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FORM 10-KSB/A
AMENDMENT NO. 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended - December 31,
1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
Commission file number 0-26323
ADVANCED BIOTHERAPY CONCEPTS, INC.
(Exact name of registrant as specified in its charter)
Nevada 95-4066865
State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
6355 Topanga Canyon Boulevard
Suite 510
Woodland Hills, California 91367
(Address of principal executive offices, including zip code.)
(818) 883-3956
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES [X] NO [ ]
Check if no disclosure of delinquent filers pursuant to Item 405 of Regulation
S-B is contained herein, and no disclosure will be contained, to the best of
Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB/A or any amendment to
this Form 10-KSB/A. [ ]
State Issuer's revenues for its most recent fiscal year.
December 31, 1999: $-0-
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The aggregate market value of the voting stock held by non-affiliates computed
by reference to the average bid and ask price of such stock on was $40,045,888.
Issuers involved in Bankruptcy Proceedings during the past Five Years. Not
Applicable.
State the number of shares outstanding of each of the Issuer's classes of common
equity, as of the latest practicable date:
March 31, 2000 - 39,398,265 shares of Common Stock
Documents Incorporated by Reference
1. Form 10SB Registration Statement (SEC File #000-26323) and all
amendments thereto, which was filed with the Securities and Exchange
Commission and all exhibits thereto.
2. All reports filed with the Securities and Exchange Commision subsequent
to June 10, 1999.
Transitional Small Business Issuer Format
YES [ ] NO [X]
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INTRODUCTION TO FORM 10-KSB/A
Advanced Biotherapy Concepts, Inc. filed its Form 10-KSB on or around
April 11, 2000 ("Form 10-KSB"). The Form 10-KSB contains certain typographical
errors and inconsistencies which the Company hereby corrects by reason of the
filing of this Form 10-KSB/A. The specific Items of this Form 10-KSB/A which
contain corrections to the Form 10-KSB are set forth below:
(a) Item 1. Business. "Technical Background" - In the paragraph beginning
with the words "The Company's goal ..." (i) deleted the semicolon ";"
after the word "product", (ii) deleted entirely the sentence "The
antibodies, however, can be produced simultaneously";
(b) Item 1. "Human Immunodeficiency"- Deleted the comma "," after the word
"invading";
(c) Item 1. "Federal Drug Administration Regulation" - In the paragraph
beginning with the words "upon successful completion..." (i) changed
the word "will" to "should" (ii) deleted the words "though they may
also provide some" immediately before the words "information about
effectiveness", (iii) deleted the "s" in the word "trials" found in
the last sentence thereof;
(d) Item 1. "Product Liability Exposure" - Deleted entirely the
subparagraph beginning with the words "Because many of the Company's
products....";
(e) Item 1. "Patent Status and Protection of Proprietary Technology" -
Corrected the word "recent" to read "recently";
(f) Item 1. "Risk Factors" - Corrected Paragraph 1 thereof to insert the
word "or" before the words "seek additional capital";
(g) Item 1. "Risk Factors," Corrected Paragraph 4 thereof to delete the
word "product" after the treatment referred to as "AGT-1";
(h) Item 5. "Market for Registrant's Common Equity and Related
Stockholders Matters" - Added the word "symbol" after the words "under
the"; and
(i) Item 6. "Management's Discussion and Analysis of Financial Condition
and Result of Operations" - Corrected the dollar figure $500,000 to
read $250,000 in accordance with Note 2 to the Financial Statements.
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PART I
ITEM 1. BUSINESS.
General
Advanced Biotherapy Concepts, Inc. (the "Company") is a biotechnology
company whose efforts are directed at the development of treatments for diseases
related to immune system deficiencies.
The Company is currently developing a family of treatments collectively
referred to as AGT-1. The Company believes that AGT-1 (also referred to as the
Company's products) will remove, inhibit or neutralize certain interferon's
(IFN'S) and cytokines, tumor necrosis factor, HLA class II antigens, IgE, and
other pathological factors and/or their receptors, as well as neutralizing,
removing or inhibiting autoantibodies, including antibodies to target cells, CD4
and DNA. Interferon's and cytokines are soluble components of the immune system
that are largely responsible for regulating the immune response. When
overproduced, as in certain autoimmune diseases, interferons and cytokines can
lead to immune system disturbance and inflammation.
Prior to marketing AGT-1, the Company must obtain regulatory approval
from the United States Food and Drug Administration ("FDA") and Environmental
Protection Agency ("EPA"). The Company is not sufficiently funded to allow it to
complete the product development process, obtain FDA approval, and marketing
AGT-1. However, the Company will seek additional financing through the private
sale of restricted securities to investors, enter into joint ventures or
licensing or similar arrangements with large pharmaceutical companies to provide
the funding necessary for additional activities. There can be no assurance that
the Company will enter into any such arrangements, obtain the appropriate
regulatory approvals, or develop, manufacture, market, or distribute
commercially viable products.
To date, the Company's activities have consisted primarily of research,
development and human clinical testing. Such activities have resulted in
accumulated losses at December 31, 1999. The Company anticipates that it will
incur substantial losses in the foreseeable future as a result of its continued
product development. There are no assurances that the Company will be successful
in completing its product development receive FDA approval, implement
manufacturing operations and commercially market AGT-1.
Business Objective
The specific goal of the Company's business is to successfully develop,
clinically test and obtain FDA approval for its products for AGT-1.
GLOSSARY OF TERMS
Antibody A protein in the blood that is generated by
B-lymphocytes or plasma cells in reaction to foreign
proteins or antigens. Antibodies neutralize antigens and
may result in immunity to the antigens.
Antigen A substance (usually foreign) that induces the formation
of antibodies.
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Auto-immune disease A disease in which the body produces an immune response
to some constituent of its own tissue. Such diseases
include multiple sclerosis, rheumatoid arthritis,
insulin dependent diabetes, systemic lupus
erythematosus, and AIDS.
Cytokine A soluble substance produced by cells to communicate
with other cells. These include colony-stimulating
factors, interferons, interleukins, and tumor necrosis
factors. Also referred to as soluble mediators.
Fully Human antibody An antibody produced by generating human antibodies with
fully human protein sequences using genetically
engineered strains of mice in which mouse antibody gene
expression is suppressed and functionally replaced with
human antibody gene expression, while leaving intact the
rest of the mouse immune system.
Ig (immunoglobulin) (IgA, IgD, IgE, IgG, and IgM) A group of serum proteins
representing antibodies. See Antibody.
Immune response The events that occur in humans and other vertebrate
animals when the body is invaded by foreign protein. It
is characterized by the production of antibodies and may
be stimulated by an infectious organism or parasite
(bacteria, yeast, fungi, protozoa, etc.), transplanted
material, vaccine, sperm or even the host's own tissue.
Immunegenecity The study of genetic aspects of the type and formation
of immunoglobulins (antibodies).
Immune System The cells and tissues that collectively recognize and
eliminate invading foreign substances like
microorganisms, parasites, and tumor cells from the
body.
Immunosuppressive Something that suppresses the immune system response.
Interferon-gamma Glycoprotein induced in different cell sites and
appropriate stimulus.
Lymphocyte A type of white cell arising from tissue of the lymphoid
systems. There are two types of lymphocytes: B cells and
T cells. These cells are capable of being stimulated by
an antigen to produce a specific antibody to that
antigen and to proliferate to produce a population of
such antibody-producing cells.
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Lymphokine Any of a number of soluble physiologically active
factors produced by T lymphocytes in response to
specific antigens. Important in cell-mediated immunity,
lymphokines include interferon, macrophage arming
factor, lymphocyte inhibition factor, macrophage
inhibition factor, chemotactic factor and various
cytotoxic factors.
Macrophage A motile white cell type found in vertebrate tissue,
including connective tissue, the spleen, lymph nodes,
liver, adrenal glands and pituitary, as well as, in the
endothelial lining of blood vessels and the sinusoids of
bone marrow, and in the monocytes. They display
phagocytic activity and process antigens for
presentation to lymphocytes, which then prepare
antigen-specific antibodies.
Pathogenic Descriptive of a substance or organism that produces a
disease.
Placebo An indifferent substance in the form of a medicine given
for the suggestive effect.
Polyclonal antibody An antibody produced in the normal immune response to an
antigen consisting of a number of closely related, but
not identical, proteins. The variation in Polyclonal
antibodies reflects the facts that they are formed by a
number of different lymphocytes, in contrast to
monoclonal antibodies, which are formed by a clone of
identical cells. Compare monoclonal antibody.
Protein Any group of complex nitrogenous organic compounds of
high molecular weight that has amino acids as their
basis structural units. Proteins are found in all living
matter and are required for the growth and repair of
tissue.
T-Cell A type of lymphocyte that matures in the thymus gland.
These cells are responsible for the cellular immunity
processes, such as direct cell binding to an antigen,
thus destroying it. T lymphocytes also act as regulators
of the immune response as helper T cells, or suppressor
T cells.
Tumor Necrosis Factor
(TNF) A substance that is capable of killing tumor cells and
eliciting inflammatory responses. It is produced by host
monocytes and macrophages and is also referred to as
cachectin.
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TECHNICAL BACKGROUND
The following is a summary of certain theories related to the Company's
product development activities that are recognized in the scientific community.
Scientific Rationale and Proposed Product Development.
The Company's main technology platform involves the use of antibodies.
An antibody is a protein that is secreted by cells in the blood and is part of
the body's natural defense system against foreign invaders such as viruses or
bacteria. Antibodies seek out and selectively bind to their targets, triggering
such effects as neutralizing toxins and marshaling the immune system against
infectious microorganisms and cancer cells. The Company's antibody treatment,
AGT-l, removes or neutralizes certain interferons and cytokines. These are
soluble components of the immune system that are largely responsible for
regulating the immune response and inflammation. During certain autoimmune
diseases (AD's), such as rheumatoid arthritis, certain interferons and cytokines
are overproduced by the human body, disturbing the immune system, leading to
autoimmune disease.
In particular, IFN-a or IFN-y is known to trigger or exacerbate AD's in
animals prone to AD, and in patients who have had underlying autoimmune
conditions or a predisposition to them. In animal models of a number of human
AD's, the administration of antibodies to IFN-a or IFN-y halted or delayed these
diseases. This includes antibodies to IFN-y given to:
1. Zealand Black and White mice known to develop a severe AD similar to
SLE in humans.
2. Lewis rats afflicted with actively induced experimental AD of the
peripheral nervous system.
3. NOD mice, an animal model of human type I diabetes.
4. BB/Wor rats, a diabetes-prone strain, and CBA/J mice, a strain
susceptible to experimental autoimmune thyroiditis (EAT) In all cases, the
anti-IFN-y antibodies suppressed or reduced the disease.
The Company is also pursuing collaborative relationships with the
biotechnology companies for the development of fully human antibodies. The
importance of this development is that it will allow the Company to repeatedly
treat patients over a longer period of time, the objective of which is to
commercialize its treatmentization. Until now, clinical trials have been
conducted with polyclonal antibodies, which are derived from animal protein.
These can be given to patients for only a few days in succession.
The Company's goal is to produce, or have produced, a series of fully
human antibodies, a commercializable product. Fully human antibodies are
produced by genetic engineering and will result in a product which can be
administered to patients on a long-term basis. The Company has identified
several biotechnology companies that may develop and manufacture such antibodies
for the Company. The availability of this technology makes it possible to
produce safer and more standardized antibodies for large-scale production. It is
estimated that it will take up to one year to produce such antibodies. The shelf
life for the products developed by the Company is approximately one year.
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Human Immunodeficiency
The immune system has two principal responses in the fight against
infectious attacks. The first is the production of antibodies, protein molecules
that latch onto and neutralize foreign invaders such as bacteria and viruses.
Antibodies are believed to coat microbes in a way that make them palatable to
macrophage, scavenger cells, which destroy the invading cells. Each type of
antibody acts on only a very specific target molecule, known as an antigen.
Thus, antibodies designed to attack one type of infection are often ineffective
against others.
While antibodies are effective tools in the immunological system, they
cannot provide full protection against infectious attack.
Human Clinical Studies
The Company is presently conducting human clinical studies in Russia.
The Company intends to continue clinical studies regarding select
autoimmune diseases. In doing so, it will be able to consult with experts in
particular fields who have state of the art facilities and trained personnel.
All such investigations will be conducted under strict confidentiality
agreements and protocols that prohibit use and disclosure of the Company's
products and prohibit publication of findings without the consent of the
Company.
The amount spent on research and development for the fiscal year
ending December 31, 1999 was $156,280 and was $137,071 for the fiscal year
ending December 31, 1998.
Manufacturing
The Company intends to out-source product manufacturing and has
identified several contract manufacturers as having suitable facilities for
manufacturing large quantities of fully human antibodies.
The raw materials are used as base components in a number of drug
products and are commercially available nationally and internationally.
The Company has not entered into any manufacturing agreement for fully
human antibodies and there is no assurance that any agreements will be entered
into in the future. The contract manufacturers schedule time in their plant upon
notice from the Company of needed production.
Government Regulation
The Company's activities are subject to extensive federal, state,
county and local laws and regulations controlling the development, testing,
manufacture and distribution of medical treatments. Most of the Company's
products will be subject to regulation as therapeutics by the United States Food
and Drug Administration ("FDA"), as well as varying degrees of regulation by a
number of foreign governmental agencies. To comply with the FDA regulations
regarding the manufacture and marketing of the Company's products, the Company
may incur substantial costs relating to laboratory and clinical testing of new
products and for the preparation and filing of documents in the formats
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required by the FDA. There are no assurances that the Company will receive FDA
approval necessary to commercially market its products and that if the Company
is successful it will not encounter delays in bringing its new products to
market as a result of being required by the FDA to conduct and document
additional investigations of product safety and effectiveness.
