parties. As of December 31,
1997, the Company's research and development staff numbered 8 individuals. In
addition to its internal research and development efforts, the Company
encourages the development of product candidates in areas related to its present
lines by working with universities and government agencies. Novavax's research
and development expenditures, approximated $2,874,000, $3,716,000 and $3,708,000
and in the years ended December 31, 1997, 1996 and 1995, respectively.


PATENTS AND PROPRIETARY INFORMATION

The Company, through a wholly-owned subsidiary, holds 46 U.S. patents and 53
foreign patents covering its technologies (which include a wide variety of
component materials, its continuous flow vesicle production process and its
Novamix(R) production equipment). The Company believes that these patents are
important for the protection of its technology as well as certain of the
development processes that underlie that technology. In addition, 8 U.S. patent
applications and 53 foreign patent applications are pending covering the
composition, manufacture and use of its organized lipid structures and related
technologies.

   The Company expects to engage in collaborations, sponsored research
agreements and preclinical testing agreements in connection with its future
pharmaceutical products and vaccine adjuvants, as well 



                                                                              11

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as clinical testing agreements with academic and research institutions and U.S.
government agencies, such as the NIH, to take advantage of the technical
expertise and staff of these institutions and to gain access to clinical
evaluation models, patients and related technologies. Consistent with
pharmaceutical industry and academic standards, and the rules and regulations
promulgated under the federal Technology Transfer Act of 1986, these agreements
may provide that developments and results will be freely published, that
information or materials supplied by the Company will not be treated as
confidential and that the Company will be required to negotiate a license to any
such developments and results in order to commercialize products incorporating
them. There can be no assurance that the Company will be able to successfully
obtain any such license at a reasonable cost or that such developments and
results will not be made available to competitors of the Company on an exclusive
or nonexclusive basis.


GOVERNMENT REGULATION

The Company's research and development activities are subject to regulation for
safety, efficacy and quality by numerous governmental authorities in the United
States and other countries. The development, manufacturing and marketing of
human pharmaceuticals are subject to regulation in the United States for safety
and efficacy by the FDA in accordance with the Food, Drug and Cosmetic Act.

   In the United States, human pharmaceuticals are subject to rigorous FDA
regulation including preclinical and clinical testing. The process of completing
clinical trials and obtaining FDA approvals for a new drug is likely to take a
number of years, requires the expenditure of substantial resources and is often
subject to unanticipated delays. There can be no assurance that any product will
receive such approval on a timely basis, if at all.

   The steps required before new products for use in humans may be marketed in
the United States include (i) preclinical tests, (ii) submission to the FDA of
an application for an Investigational New Drug application (IND), which must be
approved before human clinical trials commence, (iii) adequate and
well-controlled human clinical trials to establish the safety and efficacy of
the product, (iv) submission of a New Drug Application ("NDA") for a new drug or
a Product License Application ("PLA") for a new biologic to the FDA and (v) FDA
approval of the NDA or PLA prior to any commercial sale or shipment of the
product.

   Preclinical tests include laboratory evaluation of product formulation, as
well as animal studies (if an appropriate animal model is available) to assess
the potential safety and efficacy of the product. Formulations must be
manufactured according to GMP and preclinical safety tests must be conducted by
laboratories that comply with FDA regulations regarding GLP. The results of the
preclinical tests, are submitted to the FDA as part of an IND and are reviewed
by the FDA prior to the commencement of human clinical trials. There can be no
assurance that submission of an IND will result in FDA authorization to commence
clinical trials. Clinical trials involve the administration of the
investigational new drug to healthy volunteers and to patients under the
supervision of a qualified principal investigator and are typically conducted in
three sequential phases, although the phases may overlap. The Company or the FDA
may suspend clinical trials at any time if the participants are being exposed to
an unacceptable health risk. The FDA may deny an NDA or PLA if applicable
regulatory criteria are not satisfied, require additional testing or
information, or require post marketing testing and surveillance to monitor the
safety of the Company's products.

   In addition to obtaining FDA approval for each PLA, an Establishment License
Application ("ELA") must be filed and approved by the FDA for the manufacturing
facilities of a biologic product before commercial marketing of the biologic
product is permitted. The regulatory process may take many years and requires
the expenditure of substantial resources.

   In addition to regulations enforced by the FDA, the Company also is subject
to regulation under the Occupational Safety and Health Act, the Environmental
Protection Act, the Toxic Substances Control Act, the Resource Conservation and
Recovery Act and other present and potential future federal, state or local
regulations. The Company's research and development involves the controlled use
of hazardous materials, chemicals and viruses. Although the Company believes
that its safety procedures for handling and disposing of such materials comply
with the standards prescribed by state and federal regulations, the risk of
accidental contamination or injury from these materials cannot be completely
eliminated. In the event of such an accident, the Company could be held liable
for any damages that result, and any such liability could exceed the resources
of the Company.

   In both domestic and foreign markets, the ability of the Company to
commercialize its product candidates will depend, in part, on the availability
of reimbursement from third-party payers, such as government health
administration authorities, private health insurers and other organizations. If
adequate coverage and reimbursement levels are not provided by government and
third-party payers for uses of the Company's therapeutic products, the market
acceptance of these products would be adversely affected.

   There have been a number of federal and state proposals during the last few
years to subject the pricing of pharmaceuticals to government control and to
make other changes to the medical care system of the United States. It is
uncertain what legislative proposals will be adopted or what actions federal,
state or private payers for medical goods and services may take in response to
any medical reform proposals or legislation. The Company cannot predict the
effect medical reforms may have on its business, and no assurance can be given
that any such reforms will not have a material adverse effect on the Company.


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EMPLOYEES

The Company had 15 full-time employees as of December 31, 1997, of whom 8 are in
research and development. The Company has no collective bargaining agreement
with its employees and believes that its employee relations are good.



ITEM 2. PROPERTIES

The Company leases approximately 12,000 square feet of administrative offices
and laboratory space for its corporate headquarters and PHARMACEUTICAL DIVISION,
located at 8320 Guilford Road, Columbia, Maryland. The Company believes its
facilities are adequate to produce quantities of Novasome lipid vesicles and
MNPs sufficient to support its needs for early-stage clinical trials. It does
not presently have FDA certified facilities capable of producing the larger
quantities of pharmaceutical products required for larger scale clinical trials
or commercial production. The Company will need to rely on collaborators,
licensees or contract manufacturers or acquire such manufacturing facilities for
later stage clinical trials and commercial production of its own
pharmaceuticals.

   The Company's BIOLOGICS DIVISION also leases 2,363 square feet of space
located in Rockville, Maryland. This space contains the Company's certified
animal facility and laboratories for its biologics development which includes
the vaccine and vaccine adjuvant product and services group.



ITEM 3. LEGAL PROCEEDINGS

Not Applicable.



ITEM 4. SUBMISSION OF MATTERS TO
        A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 31, 1997.


EXECUTIVE OFFICERS OF THE REGISTRANT

The Company's executive officers hold office until the first meeting of the
Board of Directors following the annual meeting of stockholders and until their
successors are duly chosen and qualified, or until they resign or are removed
from office in accordance with the Company's By-laws.

                                        PRINCIPAL OCCUPATION AND OTHER BUSINESS
NAME                     AGE               EXPERIENCE DURING PAST FIVE YEARS
- -------------------------------------------------------------------------------

RICHARD F. MARADIE       50                 Chief Executive Officer of Novavax
                                            since March, 1997. Co-Founder,
                                            Director, President and Chief
                                            Executive Officer of Protyde
                                            Pharmaceuticals, Inc. from 1994 to
                                            1997. Director, Executive Vice
                                            President and Chief Operating
                                            Officer of Platelet Research
                                            Products, Inc. from 1991 to 1994.
                                            Director, President and Chief
                                            Executive Officer of VimRx
                                            Pharmaceuticals, Inc. from 1988 to
                                            1991. Executive Vice President and
                                            Chief Operating Officer of Creative
                                            Biomolecules, Inc. from 1987 to
                                            1988. Senior Director Cetus
                                            Corporation and General Manager and
                                            Chairman of the Board of Managers
                                            for Cetus/BenVenue Oncology
                                            Therapeutics from 1983 to 1987.
                                            Director of Oncology Marketing and
                                            Sales of Adria Laboratories, Inc.
                                            from 1974 to 1983.

D. CRAIG WRIGHT, M.D.    47                 Vice President, Research and
                                            Development and Operations of
                                            Novavax since 1993. Founder and
                                            Senior Director of Medical Research
                                            of Univax Biologics, Inc., a
                                            biopharmaceutical company, from 1988
                                            to 1992.

BRENDA L. FUGAGLI        41                 Vice President, Chief Financial
                                            Officer and Treasurer of Novavax
                                            since July, 1997. President, Chief
                                            Operating Officer, Carestream a
                                            division of FoxMeyer Corporation,
                                            1995. Senior Vice President of
                                            Marketing FoxMeyer Drug Company 1992
                                            to 1995. Vice President and
                                            Controller FoxMeyer Corporation from
                                            1989 to 1992.


                                                                              13

<PAGE>   8


                                                PRINCIPAL OCCUPATION AND
                                               OTHER BUSINESS EXPERIENCE
NAME                          AGE                DURING PAST FIVE YEARS
- --------------------------------------------------------------------------------
THOMAS G. TACHOVSKY, PH.D.    51            Vice President, Business Development
                                            since February, 1998. General
                                            Partner and Founder, Matco &
                                            Associates, a consulting firm, 1991
                                            to 1998. Executive Vice President
                                            R&D, Director and Founder, Protyde
                                            Pharmaceuticals, Inc., 1995 to 1997.
                                            Vice President Business Development,
                                            Cytogen Corporation, 1989 to 1991.

RICHARD J. HARWOOD, PH.D.     54            Vice President, Pharmaceutical
                                            Product Development since March,
                                            1998. Consultant K. W. Tunnell
                                            Company, Inc., 1995 to 1998. Vice
                                            President, Research and Development,
                                            Private Formulations, Inc., 1993 to
                                            1995. Technical Planning Director,
                                            Worldwide Strategic Product
                                            Planning, Bristol-Myers Squibb, 1986
                                            to 1993. Department Director,
                                            Product Development, Rorer Group,
                                            Inc., 1982 to 1986. Research Fellow,
                                            Merck and Co., Inc., 1970 to 1982.




