ADVANCED BIOTHERAPY INC
10QSB, 2000-11-14
COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 10-QSB

(Mark One)


  [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the period ended September 30, 2000

OR


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

For the transition period from             to             .

0-36323
(Commission file number)


ADVANCED BIOTHERAPY, INC.
(Exact name or registrant as specified in its charter)


 Delaware
(State of jurisdiction of
incorporation or organization)

  95-4066865
(IRS Employer
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)

             

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

             As of September 30, 2000, the Registrant had 39,848,265 shares of common stock, $0.001 par value, issued and outstanding.


ADVANCED BIOTHERAPY, INC.
(formerly Advanced Biotherapy Concepts, Inc.)
(A Development Stage Enterprise)

September 30, 2000

TABLE OF CONTENTS

      Page
PART I.      
Item 1.   Financial Statements:  
    Accountant's Review Report 3
    Balance Sheets 4
    Statements of Operations 5
    Statement of Stockholders' Equity (Deficit) 6
    Statements of Cash Flows 7
    Notes to Financial Statements 8
Item 2.   Management Discussion and Analysis of Financial Conditions and Results of Operations 16
       
PART II.      
Item 2.   Changes in Securities 18
Item 4.   Submission of Matters to a Vote of Security Holders 19
Item 6.   Exhibits and Reports on Form 8-K 19
 
SIGNATURES 20
 

PART I.

Item 1.   Financial Statements

ACCOUNTANT’S REVIEW REPORT

The Board of Directors
Advanced Biotherapy Concepts, Inc.
Woodland Hills, CA 91367

             We have reviewed the accompanying balance sheet of Advanced Biotherapy, Inc., (formerly Advanced Biotherapy Concepts, Inc.) (a development stage enterprise), as of September 30, 2000, and the related statements of operations, stockholders’ equity, and cash flows for the three and nine months then ended. All information included in these financial statements is the representation of the management of Advanced Biotherapy, Inc.

             We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

             Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with generally accepted accounting principles.

             The financial statements for the year ended December 31, 1999 were audited by us and we expressed an unqualified opinion on it in our report dated April 5, 2000. We have not performed any auditing procedures since that date.

             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 generated little revenue in the past years, and has suffered recurring losses from operations resulting in an accumulated deficit of $3,900,000 at September 30, 2000. 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. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Williams & Webster, P.S.
Certified Public Accountants
Spokane, Washington
November 8, 2000

3

ADVANCED BIOTHERAPY, INC.
(formerly Advanced Biotherapy Concepts, Inc.)
(A Development Stage Enterprise)
BALANCE SHEETS

September 30,
2000		 December 31,
1999
(unaudited)
ASSETS            
Current assets:            
   Cash   $ 853,428   $ 34,958  
     Total current assets    853,428    34,958  
           
Property and equipment, net of depreciation    4,257    —  
           
Other assets            
   Notes receivable-related party    246,619    —  
   Interest receivable    11,519    —  
   Deferred loan origination fees, net of accumulated amortization    84,399    —  
   Patents and patents pending, net of accumulated amortization    157,234    113,319  
     Total other assets    499,771    113,319  
           
Total assets   $ 1,357,456   $ 148,277  
           
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)            
Current liabilities:            
   Accounts payable and accrued liabilities   $ 181,958   $ 93,934  
   Payroll and payroll taxes payable    21,807    —  
   Accrued interest    14,822    —  
   Loan payable to related party    —    257,076  
       Total Current Liabilities    218,587    351,010  
Long-Term liabilities:            
   Convertible debt    1,176,750    —  
   Notes payable, related parties    127,631    213,381  
       Total Long-Term Liabilities    1,304,381    213,381  
       Total Liabilities    1,522,968    564,391  
Commitments and contingencies    —    —  
Stockholders’ equity (deficit):            
   Common stock, par value $0.001 per share; 100,000,000 shares authorized;
      39,848,265 and 30,198,265 shares issued and outstanding 		   39,848    30,198  
   Subscriptions receivable    —    (32,500 )
   Stock options    210,738    210,738  
   Stock warrants    168,665    —  
   Additional paid-in capital    3,231,483    2,770,305  
   Deficit accumulated during the development stage    (3,816,246 )  (3,394,855 )
       Total stockholders’ equity (deficit)    (165,512 )  (416,114 )
Total liabilities and stockholders’ equity (deficit)   $ 1,357,456   $ 148,277  

See accompanying notes and accountant’s review report.