Federal Drug Administration Regulation
The FDA approved process for conducting clinical trials in the United
States (U.S.) consists of four steps that all new drugs, antibiotics and
biologicals must follow. They are:
1. investigational new drug application (IND)
2. clinical trials
3. new drug application (review and approval)
4. post-marketing surveys
On January 11, 1993, the FDA approved new procedures to accelerate the
approval of certain new drugs and biological products directed at serious or
life-threatening illnesses. These new procedures will expedite the approvals for
patients suffering from terminal illness when the drugs provide a therapeutic
advantage over existing treatments. The Company believes that its products will
fall under the FDA guidelines for accelerated approval for drugs and biological
products directed at serious and life threatening disease because the Company's
products are targeted as potential treatments for rheumatism and are non-toxic.
The Company believes that the first step in the approval process, IND
approval, will take approximately 24 to 36 months. The Company will provide the
FDA with the results of comprehensive human clinical trials already conducted
outside the U.S. The Company anticipates filing its IND for all of its products
within the next 24 months.
Upon successful completion of the IND phase, the Company should be
permitted to commence large-scale clinical trials with its substances. Clinical
trials are conducted in three phases, normally involving progressively larger
numbers of patients. The Company, in conjunction with its FDA consultant, will
select key physicians and hospitals to actively conduct these studies. Phase I
clinical trials will be concerned primarily with learning more about the safety
of the drug, though they may also provide some information about the safety of
the drug and information about effectiveness. Phase I testing is normally
performed on healthy volunteers although for drugs directed at HIV/AIDS and
cancer, testing on infected people is permitted. The test subjects are paid to
submit to a variety of tests to learn what happens to a drug in the human body;
how it is absorbed, metabolized and excreted, what effect it has on various
organs and tissues; and what side effects occur as the dosages are increased.
The principal objective is to determine the drugs' toxicity. Phase I trials
generally involve 20-40 people at an estimated cost of $10,000 per patient,
taking six months to one year to complete. The Company has previously conducted
a Phase I pilot clinical trial in the U.S. as indicated below.
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Assuming the results of Phase I testing present no toxic or
unacceptable safety problems, Phase II trials may begin. In many cases Phase II
trials may commence before all the Phase I trials are completely evaluated if
the disease is life threatening and preliminary toxicity data in Phase I shows
no toxic side effects. In life threatening disease, Phase I and Phase II trials
are sometimes combined to show initial toxicity and efficacy in a shorter period
of time. The primary objective of this stage of clinical testing is designed to
show whether the drug is effective in treating the disease or condition for
which it is intended. Phase II studies may take several months or longer and
involve a few hundred patients in randomized controlled trials that also attempt
to disclose short-term side effects and risks in people whose health is
impaired. A number of patients with the disease or illness will receive the
treatment while a control group will receive a placebo. The cost per patient is
estimated at $10,000.
At the conclusion of Phase II trials, the FDA and the Company will have
a clear understanding of the short-term safety and effectiveness of the drugs
and their optimal dosage levels. Phase III clinical trials will generally begin
after the results of Phase II are evaluated. The objective of Phase III is to
develop information that will allow the drug to be marketed and used safely.
Phase III trials will involve hundreds, and sometimes thousands, of people with
the objective of expanding on the research.
Phase II. An objective would be to discover optimum dose rates and
schedules, less common or even rare side effects, adverse reactions, and
generate information that will be incorporated into the drugs' professional
labeling, as well as, the FDA-approved guidelines to physicians and others about
how to properly use the drug.
Patient estimates for each phase of the clinical trial process are as
follows:
APPLICATION PHASE I PHASE II PHASE III
----------- ------- -------- ---------
MS 20 200 1,000
The third step that is necessary prior to marketing a new drug is the
New Drug Application (NDA) submission and approval. In this step, all the
information generated by the clinical trials will be received and if successful,
the drug will be approved for marketing.
The final step is the random surveillance or surveys of patients being
treated with the drug to determine its long-term effects. This has no effect on
the marketing of the drug unless highly toxic conditions arise. The time
required to complete the above procedures averages seven years, however, there
is no assurance that the Company will ever receive FDA approval of any of its
products.
The Company conducted its first Phase I FDA approved clinical trial on
AIDS patients at Georgetown University between 1986 and 1987. Subsequent Phase I
FDA approved trials were conducted on AIDS patients at the University of
Nebraska during 1993. Since that time, the Company redirected its development
strategy and took advantage of its scientific relationships in Russia for the
conduct of human clinical trials on patients who suffer from severe rheumatoid
arthritis, multiple sclerosis and systemic lupus erythematosus.
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The Company's clinical trials are at a relatively early stage and the
Company has not received approval from the FDA or any other governmental agency
for the manufacturing or marketing of any products under development.
Consequently, the commencement of manufacturing and marketing of any products in
the U.S. is, in all likelihood, a number of years away. The FDA may also require
post-marketing testing and surveillance to monitor the effects of approved
products or place conditions on any approvals that could restrict the commercial
applications of such products. Product approvals may be withdrawn if compliance
with regulatory standards is not maintained or if problems occur following
initial marketing. With respect to patented products or technologies, delays
imposed by the governmental approval process may materially reduce the period
during which the Company will have the exclusive right to exploit them.
The Company anticipates that it will take up to 60 months before a
product will be available for FDA investigation and approval.
Russian Human Clinical Studies
In collaboration with the Institute of Rheumatology of the Academy of
Medical Sciences of the Russian Federation in Moscow under a joint clinical
agreement dated July 1995, the Company has completed both pilot and double-blind
clinical trials on 55 adult patients suffering from rheumatoid arthritis and
several patients with other autoimmune diseases, including systemic lupus
erythematosus. The results demonstrated a striking improvement in patients
receiving this treatment. The patients were selected from among those with the
most severe symptoms of active rheumatoid arthritis who had not responded to
conventional treatments. They were randomized into four study groups, three
receiving individual or combined antibody preparations, and the fourth, a
combination of all three antibodies. Each patient received daily injections of
the Company's treatment for five consecutive days. A decrease in joint pain and
swelling was observed in some patients as early as the first day of treatment.
By the end of the first week, all groups not only demonstrated significant
improvement in clinical symptoms, including decrease in joint pain, swelling and
stiffness, but also showed reduction of disease severity based on certain
laboratory measures.
In addition to these studies, the Company provided its treatment to the
Research Institute for Pediatric Hematology, Ministry of Health, Moscow, on a
"compassionate needs" basis to treat several children suffering from severe
juvenile rheumatoid arthritis. As an example, one female child suffered from
fever, severe pain in her wrists and knees, and disabling restriction of her hip
joint, despite the use of traditional drugs and increased use of non-steroidals.
Laboratory and x-ray data indicated evidence of inflammation in the affected
joints. All previous treatments had been ineffective. Following five days of
treatment with the Company's treatment, significant clinical improvement
occurred with normalization of temperature, decrease of morning stiffness,
reduction of hip pain, significant increase in the range of motion in the
affected joints, improvement in grip strength, and an overall increase in
physical activity and quality of life. More significantly, x-rays clearly showed
improvement of the affected joints. Other indices also normalized in subsequent
tests. For a period of six months following initial treatment, the patient
continued to show a lack of disease activity and has regained full mobility.
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In collaboration with the Department of Neurosurgery, Russian State
Medical University Hospital, Academy of Medical Sciences in Moscow., the Company
has also completed both pilot and double blind clinical trials on 82 patients
suffering from multiple sclerosis. These studies were conducted under the
direction of Professor Eugene Gusev, M.D., Head of Neurology, Department of
Neurosurgery, and President of the All-Russian Society of Neurologists. The
Company's treatment was administered for five consecutive days with a three, six
and twelve month follow-up, a period during which exacerbation or recurrence of
the disease is normal. Antibodies to two cytokines brought about stabilization
of the condition, and in several cases an improvement in neurological
deficiencies. These results confirm the Company's general approach to the
treatment of autoimmune diseases.
Future Human Testing in Russia
The Company plans to conduct future human clinical studies that it
anticipates will provide further validation and evidence regarding the Company's
scientific approach to the treatment of autoimmune diseases.
In addition, the Company has signed an agreement with the Serbsky
National Research Center for General & Forensic Psychiatry for the conduct of
clinical trials in the treatment of certain autoimmune psychiatric diseases.
These trials will be conducted under the direction of Yuri A. Alexadrovsky,
M.D., and Professor of Psychiatry. The trials, using the Company's treatment,
have been approved by the Ministry of Health of the Russian Federation.
Competition
The Company will encounter significant competition from firms currently
engaged in the biotechnology industries. The majority of these companies will be
substantially larger than the Company, and have substantially greater resources
and operating histories. The Company is aware of other competitors seeking cures
for autoimmune diseases such as HIV, however, the Company is not aware of any
competitors seeking to produce the same products as the Company.
Product Liability Exposure
The Company does not maintain any liability insurance. Even if the
Company obtains product liability insurance, there is no assurance that
available amounts of coverage will be sufficient to adequately protect the
Company in the event of a successful product liability claim. Accordingly, if
litigation is initiated against the Company, the Company will have to pay all
costs associated with the litigation as well as any judgment rendered against
the Company. In the event a large judgment is entered against the Company, the
Company may not be able to pay the same and he Company could be forced to cease
operations. However, the Company believes that it could not be held liable
during trials because it requires each participating patient to execute a waiver
of claims as a result of adverse reaction to the Company's products.
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Investment Banking
The Company has engaged Cappello Capital of Santa Monica, California,
to serve as the Company's investment banking firm and strategic advisor.
Pursuant to the Company's agreement with Cappello Capital Corp. ("Agreement"),
the Company agreed to issued to Cappello Capital Corp. or its designees, as
partial compensation for its services, warrants to purchase up to ten percent
(10%) of the issued and outstanding shares of the Company's Common Stock with an
exercise price of $0.15 per share, which price represents the seventy-five (75)
day moving average for the Company's Common Stock according to Bloomberg or a
valuation on a fully diluted basis as determined by the initial applicable
transaction consummated pursuant to the terms of the Agreement. The warrants are
exercisable for ten years and have pre-emptive rights. A cash-less exercise may
be used for all warrants transactions. No fees are payable to Cappello Capital
Corp, in connection with the exercise of the warrants. The warrants will contain
full, unconditional piggy-back registration rights without any holdback
obligations. The warrant has vested and is deemed earned as of the date of the
Agreement. Should Cappello Capital Corp. elect to cancel its Agreement with the
Company within the first twelve months following the date thereof, then the
Company would be entitled to cancel a pro rata share of the warrants based upon
the number of days remaining in the one year period from the date of Cappello
Capital Corp.'s notice of cancellation. The Company has not yet prepared the
formal warrant document that will contain the terms set forth in the Agreement.
Patent Status and Protection of Proprietary Technology
The Company has been issued patent No.'s 5,626,843 and 5,888,511. It
also has nine U.S. patents pending filed between December 22, 1997 and February
24, 2000.
The Company's most recently issued patent gives the Company patent
protection for a new anti-cytokine approach to treating different autoimmune
diseases. These include rheumatoid arthritis, multiple sclerosis, systemic lupus
erythematosus and insulin-dependent diabetes, among others. The patented
treatment uses various methods to neutralize or block specific combinations of
cytokines and their receptors. In management's opinion, the Company's patented
approach is broader in scope than certain other patented treatments.
Dependence Upon Key Personnel
The Company relies greatly in its efforts on the services and expertise
of its officers and directors. The operation and future success of the Company
would be adversely affected in the event that any of them is incapacitated or
the Company otherwise loses their services.
Uncertainties Associated with Research and Development Activities
The Company intends to continue its research and development activities
on its product and for the purpose of developing proprietary products. Research
and development activities, by their nature, preclude definitive statements as
to the time required and costs involved in reaching certain objectives. If
research and development requires more funding than anticipated, the Company may
have to reduce product development efforts or seek additional financing. There
can be no assurance that the Company would be able to secure any necessary
additional financing or that such financing would be available on favorable
terms.
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The Year 2000
The Company did not experience any material problems as a result of the
Year 2000 nor did it incur any material costs in preparation for the passing of
the Year 2000. The Company will continue to monitor its computer systems to
identify the systems that could be affected by the Year 2000 issue. Based upon
the Company's lack of problems after December 31, 1999 and its current review of
its systems, the Company does not believe that the Year 2000 problem will pose a
material operations problem for it.
Marketing
Assuming the Company is able to obtain FDA approval of its products, it
intends to market the same through collaborative relationships with other
companies. It is the Company's intention that joint venture partners will be
selected on the basis of experience and the degree of financial success they
exhibit in the industry. There are no assurances that the Company will obtain
FDA approval for its products and there are no assurances that the Company will
be successful in entering into agreements with established multinational
companies.
Company's Office
The Company's administrative offices are located at 6355 Topanga Canyon
Boulevard, Suite 510, Woodland Hills, California 91367 and its telephone number
is 818-883-3956. The Company leases 500 square feet of space. The annual base
rental was $-0- and the term of the lease was three years which expired on
December 31, 1999. On January 15, 2000, the Company renewed such lease for a
period of one year at $400 per month. Upon expiration, however, there is no
assurance that the lessor will renew said lease subsequent to December 31, 2000.
The Company leases the foregoing office space from Buccellato & Finkelstein,
Inc. The Company also subleases approximately 3,500 square feet of research and
development space at 9110 Red Branch Road, Columbia, Maryland 21045 from New
Horizons Diagnostics Inc. The annual base rental is $-0- and the term of the
lease is three years.
Employees
The Company is a development stage company and currently has three
employees other than its Officers and Directors. See "Management." Management of
the Company expects to hire employees as necessary.