PART II


ITEM 5. MARKET FOR THE REGISTRANT'S 
        COMMON EQUITY AND RELATED 
        STOCKHOLDER MATTERS 

The Company's Common Stock was held by 952 stockholders of record as of
March 20, 1998. The Company has never paid cash dividends on its Common Stock.
The Company currently anticipates that it will retain all of its earnings for
use in the development of its business and does not anticipate paying any cash
dividends in the foreseeable future.

   The principal market for the Company's Common Stock ($.01 par value) is
traded on the American Stock Exchange under the symbol "NOX". The following
table shows the range of high and low closing prices of the Company's common
stock on the American Stock Exchange for the periods indicated.

                             HIGH      LOW
- ----------------------------------------------------

1997

First quarter                $4 3/4    $3 1/4
Second quarter                4 7/16    2 5/8
Third quarter                 6         4
Fourth quarter                5 3/4     4 1/8

1996
First quarter                $6 5/8    $3 3/8
Second quarter                8 1/4     5 1/4
Third quarter                 7 1/8     3 1/8
Fourth quarter                4 5/8     2 7/8


RECENT SALES OF UNREGISTERED SECURITIES

On October 30, 1996, Novavax received $1,655,877, net of all transaction costs,
from the sale of 505,000 common shares that were privately placed with
accredited institutional investors by Vector Securities International, Inc. On
February 10, 1997, Novavax signed a definitive agreement to privately place
1,200,000 common shares with Anaconda Opportunity Fund, L.P., an accredited
institutional investor, at an aggregate price of $5,100,000. Effective on or
about the closing dates the 1,705,000 common shares were registered and freely
tradable.

   On January 23, 1998, the Company entered into Subscription Agreements to
effectuate the private placement of 6,500 shares of Series A Custom Convertible
Preferred Stock, $.01 par value per share (the "Series A Preferred Stock"). The
closing occurred on January 28, 1998 (the "Issuance Date") at an aggregate
purchase price of $6,500,000. The Company received the proceeds therefor and
paid Diaz & Altschul, LLC a fee of $425,233 in consideration for its services as
placement agent.

   The Series A Preferred stock is convertible into shares of Common Stock at a
conversion price equal to (i) during a period of 90 days following the Issuance
Date, 100% of the average of the two lowest consecutive trade prices of the
Common Stock as reported on the American Stock Exchange for the 25 trading days
immediately preceeding the conversion date (the "Two Day Average Trading Price")
or (ii) during the period on and after the date which is 91 days after the
Issuance date, 94% of the Two Day Average Trading Price (the "Conversion
Price").

   From the Issuance Date, there is ceiling price of $6.33 and within the first
180 days after the Issuance Date, the Conversion Price has applicable floor
prices based on conversion dates. The floor prices range from $5.67 to $4.32.
The maximum number of shares as measured by the conversion terms most beneficial
to the holders of the Series A Preferred Stock at the time of closing will
result in a deemed dividend in the amount of $455,048 which has been recorded to
Accumulated Deficit and Additional Paid In Capital during the three months ended
March 31, 1998.


14

<PAGE>   9



ITEM 6. SELECTED FINANCIAL DATA


<TABLE>
<CAPTION>
                                                                        For the years ended December 31,
                                              ------------------------------------------------------------------------------------

                                                      1993            1994             1995                 1996           1997
- ----------------------------------------------------------------------------------------------------------------------------------

STATEMENT OF OPERATIONS DATA:
Revenues:
<S>                                             <C>             <C>               <C>                <C>             <C>       
Research revenues (1)                           $    380,700    $    475,000      $       --         $        --     $        --
Sales                                                     --              --              --              55,553         519,714
Royalties from former parent (2)                     198,546         209,877         268,002                  --              -- 
Total Revenues                                       579,246         684,877         268,002              55,553         519,714
Costs and expenses:
Selling and marketing                                278,836         323,640         398,776                  --              -- 
General and administrative (3)                     1,976,356       2,162,431       2,905,873           1,874,418       2,437,166
Research and development                           2,701,038       2,860,048       3,708,005           3,715,545       2,874,129
Interest expense to former parent (4)                413,049       1,028,794       1,749,706                  --              -- 
Interest income                                           --              --              --            (137,539)       (244,964)
Income tax expense                                        --              --              --              98,094              -- 
Net loss                                          (4,790,033)     (5,690,036)     (8,494,358)         (5,494,985)     (4,546,617)
Net loss per share (basic and diluted)(5)                n/a             n/a    $      (0.85)        $     (0.54)    $     (0.39)
Weighted average number of common
  shares outstanding                                     n/a             n/a       9,937,936          10,132,896      11,667,428
BALANCE SHEET DATA:
Total current assets                            $    268,050    $    501,845    $  4,761,199         $ 3,220,772     $ 4,303,044
Working capital                                      202,914         306,159       4,330,412           2,639,505       4,014,406
Total assets                                       2,819,631       3,132,688       7,529,544           5,721,952       6,823,271
Capital lease obligations                                 --              --              --              34,351          23,607
Stockholders' (deficit) equity                    (1,070,994)     (2,202,868)      7,098,757           5,117,078       6,521,770
</TABLE>




(1)   Includes payments for licensing agreements and technology application
      review.

(2)   Includes royalties for product sales in IGI's animal health products,
      cosmetic and consumer products businesses through the date of the
      Distribution.

(3)   Includes administrative expenses incurred by IGI allocated to Novavax
      through the date of the Distribution.

(4)   Interest expense is solely attributable to debt incurred by Novavax to
      fund its operations through the date of the Distribution.

(5)   On December 12, 1995, IGI distributed to the holders of record of IGI's
      common stock , at the close of business on the Record Date, November 28,
      1995, one share of the Company's common stock for every one share of IGI
      common stock outstanding. Pro forma net loss per common share for the year
      ended December 31, 1995 is based upon weighted average shares outstanding
      of 9,937,936. See footnote 5 of the Financial Statements.



                                                                              15

<PAGE>   10





ITEM 7. MANAGEMENT'S DISCUSSION AND 
        ANALYSIS OF FINANCIAL CONDITION 
        AND RESULTS OF OPERATIONS 

Certain statements under Item 1 and Item 7 contained herein or as
may otherwise be incorporated by reference herein constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements include but are not limited to: statements
regarding future product development and related clinical trials and statements
regarding future research and development. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of the Company, or industry
results, to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among other things, the following: general economic and
business conditions; competition; technological advances; ability to obtain
rights to technology; ability to obtain and enforce patents; ability to
commercialize and manufacture products; results of preclinical studies; results
of research and development activities; business abilities and judgment of
personnel; availability of qualified personnel; changes in, or failure to comply
with, governmental regulations; ability to obtain adequate financing in the
future; and other factors referenced herein. All forward-looking statements
included in this document are based on information available to the Company on
the date hereof, and the Company assumes no obligation to update any such
forward-looking statements. Accordingly, past results and trends should not be
used by investors to anticipate future results or trends.

   The following is a discussion of the historical consolidated financial
condition and results of operations of Novavax and its subsidiaries. The
discussion should be read in conjunction with the consolidated financial
statements and notes thereto set forth in Item 8 to this Report.

   On December 12, 1995, the Company's former parent, IGI, Inc., distributed its
majority interest in Novavax to the IGI stockholders (the "Distribution"). Prior
to the Distribution, IGI owned 93.2% of the outstanding shares of the Company,
all of which were distributed to IGI stockholders. Certain periods covered by
the discussion below occurred when the Company was a subsidiary of IGI and may
not be indicative of current or future performance.

RESULTS OF OPERATIONS

The Company has incurred net losses since its inception from the development of
its technologies for human pharmaceuticals, vaccines and vaccine adjuvants.
Novavax expects the losses to continue and to most likely increase in the
near-term, as it conducts additional human clinical trials and seeks regulatory
approval for its product candidates. The Company also expects to continue to
incur substantial operating losses over the extensive time period required to
develop the Company's products , or until such time as revenues, to offset the
losses, are sufficient to fund its continuing operations.

   Until the second quarter of 1996, the Company had recorded revenues from two
sources: (i) research revenues from industry partners in consideration of either
exclusive licenses or technology application reviews and (ii) royalty revenues
that were attributable to product sales by IGI. Revenues from the sale of
scientific prototype vaccines and adjuvants have been recorded in the second,
third and fourth quarters of 1996 and in each quarter of 1997.


1997 COMPARED TO 1996

The net loss of $4,546,617 for the year ended December 31, 1997 was $948,368 or
17%, lower than the net loss of $5,494,985 for the year ended December 31, 1996.
The 1997 net loss includes non-cash compensation expense of $577,643 compared to
$1,506,790 included in the 1996 net loss. This compensation expense relates to
the amortization of below-market priced stock options and warrants issued at the
time of the Distribution. Other 1997 non-cash charges include $253,591 of
depreciation and patent amortization expense. Non-cash charges in 1996 included
$334,564 for the disposal of property and equipment and $328,225 of depreciation
and patent amortization expense.

   Revenues of $519,714 were recognized during 1997 compared to $55,533 during
1996. The increase was due primarily to two contracts related to vaccine
products, services and adjuvant technologies.

   Selling, general and administrative expenses include all costs associated
with the marketing of the Company's technology to potential industry partners
and those activities associated with identifying additional sources of capital.
It also includes costs associated with management and administrative activities.
Selling, general and administrative expenses were approximately $2,437,166 and
$1,874,418 for the years ended December 31, 1997 and 1996, respectively. The
increase of $562,748 was attributable to increased costs associated with
securing strategic alliances and potential sources of financing as well as the
increased staffing and infrastructure growth including the hiring of a new Chief
Financial Officer and Chief Executive Officer.

   Research and development expenses include scientific staffing, supplies and
other costs related to the ongoing development of the Novavax technologies as
well as the development of the Company's three lead product candidates. Research
and development expenses were approximately $2,874,129 and $3,715,545 for the
years ended 




16

<PAGE>   11
December 31, 1997 and 1996, respectively. Although such expenses have decreased
by $841,416, this change is primarily caused by the net decrease in the
amortization of below-market priced stock options issued at the time of the
Distribution of $933,742 and the non-recurring charge of $334,564 for the
disposal of assets in 1996.

