<PAGE> 1
=====================================================================
FORM 10-KSB
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 or any amendment to this Form 10-KSB. [ ]
State Issuer's revenues for its most recent fiscal year.
December 31, 1999: $-0-
=====================================================================
<PAGE> 2
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 ]
<PAGE> 3
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 of 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.
<PAGE> 4
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.
<PAGE> 5
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.
<PAGE> 6
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 antibodies, however, can be produced simultaneously. The shelf life
for the products developed by the Company is approximately one year.
<PAGE> 7
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
<PAGE> 8
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 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 will 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, though they may also provide some 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 trials in the U.S. as indicated below.
<PAGE> 9
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.
<PAGE> 10
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.
<PAGE> 11
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.
Because many of the Company's products may be used on human
patients, the Company may be exposed to product liability claims. The
Company does not maintain any liability insurance. Even in the Company
obtains 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.
<PAGE> 12
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. 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 recent 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.
<PAGE> 13
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,
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> 14
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, product 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, product 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> 15
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 "ADVB." The table shows
the high and low bid of the Company's Common Stock during the fiscal
years 1998 and 1999:
<PAGE> 16
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 $500,000. 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> 17
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, also other changes resulted in an increase of cash between
1998 and 1999 of $33,776. The Company did not realized 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. Acash-less exercise may be used for all warrant
transactions. No fees are payable to Cappello Capital Corp. in
<PAGE> 18
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 contains 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 fo 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> 19
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> 20
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
ASSETS
December 31, December 31,
1999 1998
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
============ ============
The accompanying notes are an integral part of these financial
statements.
F-2
<PAGE> 21
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF OPERATIONS
From
Inception
(12/02/85)
Years Ended December 31, Through
1999 1998 12/31/99
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
=========== ========== ============
The accompanying notes are an integral part of these financial
statements.
F-3
<PAGE> 22
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> 23
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
Deficit
Accumulated
During
Stock Stock Development
Subscriptions Options Stage
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.
F-4a
<PAGE> 24
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
From
Inception
(12/02/85)
Years Ended December 31, Through
1999 1998 12/31/99
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
============ ========== ============
<PAGE> 25
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
From
Inception
(12/02/85)
Years Ended December 31, Through
1999 1998 12/31/99
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
The accompanying notes are an integral part of these financial
statements.
F-5b
<PAGE> 26
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> 27
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> 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)
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.
Accumulated Net
Cost amortization amount
Balance, at December 31, 1997 $ 109,162 $ (49,934) $ 59,228
1998 activity 23,149 (5,850)
--------- --------- ---------
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
========= ========= =========
F-8
<PAGE> 29
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> 30
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:
Common stock
Amount Additional
per Paid-in
share Shares Amount capital
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
---------- -------- -----------
F-10
<PAGE> 31
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)
Common stock
Amount Additional
per Paid-in
share Shares Amount capital
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
---------- -------- -----------
<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)
Common stock
Amount Additional
per Paid-in
share Shares Amount capital
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
========== ======== ===========
(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> 33
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, 1999and 1998 are 2,877,953 and
2,035,000, respectively.
F-13
<PAGE> 34
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.
Year-End Year-End From Inception
December 31, December 31, (12/02/85) to
1999 1998 12/31/99
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
=========== ========== ============
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> 35
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 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 Company Common Stock with an exercise
price based on the Company's valuation at the lesser of $0.15 per share
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 anti-
dilution protection. A cash-less exercise may be used for all warrant
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. 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> 36
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.
Date of Date of
Election of Termination
Name Position Held Designation or Resignation
Simon Skurkovich, M.D. Chairman of the Board
of Directors 11/6/85
Edmond Buccellato CEO and member of the 11/16/95
Board of Directors
Boris Skurkovich, M.D. Vice President and a 12/6/86
member of the Board
of Directors
Joseph Bellanti, M.D. Vice President and a 12/6/86
member of the Board
of Directors
Lawrence Loomis Member of the 12/6/86
Board of Directors
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
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> 37
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 undergraduate
degree in Chemistry from New York University and his graduate degree in
Chemistry from City University.
<PAGE> 38
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> 39
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)
Other Restricted Securities
Name and Annual Stock Underlying LTIP All
Other
Principal Compen- Options/ Compen-
Position Year Salary Bonus sation Award(s) SARs Payouts sation
($) ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Simon 1999 $100,000 0 0 0 0 0 0
Skurkovich 1998 $100,000 0 0 0 0 0 0
Chairman 1997 $150,000 0 0 0 0 0 0
Edmond 1999 $ 75,000 0 0 0 0 0 0
Buccellato 1998 $ 50,000 0 0 0 0 0 0
President 1997 $100,000 0 0 0 0 0 0
Boris 1999 0 0 0 0 0 0 0
Skurkovich 1998 0 0 0 0 0 0 0
Vice 1997 0 0 0 0 0 0 0
President
Joseph 1999 0 0 0 0 0 0 0
Bellanti 1998 0 0 0 0 0 0 0
Vice 1997 0 0 0 0 0 0 0
President
Lawrence 1999 0 0 0 0 0 0 0
Loomis 1998 0 0 0 0 0 0 0
Director 1997 0 0 0 0 0 0 0
<PAGE> 40
Jeanne 1999 $45,000 0 0 0 0 0 0
Kelly 1998 0 0 0 0 0 0 0
Secretary 1997 $45,000 0 0 0 0 0 0
Treasurer
Leonard 1999 0 0 0 0 0 0 0
Millstein 1998 0 0 0 0 0 0 0
Director 1997 0 0 0 0 0 0 0
Richard 1999 0 0 0 0 0 0 0
Eamer 1998 0 0 0 0 0 0 0
Director 1997 0 0 0 0 0 0 0
</TABLE>
There are no retirement, pension, or profit sharing plans for the
benefit of the Company's officers and directors. The Company has
granted non-qualified stock options for the benefit of officers and
directors. The number of shares of common stock under option as of
December 31, 1999 was 2,877,953.
Option/SAR Grants.
The following grants of stock options, whether or not in tandem
with stock appreciation rights ("SARs") and freestanding SARs have been
made to officers and/or directors:
<TABLE>
<CAPTION>
Number of
Securities
Number of Underlying
Securities Options/SARs
Underlying Granted Exercise Number of
Options During Last or Base Options Expiration
Name SARs Granted 12 Months Price($/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> 41
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> 42
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> 43
[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> 44
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.
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:
<PAGE> 45
Exhibit
No. Description
3.1 Articles of Incorporation.
3.2 Bylaws.
4.1 Specimen Stock Certificate.
The following documents are incorporated herein:
27 Financial Data Schedule
10.1 Stock Bonus Plan dated January 11, 2000.
<PAGE> 46
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 10th day of April, 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 10th day of
March, 2000.
SIGNATURES TITLE DATE
/s/ Simon Skurkovich Chairman of the Board of Directors 4/10/2000
Simon Skurkovich
/s/ Edmond Buccellato President, CEO and member of the 4/10/2000
Edmond Buccellato Board of Directors
/s/ Boris Skurkovich Vice President and a member of the 4/10/2000
Boris Skurkovich Board of Directors
/s/ Lawrence Loomis Member of the Board of Directors 4/10/2000
Lawrence Loomis
/s/ Jeanne Kelly Secretary/Treasurer 4/10/2000
/s/ Edmond Buccellato Chief Financial Officer 4/10/2000
Edmond Buccellato
<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>
<PAGE> 47
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> 48
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> 49
(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> 50
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> 51
(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> 52
(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> 53
(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> 54
(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> 55
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> 56
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> 57
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:
___________________________________