RISK FACTORS
1. Liquidity; Need for Additional Financing. The Company believes that
it does not have the cash it needs for at least the next twelve months based
upon its internally prepared budget. The Company's cash requirements, however,
are not easily predictable and there is a possibility that its budget estimates
will prove to be inaccurate. If the Company is unable to generate a positive
cash flow before its cash is depleted, it will be required to curtail operations
substantially, or seek additional capital. There is no assurance that the
Company will be able to obtain additional capital if required, or if capital is
available, to obtain it on terms favorable to the Company. The Company may
suffer from a lack of liquidity in the future that could impair its short-term
marketing and sales efforts and adversely affect its results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<PAGE>
PAGE 15
2. Lack of Regulatory Clearance/Approval and Limited Clinical Data. The
Company's product has not been cleared for marketing by the FDA or foreign
regulatory authorities and cannot be commercially distributed in the U.S. and
some international markets unless and until such clearance is obtained. Failure
to obtain FDA clearance would delay sales of the AGT-1 product and would
materially affect the financial condition of the Company.
3. Dependence on the Product. The Company expects to derive a
substantial majority of its revenues from fully human forms of AGT-1 through
product licensing and royalty fees. The life cycle of a fully human antibody
product is difficult to estimate in terms of current and future technological
developments, competition, and other factors. Failure of the Company to
successfully commercialize AGT-1, or to realize significant revenues from the
product would have a material adverse effect on the financial condition of the
Company. As of the date hereof the Company has not realized any revenues from
the sale of AGT-1.
4. Lack of Marketing and Sales Experience. The Company has not yet sold
any products. After the necessary regulatory approvals are obtained, the Company
intends to market and sell AGT-1, through a network of qualified independent
distributors, agents, and key strategic partners, none of which are currently in
place. There are no assurances that the Company can establish the necessary
relationships for marketing and selling AGT-1, or that the network will
successfully implement an effective marketing and sales strategy.
5. Manufacturing. The Company lacks the facilities to manufacture its
product and does not have an adequate supply of product to begin clinical
studies in the U.S. If the Company is unable to contract for manufacturing
capabilities on acceptable terms, it would result in the delay of sales, which
in turn could materially impair the Company's competitive position, and the
possibility of the Company achieving profitability.
6. Uncertainty Relating to Favorable Third-Party Reimbursement. In the
U.S., success in obtaining favorable third-party payment for a new product
depends greatly on the ability to present data which demonstrates positive
outcomes and reduced utilization of other products or services as well as cost
data which shows that treatment costs using the new product are equal to or less
than what is currently covered for other products. Failure by the Company to
present such clinical data would adversely affect the Company's ability to
obtain favorable third party reimbursement as well as the commercial success of
the AGT-1 product.
7. Patents and Proprietary Rights. The Company's success and ability to
compete effectively will depend in part on the strength of its patents and the
ability to obtain protection for its products in foreign markets. No assurance
can be given that any patents issued to the Company will not be challenged,
invalidated, or circumvented. Litigation, which could result in substantial cost
to the Company, may also be necessary to enforce any patents issued to the
Company and/or determine the scope and validity of other's proprietary rights.
<PAGE>
PAGE 16
ITEM 2. DESCRIPTION OF PROPERTIES.
The Company's administrative offices are located at 6355 Topanga Canyon
Boulevard, Suite 510, Woodland Hills, California 91367 and its telephone number
is (818) 883-3956. The Company leases 500 square feet of space. The annual base
rental through December 31, 1999 was $-0- and the term of the lease was three
years. The Company leases the foregoing office space from Buccellato &
Finkelstein, Inc.
The Company's administrative office lease commenced on January 1, 1997
and expired on December 31, 1999. On January 15, 2000, the Company renewed such
lease for a period of one year at $400 per month. Upon expiration, however,
there is no assurance that the lessor will renew said lease subsequent to
December 31, 2000. In the event the lessor will not renew said lease, the
Company will have to move to new facilities. The Company believes that there is
adequate rental space available if the Company has to find a new location and
its operations will not be adversely effected by such relocation.
The Company also subleases approximately 3,500 square feet of research
and development space at 9110 Red Branch Road, Columbia, Maryland 21045 from New
Horizons Diagnostics, Inc. The annual base rental is $-0- and the term of the
lease is three years.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not the subject of any pending legal proceedings; and to
the knowledge of management, no proceedings are presently contemplated against
the Company by any federal, state or local governmental agency.
Further, to the knowledge of management, no director or executive
officer is party to any action in which any has an interest adverse to the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company did not submit any matter to the Shareholders for a vote
during the year ending December 31, 1999.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS.
As of February 15, 2000, the Company's securities were listed on the
Bulletin Board operated by the National Association of Securities Dealers, Inc.
(the "Bulletin Board") under the symbol "ADVB." The table shows the high and low
bid of the Company's Common Stock during the fiscal years 1998 and 1999:
<PAGE>
PAGE 17
QUARTER ENDED BID
1998
March 31 $0.24 $0.12
June 30 $0.20 $0.09
September 30 $0.11 $0.06
December 31 $0.08 $0.04
1999
March 31 $0.20 $0.10
June 30 $0.08 $0.05
September 30 $0.10 $0.01
December 31 $0.35 $0.05
Holders
As of December 31, 1999, the Company had 1,754 holders of record of its
Common Stock. This number does not include those beneficial owners whose
securities are held in street name. The total number of stockholders is
estimated to be approximately 3,400.
Dividends
The Company has never paid a cash dividend on its Common Stock and has
no present intention to declare or pay cash dividends on the Common Stock in the
foreseeable future. The Company intends to retain any earnings that it may
realize in the future to finance its operations. Future dividends, if any, will
depend on earnings, financing requirements and other factors.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT
OF OPERATIONS.
The Company has inadequate cash to maintain operations during the next
twelve months. For the twelve-month period subsequent to December 31, 1999, the
Company anticipates that its minimum cash requirements to continue as a going
concern for the next twelve months will be approximately $250,000. In order to
meet the foregoing cash requirements, the Company will have to sell securities
or obtain a loan. There is no assurance, however, that the Company will be able
to sell any securities or obtain a loan. The Company also intends to establish a
collaborative relationship with either a pharmaceutical or biotechnological
company that could result in the generation of royalty payments to the Company.
As of the date hereof, the Company has not entered into agreements with any
pharmaceutical or biotechnological companies. In the event that the Company does
not raise additional capital from any of the foregoing sources, it may have to
curtail operations.
The Company's development goal is to produce, or have produced, a
series of fully human antibodies through collaborations with other biotechnology
companies. The Company has identified several biotechnology companies that can
develop and manufacture such antibodies for the Company. The availability of
this technology will make it possible to produce safer and more standardized
antibodies for commencement of human clinical trials, under FDA guidelines, in
the U.S.
The Company has no expected purchases or sales of significant
equipment.
<PAGE>
PAGE 18
There are no expected significant changes in the number of employees of
the Company.
Results of Operations - From Inception through December 31, 1999.
The Company is considered to be in the development stage as defined in
Statement of Financial Accounting Standards No. 7. There have been no operations
since incorporation.
Liquidity and Capital Resources.
As of December 31, 1999, the Company has issued and outstanding
30,198,265 shares of its Common Stock to officers, directors and others. The
Company is a development stage company and has no material assets. The Company
had $34,598 in cash as of December 31, 1999.
Fiscal 1999 compared to fiscal 1998.
For the year ending December 31, 1999, the Company realized a net
income of $1,143,892 and a loss from operations of $334,278 compared to a net
loss of $259,912 and a loss from operations of $260,314 for the year ending
December 31, 1998. The net income for the year ending December 31, 1999 was the
result of recognizing an extraordinary item related to an agreement by three key
employees to forgive the Company of the cumulative accrued salaries owed to them
through December 31, 1999 in the aggregate amount of $1,482,209. The Company
also issued 842,953 non-qualified stock options to these employees, exercisable
immediately and expiring on December 31, 2005 at an exercise price of $0.05 per
share of Common Stock.
The Company also increased research and development expenses over 1998
in the amount of $19,209 related to clinical trials conducted during the year.
Expenditures were $156,280 in 1999 and $137,071 in 1998. The Company also
increased expenditures related to legal and accounting fees, over 1998, in the
amount of $27,440 associated with the filing of Form 10-SB with the Securities
and Exchange Commission during 1999. The Company also increased expenditures
associated with patents and patents pending. Expenditures were $45,925 in 1999
and $23,149 in 1998. The Company's financing activities in terms of proceeds
from the issuance of Common Stock, for working capital purposes, in addition to
these changes, resulted in an increase of cash between 1998 and 1999 of $33,776.
The Company did not realize any operating revenues through December 31, 1999.
Subsequent Events
On January 19, 2000, the Company engaged Cappello Capital Corp. of
Santa Monica, California to serve as the Company's investment banking firm and
strategic advisor. Pursuant to the Company's agreement with Cappello Capital
Corp. ("Agreement"), the Company agreed to issue to Cappello Capital Corp. or
its designees, as partial compensation for its services, warrants to purchase up
to ten percent (10%) of the issued and outstanding shares of the Company's
common stock with an exercise price of $0.15 per share, which price represents
the seventy-five (75) day moving average for the Company's Common Stock
according to Bloomberg or a valuation on a fully diluted basis as determined by
the initial applicable transaction consummated pursuant to the terms of the
Agreement. The warrants are exercisable for ten years and have pre-emptive
rights. A cash-less exercise may be used for all warrant transactions. No fees
are payable to Cappello Capital Corp. in
<PAGE>
PAGE 19
connection with the exercise of the warrants. The warrants will contain full,
unconditional piggy-back registration rights without any holdback obligation.
The warrant has vested and is deemed earned as of the date of the Agreement.
Should Cappello Capital Corp. elect to cancel its Agreement with the Company
within the first twelve months following the date thereof, then the Company
would be entitled to cancel a pro rata shares of the warrants based upon the
number of days remaining in the one year period from the date of Cappello
Capital Corp.'s notice of cancellation. The Company has not yet prepared the
formal warrant document that will contain the terms set forth in the Agreement.
On January 11, 2000, the Company issued 9,200,000 shares of common
stock to certain key officers and directors under a stock bonus plan, subject to
various restrictions. The plan's purpose is to keep personnel of experience and
ability in the employ of the Company and to compensate them for their
contributions to the growth of the Company, thereby inducing them to continue to
make such contributions in the future. Such stock bonuses were issued at the
weighted average price at which the Company has been selling shares of stock out
of authorized but yet unissued common stock to third parties during the six
months immediately preceding the issuance of the Bonus shares, or $0.05 per
share.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
TO BEGIN ON FOLLOWING PAGE.
<PAGE>
PAGE 20
WILLIAMS & WEBSTER, P.S.
Certified Public Accountants & Business Consultants
601 W. Riverside, Suite 1940, Spokane, WA 99201-0611
(509) 838-5111 FAX (509) 838-5114 E-mail [email protected]
Board of Directors
Advanced Biotherapy Concepts, Inc.
Woodland Hills, CA 91367
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying balance sheets of Advanced Biotherapy Concepts,
Inc., (a development stage enterprise), as of December 31, 1999 and 1998 and the
related statements of operations, stockholders' equity (deficit) and cash flows
for the years then ended and for the period from December 2, 1985 (inception)
through December 31, 1999. 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 audits 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 financial position of Advanced Biotherapy Concepts,
Inc. as of December 31, 1999 and 1998, and the results of its operations and its
cash flows for the years then ended and for the period from December 2, 1985
(inception) to December 31, 1999, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses from operations,
has generated little revenue in the past years, has a working capital deficit of
$316,052 at December 31, 1999 and has substantial liabilities. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans regarding this issue are also discussed in Note 2,
and include additional capitalization of the Company, as well as an attempt to
decrease expenses. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
/s/ Williams & Webster, P.S.
Williams & Webster, P.S.
Spokane, Washington
April 5, 2000
F-1
<PAGE>
PAGE 21
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
December 31, December 31,
1999 1998
------------ -------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 34,958 $ 1,182
------------ ------------
TOTAL CURRENT ASSETS 34,958 1,182
------------ ------------
PROPERTY AND EQUIPMENT,
net of depreciation -- --
OTHER ASSETS
Patents and patents pending, net of
accumulated amortization 113,319 76,527
------------ ------------
TOTAL ASSETS $ 148,277 $ 77,709
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 93,934 $ 54,882
Loan payable to related party 257,076 257,076
Salaries payable -- 1,501,360
Accrued interest -- 9,962
------------ ------------
TOTAL CURRENT LIABILITIES 351,010 1,823,280
LONG-TERM LIABILITIES
Notes payable, related parties 213,381 213,381
------------ ------------
TOTAL LIABILITIES 564,391 2,036,661
------------ ------------
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, par value $0.001 per
share; 50,000,000 shares authorized;
30,198,265 and 27,141,075 shares
issued and outstanding 30,198 27,141
Subscriptions receivable (32,500) --
Stock options 210,738 --
Additional paid-in capital 2,770,305 2,552,654
Deficit accumulated during the
development stage (3,394,855) (4,538,747)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (416,114) (1,958,952)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 148,277 $ 77,709
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
PAGE 22
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FROM
INCEPTION
(12/02/85)
YEARS ENDED DECEMBER 31, THROUGH
1999 1998 12/31/99
----------- ----------- ------------
<S> <C> <C> <C>
REVENUES $ -- $ -- $ 89,947
----------- ----------- ------------
OPERATING EXPENSES
Research and development 156,280 137,071 2,105,046
Professional fees 35,308 7,868 1,121,751
Depreciation and
amortization 9,134 5,850 407,782
Salaries and benefits 120,000 85,000 751,501
Shareholder relations and
transfer fees 7,600 9,747 128,146
Rent 1,800 -- 111,054
General and administrative 4,156 14,778 562,993
----------- ----------- ------------
334,278 260,314 5,188,273
----------- ----------- ------------
Loss from operations (334,278) (260,314) (5,098,326)
Other income (expense)
Miscellaneous income 22,000 -- 22,000
Interest income 259 402 1,096
Interest expense (26,298) -- (367,062)
----------- ----------- ------------
(4,039) 402 (343,966)
----------- ----------- ------------
Loss before extraordinary
item (338,317) (259,912) (5,442,292)
Extraordinary item,
forgiveness of debt 1,482,209 -- 2,047,437
----------- ----------- ------------
NET INCOME (LOSS) $ 1,143,892 $ (259,912) $(3,394,855)
=========== =========== ============
BASIC NET INCOME (LOSS)
PER COMMON SHARE $ 0.04 $ (0.01) $ (0.17)
=========== =========== ============
DILUTED NET INCOME (LOSS)
PER COMMON SHARE $ 0.04 $ (0.01) $ (0.17)
=========== =========== ============
WEIGHTED AVERAGE NUMBER OF
BASIC COMMON STOCK
SHARES OUTSTANDING 28,946,467 26,988,575 20,479,995
=========== =========== ============
WEIGHTED AVERAGE NUMBER OF
DILUTED COMMON STOCK
SHARES OUTSTANDING 30,981,467 26,988,575 20,479,995
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
PAGE 23
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
COMMON STOCK ADDITIONAL
PAID-IN
SHARES AMOUNT CAPITAL
---------- ---------- -----------
Balance,
December 31, 1997 26,836,075 $ 26,836 $ 2,522,459
Common stock issued 305,000 30 530,195
Net loss for the year
ended December 31, 1998 -- -- --
---------- ---------- -----------
Balance,
December 31, 1998 27,141,075 27,141 2,552,654
Common stock issued at
approximately $0.05
per share 3,158,000 3,158 151,993
Cancellation of escrowed
shares (850,000) (850) 850
Common stock issued for
services at approximately
$0.05 per share 99,190 99 4,860
Contribution of capital
by shareholders in form
of foregone interest
and rent -- -- 28,098
Stock subscriptions
issued 650,000 650 31,850
Stock options issued in
exchange for forgiveness
of accrued wages -- -- --
Net income for the year
ended December 31, 1999 -- -- --
---------- ---------- -----------
Balance,
December 31, 1999 30,198,265 $30,198 $ 2,770,305
========== ========== ===========
Required information regarding stock issuances prior to January 1, 1999 can be
found in Note 7.