   Research and development expenses, before these items were $2,407,258 and
$1,908,370 for 1997 and 1996. After considering the impact of these
aforementioned non-cash expenses, research and development costs increased by
$498,888. The increase was primarily due to the number of product candidates in
clinical trials and the growth of the underlying research and development
infrastructure including facility expansion.

   Interest income was approximately $244,964 and $137,539 for the years ended
December 31, 1997 and 1996, respectively. The increase in net interest income
was a direct result of an increase in the average cash balances on hand
throughout the year.


1996 COMPARED TO 1995

The net loss of $5,494,985 for the year ended December 31, 1996 was $2,999,373,
or 35%, lower than the net loss of $8,494,358 for the year ended December 31,
1995. The 1996 net loss includes $1,506,790, compared to $101,183 included in
the 1995 net loss, of non-cash compensation expense. Other non-cash charges
include $334,564 for the disposal of property and equipment and $328,225 of
depreciation and patent amortization expense. Non-cash charges of $272,886 for
depreciation and patent amortization have been included in the 1995 expense.

   Revenues of $55,533 were recognized during the year ended December 31, 1996
from the sale of scientific prototype vaccines and adjuvants. Novavax earned
royalties from IGI of 10% of licensed product sales, or $268,002, in the year
ended December 31, 1995.

   Total operating expenses were $5,589,963 in 1996, decreasing $1,422,691, or
20%, from the $7,012,654 incurred in 1995. Reduced cash resources caused the
Company to reduce spending and achieve other efficiencies including a refocus of
its efforts on the development of its three lead product candidates in
connection with FDA human clinical trials.

   Total selling, general and administrative expenses were $1,874,418 and
$3,304,649 for the years ended December 31, 1996 and 1995, respectively. Costs
associated with the Distribution are included in the 1995 expenses. Nonrecurring
charges of $230,474 were incurred through June 30, 1996 for transitional
services provided by IGI. The agreement providing these services terminated on
June 30, 1996 and no additional charges have been recorded. Certain costs
included in the 1995 expenses were estimates allocated from IGI, based on
Novavax being a separate public company, and may not compare with the actual
costs Novavax incurred in 1996. These estimated costs were $850,000 for the year
ended December 31, 1995.

   Research and development expenses were $3,715,545 and $3,708,005 for the
years ended December 31, 1996 and 1995, respectively. The 1996 expenses include
non-cash charges of $1,410,648, compared to $101,183 in 1995, related to the
amortization of below-market priced stock options issued at the time of the
Distribution, and non-cash charges of $334,564 for the disposal of property and
equipment related to the closing of one of the Novavax subsidiaries' laboratory.

   Net interest income of $137,539 was recorded during the twelve months ended
December 31, 1996, compared with net interest expense of $1,749,706 for the same
period ended December 31, 1995, that was charged to Novavax by IGI for
borrowings and notes due to IGI through the date of the Distribution to fund
operating losses, capital equipment purchases and patent costs.

   In connection with the filing of the Company's 1995 tax return during 1996,
it was determined that the Company had an Alternative Minimum Tax liability
resulting from the cash received from IGI in return for the license. Net income
tax expense of $98,094 for 1996 is attributable to the Alternative Minimum Tax
calculation.


LIQUIDITY AND CAPITAL RESOURCES

Novavax's capital requirements depend on numerous factors, including but not
limited to the progress of its research and development programs, the progress
of preclinical and clinical testing, the time and costs involved in obtaining
regulatory approvals, the costs of filing, prosecuting, defending and enforcing
any patent claims and other intellectual property rights, competing
technological and market developments, and changes in Novavax's development of
commercialization activities and arrangements. During 1996, the Company moved
three product candidates into clinical trials in less than one year. This rapid
development prompted the need for expansion in late 1996. On October 31, 1996,
the Company completed the relocation of its administrative offices and
pharmaceutical laboratories to a leased facility in Columbia, Maryland. Future
activities to establish commercial-scale manufacturing capabilities are subject
to the Company's ability to raise funds through equity financing, or
collaborative arrangements with corporate partners. Novavax's future growth will
depend on its ability to commercialize its Novavax technologies for human
pharmaceutical applications.

   Net cash used in 1997 for operating activities was $4,244,733. From the date
of the Distribution, Novavax has conducted its operations with approximately
$5,000,000 paid by IGI under the IGI License Agreement along with net proceeds
from several financing transactions completed and described herein. Additionally
the Company has received sources of cash from the sale of scientific prototype
vaccines and adjuvants and from the exercise of stock options.

   On October 30, 1996, Novavax received $1,655,877, net of all transaction
costs, from the sale of 505,000 common shares that were privately placed with
accredited institutional investors by Vector Securities International, Inc.


                                                                              17

<PAGE>   12

   On February 10, 1997, Novavax signed a definitive agreement to privately
place 1,200,000 common shares with Anaconda Opportunity Fund, L.P., an
accredited institutional investor, at an aggregate price of $5,100,000. As part
of the transaction, Novavax also granted warrants to purchase an additional
600,000 shares at a price of $6.00 per share and 600,000 shares at a price of
$8.00 per share. The warrants have a three-year term. The transaction was closed
March 14, 1997 with net proceeds of $5,002,718.

   On January 23, 1998, the Company entered into Subscription Agreements with
each of four purchasers to effectuate the private placement of 6,500 share of
Series A Custom Convertible Preferred Stock, $.01 par value per share (the
"Series A Preferred Stock"). The closing occurred on January 28, 1998 (the
"Issuance Date") at an aggregate purchase price of $6,500,000. The Company
received the proceeds therefor and paid Diaz & Altschul, LLC a fee of $425,233
in consideration for its services as placement agent.

   The Series A Preferred Stock is convertible into shares of Common Stock at a
conversion price equal to (i) during a period of 90 days following the Issuance
Date, 100% of the average of the two lowest consecutive trade prices of the
Common Stock as reported on the American Stock Exchange for the 25 trading days
immediately preceding the conversion date (the "Two Day Average Trading Price")
or (ii) during the period on and after the date which is 91 days after the
Issuance Date, 94% of the Two Day Average Trading Price (the "Conversion
Price"). From the Issuance Date, there is a ceiling price of $6.33 and within
the first 180 days after the Issuance Date, the Conversion Price has applicable
floor prices, ranging from $5.67 to $4.32, based on conversion dates. The
maximum number of shares as measured by the conversion terms most beneficial to
the holders of the Series A Preferred Stock at the time of closing results in a
deemed dividend in the amount of $455,048 which will be recorded in the first
quarter of 1998.

   As of December 31, 1997, Novavax estimates that the money received from the
most recent sale of the privately placed Preferred Stock, and its existing cash
resources will be sufficient to finance its operations at current and projected
levels of development activity for approximately 18 to 24 months. On December
31, 1997, the Company had $3,847,107 in cash, cash equivalents and marketable
securities on hand.

   Past spending levels are not necessarily indicative of future spending.
Future expenditures for product development, especially relating to outside
testing and human clinical trials, are discretionary and, accordingly, can be
adjusted to available cash. Moreover, the Company will seek to establish one or
more collaborations with industry partners to defray the costs of clinical
trials and other related activities. Novavax will also seek to obtain additional
funds through public or private equity or debt financings, collaborative
arrangements with pharmaceutical companies or from other sources. There can be
no assurance that additional funding or bank financing will be available at all
or on acceptable terms to permit successful commercialization of Novavax's
technologies and products. If adequate funds are not available, Novavax may be
required to significantly delay, reduce the scope of or eliminate one or more of
its research or development programs, or seek alternative measures including
arrangements with collaborative partners or others that may require Novavax to
relinquish rights to certain of its technologies, product candidates or
products.



I
TEM 7A. QUANTITATIVE AND QUALITATIVE 
         DISCLOSURES ABOUT MARKET RISKS

Not applicable.



ITEM 8. FINANCIAL STATEMENTS AND 
        SUPPLEMENTARY DATA

The financial statements and notes thereto listed in the accompanying index to
financial statements (Item 14) are filed as part of this Annual Report and are
incorporated herein by this reference.



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH 
        ACCOUNTANTS ON ACCOUNTING AND 
        FINANCIAL DISCLOSURE

None.


18

<PAGE>   13




PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 

The information required by this item is contained in part under the caption
"Executive Officers of the Registrant" in Part I hereof, and the remainder is
contained in the Company's Proxy Statement for the Company's Annual Meeting of
Stockholders to be held on May 14, 1998 (the "1998 Proxy Statement") under the
captions "Proposal 1 -- Election of Directors" and "Beneficial Ownership of
Common Stock" and is incorporated herein by this reference. The Company expects
to file the 1998 Proxy Statement within 120 days after the close of the fiscal
year ended December 31, 1997.

   Officers are elected on an annual basis and serve at the discretion of the
Board of Directors.



ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is contained in the Company's 1998 Proxy
Statement under the captions "Executive Compensation" and "Director
Compensation" and is incorporated herein by this reference.



ITEM 12. SECURITY OWNERSHIP OF
         CERTAIN BENEFICIAL OWNERS
         AND MANAGEMENT

The information required by this item is contained in the Company's 1998 Proxy
Statement under the caption "Beneficial Ownership of Common Stock" and is
incorporated herein by this reference.



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED 
         TRANSACTIONS

The information required by this item is contained in the Company's 1998 Proxy
Statement under the caption "Certain Relationships and Related Transactions" and
is incorporated herein by this reference.



PART IV


ITEM 14. EXHIBITS, FINANCIAL STATEMENT 
         SCHEDULES, AND REPORTS ON FORM 8-K 

(a)(1)   Financial Statements: Report of Independent Accountants Consolidated
         Balance Sheets as of December 31, 1997 and 1996 Consolidated Statements
         of Operations for the years ended December 31, 1997,1996, and 1995
         Consolidated Statements of Cash Flows for the years ended December 31,
         1997,1996, and 1995 Consolidated Statements of Stockholders' Equity for
         the years ended December 31, 1997,1996, and 1995 Notes to Consolidated
         Financial Statements

(2)      Financial Statement Schedules: Schedules are either not applicable or
         not required because the information required is contained in the
         financial statements or notes thereto. Condensed financial information
         of the Registrant is omitted since there are no substantial amounts of
         restricted net assets applicable to the Company's consolidated
         subsidiaries.