4

ADVANCED BIOTHERAPY, INC.
(formerly Advanced Biotherapy Concepts, Inc.)
(A Development Stage Enterprise)
STATEMENTS OF OPERATIONS

Quarter Ended Nine Months Ended
September 30,
2000		 September 30,
1999		 September 30,
2000		 September 30,
1999		 From Inception
December 2, 1985 Through
September 30, 2000
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Revenues   $ —   $ —   $ —   $ —   $ 89,947  
Operating expenses                           
   Research and development    876    1,588    6,568    12,407    2,111,614  
   Promotional fees    15,020    —    15,020    —    15,020  
   Professional fees    72,858    —    316,061    42,429    1,437,812  
   Depreciation and
      amortization 		   7,410    1,500    13,012    4,500    420,794  
   Salaries and benefits    81,773    —    95,530    —    847,031  
   Contract services    12,419    —    50,495    —    50,495  
   Shareholder relations and
      transfer fees 		   9,573    1,500    16,783    5,500    144,929  
   Rent    5,050    —    5,950    —    117,004  
   General and administrative    38,768    1,283    53,999    2,826    616,992  
   243,747    5,871    573,418    67,662    5,761,691  
                          
Income (loss) from
   operations 		   (243,747 )  (5,871 )  (573,418 )  (67,662 )  (5,671,744 )
                          
Other income (expense):                           
   Miscellaneous income    —    22,000    —    22,000    22,000  
   Internal gain on sale of
      securities 		   —    —    157,520    —    157,520  
   Interest income    8,659    15    16,291    148    17,387  
   Interest expense    (16,215 )  —    (21,784 )  —    (388,846 )
   (7,556 )  22,015    152,027    22,148    (191,939 )
                          
Loss before income taxes    (251,303 )  16,144    (421,391 )  (45,514 )  (5,863,683 )
                          
Income taxes    —    —    —    —    —  
Loss before extraordinary item    (251,303 )  16,144    (421,391 )  (45,514 )  (5,863,683 )
Extraordinary item,
   forgiveness of debt 		   —    —    —    —    2,047,437  
Net loss   $ (251,303 ) $ 16,144 $ (421,391 ) $ (45,514 ) $ (3,816,246 )
Basic and diluted net loss per
   common stock share
   outstanding 		  $ (0.01 ) $ nil   $ (0.01 ) $ nil   $ (0.17 )
Weighted average number of
   basic and diluted common
   stock shares outstanding 		   39,573,265    28,913,475    39,087,681    28,587,386    21,868,510  

See accompanying notes and accountant’s review report.

5

ADVANCED BIOTHERAPY, INC.
(formerly Advanced Biotherapy Concepts, Inc.)
(A Development Stage Enterprise)
STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

Common Stock Additional Paid-in Stock Stock Stock Deficit Accumulated
During Development
Shares Amount Capital Subscriptions Warrants Options Stage
Balance, December 31,
   1997 		   26,836,075   $ 26,836   $ 2,522,459   $ —   $ —   $ —   $ (4,278,835 )
Common stock issued    305,000    305    30,195    —    —    —    —  
Net loss for the year ended
   December 31, 1998 		   —    —    —    —    —    —    (259,912 )
Balance, December 31,
   1998 		   27,141,075    27,141    2,552,654    —    —    —    (4,538,747 )
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    (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 		   30,198,265    30,198    2,770,305    (32,500 )  —    210,738    (3,394,855 )
Contribution of capital by
   shareholders in form of
   foregone interest
   and rent 		   —    —    7,328    —    —    —    —  
Stock subscriptions paid    —    —    —    32,500    —    —    —  
Stock issued as part of stock
   bonus plan in exchange
   for loan payable and
   notes receivable 		   9,200,000    9,200    450,800    —    —    —    —  
Stock warrants issued in
   exchange for services at
   $0.036 per warrant 		   —    —    —    —    168,665    —    —  
Stock issued for cash at
   $0.01 from the exercise
   of options 		   350,000    350    3,150    —    —    —    —  
Stock adjustment    100,000    100    (100 )  —    —    —    —  
Net loss for the nine month
   period ended
   September 30, 2000 		   —    —    —    —    —    —    (421,391 )
Balance, September 30,
   2000 (Unaudited) 		   39,848,265   $ 39,848   $ 3,231,483   $ —   $ 168,665   $ 210,738   $ (3,816,246 )

Required information regarding stock issuance's prior to January 1, 1999 can be found in Note 8.