The accompanying notes are an integral part of these financial statements.
F-4a
<PAGE>
PAGE 24
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
DURING
STOCK STOCK DEVELOPMENT
SUBSCRIPTIONS OPTIONS STAGE
------------- --------- ---------------
<S> <C> <C> <C>
Balance,
December 31, 1997 $ -- $ -- $ (4,278,835)
Common stock issued -- -- --
Net loss for the year
ended December 31, 1998 -- -- (259,912)
------------- --------- ---------------
Balance,
December 31, 1998 -- -- (4,538,747)
Common stock issued at
approximately $0.05
per share -- -- --
Cancellation of escrowed
shares -- -- --
Common stock issued for
services at approximately
$0.05 per share -- -- --
Contribution of capital
by shareholders in form
of foregone interest
and rent -- -- --
Stock subscriptions
issued (32,500) --
Stock options issued in
exchange for forgiveness
of accrued wages -- 210,738 --
Net income for the year
ended December 31, 1999 -- -- 1,143,892
------------- --------- ---------------
Balance,
December 31, 1999 $ (32,500) $ 210,738 $ (3,394,855)
============= ========= ===============
Required information regarding stock issuances prior to January 1, 1999 can be
found in Note 7.
The accompanying notes are an integral part of these financial statements.
</TABLE>
F-4b
<PAGE>
PAGE 25
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FROM
INCEPTION
(12/02/85)
YEARS ENDED DECEMBER 31, THROUGH
1999 1998 12/31/99
----------- ----------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 1,143,892 $ (259,912) $ (3,394,855)
Adjustments to reconcile
net loss to cash used in
operating activities:
Depreciation and
amortization 9,134 5,850 407,782
Extraordinary gain (1,482,209) -- (1,684,068)
Expenses paid through
issuance of common
stock 4,959 -- 231,340
Expenses paid through
contribution of additional
paid in capital 28,098 -- 28,098
Organization costs -- -- (9,220)
Increase (decrease) in:
Accounts payable 39,052 9,506 93,934
Accounts payable,
related parties -- -- 257,076
Salaries payable 181,624 168,360 1,682,984
Accrued interest -- -- 9,962
----------- ----------- ------------
Net cash used in
operating activities (75,450) (76,196) (2,376,967)
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of fixed assets -- -- (36,973)
Acquisition of patents (45,925) (23,149) (178,237)
----------- ----------- ------------
Net cash used in
investing activities (45,925) (23,149) (215,210)
CASH FLOWS FROM
FINANCING ACTIVITIES
Proceeds from issuance
of common stock 155,151 30,500 2,413,754
Proceeds from
notes payable -- -- 288,508
Payments on notes payable -- -- (75,127)
----------- ----------- ------------
Net cash provided by
financing activities 155,151 30,500 2,627,135
----------- ----------- ------------
Net increase (decrease)
in cash 33,776 (68,845) 34,958
Cash, beginning 1,182 70,027 --
----------- ----------- ------------
Cash, ending $ 34,958 $ 1,182 $ 34,958
=========== =========== ============
</TABLE>
F-5a
<PAGE>
PAGE 26
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FROM
INCEPTION
(12/02/85)
YEARS ENDED DECEMBER 31, THROUGH
1999 1998 12/31/99
----------- ----------- ------------
<S> <C> <C> <C>
Supplemental disclosures:
Interest paid $ -- $ -- $ 339,927
=========== =========== =============
Income taxes paid $ -- $ -- $ --
=========== =========== =============
NON-CASH FINANCING AND INVESTING ACTIVITIES:
Professional fees
and expenses $ 33,057 $ 7,775 $ 368,967
Common stock subscribed $ 32,500 $ -- $ 32,500
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5b
<PAGE>
PAGE 27
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Advanced Biotherapy Concepts, Inc. (hereinafter "the Company"), was incorporated
December 2, 1985 under the laws of the State of Nevada. The Company is involved
in the research and development of the treatment of autoimmune diseases in
humans. The Company is currently conducting research in Maryland.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Advanced Biotherapy Concepts,
Inc. is presented to assist in understanding the Company's financial statements.
The financial statements and notes are representations of the Company's
management which is responsible for their integrity and objectivity. These
accounting policies conform to generally accepted accounting principles and have
been consistently applied in the preparation of the financial statements.
Development Stage Activities
The Company has been in the development stage since its formation in 1985 and
has not realized any significant revenues from its planned operations. It is
primarily engaged in the research and development of the treatment of autoimmune
diseases in humans.
Going Concern
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern.
As shown in the accompanying financial statements, the Company incurred a net
income of $1,143,892 for 1999. This was caused by an extraordinary item,
forgiveness of debt, in the amount of $1,482,209. At December 31, 1999, current
liabilities exceed current assets by $316,052 and the Company has an accumulated
deficit during the development stage at December 31, 1999 of $3,394,855. The
future of the Company is dependent upon its ability to obtain financing, and
upon future profitable operations from the commercial success of its medical
research and development of products to combat diseases of the human immune
system and products for treatment of viral and bacterial diseases of animals.
Management has established plans designed to increase the capitalization of the
Company and is actively seeking additional capital that will provide funds
needed to increase liquidity, fund the research and development and therefore
the internal growth of the Company, in order to fully implement its business
plans. For the twelve-month period subsequent to December 31, 1999, the Company
anticipates that its minimum cash requirements to continue as a going concern
will be less than $250,000. The anticipated source of funds will be provided
from the issuance for cash of additional common stock of the Company. In
addition, management is actively seeking a collaborative relationship with
either a pharmaceutical or
F-6
<PAGE>
PAGE 28
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
biotechnology company. If successful, cash requirements may be met through
royalty or licensing fees. The financial statements do not include any
adjustments relating to the recoverability and classification of recorded
assets, or the amounts and classification of liabilities that might be necessary
in the event the Company cannot continue in existence.
Accounting Method
The Company's financial statements are prepared using the accrual method of
accounting.
Cash and Cash Equivalents
For purposes of the Statement of Cash Flows, the Company considers all
short-term debt securities purchased with a maturity of three months or less to
be cash equivalents.
Provision for Taxes
At December 31, 1999, the Company had net operating loss carryforwards of
approximately $3,300,000 which may be offset against future taxable income. No
tax benefit has been reported in the financial statements as the Company
believes there is a 50% or greater chance that the net operating loss
carryforwards will expire unused. Accordingly, the potential tax benefits of the
net operating loss carryforwards are offset by a valuation allowance of the same
amount.
Use of Estimates
The process of preparing financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
regarding certain types of assets, liabilities, revenues, and expenses. Such
estimates primarily relate to unsettled transactions and events as of the date
of the financial statements. Accordingly, upon settlement, actual results may
differ from estimated amounts.
Impaired Asset Policy
In March 1995, the Financial Accounting Standards Board issued a statement
titled "Accounting for Impairment of Long-lived Assets." In complying with this
standard, the Company reviews its long-lived assets quarterly to determine if
any events or changes in circumstances have transpired which indicate that the
carrying value of its assets may not be recoverable. The Company determines
impairment by comparing the undiscounted future cash flows estimated to be
generated by its assets to their respective carrying amounts. The Company does
not believe any adjustments are needed to the carrying value of its assets at
December 31, 1999 and 1998.
F-7
<PAGE>
PAGE 29
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Reclassifications
Certain amounts from prior periods have been reclassified to conform with the
current period presentation. This reclassification has resulted in no changes to
the Company's accumulated deficit or net losses presented.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided using the
straight line method over the estimated useful lives of the assets. The
following is a summary of property, equipment and accumulated depreciation at
December 31, 1999 and 1998.
ACCUMULATED
COST DEPRECIATION
-------- --------
Lab equipment $ 27,582 $ 27,582
Office equipment 4,839 4,839
Furniture and fixtures 1,302 1,302
-------- --------
$ 33,723 $ 33,723
======== ========
There was no depreciation expense for the years ended December 31, 1999 and
1998.
NOTE 4 - INTANGIBLE ASSETS
Patents and Patents Pending
Costs relating to the development and approval of patents, other than research
and development costs, which are expensed, are capitalized and amortized using
the straight-line method over seventeen years.
<TABLE>
<CAPTION>
ACCUMULATED NET
COST AMORTIZATION AMOUNT
-------- ------------ ---------
<S> <C> <C> <C>
Balance, at December 31, 1997 $ 109,162 $ (49,934) $ 59,228
1998 activity 23,149 (5,850) 17,299
-------- ------------ ---------
Balance, at December 31, 1998 132,311 (55,784) 76,527
1999 Activity 45,925 (9,133) 36,792
-------- ------------ ---------
Balance, December 31, 1999 $ 178,236 $ (64,917) $ 113,319
========= ============ =========
</TABLE>
F-8
<PAGE>
PAGE 30
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 5 - RELATED PARTY TRANSACTIONS
The Company's chairman and principal shareholder has advanced funds to pay a
significant portion of the Company's expenses since 1989. At December 31, 1999
and 1998, the cumulative amounts owed to the chairman for expenses amount to
$257,076. Even though the chairman is not charging interest to the Company,
interest was calculated at the applicable federal rate of 5.59% at December 31,
1999. This interest was recorded as interest expense and contributed capital in
the accompanying financial statements. At December 31, 1998 the amounts owing to
the Company's chairman for accrued salary was $1,146,000. During 1999 an
additional salary was accrued in the amount of $100,000. At December 31, 1999,
in accordance with an agreement with other employee/shareholders of the Company,
the chairman received options to purchase 623,000 shares of common stock at
$0.10 per share. The value of these options, in the amount of $155,750, was used
to reduce the accrued salary of the chairman. See Note 8. In 1999, the chairman
forgave the balance of accrued salary of $1,090,250 along with accrued interest
of $9,962. This is recorded in the financial statements as a component of
extraordinary income.
At December 31, 1999 and 1998, the Company owed its secretary/treasurer $13,381
for expenses paid in previous years recorded in notes payable. At December 31,
1998 the Company also owed $184,000 in unpaid salary recorded as salary payable.
During 1999, additional salary in the amount of $45,000 was accrued for this
employee. At December 31, 1999, in accordance with an agreement with other
employee/shareholders of the Company, the secretary/treasurer received options
to purchase 114,500 shares of common stock at $0.10 per share. The value of
these options, in the amount of $28,625, was used to reduce the accrued salary
of this employee/shareholder. See Note 8. In 1999, the secretary/treasurer
forgave the balance of accrued salary in the amount of $200,375. This is
recorded in the financial statements as a component of extraordinary income.
At December 31, 1998 the CEO of the Company was owed $171,360 in accrued salary.
During 1999, a portion of this liability was paid. Also during 1999, additional
salary in the amount of $75,000 was accrued. At December 31, 1999, in accordance
with an agreement with other employee/shareholders of the Company, the CEO
received options to purchase 105,453 shares of common stock at $0.10 per share.
The value of these options in the amount of $26,363 was used to reduce the
accrued salary of the CEO. See Note 8. In 1999, the CEO forgave the balance of
accrued salary in the amount of $181,622. This is recorded in the financial
statements as a component of extraordinary income.
Notes payable to related parties consist of loans payable to the chairman and
principal shareholder ($200,000) and to another officer ($13,381). The notes
have no specific due date, are currently uncollateralized, and are non-interest
bearing, however, interest was calculated at the applicable federal rate in
place at December 31, 1999 in the amount of 5.59%. This interest was recorded as
interest expense and contributed capital in the accompanying financial
statements.