(3)      Exhibits Required to be Filed by Item 601 of Regulation S-K.

         Exhibits marked with a single asterisk are filed herewith, and exhibits
         marked with a double asterisk reference management contract,
         compensatory plan or arrangement, filed in response to Item 14 (a)(3)
         of the instructions to Form 10-K. The other exhibits listed have
         previously been filed with the Commission and are incorporated herein
         by reference.

3.1      Amended and Restated Certificate of Incorporation of Novavax, Inc.
         [Incorporated by reference to Exhibit 3.1 to the Company's Annual
         Report Form 10-K for the fiscal year end December 31, 1996, File No.
         0-26770, filed March 21, 1997 (the "1996 Form 10-K")]

3.2      Amended and Restated By-laws of Novavax, Inc. [Incorporated by
         reference to Exhibit 3.2 to the 1996 Form 10-K.]

3.3      Certificate of Designations of Series A Custom Convertible Preferred
         Stock dated January 28, 1998 by and between the Company and each of the
         four purchasers, Delta Opportunity Fund, Ltd., Olympus Securities,
         Ltd., Nelson Partners, OTATO Limited Partnership. [Incorporated by
         reference to Exhibits 4.2


                                                                              19

<PAGE>   14

         to the Company's Registration Statement on Form S-3, File No.
         333-46409, filed February 17, 1998. ]

   4     Specimen stock certificate for shares of Common Stock par value $.01
         per share. [Incorporated by reference to Exhibit 4.1 to the Company's
         Registration Statement on Form 10, File No. 0-26770, filed September
         14, 1995 (the "Form 10").]

   10.1  Tax Matters Agreement between Novavax and IGI. [Incorporated by
         reference to Exhibit 10.1 to the Form 10.]

   10.2  Transition Services Agreement between Novavax and IGI. [Incorporated by
         reference to Exhibit 10.2 to the Form 10.]

   10.3  License Agreement between IGEN, Inc. and Micro-Pak, Inc.[Incorporated
         by reference to Exhibit 10.3 to the Company's Annual Report on Form
         10-K for the fiscal year ended December 31, 1995, File No. 0-26770,
         filed April 1, 1996, (the "1995 Form 10-K").]

 **10.4  1995 Stock Option Plan. [Incorporated by reference to Exhibit 10.4 to
         the Form 10.]

 **10.5  1995 Director Stock Option Plan. [Incorporated by reference to Exhibit
         10.5 to the Form 10.]

   10.6  Stock Purchase Agreement dated October 9, 1996 by and between the
         Company and the purchasers named therein. [Incorporated by reference to
         Exhibit 4.4 to the Company's Registration Statement on Form S-3, File
         No. 333-14305, filed October 17, 1996.]

   10.7  Agreement of Lease by and between the Company and Rivers Center
         Associates Limited Partnership, dated September 25, 1996. [Incorporated
         by reference to Exhibit 10.7 to the 1996 Form 10-K.]

   10.8  Stock and Warrant Purchase Agreement dated February 10, 1997 by and
         between the Company and Anaconda Opportunity Fund, L.P. [Incorporated
         by reference to Exhibit 4.4 to the Company's Registration Statement on
         Form S-3, File No. 333-22685, filed March 4, 1997(the "Anaconda S-3").]

   10.9  Form of Warrant issued by the Company to Anaconda Opportunity Fund,
         L.P. [Incorporated by reference to Exhibit 4.5 to the Anaconda S-3.]

 **10.10 Employment Agreement dated May 15, 1997, by and between the Company 
 *       and Richard F. Maradie.

 **10.11 Employment Agreement dated July 24, 1997, by and between the Company
 *      and Brenda L. Fugagli.

 **10.12 Letter Agreement dated February 19, 1998, by and between the Company
 *       and Richard J. Harwood.

 **10.13 Letter Agreement dated February 19, 1998, by and between the Company
 *       and Thomas G. Tachovsky.

   10.14 Form of Subscription Agreement dated January 23, 1998 by and between
         the Company and each of the four purchasers, Delta Opportunity Fund,
         Ltd., Olympus Securities, Ltd., Nelson Partners, OTATO Limited
         Partnership. [Incorporated by reference to Exhibits 4.5 to the
         Company's Registration Statement on Form S-3, File No. 333-46409, filed
         February 17, 1998.]

   21    List of Subsidiaries [Incorporated by reference to Exhibit 21 to the
         1995 Form 10-K.]

  *23    Consent of Coopers & Lybrand L.L.P.

  *27    Financial Data Schedule

  (B)    Reports on Form 8-K:

         None.


20

<PAGE>   15



INDEX TO CONSOLIDATED 
FINANCIAL STATEMENTS


DESCRIPTION

Report of Independent Accountants               22

Consolidated Statements of Operations
  for each of the three years in the
  period ended December 31, 1997                23

Consolidated Balance Sheets as of
  December 31, 1997 and 1996                    24

Consolidated Statements of Cash Flows
  for each of the three years in the period
  ended December 31, 1997                       25
                                                  
Consolidated Statements of Changes in
  Stockholders' Equity for each of the three
  years in the period ended December 31, 1997   26

Notes to Consolidated Financial Statements      27



                                                                              21

<PAGE>   16
REPORT OF INDEPENDENT
ACCOUNTANTS

To the Board of Directors and Stockholders of Novavax, Inc.:

We have audited the accompanying consolidated balance sheets of Novavax, Inc.
and Subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of operations, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

   We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

   In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Novavax, Inc. and
Subsidiaries as of December 31, 1997 and 1996, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1997 in conformity with generally accepted accounting
principles.


COOPERS & LYBRAND L.L.P.


McLean, Virginia
March 13, 1998



22

<PAGE>   17



NOVAVAX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS



<TABLE>
<CAPTION>
                                                             For the years ended December 31,
                                                        -------------------------------------------

                                                            1997          1996             1995
- ---------------------------------------------------------------------------------------------------
<S>                                                   <C>            <C>               <C>        
Revenues:
  Contract Revenue                                    $   519,714    $    55,533       $        -- 
  Royalties from former parent                                 --             --           268,002 
                                                      -----------    -----------       -----------   
    Total Revenues                                        519,714         55,533           268,002
Operating expenses:                                                                                
  Selling and marketing                                        --             --           398,776
  General and administrative                            2,437,166      1,874,418         2,905,873 
  Research and development                              2,874,129      3,715,545         3,708,005 
                                                      -----------    -----------       -----------   
    Total operating expenses                            5,311,295      5,589,963         7,012,654 
  Loss from operations                                 (4,791,581)    (5,534,430)       (6,744,652)
  Interest expense to former parent                            --             --        (1,749,706)
  Interest income, net                                    244,964        137,539                -- 
                                                      -----------    -----------       ----------- 
  Loss before income taxes                             (4,546,617)    (5,396,891)       (8,494,358)
Income tax expense                                             --        (98,094)               -- 
                                                      -----------    -----------       ----------- 
Net loss                                              $(4,546,617)   $(5,494,985)      $(8,494,358)
                                                      ===========    ===========       =========== 
Net loss per share (basic and diluted)                $     (0.39)         (0.54)            (0.85)
                                                      ===========    ===========       =========== 
                                                                                                   
Weighted average number of common shares outstanding   11,667,428     10,132,896         9,937,936 
                                                      ===========    ===========       ===========
                                                                                       
</TABLE>




The accompanying notes are an integral part of the consolidated financial
statements.

                                                                              23

<PAGE>   18

NOVAVAX, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS



<TABLE>
<CAPTION>
                                                                    As of December 31,
                                                              ----------------------------

                                                                   1997             1996
- ------------------------------------------------------------------------------------------

<S>                                                          <C>             <C>
ASSETS
Current Assets:
  Cash and cash equivalents                                  $  3,847,107    $  2,481,258
  Marketable securities                                                --         500,820
  Accounts receivable                                             217,150              --
  Receivable from former parent                                    32,835              --
  Prepaid expenses and other current assets                       205,952         238,694
                                                             ------------    ------------
      Total current assets                                      4,303,044       3,220,772
                                                             ------------    ------------
  Property and equipment-- cost                                 1,428,638       1,383,123
    Accumulated depreciation                                     (539,463)       (405,212)
                                                             ------------    ------------
  Property and equipment -- net                                   889,175         977,911
  Patent costs, net of accumulated amortization of
    $549,397 and $430,057 in 1997 and 1996, respectively        1,573,454       1,494,880
  Other assets                                                     57,598          28,389
                                                             ------------    ------------
      Total assets                                           $  6,823,271    $  5,721,952
                                                             ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Capital lease obligations                                  $     10,744    $     10,744
  Accounts payable                                                237,884         367,754
  Accrued payroll                                                  40,010         196,593
  Payable to former parent                                             --           6,176
                                                             ------------    ------------
      Total current liabilities                                   288,638         581,267
  Capital lease obligations, less current maturities               12,863          23,607
                                                             ------------    ------------
Stockholders' Equity:
  Preferred stock, $.01 par value, 2,000,000 shares
    authorized                                                         --              --
  Common stock, $.01 par value, 30,000,000 shares
      authorized, 12,031,757 issued and 
      12,012,013 outstanding at December 31, 1997 
      and 10,660,710 shares issued and outstanding
      at December 31, 1996                                        120,318         106,607
  Additional paid-in capital                                   38,020,621      32,409,899
  Accumulated deficit                                         (31,342,780)    (26,796,164)
  Deferred compensation on stock options granted                  (25,620)       (603,264)
                                                             ------------    ------------
  Treasury stock, 19,744 shares, cost basis                      (250,769)             --
      Total stockholders' equity                                6,521,770       5,117,078
                                                             ------------    ------------
      Total liabilities and stockholders' equity             $  6,823,271    $  5,721,952
                                                             ============    ============
</TABLE>




The accompanying notes are an integral part of the consolidated financial
statements.