See accompanying notes and accountant’s review report.

6

ADVANCED BIOTHERAPY, INC.
(formerly Advanced Biotherapy Concepts, Inc.)
(A Development Stage Enterprise)
STATEMENTS OF CASH FLOWS

Nine Months Ended
September 30,		 From Inception
December 2, 1985
through
September 30,
2000 1999 2000
(unaudited) (unaudited) (unaudited)
Cash flows from operating activities:                 
Net income (loss)   $ (421,391 ) $ (45,514 ) $ (3,816,246 )
Adjustments to reconcile net loss to cash used in operating activities:                 
   Depreciation and amortization    13,012    4,500    420,794  
   Extraordinary gain    —    —    (1,684,068 )
   Investment income    (157,520 )  —    (157,520 )
   Expenses paid through issuance of common stock    —    —    231,340  
   Expenses paid through issuance of common stock
      warrants 		   168,665    —    168,665  
   Expenses paid through contribution of additional paid in capital    7,328    —    35,426  
   Organization costs    —    —    (9,220 )
   Decrease (increase) in:                 
     Accounts receivable    —    (22,000 )  —  
     Interest receivable    (11,519 )  —    (11,519 )
     Deferred loan origination costs    (88,256 )          
   Increase (decrease) in:                 
   Accounts payable    88,024    (5,707 )  181,958  
   Accounts payable, related parties    (129,444 )  —    127,632  
   Payroll and payroll taxes payable    21,807    (20,055 )  1,704,791  
   Accrued interest    14,822    —    24,784  
Net cash used in operating activities    (494,472 )  (88,776 )  (2,783,183 )
Cash flows from investing activities:                 
   Purchase of fixed assets    (4,411 )  —    (41,384 )
   Internal gain on sale of securities    157,520    —    157,520  
   Acquisition of patents    (52,917 )  —    (231,154 )
Net cash provided (used) in investing activities    100,192    —    (115,018 )
Cash flows from financing activities:                 
   Proceeds from issuance of common stock    3,500    88,670    2,417,254  
   Proceeds from stock subscriptions    32,500    —    32,500  
   Proceeds from notes payable    1,276,750    —    1,565,258  
   Payments on notes payable    (100,000 )  —    (175,127 )
Net cash provided by financing activities    1,212,750    88,670    3,839,885  
Net increase (decrease) in cash    818,470    (106 )  941,684  
Cash, beginning    34,958    1,182    —  
Cash, ending   $ 853,428   $ 1,076   $ 941,684  
Supplemental disclosures:                 
   Interest paid   $ 984   $ —   $ 340,911  
   Income taxes paid   $ —   $ —   $ —  
Non-cash financing and investing activities:                 
   Professional fees and expenses   $ 7,328   $ —   $ 376,295  
   Common stock subscribed   $ —   $ —   $ 32,500  
   Common stock issued in exchange for a loan payable and notes
      receivable 		  $ 460,000   $ —   $ 460,000  
   Warrants issued for services   $ 168,665   $ —   $ 168,665  

See accompanying notes and accountant’s review report.

7

ADVANCED BIOTHERAPY, INC.
(formerly Advanced Biotherapy Concepts, Inc.)
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000

Note 1.   Organization and Description of Business

             Advanced Biotherapy, Inc. (formerly Advanced Biotherapy Concepts, Inc.) was originally 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 most notably multiple sclerosis and rheumatoid arthritis. The Company is currently conducting research in Maryland and Russia. The Company’s fiscal year-end is December 31.

             On July 14, 2000, the Company incorporated a wholly owned subsidiary, Advanced Biotherapy, Inc. in the state of Delaware.