F-9
<PAGE>
PAGE 31
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 5 - RELATED PARTY TRANSACTION (CONTINUED)
During 1999 and 1998, the Company received the use of approximately 3,500 square
feet of commercial building space on a rent-free basis from a firm owned by one
of the Company's directors. The utilization of the facility in this manner is
mutually beneficial to the Company and the owner of this otherwise empty
facility. No formal agreement memorializes this month-to-month arrangement. The
value of the use of the facility is approximately $150 per month, and is
recorded in the financial statements as rent expense and contributed capital.
NOTE 6 - YEAR 2000 ISSUES
Like other companies, Advanced Biotherapy Concepts, Inc. could be adversely
affected if the computer systems it, or its suppliers or customers, uses do not
properly process and calculate date-related information and data from the period
surrounding and including January 1, 2000. This is commonly known as the "Year
2000" issue. Additionally, this issue could impact non-computer systems and
devices such as production equipment, elevators, etc. The costs related to Year
2000 compliance are expensed as incurred. At this time, there have been no known
effects to the Company in regards to the Year 2000 issue.
NOTE 7 - COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL
Information regarding the number of shares issued and consideration received is
as follows:
<TABLE>
<CAPTION>
COMMON STOCK
AMOUNT ADDITIONAL
PER PAID-IN
SHARE SHARES AMOUNT CAPITAL
----- ------ ------ ------------
<S> <C> <C> <C> <C>
Common stock issued for cash:
1985 $ .50 100,000 $ 100 $ 49,900
1986 1.00 639,500 640 678,861
1987 1.00 850,500 850 759,650
1988 1.00 25,000 25 24,975
1993 .25 2,402,000 2,402 475,900
1995 .05 1,000,000 1,000 49,000
1996 .05 520,000 520 25,480
1997 .05 490,000 490 24,010
1997 .10 1,310,500 1,311 129,739
1997 .01 325,000 325 2,925
1998 .10 305,000 305 30,195
1999 .05 3,158,000 3,158 151,993
---------- -------- ---------
11,125,500 11,126 2,402,628
---------- -------- ---------
</TABLE>
F-10
<PAGE>
PAGE 32
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 7 - COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL (CONTINUED)
<TABLE>
<CAPTION>
AMOUNT ADDITIONAL
PER PAID-IN
SHARE SHARES AMOUNT CAPITAL
----- ------ ------ ------------
<S> <C> <C> <C> <C>
Common stock issued for
patents assigned:
1984 .01 550,000 5,500
1985, adjustment to reflect
change in number and par value
of shares outstanding 2,750,000 (2,200) 2,200
3,300,000 3,300 2,200
----------- -------- --------
Common stock issued for acquisitions:
1985 .01 13,333,500 13,334 (41,112)
----------- -------- --------
Common stock issued for note receivable:
1986 1.00 10,000 10 9,990
----------- -------- --------
Contribution of additional
paid in capital
1999 -- 28,098
----------- -------- --------
Stock subscriptions
1999 .05 650,000 650 31,850
----------- -------- --------
Cancellation of escrowed shares
1999 .001 (850,000) (850) 850
----------- -------- --------
1989 .20 20,000 20 3,980
1989 1.10 5,000 5 5,495
1990 .50 3,500 4 1,746
1990 .62 14,750 14 9,131
1990 .66 10,875 11 7,166
1990 .80 8,250 8 6,592
1991 .31 7,000 7 2,163
1991 .34 100,000 100 33,900
1991 1.00 2,500 3 2,497
1991 .85 50,000 50 42,450
1992 .625 2,000 2 1,248
1992 .75 60,500 60 45,315
1993 .25 120,000 120 29,880
1996 .03 234,000 234 6,786
1996 .05 26,000 26 1,274
1996 .12 48,500 48 5,772
1997 .05 155,500 155 7,619
1999 .05 99,190 99 4,860
----------- -------- --------
992,565 991 230,349
----------- -------- --------
</TABLE>
F-11
<PAGE>
PAGE 33
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 7 - COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL (CONTINUED)
<TABLE>
<CAPTION>
AMOUNT COMMON STOCK ADDITIONAL
PER -------------- PAID-IN
SHARE SHARES AMOUNT CAPITAL
----- ------ ------ -----------
<S> <C> <C> <C> <C>
Common stock issued
to replace unrecorded
certificates
1988 .001 1,200 1 (1)
1992 .001 500 1 (1)
---------- -------- -----------
1,700 2 (2)
---------- -------- -----------
Common stock issued
for forgiveness of
accounts payable (1)
1990 .50 25,000 25 12,475
1996 .05 150,000 150 7,350
---------- -------- -----------
175,000 175 19,825
---------- -------- -----------
Common stock issued for
commissions (1)
1993 .001 1,260,000 1,260
---------- -------- -----------
Stock options issued
1993 - for debt
repayment (1) .25 200,000 200 49,800
1991 - for
services (1) 35,825
---------- ------- -----------
Total 30,198,265 $30,198 $ 2,770,305
========== ======= ===========
</TABLE>
(1) Per share amounts determined by information deemed most reliable based
on circumstances of each case: trading price at time of issuance or
value of services received.
F-12
<PAGE>
PAGE 34
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 8 - STOCK OPTIONS AND ISSUANCE COMMITMENTS
On February 25, 1991, the Corporation granted non-statutory options to purchase
stock to members of its board of directors, officers, and outside consultants.
These remaining options offer a total of 860,000 shares at a price of $.20 per
share with an exercise period of February 25, 1991 to February 25, 2001.
Additional options were issued effective February 1, 1993, for a total of
250,000 shares at a price of $.01 per share, with an exercise period of February
1, 1993, to February 1, 2003. During 1995, options for 50,000 shares were
granted at $.20 per share which expire in 2005. Also in 1995, options for
350,000 shares were granted at $.01 per share expiring in 2005. During 1996,
options for 525,000 shares were granted at $.10 per share. The shares purchased
will be restricted and, therefore, may not be transferred without registration
under applicable Federal and State securities laws. Stock options granted to a
director of the Company for 325,000 shares at a price of $.01 were exercised in
1997. No stock options were granted, exercised or cancelled in the year ending
December 31, 1998. No options were exercised or cancelled in the year ending
December 31, 1999. On December 31, 1999, three officers of the Company received
842,953 stock options in partial payment of accrued salaries. In accordance with
Statement or Financial Accounting Standard No. 123, the fair value of the
options was estimated using the Black Scholes Option Price Calculation. The
following assumptions were made to value the stock options: strike price at
$0.10, risk free interest rate at 5%, expected life at 5 years, and expected
volatility at 30%. At December 31, 1999, the Company recorded $210,738 ($0.25
per options) to reduce accrued wages for the value of these options based upon
these Black Scholes assumptions. These stock options are exercisable
immediately, and expire on December 31, 2005. See Note 5.
GRANT EXPIRATION NUMBER OF EXERCISE
DATE DATE SHARES PRICE
-------- -------- -------- --------
02/25/91 02/25/01 650,000 $ .20
11/30/95 11/30/05 350,000 .01
12/01/95 12/01/05 50,000 .20
02/01/93 02/01/03 150,000 .01
02/25/91 02/25/01 125,000 .20
02/25/91 02/25/01 85,000 .20
02/01/93 02/01/03 100,000 .01
11/20/96 12/01/05 525,000 .10
12/31/99 12/31/05 842,953 .10
---------
Total 2,877,953
=========
Options exercisable at December 31, 1999 and 1998 are 2,877,953 and 2,035,000,
respectively.
F-13
<PAGE>
PAGE 35
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 9 - INCOME (LOSS) PER SHARE
Basic earnings (loss) per share is computed by dividing the net income (loss) by
the weighted average number of shares outstanding during the period. The
weighted average number of shares is calculated by taking the number of shares
outstanding and weighting them by the amount of time that they were outstanding.
Diluted earnings (loss) per share is computed by dividing the net income (loss)
by the weighted average number of diluted shares outstanding during the period.
Diluted shares consist of basic weighted shares outstanding and the inclusion of
common stock equivalents.
The following data shows the amounts used in computing earnings (loss) per share
and the effect on income and the weighted average number of shares of dilutive
potential common stock.
<TABLE>
<CAPTION>
YEAR-END YEAR-END FROM INCEPTION
DECEMBER 31, DECEMBER 31, (12/02/85) TO
1999 1998 12/31/99
------------ ------------ --------------
<S> <C> <C> <C>
Loss from Operations before
extraordinary items $ (338,317) $ (259,912) $(5,442,292)
Extraordinary gains 1,482,209 -- 2,047,437
------------ ------------ --------------
Income (loss) available
to common stockholders
after inclusion
extraordinary items $ 1,143,892 $ (259,912) $(3,394,855)
=========== ============= ==============
Weighted average number of
share used in basic EPS 28,946,467 26,988,575 20,479,995
Effect of dilutive
securities
Stock options 2,035,000 -- --
------------ ------------ --------------
Weighted average number
of common shares and
dilutive potential
conversion stock used
in diluted EPS 30,981,467 26,988,575 20,479,995
=========== ============= ==============
</TABLE>
The weighted average effect of stock options on dilutive EPS was calculated
using the Treasury Stock Method based upon the prices as denoted in Note 7.
For 1999, all options on common stock issued prior to December 31, 1999 were
considered dilutive for EPS.
F-14
<PAGE>
PAGE 36
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 9 - INCOME (LOSS) PER SHARE (CONTINUED)
For 1998 and for the period from inception (December 2, 1985) through December
31, 1999, options for common stock were not included in diluted EPS because
their effects were antidilutive.
Transactions occurring after December 31, 1999, that had they taken place in
1999, which would have changed the number of shares used in the computations of
earnings per share, include the issuance of 9,200,000 shares of stock on January
11, 2000 in accordance with a stock bonus plan. See Note 10.
NOTE 10 - SUBSEQUENT EVENTS
On January 11, 2000, the Company issued 9,200,000 shares of common stock to
certain key officers and directors under a stock bonus plan, subject to various
restrictions. The plan's purpose is to keep personnel of experience and ability
in the employ of the Company and to compensate them for their contributions to
the growth of the Company, thereby inducing them to continue to make such
contributions in the future. Such stock bonuses were issued at the weighted
average price at which the Company has been selling shares of stock out of
authorized but yet unissued common stock to third parties during the six months
immediately preceding the issuance of the Bonus shares, or $0.05.
On January 19, 2000, the Company engaged Cappello Capital of Santa Monica,
California, to serve as the Company's investment banking firm and strategic
advisor. Pursuant to the Company's agreement with Cappello Capital Corp.
("Agreement"), the Company agreed to issued to Cappello Capital Corp. or its
designees, as partial compensation for its services, warrants to purchase up to
ten percent (10%) of the issued and outstanding shares of the Company's Common
Stock with an exercise price of $0.15 per share, which price represents the
seventy-five (75) day moving average for the Company's Common Stock according to
Bloomberg or a valuation on a fully diluted basis as determined by the initial
applicable transaction consummated pursuant to the terms of the Agreement. The
warrants are exercisable for ten years and have pre-emptive rights. A cash-less
exercise may be used for all warrants transactions. No fees are payable to
Cappello Capital Corp, in connection with the exercise of the warrants. The
warrants will contain full, unconditional piggy-back registration rights without
any holdback obligations. The warrant has vested and is deemed earned as of the
date of the Agreement. Should Cappello Capital Corp. elect to cancel its
Agreement with the Company within the first twelve months following the date
thereof, then the Company would be entitled to cancel a pro rata share of the
warrants based upon the number of days remaining in the one year period from the
date of Cappello Capital Corp.'s notice of cancellation. The Company has not yet
prepared the formal warrant document that will contain the terms set forth in
the Agreement.
F-15
<PAGE>
PAGE 37
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There have been no disagreements on accounting and financial
disclosures from the inception of the Company through the date of this Form
10-KSB for the year ending December 31, 1999.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Identification of Directors and Executive Officers.
The following table sets forth the names and nature of all positions
and offices held by all directors and executive officers of the Company for the
calendar year ending December 31, 1999, and to the date hereof, and the period
or periods during which each such director or executive officer served in his or
her respective positions.
<TABLE>
<CAPTION>
DATE OF DATE OF
ELECTION OF TERMINATION
NAME POSITION HELD DESIGNATION OR RESIGNATION
- --------------------- --------------------- ------------- -----------------
<S> <C> <C>
Simon Skurkovich, M.D. Chairman of the Board
of Directors 11/6/85
Edmond Buccellato CEO and member of the Board 11/16/95
of Directors
Boris Skurkovich, M.D. Vice President and a member 12/6/86
of the Board of Directors
Joseph Bellanti, M.D. Vice President and a member 12/6/86
of the Board of Directors
Lawrence Loomis Member of the
Board of Directors 12/6/86
Leonard Millstein Member of the
Board of Directors 12/6/86
Richard Eamer Member of the
Board of Directors 3/20/98
Jeanne Kelly, Ph.D. Secretary/Treasurer 12/6/86
Term of Office
</TABLE>
Each director serves for a term of one year or until his successor is
duly elected once qualified. The Company's officers are appointed by the Board
of Directors and hold office at the discretion of the Board.
<PAGE>
PAGE 38
Biographical Descriptions of Officers and Directors
Simon Skurkovich, M.D. - Since 1985, Dr. Skurkovich has served as
Chairman of the Board. He has previously been granted five patents in Russia,
and eight in the U.S. He is the creator of immune preparations from human blood
against antibiotic resistant bacteria that saved thousands of lives in the
Soviet Union and eastern Europe. In Russia, he was professor and Chief of the
Immunology Laboratory of the Institute of Hematology and Blood Transfusion and
was awarded gold and silver medals for his scientific discoveries. His
laboratory was also awarded the nation's highest honor, the Lenin Prize, for his
patented work. Dr. Skurkovich received an M.D., Ph.D. and a Doctorate in Medical
Sciences (D.Sc.) from Pirogov State Medical Institute in Moscow. He has written
more than 200 articles for scientific publications.