24



<PAGE>   19
NOVAVAX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS



<TABLE>
<CAPTION>
                                                             For the years ended December 31,
                                                        -----------------------------------------

                                                            1997          1996          1995
- -------------------------------------------------------------------------------------------------

Cash flows from operating activities:
<S>                                                   <C>             <C>            <C>
  Net Loss                                            $(4,546,617)    $(5,494,985)   $(8,494,358)
    Reconciliation of net loss to net cash used
       by operating activities:
      Non-cash restructuring and recapitalization              --              --      1,513,253
      Reimbursement to former parent                           --              --       (250,000)
      Non-cash compensation expense                       577,644       1,506,790        101,183
      Depreciation and amortization                       253,591         328,225        272,886
      Disposal of property and equipment                       --         334,564             --
      Issuance of stock to 401k plan                        9,729              --             --
    Changes in operating assets and liabilities
      Accounts receivable                                (217,150)             --        475,000
      Prepaid expenses and other assets                     3,534        (185,074)       (58,993)
      Payable to/receivable from former parent            (39,011)         60,930        (54,754)
      Accounts payable and accrued expenses              (286,453)        133,560        235,101
                                                      -----------     -----------    -----------
Net cash used by operating activities                  (4,244,733)     (3,315,990)    (6,260,682)

Cash flows from investing activities:
  Proceeds from the sale of marketable securities         500,820        (500,820)            --
  Capital expenditures                                    (45,515)        (98,363)       (45,562)
  Deferred patent costs                                  (197,914)       (244,321)      (367,418)
                                                      -----------     -----------    -----------
Net cash used by investing activities                     257,391        (843,504)      (412,980)
Cashflows from financing activities:
  Payable to former parent                                     --              --      2,081,776
  Notes payable to former parent                               --              --      4,172,401
  License agreement with former parent                         --              --      5,000,000
  Payment of capital leases                               (10,744)             --             --
  Proceeds from the private placement of
    Common Stock, net                                   5,002,718       1,655,877             --
  Proceeds from the exercise of options                   361,217         350,639         37,500
                                                      -----------     -----------    -----------
Net cash provided by financing activities               5,353,191       2,006,516     11,291,677
                                                      -----------     -----------    -----------
Net change in cash and cash equivalents                 1,365,849      (2,152,978)     4,618,015
Cash and cash equivalents at beginning of the period    2,481,258       4,634,236         16,221
                                                      -----------     -----------    -----------
Cash and cash equivalents at end of the period        $ 3,847,107     $ 2,481,258    $ 4,634,236
                                                      ===========     ===========    ===========
</TABLE>




The accompanying notes are an integral part of the consolidated financial
statements.



                                                                              25

<PAGE>   20
NOVAVAX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the years ended December 31, 1997, 1996 and 1995



<TABLE>
<CAPTION>

                                                                     Additional     Note Payable       Combined
                                               Common Stock           Paid-in        to Former          Equity
                                           Shares       Dollars        Capital        Parent           Capital        Deficit
- ----------------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>            <C>            <C>           <C>                 <C>           <C>

Balance, January 1, 1995                 14,973                                   $12,851,599        $ 4,974,000    $(20,028,467)

  Proceeds from payable to
    former parent                                                                                                      7,221,646
  Proceeds from note payable to
    former parent                                                                   4,172,401
  Restructuring and recapitalization  9,872,963       $ 98,879      $23,162,374   (17,024,000)        (4,974,000)
  License agreement with
    former parent                                                     5,000,000              
  Options granted as compensation                                     1,988,748              
  Amortization of deferred
    compensation
  Exercise of stock options              50,000            500           37,000
  Net loss                                                                                                            (8,494,358)
                                     ----------      ---------      -----------       --------          ----------  ------------
Balance, December 31, 1995            9,937,936         99,379       30,188,122             --                 --    (21,301,179)

  Options and warrants granted
    as compensation                                                    222,489
  Amortization of deferred
    compensation
  Private sale of common stock, net     505,000          5,050        1,650,827
  Exercise of stock options             217,774          2,178          348,461
  Net loss                                                                                                            (5,494,985)
                                     ----------      ---------      -----------       --------          ----------  ------------
Balance, December 31, 1996           10,660,710        106,607       32,409,899                                      (26,796,164)

  Options granted as compensation
  Company contribution to
    Employee 401k plan                      771              8            2,491
  Amortization of deferred
    compensation
  Private sale of common stock, net   1,200,000         12,000        4,990,718
  Exercise of stock options             170,276          1,703          617,513
  Net loss                                                                                                            (4,546,617)
                                     ----------      ---------      -----------       --------          ----------  ------------
Balance, December 31, 1997           12,031,757       $120,318      $38,020,621       $     --          $      --   $(31,342,780)
                                     ==========      =========      ===========       ========          ==========  ============
</TABLE>




<TABLE>
<CAPTION>
                                             Deferred                                                   Total
                                            Compensation                                             Stockholders'
                                              on Stock                 Treasury Stock                   Equity
                                          Options Granted          Shares           Dollars           (Deficit)
- -----------------------------------------------------------------------------------------------------------------
<S>                                        <C>                     <C>               <C>          <C>

Balance, January 1, 1995                                                                            $(2,202,868)

  Proceeds from payable to
    former parent                                                                                     7,221,646
  Proceeds from note payable to
    former parent                                                                                     4,172,401
  Restructuring and recapitalization                                                                  1,263,253
  License agreement with
    former parent                                                                                     5,000,000
  Options granted as compensation           $(1,988,748)                                                     --
  Amortization of deferred
    compensation                                101,183                                                 101,183
  Exercise of stock options                                                                              37,500
  Net loss                                                                                           (8,494,358)
                                            -----------              ------       ---------           ---------
Balance, December 31, 1995                   (1,887,565)                --             --             7,098,757

  Options and warrants granted
    as compensation                            (222,489)                                                     --
  Amortization of deferred
    compensation                              1,506,790                                               1,506,790
  Private sale of common stock, net                                                                   1,655,877
  Exercise of stock options                                                                             350,639
  Net loss                                                                                           (5,494,985)
                                            -----------              ------       ---------           ---------
Balance, December 31, 1996                     (603,264)                --                            5,117,078

  Company contribution to
    Employee 401k plan                                                1,330       $   7,230               9,729
  Amortization of deferred
    compensation                                577,644                                                 577,644
  Private sale of common stock, net                                                                   5,002,718
  Exercise of stock options                                         (21,074)       (257,999)            361,217
  Net loss                                                                                           (4,546,616)
                                            -----------              ------       ---------           ---------
Balance, December 31, 1997                  $   (25,620)            (19,744)      $(250,769)         $6,521,770
                                            ===========              ======       =========           =========
</TABLE>




The accompanying notes are an integral part of the consolidated financial
statements.

26


<PAGE>   21

NOVAVAX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS


1. DESCRIPTION OF BUSINESS AND BASIS OF 
   PRESENTATION

DESCRIPTION OF BUSINESS

Novavax, Inc., a Delaware corporation ("Novavax" or the "Company"), is a
biopharmaceutical company focusing on the research and development of
proprietary topical and oral drug delivery technologies and applications of
those technologies. The Company's technology platforms involve the use of
proprietary organized lipid structures made into microscopic vesicles for the
delivery of a wide variety of drugs and other therapeutic products, including
certain hormones, antibacterial and anti-viral products and vaccine adjuvants.
The Company currently has three lead product candidates in various stages of
development and animal and human trials. These include, ESTRASORB(TM), a
topical estrogen cream, ANDROSORB(TM), a topical testosterone cream, and
Helicore(TM), an oral anti-bacterial preparation for the treatment of
Helicobacter pylori infection. The regulatory process is lengthy, requiring
substantial funds, and the Company cannot predict when approval of any product
or a license to sell any product might occur. In addition, there can be no
assurances the Company will have sufficient funds necessary or that the
additional funds will be available at all or on acceptable terms. The Company
also recognizes that the commercial launch of any product is subject to certain
risks including but not limited to manufacturing scale-up and market
acceptance.


BASIS OF PRESENTATION

The accompanying consolidated financial statements include the accounts of
Novavax (formerly Molecular Packaging Systems, Inc.), its wholly-owned
subsidiaries Micro-Pak, Inc. ("Micro-Pak") and Micro Vesicular Systems, Inc.
("MVS"), and Lipovax, Inc. ("Lipovax", formerly known as Novavax, Inc.). All
significant intercompany accounts and transactions have been eliminated in
consolidation.

   The financial statements for the period January 1, 1995 through December 12,
1995 have been prepared for the aforementioned companies on a combined basis
from books and records maintained by IGI, Inc. ("IGI"). These combined financial
statements reflect the financial position and results of operations of the
combined companies at their historical bases, including allocations of certain
costs by IGI. The accounts and transactions between the companies have been
eliminated. The financial statements may not be indicative of the results that
would have been attained had the entities operated together independently of
IGI.


2. DISTRIBUTION

On December 12, 1995 (the "Distribution Date"), IGI distributed to the holders
of record of IGI's common stock, at the close of business on the Record Date,
November 28, 1995, one share of the Company's common stock for every one share
of IGI common stock outstanding (the "Distribution"). The Distribution resulted
in 93.2% of the outstanding shares of the Company's common stock being
distributed to holders of IGI common stock on a proportionate basis after taking
into account the Restructuring and Recapitalization described in Note 3. As a
result of the Distribution, the Company is no longer a subsidiary of IGI but an
independent publicly-owned company whose shares are traded on the American Stock
Exchange under the trading symbol NOX.


3. RESTRUCTURING AND RECAPITALIZATION

Prior to the Distribution, IGI consolidated its animal health products and
cosmetics and consumer products businesses (the "Core Businesses") within itself
and its subsidiaries. Concurrently it consolidated the biotechnology business
(the "Biotechnology Business") within Novavax and its subsidiaries (the
"Restructuring"). At the time of the Restructuring, IGI owned, through its
wholly-owned subsidiary, IGEN, Inc. ("IGEN"), the following percentages of the
voting power of the subsidiaries conducting the Biotechnology Business: 84.7% of
the voting power of Novavax, the sole stockholder of both Micro-Pak and MVS, and
90.3% of the voting power of Lipovax. The Biotechnology Business resided, and
continues to reside, within Novavax, Micro-Pak, MVS and Lipovax. Prior to the
Restructuring, the current and former employees of Novavax and Lipovax held
approximately 15.3% and 9.7% of the voting power of Novavax and Lipovax,
respectively.