             On September 1, 2000, the Company merged with its wholly owned subsidiary, effectively changing its name to Advanced Biotherapy, Inc. (hereinafter “the Company”) and its domicile to Delaware.

Note 2.   Summary of Significant Accounting Policies

             This summary of significant accounting policies of Advanced Biotherapy, 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 most notably multiple sclerosis and rheumatoid arthritis.

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 loss of $421,391 for the first nine months of 2000. At September 30, 2000, the Company has an accumulated deficit during the development stage of $3,816,246. The future of the Company is dependent 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 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 September 30, 2000, the Company anticipates that its minimum cash require ments to continue as a going concern will be less than $800,000. The anticipated source of funds will be the issuance for cash of additional common stock of the Company and convertible debt. (See Note 12). In addition, management is actively seeking a collaborative relationship with either a pharmaceutical or 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.

8

Cash and Cash Equivalents

             For purposes of the Statement of Cash Flows, the Company considers all bank accounts, money market accounts and short-term debt securities purchased with a maturity of three months or less to be cash equivalents.

Provision for Taxes

             At September 30, 2000, the Company had net operating loss carryforwards of approximately $3,800,000 which may be offset against future taxable income through 2019. 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 September 30, 2000.

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.

Promotional Fees

             Promotional fees are charged to operations in the year incurred. For the nine months ended September 30, 2000, promotional fees amounted to $15,020.

Compensated Absences

             Employees of the Company are entitled to paid vacation, paid sick days and personal days off, depending on job classification, length of service, and other factors. It is impracticable to estimate the amount of compensation for future absences, and, accordingly, no liability has been recorded in the accompanying financial statements. The Company’s policy is to recognize the costs of compensated absences when actually paid to employees.

Revenue Recognition

             Upon entering into license agreements with other companies, revenue will be recognized when fees are received. Prior to 1994, revenues were recognized when fees for services related to research activities were received.

Interim Financial Statements

             The interim financial statements as of and for the quarter and nine months ended September 30, 2000, included herein, have been prepared for the Company without audit. These statements reflect all adjustments, which are, in the opinion of management, necessary to present fairly the results of operations for these periods. All such adjustments are normal recurring adjustments. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full fiscal year.

9

Derivative Instruments

             In June 1998 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities.” This standard establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value.

             At September 30, 2000, the Company has not engaged in any transactions that would be considered derivative instruments or hedging activities.

Fair Value of Financial Instruments

             The carrying amounts for cash, notes receivable, accounts payable, loans and notes payable, accrued liabilities, and convertible debt approximate their fair value.

Deferred Loan Origination Fees

             During the quarter ended September 30, 2000, the Company entered into convertible subordinated debt which required the payment of loan origination fees. (See Note 14). These loan origination fees, which totaled $88,256, at September 30, 2000, are amortized over the life of the related debt. During the three months ended September 30, 2000, the Company recorded amortization expense in the amount of $3,857 related to these fees.

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 September 30, 2000:

Cost Accumulated Depreciation
Lab equipment   $ 27,582   $ 27,582  
Office equipment    9,250    4,993  
Furniture and fixtures    1,302    1,302  
  $ 38,134   $ 33,877  

             Depreciation expense for the nine month period ended September 30, 2000 was $154, and none for the year ended December 31, 1999.

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.

             The following is a summary of patents and patents pending at September 30, 2000:

Cost Accumulated amortization Net amount
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  
2000 Activity    52,917    (9,002 )  43,915  
Balance, September 30, 2000   $ 231,153   $ (73,919 ) $ 157,234  
10

Note 5.   Related Party Transactions

             The Company has notes receivable in the amount of $246,619 from employee/shareholders of the Company in connection with an agreement as noted below. The notes accrue interest at a rate of 6.5% per annum and are payable on December 31, 2002.

             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, the cumulative amounts owed to the chairman for expenses amount to $257,076. Even though the chairman was 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. During 2000, the Company paid part of this note and the balance was used to offset a bonus stock sale to the chairman. At December 31, 1998, the amounts owing to the Company’s chairman for accrued salary was $1,146,000. During 1999, 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 chairm an 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 10. 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, the Company owed its secretary/treasurer $13,381 for expenses paid in previous years and recorded in notes payable. During 2000, this note was used as partial payment for a bonus stock purchase by the secretary/treasurer. 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 10. 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 President 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 President 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 President. See Note 9. In 1999, the President 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.