Edmond Buccellato - Since 1995, Mr. Buccellato has served as CEO and a
member of the Board of Directors. He was co-founder, member of the Board of
Directors and Vice President of Finance of Phase Medical, Inc., an infusion
therapy company sold to Becton Dickinson in 1994. He was also co-founder, member
of the Board of Directors and Vice President of Finance of Synergistic Systems,
Inc., a company that became the largest medical billing company in the western
United States. He is also co-founder and member of the Board of Directors of
Polymer Safety, LLC, a manufacturer of synthetic medical and industrial
examination gloves. He is also co-founder and member of the Board of Directors
of Physicians' choice LLC, a medical billing company. Mr. Buccellato received
his undergraduate degree From California State University at San Diego, and his
graduate degree from the University of Southern California.
Boris Skurkovich, M.D. - Since 1986, Mr. Skurkovich has served as Vice
President and member of the Board of Directors. He completed a clinical and
research fellowship at the Maxwell Finland Laboratory for Infectious Diseases,
Boston City Hospital, Boston, Massachusetts and presently is a professor at
Brown University Medical School. He has collaborated with his father on the
development of the Company's treatment of autoimmune diseases. Dr. Skurkovich
received his M.D. from the Moscow State Medical Institute.
Joseph A. Bellanti, M.D. - Since 1986, Mr. Bellanti has served as Vice
President and member of the Board of Directors. He is Director of the
International Center for Interdisciplinary Studies of Immunology and a professor
of Pediatrics and Microbiology at Georgetown University Medical School. He has
authored or co-authored over 400 scientific articles and abstracts and 25 books
and/or chapters in books in the fields of immunology and virology. His textbook,
"Immunology", now in its third edition, is used in many medical school
classrooms throughout the country. Dr. Bellanti received his B.S. and M.D.
degrees from the University of Buffalo, Buffalo, New York.
Lawrence Loomis - Since 1986 Mr. Loomis has served as a member of the
Board of Directors. Mr. Loomis is President and sole shareholder of New Horizons
Diagnostics, Inc., a company that develops bacteriological screening methods,
monoclonal antibodies for detection of various infectious disease agents, and
rapid bacterial and viral assay kits. Prior to founding New Horizons
Diagnostics, Inc. in 1980, Mr. Loomis was in charge of the Immunology Department
for BBL, a division of Becton Dickinson. Mr. Loomis received his
<PAGE>
PAGE 39
undergraduate degree in Chemistry from New York University and his graduate
degree in Chemistry from City University.
Leonard Millstein - Since 1986, Mr. Millstein has served as a member of
the Board of Directors. Mr. Millstein received his MSCE and Ph.D. in Civil
Engineering from Moscow State Construction University in 1964 and 1974,
respectively. After immigrating to the United States in 1978 he held teaching
positions at Howard University in Washington D.C. and Johns Hopkins University
in Baltimore, Maryland. He has over 200 publications and is a member of the
American Concrete Institute and American Society of Civil Engineers. From 1981
to the present, he has been a CEO of Radcon Products, a company involved in
manufacturing of proprietary concrete sealants. From 1990 until the present, he
has been a Chairman of the Board of TTLTIC, a private consulting company.
Richard Eamer - Since 1998, Mr. Eamer has served as a member of the
Board of Directors. Prior to joining the Company, Mr. Eamer was the founder,
Chairman of the Board and Chief Executive Officer of National Medical
Enterprises (NME), a company with over $5 billion in revenues. MNE was sold to
Tenet Healthcare Corporation (NYSE symbol THC), which presently has a market
capitalization of over 11 billion dollars. He is also the founder to two newly
established closely held companies, one in veterinary care ant the other in
industrial otology. Mr. Eamer is a former Director and Chairman of the Board of
Hillhaven Corporation, the nation's second largest operator or long term care
facilities. He was also a Director of Unocal Corporation and is currently a
Director of Imperial Bank. He is a member of the Conference Board and as
associate at the University of Southern California, a member of the Board of
Trustee of the Hugh O'Brian Youth Foundation, serves on the Board of Trustees of
the UCLA Foundation and the Hope for Hearing Foundation. Other affiliations
include the Pepperdine University Board of Regents and the Board of the John
Douglas French Alzheimer's Foundation. Mr. Eamer is also the recipient of the
Doheny Eye Institute's "The Doheny Award" for lifetime achievement and
preeminence in his field.
Jeanne Kelly - Since 1986, Ms. Kelly has served as Secretary/Treasurer
of the Company and assistant to Dr. Simon Skurkovich. She holds a Ph.D. in
Social Anthropology from American University. Since 1986, Ms. Kelly has been
employed by Coates & Jarrett, Inc., a consulting firm located in Washington,
D.C. Coates & Jarrett conducts research on behalf of emerging technology
corporations.
Family Relationships
The only known relationship between any directors is Simon Skurkovich,
father to Boris Skurkovich, and father-in-law to Leonard Millstein.
Involvement in Certain Legal Proceedings
During the past five years, no present or former director, executive
officer or person nominated to become a director or an executive officer of the
Company has been the subject matter of any legal proceedings, including
bankruptcy, criminal proceedings, or civil proceedings. Further, no legal
proceedings are known to be contemplated by governmental authorities against any
director, executive officer and person nominated to become a director.
<PAGE>
PAGE 40
Compliance with Section 16(a) of the Exchange Act.
The directors, executive officer or ten percent stockholders of the
Company filed Form 3 on April 3, 2000. Form 4 was required to be filed by Simon
Skurkovich and has not yet been filed. Dr. Skurkovich sold 124,000 shares of
common stock between February 16, 2000 and March 1, 2000. In accordance with
Section 16(a) of the Exchange Act, the profits realized on the sale of such
shares by Dr. Skurkovich was disgorged by him and returned to the Company by him
on March 22, 2000. Form 4 was also required to be filed by Edmond Buccellato and
has not yet been filed. Mr. Buccellato sold 10,000 shares of common stock on
March 3, 2000. In accordance with Section 16(a) of the Exchange Act, the profits
realized on the sale of such shares by Mr. Buccellato was disgorged by him and
returned to the Company by him on April 7, 2000. At the time of the sales by Dr.
Skurkovich and Mr. Buccellato, they were not aware of the restrictions under
Section 16(a) of the Exchange Act. Subsequently, after learning of such
restrictions, they disgorged their profit on the sale of the stock to the
Company.
ITEM 10. EXECUTIVE COMPENSATION.
The following table sets forth the compensation accrued by the Company
since January 1, 1997 through December 31, 1999, for each officer and director
of the Company. This information includes the dollar value of base salaries,
bonus awards and number of stock options granted, and certain other
compensation, if any.
<TABLE>
<CAPTION>
SUMMARY ACCRUED COMPENSATION TABLE
(a) (b) (c) (d) (e) (f) (g) (h) (i)
SECURITIES
OTHER UNDERLYING
NAME AND ANNUAL RESTRICTED OTHER ALL
PRINCIPAL COMPEN- STOCK OPTIONS/ LTIP COMPEN-
POSITION YEAR SALARY BONUS SATION AWARD(S) SARS PAYOUTS SATION
($) ($) ($) ($) (#) ($) ($)
- ----------- ---- --------- ------ ------- ------- -------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Simon 1999 $100,000
Skurkovich 1998 $100,000 0 0 0 0 0 0
Chairman 1997 $150,000 0 0 0 0 0 0
Edmond 1999 $ 75,000
Buccellato 1998 $ 50,000 0 0 0 0 0 0
President 1997 $100,000 0 0 0 0 0 0
Boris 1999 0
Skurkovich 1998 0 0 0 0 0 0 0
Vice 1997 0 0 0 0 0 0 0
President
Joseph 1999 0
Bellanti 1998 0 0 0 0 0 0 0
Vice 1997 0 0 0 0 0 0 0
President
Lawrence 1999 0
Loomis 1998 0 0 0 0 0 0 0
Director 1997 0 0 0 0 0 0 0
</TABLE>
<PAGE>
PAGE 41
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jeanne 1999 $45,000
Kelly 1998 0 0 0 0 0 0 0
Secretary 1997 $45,000 0 0 0 0 0 0
Treasurer
Leonard 1999
Millstein 1998 0 0 0 0 0 0 0
Director 1997 0 0 0 0 0 0 0
Richard 1999
Eamer 1998 0 0 0 0 0 0 0
Director 1997 0 0 0 0 0 0 0
</TABLE>
There are no retirement, pension, or profit sharing plans for the
benefit of the Company's officers and directors. The Company has granted
non-qualified stock options for the benefit of officers and directors. The
number of shares of common stock under option as of December 31, 1999 was
2,877,953.
Option/SAR Grants.
The following grants of stock options, whether or not in tandem with
stock appreciation rights ("SARs") and freestanding SARs have been made to
officers and/or directors:
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
NUMBER OF UNDERLYING
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED EXERCISE NUMBER OF
OPTIONS DURING LAST OR BASE OPTIONS EXPIRATION
NAME SARS GRANTED 12 MONTHS PRICE($/SH) EXERCISED DATE
- ---------------- ------------ ------------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Simon Skurkovich 300,000 0 $ 0.10 -0- 12/31/05
623,000 623,000 $ 0.10 -0- 12/31/05
Edmond Buccellato 50,000 0 $ 0.10 -0- 12/31/05
50,000 0 $ 0.20 -0- 12/31/05
105,453 105,453 $ 0.10 -0- 12/31/05
Boris Skurkovich 100,000 0 $ 0.01 -0- 12/31/05
150,000 0 $ 0.20 -0- 12/31/05
50,000 0 $ 0.10 -0- 12/31/05
Jeanne Kelly 150,000 0 $ 0.20 -0- 02/25/01
150,000 0 $ 0.01 -0- 02/01/03
50,000 0 $ 0.20 -0- 02/25/01
100,000 0 $ 0.10 -0- 12/01/05
114,500 114,500 $ 0.10 -0- 12/31/05
Laurence Loomis 100,000 0 $ 0.20 -0- 02/25/01
75,000 0 $ 0.20 -0- 02/25/01
25,000 0 $ 0.10 -0- 12/01/05
Leonard Millstein 100,000 0 $ 0.20 -0- 01/25/01
25,000 0 $ 0.20 -0- 02/25/01
Joseph Bellanti 100,000 0 $ 0.20 -0- 02/25/01
350,000 0 $ 0.01 -0- 11/20/05
</TABLE>
<PAGE>
PAGE 42
Long-Term Incentive Plan Awards.
The Company does not have any long-term incentive plans that provide
compensation intended to serve as incentive for performance other than a Stock
Bonus Plan adopted by the Company on January 11, 2000.
The plan's purpose is to keep personnel of experience and ability in
the employ of the Company and to compensate them for their contributions to the
growth of the Company, thereby inducing them to continue to make such
contributions in the future.
Compensation of Directors.
Directors did not receive any compensation for serving as members of
the Board of Directors for the year ending December 31, 1999. The Board has not
implemented a plan to award any future options to any Directors, except for said
stock bonus plan approved by the Board of Directors on January 11, 2000. Under
the plan, certain Directors and key employees, as indicated below, were awarded,
in the aggregate, 9.2 million shares of the Company's common stock at a price of
$0.05 per share. The awards were made after December 31, 1999 and accordingly
are not included in the charts set forth in Items 10 and 11. Such stock bonuses
were issued at the weighted average price at which the Company has been selling
shares of stock out of authorized but yet unissued common stock to third parties
during the six months immediately preceding the issuance of the Bonus shares, or
$0.05 per share. Consideration for the purchase of such shares was in the form
of a note in favor of the Company by each Officer/Director to whom the stock was
awarded. The terms of the stock bonus plan and accompanying note are
incorporated by reference and as an exhibit. There are no other contractual
arrangements with any member of the Board of Directors.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Security Ownership of Certain Beneficial Owners
The following table sets forth the Common Stock ownership, including
options to purchase stock, of each person known by the Company to be the
beneficial owner of five percent (5%) or more of the Company's Common Stock,
each director individually and all officers and directors of the Company as a
group as of December 31, 1999. Each person has sole voting and investment power
with respect to the shares of Common Stock shown, unless otherwise noted, and
all ownership is of record and beneficial.
NAME AND NUMBER OF PERCENTAGE
ADDRESS OF OWNER SHARES POSITION OF SHARES
- ------------------- ------------ -------- ----------
Simon V. Skurkovich 2,116,770[1] Chairman of 7.01%
802 Rollins Avenue the Board of
Rockville, MD 20852 Directors
Edmond Buccellato 651,343[2] CEO and 2.16%
6716 Faust Ave. Director
West Hills, CA 91307
<PAGE>
PAGE 43
Boris V. Skurkovich 3,047,020[3] Director 10.09%
18 Blaisdell Ave.
Pawtucket, RI 01860
Joseph Bellanti 600,000[4] Director 1.99%
607 Corewood Lane
Bethesda, MD 20816
Larry Loomis 725,000[5] Director 2.40%
9110 Red Branch Rd.
Columbia, MD 21045
Leonard Millstein 3,665,159[6] Director 12.14%
1677 Calle Alta
La Jolla, CA 92037
Richard Eamer -0- Director 0.00%
2400 Broadway Ave.
Suite 500
Santa Monica, CA 90404
Jeanne Kelly 714,500[7] Secretary/ 2.37%
4515 Willard Ave. Treasurer
Chevy Chase, MD 20815
All officers and 11,519,792 38.15%
directors as a
group (8 persons)
[1] Includes options to purchase up to 300,000 shares of common stock at an
exercise price of $0.10 per share, and options to purchase up to 623,000
shares of common stock at an exercise price of $0.10 per share. Does not
include 4,000,000 shares of common stock issued on January 11, 2000
through a stock bonus plan.
[2] Shares held in the names of the Edmond Buccellato (254,000), Edmond and
Leana Buccellato Family Trust (153,000 shares), Edmond Buccellato and
Leana Buccellato FBO the Buccellato Living Trust (20,000 shares), Amy
Buccellato (8,400 shares), and Matthew Buccellato (10,490 shares).