   On September 20, 1995, Novavax, Lipovax and Novavax Acquisition Subsidiary,
Inc., a wholly-owned subsidiary of Novavax created for purposes of the
Restructuring ("Acquisition Corporation"), entered into a merger agreement (the
"Merger Agreement"). The Merger Agreement, which was approved by Lipovax
stockholders on October 12, 1995, provided, among other things, for a reverse
triangular merger (the "Merger") in which Acquisition Corporation merged with
and into Lipovax and Lipovax became a wholly-owned subsidiary of Novavax. As
consideration for the Merger, Novavax issued an aggregate of 21,698 shares, of
which 90.3% were issued to IGEN and the remaining 9.7% to the minority
stockholders of Lipovax. The issuance of shares to the minority stockholders of
Lipovax resulted in a charge to the statement of operations of $866,966 to
reflect the purchase of in process research and development. After the Merger,
IGEN owned 85.5% of the outstanding shares of Novavax, and the remaining 14.5%
were held by the minority stockholders of Novavax (8.8%) and by the former
minority stockholders of Lipovax (5.7%).

   As part of the Restructuring, Novavax issued to IGEN 41,569 shares of Novavax
Common Stock in exchange for the transfer by 



                                                                              27

<PAGE>   22
IGEN to Novavax of all of IGEN's rights to the payment of $17,024,000 aggregate
indebtedness owed to ImmunoGenetics, Inc., a wholly-owned subsidiary of IGEN
(and the primary operating entity of the Core Businesses ("ImmunoGenetics")), by
MVS ($9,996,504) and Lipovax ($7,027,496) (collectively, "Novavax Sub Debt").
The Novavax Sub Debt resulted from loans made by ImmunoGenetics to MVS and
Lipovax during the period from 1991 to the Distribution Date. The number of
shares of Novavax Common Stock issued in exchange for the Novavax Sub Debt was
based on the value of $409.54 per share of Novavax Common Stock. In connection
with the Restructuring, Novavax converted $17,024,000 of these loans for 41,569
shares of Novavax stock.

   In addition to the Restructuring, Novavax recapitalized its capital stock
(the "Recapitalization"). Immediately prior to the Recapitalization, Novavax's
issued and outstanding capital stock consisted of approximately 75,240 shares of
Class A Common Stock and 3,000 shares of Class B Common Stock. As a result of
the Recapitalization, each share of Class A and Class B Common Stock was
converted into approximately 126.37944 shares of Novavax Common Stock. After the
Restructuring and Recapitalization, there were 9,887,936 shares of Novavax
Common Stock outstanding.

   To complete the separation of the Core Businesses from the Biotechnology
Business, on December 12, 1995, IGEN distributed all of the shares of Novavax
Common Stock held by IGEN (approximately 93.2% of the voting securities of
Novavax) to IGI in a transaction intended to qualify as a tax-free distribution
under section 355 of the Code. IGI received a private letter ruling from the
Internal Revenue Service ("IRS") that the Distribution would not be taxable to
IGI or its shareholders.


4. SUMMARY OF SIGNIFICANT
   ACCOUNTING POLICIES

CASH AND CASH EQUIVALENTS AND MARKETABLE SECURITIES

Cash equivalents are considered to be short-term highly liquid investments with
original maturities of 90 days or less. Marketable securities consist of
investments in fixed income securities with original maturities of greater than
three months and less than one year. Marketable securities are stated at cost
which approximates market. Interest income is accrued as earned.


PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Depreciation of furniture, fixtures
and equipment is provided under the straight-line method over the estimated
useful lives, generally five years. Amortization of leasehold improvements is
provided over the estimated useful lives of the improvements or the term of the
lease, which ever is shorter. Furniture and equipment held under capital leases
are amortized under the straight-line method over the shorter of the lease term
or the estimated useful life of the asset.

   Repair and maintenance costs are charged to operations as incurred while
major improvements are capitalized. When assets are retired or disposed of, the
cost and accumulated depreciation thereon are removed from the accounts and any
gains or losses are included in operations.


PATENT COST

Costs associated with obtaining patents, principally legal costs and filing
fees, are being amortized on a straight line basis over the remaining economic
lives of the respective patents. The Company periodically evaluates the carrying
amount of these assets based on current licensing and future commercialization
efforts and if warranted, impairment would be recognized. Accumulated
amortization of patent costs was $549,397 and $430,057 at December 31, 1997 and
1996, respectively.


REVENUE RECOGNITION

Revenues from the sale of scientific prototype vaccines and adjuvants are
recorded as the products are produced and shipped. Revenues earned under
research contracts are recognized when the related contract provisions are met.


NET LOSS PER SHARE

In 1997, the Company adopted SFAS No. 128, Earnings per Share. Basic earnings
per share is computed by dividing the net loss available to common shareholders
by the weighted average number of common share outstanding during the period.
Diluted earnings per share is computed by dividing net earnings available to
common shareholders by the weighted average number of common shares outstanding
after giving effect to all dilutive potential common shares that were
outstanding during the period.

   Potential common shares are not included in the computation of dilutive
earnings per share if they are antidilutive. Net loss per share as reported was
not adjusted for potential common shares as they are antidilutive. Earnings per
share for all other periods presented conform to SFAS No. 128.

   Pro forma net loss per share for the year ended December 31, 1995 is based
upon weighted average shares outstanding of 9,937,936 representing primarily
shares issued in connection with the Recapitalization. These shares have been
treated as outstanding as if the transaction had occurred on January 1, 1995.


INCOME TAXES

The Company's income taxes are determined in accordance with the provisions of
Statement of Financial Accounting Standards (SFAS) No. 109 which requires the
asset and liability method of accounting for income taxes. Under the asset and
liability method deferred income taxes are recognized for the tax consequences
of temporary differences by applying enacted statutory tax rates applicable to
future years to 


28

<PAGE>   23
differences between the financial statement carrying amounts and the tax basis
of existing assets and liabilities.

   The effect on deferred taxes of changes in tax rates is recognized in income
in the period that includes the enactment date. A valuation allowance is
recorded based on management's determination of the ultimate realizability of
future deferred tax assets. Novavax was included in IGI's consolidated federal
income tax return through the effective date of the Distribution. Provisions for
income taxes were calculated on a separate return basis and were determined in
accordance with the provisions of SFAS No. 109.


USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles 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.
Significant estimates include valuation of patent costs and benefits for income
taxes and related valuation allowances. Actual results could differ from those
estimates.


NEW ACCOUNTING STANDARDS

The Financial Accounting Standards Board has issued two new standards which
become effective for reporting periods beginning after December 15, 1997. SFAS
No. 130, Reporting Comprehensive Income, requires additional disclosures with
respect to certain changes in assets and liabilities that previously were not
required to be reported as results of operations for the period. The Company
will begin making the additional disclosures required by SFAS No. 130 in the
first quarter of 1998. SFAS no. 131, Disclosures about Segments of an Enterprise
and Related Information, requires financial and descriptive information with
respect to "operating segments" of an entity based on the way management makes
internal operating decisions. The Company will begin making the disclosures
required by SFAS No. 131 with financial statements for the period ending
December 31, 1998.


5. TRANSACTIONS WITH FORMER PARENT

CHARGES

Through the Distribution Date, IGI charged Novavax for expenses incurred on its
behalf, including executive, legal, accounting, data processing, consulting,
cash management, human resources and employee benefits. These costs were
allocated on a variety of methods, including:

- -     Specific identification based on estimates of time and services provided

- -     Relative identification allocated based on Novavax's relationship to the
      entire pool of beneficiaries

   The allocation methods, while reasonable under the then current
circumstances, may not represent the cost of similar activities on a separate
entity basis. For the period January 1, 1995 through December 31, 1995 such
costs have been included in general and administrative expenses ($850,000), and
interest expense ($1,749,706). These amounts have been accumulated on Novavax's
accompanying Balance Sheet as payable to parent through the Distribution Date,
at which time such amounts were reversed to the Deficit since these charges will
not be repaid.


BORROWING ARRANGEMENTS

On the Distribution Date, Novavax had a note payable to IGI under which
borrowings bore interest at IGI's borrowing rate. The note was converted into
shares of Novavax common stock based on an appraisal of Novavax common stock.
The outstanding loan balance of $17,024,000 was converted into 5,253,494 shares
of Novavax common stock after the Restructuring and Recapitalization. Such
amount was included in the Distribution and, accordingly, has been included in
stockholders' equity in the accompanying balance sheets. In accordance with the
plan of Distribution, $250,000, representing loans made by IGI to Novavax in
excess of $17,024,000, was deducted from IGI's $5,000,000 payment due under the
License Agreement. Novavax has no outside borrowing arrangements.


TRANSITION SERVICES

Under a Transition Services Agreement, established at the time of the
Distribution, IGI continued to provide certain administrative services to
Novavax, including services relating to human resources, purchasing and
accounting, data processing and payroll services from the day of the
Distribution until June 30, 1996. Novavax paid IGI a fee for all services
provided by IGI employees, based on IGI's cost. The agreement was terminated on
June 30, 1996. Costs of $230,474 were incurred for the six month period ended
June 30, 1996. For the period December 13, 1995 through December 31, 1995,
$35,000 of such costs were incurred. These charges have been offset in part by
receivables due from IGI and recorded as a payable to former parent on the
December 31, 1995 balance sheet. At December 31, 1997 the Company was owed
$32,285 from IGI primarily related to patent costs.


ROYALTY REVENUES

Novavax earned royalties from IGI at 10% of the sales of the licensed products.
The agreements were terminated in connection with the Distribution and execution
of the License Agreement. In connection with the Distribution, IGI paid Novavax
$5,000,000 in return for a fully paid-up, ten-year license (the "License
Agreement") entitling it to the exclusive use of the Novavax Technologies in the
fields of (i) animal pharmaceuticals, biologicals and other animal health
products; (ii) foods, food applications, nutrients and flavorings; (iii)
cosmetics, consumer products and dermatological over-the-counter and



                                                                              29

<PAGE>   24

prescription products (excluding certain topically delivered hormones); (iv)
fragrances; and (v) chemicals, including herbicides, insecticides, pesticides,
paints and coatings, photographic chemicals and other specialty chemicals; and
the processes for making the same. IGI has the option, exercisable within the
last year of the ten-year term, to extend the License Agreement for an
additional ten-year period for $1,000,000. Novavax will retain the right to use
its Novavax Technologies for all other applications, including human vaccines
and pharmaceuticals.
   Novavax has presented the payment under the License Agreement as a capital
contribution in its financial statements to reflect the intercompany nature and
substance of the transaction. The form was structured as a prepaid license
agreement to address various considerations of the Distribution including tax
and financing considerations. For tax purposes, the transaction was treated as
income for the period ended December 31, 1995. IGI has no further obligations or
intentions to fund Novavax.


6. SUPPLEMENTAL CASH FLOW INFORMATION 

Cash paid for:


<TABLE>
<CAPTION>
                       1997      1996        1995
- --------------------------------------------------
<S>                  <C>      <C>              <C>
Taxes                $ --     $100,000         $--
Interest               --       10,955          --
</TABLE>



   For the years ended December 31, 1997, 1996 and 1995, the Company had the
following non-cash financing and investing activities:


<TABLE>
<CAPTION>
                                     1997        1996         1995
- ------------------------------------------------------------------------
<S>                                <C>        <C>          <C>       
Reversal against deficit of
  payable to former parent         $    --    $     --     $7,221,646
Options granted
  as compensation                       --          --     $1,988,748
Capital lease obligation for
  the purchase of furniture
  and equipment                    $    --    $ 36,285     $       --
</TABLE>



7. PROPERTY AND EQUIPMENT
Property and equipment, stated at cost, is comprised of the following:


<TABLE>
<CAPTION>
                                      1997            1996
- -------------------------------------------------------------
<S>                                <C>            <C>       
Leasehold improvements             $  327,682     $  321,506
Machinery and equipment             1,021,135        993,202
Equipment under capital leases         36,285         36,285
Furniture and fixtures                 43,536         32,130
                                   ----------     ----------
                                    1,428,638      1,383,123
Less accumulated depreciation        (539,463)      (405,212)
                                   ----------     ---------- 
                                   $  889,175     $  977,911 
                                   ==========     ========== 
                                                             
</TABLE>


   During 1996, the disposal of property and equipment having a net book value
of $334,564 was recorded relating to the closing of one of the Novavax
subsidiaries' laboratory. Depreciation expense of $134,251, $221,237 and
$189,085 and was recorded in the years ended December 31, 1997, 1996 and 1995,
respectively.


8. STOCK OPTIONS AND WARRANTS

1995 STOCK OPTION PLAN

Various directors, officers and employees of IGI including those employed by
Novavax have been awarded stock options under various IGI stock option plans at
100% of the fair market value of IGI's stock at the date of grant. In connection
with the Distribution, the Board of Directors of Novavax authorized the grant of
Novavax options to all holders of options to purchase IGI Common Stock as of the
Distribution Date ("Spin-off Options"). The Spin-off Options were granted to
such holders on substantially similar terms to the corresponding options to
purchase IGI Common Stock. The number of shares of Novavax common stock under
the options as compared to their IGI counterparts reflects the distribution
ratio of one share of Novavax common stock for one share of IGI common stock.
Exercise prices of the options were based on the relative market capitalization
of IGI and Novavax on the 20 trading days immediately following the Distribution
Date to restore holders of each option to the economic position prior to the
Distribution Date. As of the Distribution Date, 2,034,015 Spin-off Options to
purchase shares of Novavax common stock were granted to holders of options to
purchase IGI common stock at $3.69 per share.

   Under the Novavax 1995 Stock Option Plan (the "Plan"), options may be granted
to officers, employees and consultants or advisors to Novavax and any present
or future subsidiary to purchase a maximum of 4,000,000 shares of Novavax
common stock (including the Spin-off Options). Incentive options, having a
maximum term of ten years, can be granted at no less than 100% of the fair
market value of Novavax's stock at the time of grant and are generally
exercisable in cumulative increments over several years from the date of grant.
Both incentive and non-statutory stock options may be granted under the 1995
plan. There is no minimum exercise price for non-statutory stock options.

   The Board of Directors of Novavax granted, as of the Distribution Date,
options to purchase 600,000 shares of Novavax common stock to various employees
at an exercise price of $.01 per share. Concurrently, the Board granted options
to purchase 415,000 shares of Novavax common stock at $3.24 per share to Novavax
employees, the estimated fair market value. 890,000 of these options first
become exercisable on the six month anniversary of the Distribution Date as to
50% of the shares covered thereby and as to an additional 25% of the shares on
each of the first and second anniversaries of the Distribution Date. 125,000 of
these options first become exercisable in increments of 




30

<PAGE>   25
25% of the shares on each of the first through fourth anniversaries of the
Distribution Date. These options become immediately exercisable in the event of
the acquisition of Novavax, including a merger in which Novavax is not the
surviving entity, the sale of all or substantially all of the assets of Novavax
or the acquisition of a majority of the equity securities of Novavax. The
options also become immediately exercisable in the event the optionee is
terminated without cause. As of the Distribution Date, 28,871 substitute options
were issued in exchange for options to purchase Lipovax, which existed prior 
to the Distribution Date.


1995 DIRECTOR STOCK OPTION PLAN

The 1995 Director Stock Option Plan (the "Director Plan") provides for the
issuance of up to 500,000 shares of Novavax Common Stock. 110,000, 80,000 and
120,000 options were granted under this plan in 1997, 1996 and 1995,
respectively. In addition, each Eligible Director then serving as a director on
the last business day of 1998 will be granted a non-qualified option to purchase
10,000 shares of Common Stock. The exercise price per share is the fair market
value on the date of grant. Options granted to Eligible Directors are
exercisable in full beginning six months after the date of grant and terminate
ten years after the date of grant.

   Such options cease to be exercisable at the earlier of their expiration or
three years after an Eligible Director ceases to be a director for any reason.
In the event that an Eligible Director ceases to be a director on account of his
death, his outstanding options (whether exercisable or not on the date of death)
may be exercised within three years after such date (subject to the condition
that no such option may be exercised after the expiration of ten years from its
date of grant).



   Activity under the 1995 Stock Option Plan and 1995 Director Stock Option Plan
was:


<TABLE>
<CAPTION>
                                                         1995
                                      1995 Stock     Director Stock
                                     Option Plan      Option Plan
- ----------------------------------------------------------------------------

<S>                               <C>            <C>    
Balance January 1, 1995                  22,749
  Granted at average price
    of $2.97 per share                3,077,886        120,000
  Exercised at average price
    of $.75 per share                  (50,000)
  Expired or canceled at
    average price of
    $3.66 per share                     (2,000)
                                    ----------       ---------
December 31, 1995                    3,048,635         120,000
  Granted at average price
    of $4.96 per share                 660,000          80,000
  Exercised at average price
    of $1.61 per share                (215,274)
  Expired or canceled at
    average price of
    $3.84 per share                    (20,500)
                                    ----------       ---------
                          
December 31, 1996                    3,472,861         200,000
  Granted at average price
    of $4.18 per share                 300,000         110,000
  Exercised at average price
    of $2.86 per share                (190,693)
  Expired or canceled at
    average price of
    $3.58 per share                   (378,610)
                                    ----------       ---------
                         
December 31, 1997                    3,203,558         310,000
                                    ----------       ---------
Price Range                       $.01 to 7.00   $3.24 to 5.81
                                  ------------   -------------
Weighted average                         $3.35           $4.01
Exercisable                          2,603,925         240,000
Available for grant
  December 31, 1996                    259,365         300,000
  December 31, 1997                    361,549         190,000         
                                    ----------       ---------
</TABLE>



Information with respect to stock options outstanding at December 31, 1997 is as
follows:


<TABLE>
<CAPTION>
                                       Weighted
                            Number      Average     Weighted
                              of       Remaining    Average
                            Options   Contractual   Exercise
Price Range               Outstanding     Life        Price
- --------------------------------------------------------------

Options issued at below
  Market Value
<S>                         <C>           <C>          <C>  
$0.01                       523,383       7.7          $0.01
- --------------------------------------------------------------
Options issued at
  Market Value
$1.21 to 2.50                20,622       7.9          $1.21
$2.51 to 3.50             1,193,788       6.0          $3.06
$3.51 to 4.50               947,800       7.0          $3.90
$4.51 to 7.00               827,965       7.4          $5.54
                          ---------       ---          -----
                          2,990,175       6.7          $4.00
                          ---------       ---          -----
</TABLE>




                                                                              31

<PAGE>   26
   In connection with its stock option plans, Novavax makes no charges to
operations in connection with stock options granted at the fair market value at
the date of grant. With respect to options which were granted below fair market
value at the date of grant, the Company records compensation expense for the
difference between the fair market value at the date of grant and the exercise
price as the options become exercisable. $471,924, $1,410,648 and $101,183
related to such options has been included as compensation expense in 1997, 1996
and 1995, respectively.