Includes options to purchase up to 50,000 shares of common stock at an
exercise price of $0.10 per share and options to purchase up to 50,000
shares of common stock at an exercise price of $0.20 per share. Includes
options to purchase up to 105,543 shares of common stock at an exercise
price of $0.10 per share. Does not include 1,500,000 shares of common
stock issued on January 11, 2000 through a stock bonus plan.
[3] Shares held in the name of Boris Skurkovich (575,020 shares), Carol
Marjorie Dorros (550,000), Samuel Skurkovich (501,000 shares), and
Samuel Aaron Skurkovich (1,121,000 shares). Includes options to purchase
up to 100,000 shares of common stock at an exercise price of $0.01 per
share; options to purchase up to 150,000 shares of common stock at an
exercise price of $0.02 per share and options to purchase 50,000 shares
of common stock at an exercise price of $0.10 per share. Does not
include 1,500,000 shares of common stock issued on January 11, 2000
through a stock bonus plan.
<PAGE>
PAGE 44
[4] Includes options to purchase up to 100,000 shares of common stock at an
exercise price of $0.20 per share and options to purchase up to 350,000
shares of common stock at an exercise price of $0.01 per share. All of
the foregoing options have been assigned to the I Care Foundation.
[5] Shares held in the names of Larry Loomis (325,000 shares) and New
Horizons Diagnostics, Inc. (200,000 shares). Includes options to
purchase up to 75,000 shares of common stock at an exercise price of
$0.20 per share and options to purchase up to 10,000 shares of common
stock at an exercise price of $0.10 per share. Does not include
1,000,000 shares of common stock issued on January 11, 2000 through a
stock bonus plan.
[6] Shares held in the names of Leonard Millstein (465,100 shares), Ellen
Millstein (1,278,359 shares), William Millstein (888,350 shares) and
Melvin Millstein (908,350 shares). Includes options to purchase up to
125,000 shares of common stock at an exercise price of $0.20 per share.
[7] Includes options to purchase up to 150,000 shares of common stock at an
exercise price of $0.01 per share and options to purchase up to 100,000
shares of common stock at an exercise price of $0.10 per share and
options to purchase up to 50,000 shares of common stock at an exercise
price of $0.20 per share. Includes options to purchase up to 114,500
shares of common stock at an exercise price of $2.00 per share. Does not
include 1,000,000 shares of common stock issued on January 11, 2000
through a stock bonus plan.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Simon Skurkovich, MD, the Company's Chairman of the Board of Directors
and a shareholder of the Company advanced funds to pay a significant portion of
the Company's expenses since 1989. At December 31, 1999 the cumulative amounts
owed to Dr. Skurkovich by the Company for expenses paid by him on behalf of the
Company was $262,776, and $1,255,962 for unpaid salaries and accrued interest.
In consideration for writing off the unpaid salaries of $1,246,000 owed Dr.
Skurkovich as of December 31, 1999, the Board of Directors authorized the
issuance non-qualified stock options to purchase 623,000 shares of common stock
at an exercise price of $0.10 per share, exercisable at any time between January
1, 2000 and December 31, 2005.
Edmond Buccellato, the Company's Chief Executive Officer, member of the
Board of Directors and a shareholder, was owed $207,985 for cumulative unpaid
salaries as of December 31, 1999. In consideration for writing off the unpaid
salaries of $207,985 owed Mr. Buccellato as of December 31, 1999, the Board of
Directors authorized the issuance non-qualified stock options to purchase
105,543 shares of common stock at an exercise price of $0.10 per share,
exercisable at any time between January 1, 2000 and December 31, 2005.
<PAGE>
PAGE 45
The Company is currently indebted to Jeanne Kelly, the Company's
Secretary/Treasurer in the amount of $229,000 for cumulative unpaid salaries and
$13,381 for expenses advanced by Ms. Kelly through December 31, 1999. In
consideration for writing off the cumulative unpaid salaries of $229,000 owed
Ms. Kelly as of December 31, 1999, the Board of Directors authorized the
issuance non-qualified stock options to purchase 114,500 shares of common stock
at an exercise price of $0.10 per share, exercisable at any time between January
1, 2000 and December 31, 2005.
The Company subleases 500 square feet of office space on a rent-free
basis through December 31, 1999 and at the rate of $400 per month for the twelve
months ending December 31, 2000. The office space is owned by Buccellato &
Finkelstein, Inc. Mr. Buccellato is the CEO of the Company.
Sale of Unregistered Securities in the Fourth Quarter of 1999.
Between January 1, 1999 and May 31, 1999, the Company issued 1,507,100
shares of common stock to individuals in consideration of the sum of $82,770.
The foregoing securities were issued pursuant to Section 4(2) of the Act and are
restricted securities as that term is defined in Rule 144 of the Act.
Between January 1, 1999 and May 31, 1999, the Company issued 197,490
shares of common stock individuals in consideration of services valued at
$9,874. The foregoing securities were issued pursuant to Section 4(2) of the Act
and are restricted securities as that term is defined in Rule 144 of the Act.
Between June 1, 1999 and December 31, 1999, the Company issued
2,202,600 shares of common stock to individuals in consideration of the sum of
$110,130, including subscriptions receivable at December 31, 1999 of $32,500.
The foregoing securities were issued pursuant to Section 4(2) of the Act and are
restricted securities as that term is defined in Rule 144 of the Act.
On November 4, 1999 the Company cancelled 850,000 shares of common
stock held in escrow under an escrow agreement dated July 1, 1991. Under the
terms of that agreement, such shares were to be released to an individual based
upon the Company receiving $2.5 million in cash prior to December 31, 1992.
Since no such funds were received by the Company prior to December 31, 1992, the
shares held in escrow were cancelled.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
Reports on Form 8-K
No reports on Form 8-K have been filed during the last quarter of the
period covered by this report.
<PAGE>
PAGE 46
Exhibits
The following documents are incorporated herein by reference from the
Registrant's Form 10SB Registration Statement and all amendments thereto, which
was filed with the Securities and Exchange Commission, and all exhibits thereto:
EXHIBIT
NO. DESCRIPTION
- --- ------------
3.1 Articles of Incorporation.
3.2 Bylaws.
4.1 Specimen Stock Certificate.
The following documents are incorporated herein:
10.1 Stock Bonus Plan dated January 11, 2000.
27 Financial Data Schedule
<PAGE>
PAGE 47
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, on this 4th
day of May, 2000.
ADVANCED BIOTHERAPHY CONCEPTS, INC.
(Registrant)
BY: /s/ Edmond Buccellato
Edmond Buccellato, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person on behalf of the
Registrant and in the capacities and on this 4th day of May, 2000.
SIGNATURES TITLE DATE
- ---------- ----- ----
/s/ Simon Skurkovich Chairman of the Board of Directors 5/4/2000
Simon Skurkovich
/s/ Edmond Buccellato President, CEO and member of the 5/4/2000
Edmond Buccellato Board of Directors
/s/ Boris Skurkovich Vice President and a member 5/4/2000
Boris Skurkovich of the Board of Directors
/s/ Lawrence Loomis Member of the Board of Directors 5/4/2000
Lawrence Loomis
/s/ Jeanne Kelly Secretary/Treasurer 5/4/2000
/s/ Edmond Buccellato Chief Financial Officer 5/4/2000
Edmond Buccellato
<PAGE>
EXHIBIT 10.1
Stock Bonus Plan
Dated for Reference as of January 11, 2000
1. Purpose
This plan's purpose is to keep personnel of experience and ability in the employ
of Advanced Biotherapy Concepts, Inc. and its Subsidiaries and to compensate
them for their contributions to the growth and profits of the Company and its
Subsidiaries and thereby induce them to continue to make such contributions in
the future.
2. Definitions
For purposes of this Plan, the following terms will have the definitions set
forth below:
(a) "Company." Advanced Biotherapy Concepts, Inc.
(b) "Subsidiary" or "Subsidiaries." A corporation or corporations of that the
Company may in the future own, directly or indirectly, shares having a
majority of the ordinary voting power for the election of directors.
(c) "Board." A quorum of the Company's Board of Directors.
(d) "Date of Issuance." This term shall have the meaning supplied by
Section 6(c), below.
(e) "Plan." The Advanced Biotherapy Concepts, Inc. Stock Bonus
Plan.
(f) "Bonus Share." The shares of common stock of the Company
reserved pursuant to Section 3 hereof and any such shares issued
to a Recipient pursuant to this Plan.
(g) "Fair Market Value." Fair market value shall be defined as the weighted
average price at which the Company has been selling shares of stock out of
authorized but yet unissued common stock to third parties during the six
months immediately preceding the issuance of the Bonus shares.
(h) "Recipient." An employee or Board member of the Company or a Subsidiary to
whom shares are allocated under this Plan, or such individual's designated
beneficiary, surviving spouse, estate, or legal representative. For this
purpose, however, any such beneficiary, spouse, estate, or legal
representative shall be considered as one person with the employee.
(i) "Restricted Period." This phrase shall have the meaning supplied
by Section 7(c), below.
<PAGE>
3. Bonus Share Reserve
(a) Bonus Share Reserve. The Company has established a Bonus Share reserve to
which will be credited 10,000,000 shares of the common stock of the
Company, par value $0.001 per share. Should the shares of the Company's
common stock, due to a stock split or stock dividend or combination of
shares or any other change, or exchange for other securities, by
reclassification, reorganization, merger, consolidation, recapitalization
or otherwise, be increased or decreased or changed into, or exchanged for,
a different number or kind of shares of stock or other securities of the
Company or of another corporation, the number of shares then remaining in
the Bonus Share reserve shall be appropriately adjusted to reflect such
action. If any such adjustment results in a fractional share, the fraction
shall be disregarded.
(b) Adjustments to Reserve. Upon the allocation of shares hereunder, the
reserve will be reduced by the number of shares so allocated and, upon the
failure to make the required payment on the issuance of any Bonus Shares
pursuant to Section 6(a) or upon the repurchase thereof pursuant to Section
7(d)(i) or (ii), Section 8 or Section 10 hereof, the reserve shall be
increased by such number of shares, and such Bonus Shares may again be the
subject of allocations hereunder.
(c) Distributions of Bonus Shares. Distributions of Bonus Shares, as the Board
shall in its sole discretion determine, may be made from authorized but
unissued shares or from treasury shares. All authorized and unissued shares
issued, as Bonus Shares in accordance with the Plan shall be fully paid and
non-assessable shares and free from preemptive rights.
4. Eligibility and Making of Allocations
(a) Eligible Employees. Any salaried executive employee of the
Company or any Subsidiary (including officers and directors)
shall be eligible to receive an allocation of Bonus Shares
pursuant to the Plan.
(b) Selection by the Board. From the employees eligible to receive allocations
pursuant to the Plan, the Board may from time to time select those
employees to whom it recommends that it make allocations. Such
recommendations shall include a recommendation as to the number of Bonus
Shares that should be allocated to each such individual. In selecting those
employees whom it wishes to recommend for allocations and in determining
the number of Bonus Shares it wishes to recommend, the Board shall consider
the position and responsibilities of the eligible employees, the value of
their services to the Company and its Subsidiaries and such other factors
as the Board deems pertinent.
<PAGE>
(c) Participation in Other Stock Option Plans. A person who has received
options to purchase stock under any stock option plan of the Company or a
Subsidiary may exercise the same in accordance with their terms, and will
not by reason thereof be ineligible to receive Bonus Shares under this
Plan.
(d) Limit on Number of Allocable Shares. The total number of Bonus Shares,
which may be allocated pursuant to this Plan, will not exceed the amount
available therefore in the Bonus Share reserve.
5. Form of Allocations
(a) Number Specified. Each allocation shall specify the number of
Bonus Shares subject thereto, subject to the provisions of
Section 4.
(b) Notice. When an allocation is made, the Board shall advise the Recipient
and the Company thereof by delivery of written notice in the form of
Exhibit A hereto annexed.
6. Payment Required of Recipients
(a) Acceptance of Allocation. Within 30 days from the date of allocation, the
Recipient shall, if he desires to accept the allocation, pay to the Company
an amount equal to the fair market value of the Bonus Shares so allocated,
in cash, by certified or bank cashier's check, or by money order at the
office of its Treasurer. In the event such employee is presently unable to
pay such amount to the Company, employee shall issue a note in favor of the
Company in the form as indicated in the attached Exhibit C.
(b) Investment Purpose. The Company may require that, in acquiring any Bonus
Shares, the Recipient agree with, and represent to, the Company that the
Recipient is acquiring such Bonus Shares for the purpose of investment and
with no present intent to transfer (except as described in Section 7. (a)
below), sell, or otherwise dispose of such shares for a period of one year
from the date of acquiring such shares, in compliance with applicable
securities laws.
(c) Written Agreement/Date of Issuance. Concurrently with making payment, or
the issuance of a note in favor of the Company, of the fair market value of
Bonus Shares pursuant to Section 6(a) the Recipient shall deliver to the
Company, in duplicate, an agreement in writing, signed by the Recipient, in
form and substance as set forth in Exhibit B, below, and the Company will
promptly acknowledge its receipt thereof. The date of such delivery and
receipt shall be deemed the "Date of Issuance," as that phrase is used in
this Plan, of the Bonus Shares to which the shares relate. The failure to
make such payment and delivery within 30 days from the date of allocation
shall terminate the allocation of such shares to the Recipient.
<PAGE>
7. Restrictions
(a) Transfer/Issuance. Bonus Shares after the making of the payment or issuance
of the note and representations, etc., required by Section 6, will be
promptly issued or transferred and a certificate or certificates for such
shares shall be issued in the Recipient's name, or names designated as
beneficiaries of the Recipient, if such shares are gifted to named
beneficiaries. . The Recipient or named beneficiary shall thereupon be a
shareholder of all the shares represented by the certificate or
certificates. As such, the Recipient or named beneficiary will have all the
rights of a shareholder with respect to such shares, including the right to
vote them and to receive all dividends and other distributions (subject to
Section 7(b)) paid with respect to them, provided, however, that the shares
shall be subject to the restrictions in Section 7(d). Stock certificates
representing Bonus Shares will be imprinted with a legend stating that the
shares represented thereby may not be sold, exchanged, transferred,
pledged, hypothecated, or otherwise disposed of except in accordance with
this Plan's terms, and each transfer agent for the Common Stock shall be
instructed to like effect in respect of such shares.
(b) Stock Splits, Dividends, etc. If, due to a stock split, stock dividend,
combination of shares, or any other change or exchange for other securities
by reclassification, reorganization, merger, consolidation,
recapitalization or otherwise, the Recipient, as the owner of Bonus Shares
subject to restrictions hereunder, shall be entitled to new, additional, or
different shares of stock or securities, the certificate or certificates
for, or other evidences of, such new, additional, or different shares or
securities, together with a stock power or other instrument of transfer
appropriately endorsed, also shall be imprinted with a legend as provided
in Section 7(a) and deposited by the Recipient under the above-mentioned
deposit agreement. When the event(s) described in the preceding sentence
occur, all Plan provisions relating to restrictions and lapse of
restrictions will apply to such new, additional, or different shares or
securities to the extent applicable to the shares with respect to which
they were distributed, provided, however, that if the Recipient shall
receive rights, warrants or fractional interests in respect of any of such
Bonus Shares, such rights or warrants may be held, exercised, sold or
otherwise disposed of, and such fractional interests may be settled, by the
Recipient free and clear of the restrictions hereafter set forth.
(c) Restricted Period. The term "Restricted Period" with respect to restricted
Bonus Shares (after which restrictions shall lapse) means a period starting
on the Date of Issuance of such shares to the Recipient and ending on such
date not less than one (1) years after the Date of Issuance, as the Board
may establish at the time of allocation of shares hereunder.
<PAGE>
(d) Restrictions on Bonus Shares. The restrictions to which
restricted Bonus Shares shall be subject are:
(i) During the Restricted Period applicable to such shares
and except as otherwise specifically provided in the
Plan, none of such shares shall be sold, exchanged,
transferred, or otherwise disposed of unless they
first, by written notice, have been offered to the
Company for repurchase for the same amount as was paid
therefore under Section 6, with appropriate adjustment
for any change in the Bonus Shares of the nature
described in Section 7(b) the Company shall not within
30 days following such offer have so repurchased the
shares and made payment in full therefore. Unless such
repurchase is otherwise prohibited by the laws of the
State of Nevada currently in effect at the time of an
offer of Bonus Shares to the Company for repurchase
pursuant to the terms of this Plan, the Company shall
repurchase said shares and make payment in full
therefore within thirty (30) days following such
offer.
(ii) If a Recipient's employment is terminated by the Board
of Directors for any reason other than the Recipient's
death or disability, at any time before the Restricted
Period ends, the Company shall so notify the
Recipient. Such termination shall be deemed an offer
to the Company as described in Section 7(d)(i) as to
all such shares issued to such Recipient, if such
termination occurs within one year from the Date of
Issuance:
(e) Lapse of Restricted Period. The restriction set forth in Section 7(d)
hereof, with respect to the Bonus Shares to which such Restricted Period
was applicable, will lapse:
(i) as to such shares in accordance with the time(s) and
number(s) of shares as to which the Restricted Period
expires, as described in Section 7(d)(ii), or
(ii) as to any shares which the Company will fail to purchase
when they are offered to the Company, as described in Section
7(d)(i), upon the Company's failure to so repurchase.
(f) Transfers Upon Death of Recipient. Nothing in this Plan will preclude the
transfer of restricted Bonus Shares, on the Recipient's death, to the
Recipient's legal representatives or estate, nor preclude such
representatives from transferring any of such shares to the person(s)
entitled thereto by will or the laws of descent and distribution, provided,
however, that any shares so transferred as to which such restrictions have
not lapsed will remain subject to all restrictions and obligations imposed
on them by this Plan.
<PAGE>
(g) Delivery of Written Notice. All notices in writing required pursuant to
this Section 7 will be sufficient only if actually delivered or if sent via
registered or certified mail, postage prepaid, to the Company, attention
Treasurer, and/or escrow agent at its principal office within the City of
Woodland Hills, California, and will be conclusively deemed given on the
date of delivery, if delivered or on the first business day following the
date of such mailing, if mailed.
8. Finality of Determination.
The Board will administer this Plan and construe its provisions. Any
determination by the Board (except insofar as it will make recommendations only)
in carrying out, administering, or construing this Plan will be final and
binding for all purposes and upon all interested persons and their heirs,
successors, and personal representatives.
9. Limitations
(a) Rights of Recipients. Recipients of allocations will have no rights in
respect thereof other than those set forth in the Plan. Except as provided
in Sections 6(b) or 7(f), such rights may not be assigned or transferred
except by will or by the laws of descent and distribution. If any attempt
is made to sell, exchange, transfer, pledge, hypothecate, or otherwise
dispose of any Bonus Shares held by the Recipient under restrictions which
have not yet lapsed, the shares that are the subject of such attempted
disposition will be deemed offered to the Company for repurchase, and the
Company will repurchase them, as described in Section 7(d)(i). Before
issuance of Bonus Shares, no such shares will be earmarked for the
Recipients' accounts nor will such Recipients have any rights as
stockholders with respect to such shares.
(b) No Right to Continued Employment. Neither the Company's action in
establishing the Plan, nor any action taken by it or by the Board or under
the Plan, nor any provision of the Plan, will be construed as giving to any
person the right to be retained in the employ of the Company or any
Subsidiary.
(c) Limitation on Actions. Every right of action by or on behalf of the Company
or by any shareholder against any past, present, or future member of the
Board, or any officer or employee of the Company arising out of or in
connection with this Plan shall, regardless of the place where the action
may be brought and regardless of the place of residence of any such
director, officer or employee, cease and be barred by the expiration of
three years from the later of:
(i) The date of the act or omission in respect of which
such right of action arises or
<PAGE>
(ii) The first date upon which there has been made generally
available to shareholders an annual report of the Company and a
proxy statement for the annual meeting of shareholders following
the issuance of such annual report, which annual report and proxy
statement alone or together set forth, for the related period,
the amount of the allocations.
In addition, any and all right of action by any employee (past, present or
future) against the Company or any member of the Board arising out of or in
connection with this Plan will, regardless of the place where action may be
brought and regardless of the place of residence of any Board member, cease and
be barred by the expiration of three years from the date of the act or omission
in respect of which such right of action arises.
10. Amendment, Suspension or Termination of Plan
The Board may amend, suspend or terminate the Plan in whole or in part at any
time; provided that such amendment will not affect adversely rights or
obligations with respect to allocations previously made; and provided further,
that no modification of the Plan by the Board without approval of the
stockholders will (i) increase the maximum number of Bonus Shares reserved
pursuant to Section 3; (ii) change the provisions of Section 4 with respect to
the total number of Bonus Shares that may be allocated under the Plan; or (iii)
render any member of the Board eligible to receive an allocation at any time
while he is serving on the Board.
11. Governing Law.
The laws of the State of Nevada will govern the Plan.
12. Expenses of Administration.
All costs and expenses incurred in the operation and administration of this Plan
will be borne by the Company.
13. Registration of Bonus Shares.
(a) Registration Requirement. If the Company determines at any time to register
any of its securities under the Securities Act of 1933 (or similar statute
then in effect) the Company, at its expense, will include among the
securities which it then registers all Bonus Shares or other stock or
securities issued in respect thereof, in exchange therefore, or in
replacement thereof as to which the Restricted Period has expired. The
requirement of the preceding sentence, however, will not apply to the
extent that any Recipient at that time has no present intent to sell or
distribute the relevant shares. Also, in the case of stock or securities
not of the Company, the Company's obligation under this Section 13 will be
limited to using its best efforts to effect such registration.
<PAGE>
(b) Written Notification. As to each registration pursuant to this Section 13,
the Company will keep the Recipients advised in writing as to the
initiation of proceedings for such registration and as to the completion
thereof, and at its expense will keep such registration effective for a
period of nine months, or until all sales and distributions contemplated in
connection therewith are completed, whichever period is shorter. Each
Recipient will at his own expense furnish to the Company such information
regarding the Recipient and the Recipient's ownership of Bonus Shares (or
other stock or securities) as the Company may reasonably request in writing
in connection with any such registration.
(c) Prospectus; Indemnification. The Company, at its expense, will furnish to
each Recipient such number of prospectuses incident to any such
registration as such Recipient from time to time reasonably may request. In
addition, the Company will indemnify each such Recipient against all
claims, losses, damages, and liabilities caused by any untrue statement of
a material fact contained in such prospectus (or in any related
registration statement) or by any omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading, except insofar as the same may have been caused by an
untrue statement or omission based upon information furnished in writing to
the Company by such Recipient expressly for use therein. Further, as a
condition precedent to the obligations of the Company pursuant to this
Section 13, each Recipient will agree in writing to indemnify the Company
against all claims, losses, damages and liabilities caused by an untrue
statement or omission based upon information furnished to the Company by
such Recipient expressly for use therein.
<PAGE>
EXHIBIT "A" -- ADVANCED BIOTHERAPY CONCEPTS, INC.
STOCK BONUS PLAN
To: __________________, Recipient, __________________,
Advanced Biotherapy Concepts, Inc.
This is to advise you that the Advanced Biotherapy Concepts, Inc.'s Board of
Directors has on the date of this notice, January 11, 2000, allocated to the
Recipient above named a total of ________________ Bonus Shares under and
pursuant to the Stock Bonus Plan.
For these shares to be issued, the Recipient must make payment of $0.05 per
share (fair market values as of January 11, 2000), or provide a note in favor of
the Company for the same amount, and deliver to the President of the Company an
agreement in duplicate, in the form as Exhibit B hereto, within 30 days from the
date of this notice.
-------------------------------
For the Board
Date:
-----------------------
<PAGE>
EXHIBIT "B" -- ADVANCED BIOTHERAPY CONCEPTS, INC.
STOCK BONUS PLAN
To: President, Advanced Biotherapy Concepts, Inc.
Enclosed is a note in favor of the Company in the amount of ____________, being
equal to the fair market value of $0.05 per share Bonus Shares allocated to and
purchased by me pursuant to the Company's Non-Qualified Stock Bonus Plan. I
represent and agree that I am acquiring these Bonus Shares for investment and
that I have no present intention to transfer, sell or otherwise dispose of such
shares, except as permitted pursuant to the Plan and in compliance with
applicable securities laws. I agree further that I am acquiring these shares in
accordance with, and subject to, the terms, provisions and conditions of said
Plan, to all of which I hereby expressly assent. These agreements will bind and
inure to the benefit of my heirs, legal representatives, successors and assigns.
My address of record is: _______________________________________
My Social Security Number is: _________________________________
Receipt of the above, together with the payment referred to, is hereby
acknowledged.
Advanced Biotherapy Concepts, Inc.
By:_______________________________
Date: January 11, 2000
<PAGE>
EXHIBIT "C" -- PROMISSORY NOTE
$_____________ Woodland Hills, California January 11, 2000
FOR VALUE RECEIVED, the undersigned ("Maker") hereby promises to pay to
Advanced Biotherapy Concepts, Inc. ("Holder"), or order, where designated by the
Holder, the principal sum of ____________________ Dollars ($_________), to be
paid by Maker to Holder concurrently herewith, together with interest at the
rate of 6.5% per annum from the date hereof on the unpaid principal balance.
Principal and interest shall be payable in lawful money of the United States.
The outstanding principal balance together with accrued and unpaid interest
shall be due and payable on December 31, 2002, unless otherwise extended at the
option of Holder. This Note may be prepaid, in whole or in part, at any time,
and from time to time, without premium or penalty. Any payment received on this
Note shall be applied first to all accrued and unpaid interest and then to the
outstanding principal balance.
No waiver by Holder of any payment or other right under this Note shall
operate as a waiver of any other payment or right, and no waiver shall be valid
unless and until in writing and signed by Holder.
This Note may not be modified or terminated orally but only by agreement or
discharge in writing and signed by the Holder and Maker of this Note. The Holder
of this Note shall not have the right to sell, assign or otherwise transfer this
Note. This Note shall inure to the benefit of the parties and their respective
successors, heirs and legal representatives.
This Note is being delivered and is intended to be performed in Woodland
Hills, California and shall be construed and enforced in accordance with and
governed by the internal laws of the State of California without resort to
California's conflict of laws provisions.
The Holder hereby acknowledges and agrees that Rutter, Hobbs & Davidoff,
Incorporated has represented only Advanced Biotherapy Concepts, Inc., in
connection with this Note and the matters contemplated hereby, and the Holder
has been advised to consult with his own independent attorneys and accountants,
and has had an opportunity to seek independent counsel.
IN WITNESS WHEREOF, the Maker has executed this Note as of the date and at
the place first written above.
MAKER:
-----------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Statement of Financial Condition at December 31, 1999 and the Statement of
Income for the year ended December 31, 1999 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 34,958
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 34,958
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 148,277
<CURRENT-LIABILITIES> 351,010
<BONDS> 0
0
0
<COMMON> 30,198
<OTHER-SE> (446,312)
<TOTAL-LIABILITY-AND-EQUITY> 148,277
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 334,278
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,298
<INCOME-PRETAX> (338,317)
<INCOME-TAX> 0
<INCOME-CONTINUING> (338,317)
<DISCONTINUED> 0
<EXTRAORDINARY> 1,482,209
<CHANGES> 0
<NET-INCOME> 1,143,892
<EPS-BASIC> 0.04
<EPS-DILUTED> 0.04
</TABLE>