   The Company has adopted the disclosure - only provisions of Statement of
Financial Accounting Standards No. 123 ("SFAS 123") as they pertain to financial
statement recognition of compensation expense attributable to option grants. As
such, no compensation cost has been recognized on the Company's option plans. If
the Company had elected to recognize the compensation cost for the 1995 Stock
Option Plan and the 1995 Director Stock Option Plan consistent with SFAS 123,
the Company's net loss and loss per share on a pro forma basis would be:


<TABLE>
<CAPTION>
                                  1997              1996             1995
- --------------------------------------------------------------------------------

<S>                           <C>               <C>              <C>          
Net loss

  As reported                 $(4,546,617)      $(5,494,985)     $ (8,494,358)
  Pro forma                   $(5,113,882)      $(6,354,089)     $(10,110,754)
Basic earnings
 per share (in dollars)
  As reported                 $      (.39)      $      (.54)     $       (.85)
  Pro forma                   $      (.44)      $      (.63)     $      (1.02)
Risk-free interest rates         5.2%-7.2%             5.97%             5.97%
Expected life in years
  Employees                           6.0               6.0               6.0
  Directors                           3.0               3.0               3.0
Dividend Yield                        0.0%              0.0%              0.0%
Volatility
  Options issued by
   Novavax after
   November 28, 1995                   47%               75%               75%
  Options issued by
   Novavax prior
   November 28, 1995                   --                50%               50%
Weighted average
   remaining
   contractual life
   in years                           6.9               5.7               5.7
Weighted average fair
   value at date of
   grant (in dollars)               $3.41             $3.11             $3.11
</TABLE>



NON-EMPLOYEE OPTIONS

The Company has entered into agreements to receive advisory and consulting
services from several individuals, four of whom serve on the Novavax Scientific
Advisory Board. Non-qualified stock options have been granted to these
individuals under the 1995 Stock Option Plan. Using the Black-Scholes option
pricing model, a charge of $39,685 and $30,107 related to these options has been
recorded in 1997 and 1996 respectively.


COMMON STOCK WARRANTS

In connection with the October 1996 private stock sale, the Company provided the
underwriter warrants for the purchase of 50,000 shares of common stock, par
value $.01 per share. The warrants are fully exercisable at $3.75 per share and
expire on October 30, 2001. In November 1996, in consideration for services
performed by a consultant, the Company also issued warrants for 50,000 shares of
common stock, par value $.01 per share. The warrants are exercisable at $5.00
per share, and are fully vested at December 31, 1997. These warrants expire on
November 18, 2001. As of December 31, 1997, no warrants had been exercised.
Using the Black-Scholes option pricing model, a charge related to these warrants
of $66,035, and $66,035 has been recorded in 1997 and 1996 to the Statement of
Operations. On February 10, 1997, Novavax signed a definitive agreement to
privately place 1,200,000 common shares. As part of the transaction, Novavax
also granted warrants to purchase an additional 600,000 shares at a price of
$6.00 per share and 600,000 shares at a price of $8.00 per share. The warrants
have a three-year term.


9. INCOME TAXES

Deferred tax assets (liabilities) included in the balance sheets consist of the
following:


<TABLE>
<CAPTION>
                                  1997            1996
- --------------------------------------------------------------

<S>                            <C>                <C>      
Net operating losses           $ 4,888,610        3,516,909
Research tax credits               820,641          721,333
Disqualifying stock options        716,428          523,746
Deferred patent costs             (607,668)        (515,675)
Alternative-minimum tax credit      93,674           93,674
Other, net                          17,985           10,927
                              ------------       ----------
                                 5,929,670        4,350,914
Less valuation allowance        (5,929,670)      (4,350,914)
                              ------------       ----------
Deferred taxes, net           $         --       $       --
                              ============       ==========
</TABLE>



   Realization of net deferred tax assets at the balance sheet dates is
dependent on the company's ability to generate future taxable income which is
uncertain. Accordingly, a full valuation allowance was recorded against these
assets as of December 31, 1997 and 1996.

   In connection with the filing of the Company's 1995 tax return during 1996,
it was determined that the Company had an Alternative Minimum Tax liability
resulting from the cash received from IGI in return for the license. The 1996
income tax expense is fully attributable to the Alternative Minimum Tax
calculation.




32

<PAGE>   27
   Federal net operating losses and tax credits available to Novavax and are as
follows:
- -------------------------------------------------------------------------------
Net operating losses expiring through the year 2012              $12,089,502 
Research tax credits expiring through the year 2012                  820,641 
Alternative-minimum tax credit (no expiration)                        93,674


10. COMMITMENTS AND CONTINGENCIES
Novavax leases laboratory and office space, machinery and equipment under
capital and noncancelable operating lease agreements expiring at various dates
through 2006. Future minimum rental commitments under noncancelable leases as of
December 31, 1997 are as follows:


<TABLE>
<CAPTION>
                                       OPERATING
                                         LEASES             CAPITAL LEASES
- -----------------------------------------------------------------------------
<S>                                 <C>                      <C>    
1998                                $  201,709               $14,822
1999                                   176,921                12,062
2000                                   151,014                  --
2001                                   145,725                  --
2002                                   149,489                  --
Thereafter                             610,450                  --
                                    ----------               -------
Total Lease Payments                $1,435,308               $26,884
                                    ==========               
Less: amount representing interest                             3,277
                                                               -----
Present value of
  net minimum lease payments                                 $23,607
                                                             =======
</TABLE>



   Aggregate rental expenses approximated $279,398, $183,327 and $260,041 in
1997,1996 and 1995 respectively.

   In October 1996, the Company entered into a 10-year operating lease for
office and laboratory facilities. In connection with this lease agreement,
Novavax is required to maintain a "Net Asset Value" of $2,000,000. The term "Net
Asset Value" is defined as the difference between the total assets and the total
liabilities. If the Net Asset Value falls below $2,000,000, the Company is
required to provide other reasonable financial assurances to the Landlord within
five days of the Landlords request. The financial assurances may be, but
without limitation to, the following: a bond for the Landlord's benefit, an
increase in the deposit, or a letter of credit, as reasonably believed necessary
by the Landlord or its lenders.

   Also in October 1996, the Company entered into a 2-year operating lease for
approximately 2,363 square feet of laboratory space. This shared space houses
the Company's certified animal facility and laboratories for its biologics
development which includes the vaccine adjuvant program. Both leases include
various renewal options, purchase options, and escalation clauses.


11. SIGNIFICANT CUSTOMERS

Novavax's revenue includes amounts earned from arrangements with various
industry partners. In the year ended December 31, 1997, two different customers
each represented in excess of 10% of revenues.


12. SUBSEQUENT EVENTS

On January 23, 1998, the Company entered into Subscription Agreements to
effectuate the private placement of 6,500 share of Series A Custom Convertible
Preferred Stock, $.01 par value per share (the "Series A Preferred Stock"). The
closing occurred on January 28, 1998 (the "Issuance Date") at an aggregate
purchase price of $6,500,000. The Company received the proceeds therefor and
paid Diaz & Altschul, LLC a fee of $425,233 in consideration for its services as
placement agent.

   The Series A Preferred Stock is convertible into shares of Common Stock at a
conversion price equal to (i) during a period of 90 days following the Issuance
Date, 100% of the average of the two lowest consecutive trade prices of the
Common Stock as reported on the American Stock Exchange for the 25 trading days
immediately preceding the conversion date (the "Two Day Average Trading Price")
or (ii) during the period on and after the date which is 91 days after the
Issuance Date, 94% of the Two Day Average Trading Price (the "Conversion
Price").

   From the Issuance Date, there is a ceiling price of $6.33 and within the 
first 180 days after the Issuance Date, the Conversion Price has applicable
floor prices based on conversion dates. The floor prices range from $5.67 to
$4.32. The maximum number of shares as measured by the conversion terms most
beneficial to the holders of the Series A Preferred Stock at the time of closing
will result in a deemed dividend in the amount of $455,048 which has been
recorded to Accumulated Deficit and Additional Paid in Capital during the three
months ended March 31, 1998.

13. FINANCING REQUIREMENTS

Past spending levels are not necessarily indicative of future spending. The
Company will seek to establish one or more collaborations with industry
partners to defray the costs of clinical trials and other related activities.
Novavax will also seek to obtain additional funds through public or private
equity or debt financings, collaborative arrangements with pharmaceutical
companies or from other sources. If adequate funds are not available, Novavax
may be required to significantly delay, reduce the scope of or eliminate one or
more of its research or development programs, or seek alternative measures.

                                                                              33

<PAGE>   28



SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.


                                 NOVAVAX, INC.

Date:  April 6, 1998             By:     /s/ Richard F. Maradie
                                         ------------------------
                                         Richard F. Maradie
                                         Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant in
the capacity and on the date indicated.

NAME                                TITLE                          DATE
- -------------------------------------------------------------------------------


/s/ Richard F. Maradie            Chief Executive Officer       April 6, 1998
- ----------------------
Richard F. Maradie

/s/ Brenda L. Fugagli             Vice President,               April 6, 1998
- ---------------------             Principal Financial and
Brenda L. Fugagli                 Accounting Officer
                

/s/ Wayne A. Downing              Director                      April 6, 1998
- --------------------
Wayne A. Downing

/s/ Mitchell J. Kelly             Director                      April 6, 1998
- ---------------------
Mitchell J. Kelly

/s/ J. Michael Lazarus            Director                      April 6, 1998
- ----------------------
J. Michael Lazarus

/s/ John O. Marsh, Jr.            Director                      April 6, 1998
- ----------------------
John O. Marsh, Jr.

/s/ Ronald A. Schiavone           Director                      April 6, 1998
- -----------------------
Ronald A. Schiavone

/s/ Ronald H. Walker              Director                      April 6, 1998
- --------------------
Ronald H. Walker



34

<PAGE>   29

EXHIBIT INDEX


Exhibit                           
- ----------------------------------
3.1    *                          
3.2    *                          
3.3    *                          
4      *                          
10.1   *                          
10.2   *                          
10.3   *                          
10.4   *                          
10.5   *                          
10.6   *                          
10.7   *                          
10.9   *                          
10.10  *                           
10.11  *                           
10.12  *                           
10.13  *                          
10.14  *                          
21     *                          
23                                
27     *                           

* These exhibits are incorporated by reference

                                                                              35





<PAGE>   1

                                                                      EXHIBIT 23


                       CONSENT OF INDEPENDENT ACCOUNTANTS


We consent to the incorporation by reference in the Registration Statements of
Novavax, Inc. on Form S-8 (Nos.33-80277, 33-80279 and 333-3384) and
Registration Statements of Novavax, Inc. on Form S-3 (Nos. 333-14305, 333-5367,
333-22685 and 333-46409) of our report dated March 13, 1998 on our audits of
the consolidated financial statements of Novavax, Inc. and subsidiaries as of
December 31, 1997 and 1996, and for each of the three years in the period ended
December 31, 1997 which report is included in this Annual Report on Form 10-K/A.





                                        COOPERS & LYBRAND L.L.P.

McLean, Virginia
April 6, 1998