             $100,000 of the notes payable to related parties are convertible demand notes and are therefore recorded as current liabilities. These notes bear interest at 10.5%, are uncollateralized, and are payable upon fifteen days written notice. At the option of the note holders, these notes can be converted to common stock of the Company at the rate of $0.25 per share. In addition, the accrued interest may also be converted to common shares of the Company at $0.25 per share. During the quarter ended September 30, 2000, the Company paid these demand notes plus accrued interest.

             The remaining notes payable to related parties consist of loans payable to the chairman and principal shareholder and to another officer. During 2000, $85,750 of the notes was used to offset a bonus stock sale. The remaining notes have no specific due date, are currently uncollateralized, and are non-interest bearing, however, interest for the quarter was calculated at the applicable federal rate in place at September 30, 2000 in the amount of 6.15%. This interest was recorded as interest expense and contributed capital in the accompanying financial statements.

             During 2000 and 1999, 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.

             The Company leases office space from a company owned in part by an officer. The minimum base lease payment is $4,800 annually. See Note 15.

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Note 6.   Internal Gain On Sale of Securities

             During the nine months ending September 30, 2000, officers of the Company sold stock at a gain shortly after purchasing stock through a stock bonus plan. In compliance with the Securities and Exchange Rule 16b, the stockholder remitted the gain to the Company. The gain amounted to $157,520 and is reflected in the income statement as internal gain on sale of securities.

Note 7.   Year 2000 Issues

             Like other companies, Advanced Biotherapy, 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. Any 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.

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Note 8. Common Stock and Additional Paid-in Capital

             Information regarding the number of shares issued and consideration received is as follows:

Common stock
Amount
per share
Shares
Amount		 Additional
Paid-in 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  
   2000    .01    350,000    350    3,150  
  
        11,475,500    11,476    2,405,778  
  
Common stock issued for patents assigned:                      
   1984    .01    550,000    5,500    0  
   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  
   2000    .05    4,932,380    4,932    241,687  
  
        4,942,380    4,942    251,677  
  
Contribution of additional paid in capital:                      
   1999    —    —    —    28,098  
   2000    —    —    —    7,328  
  
        —    —    35,426  
  
Stock subscriptions:                      
   1999    .05    650,000    650    31,850  
  
Cancellation of escrowed shares:                      
   1999    .001    (850,000 )  (850 )  850  
  
                     
Common stock issued for services (1):                      
   1988    .50    25,000    25    12,475  
   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  
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Common stock
Amount
per share
Shares
Amount		 Additional
Paid-in Capital
   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  
  
Common stock issued to replace unrecorded
   certificates:		                      
   1988    .001    1,200    1    (1 )
   1992    .001    500    1    (1 )
   2000    .001    100,000    100    (100 )
  
        101,700    102    (102 )
  
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 in payment of notes payable (1):                      
   2000    .05    1,714,995    1,715    84,035  
  
Common stock issued in payment of loans payable (1):                      
   2000    .05    2,552,625    2,553    125,078  
  
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         39,848,265   $ 39,848   $ 3,231,483  
  

______________

             Effective with the merger of Advanced Biotherapy Concepts, Inc. with its wholly owned subsidiary, Advanced Biotherapy, Inc., each issued and outstanding share of Advanced Biotherapy Concepts, Inc. common stock has been converted automatically into one share of $0.001 par value common stock of Advanced Biotherapy, Inc.

Stock Bonus Plan

             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 had been selling shares of stock out of authorized

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but yet unissued common stock to third parties during the six months immediately preceding the issuance of the bonus shares, or $0.05.

Note 9.   Preferred Stock

             With the merger into the Delaware subsidiary, the Company has authorized 20,000,000 shares of $0.001 par value preferred stock authorized. As of September 30, 2000, the Company has not issued any of its preferred stock.

Note 10.   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. On December 31, 1999, three officers of the Company received 842,953 stock options in partial payment of accrued salaries in the amount of $210,738. In addition the same three officers forgave the balance of their accrued salaries and interest in the amount of $1,482,209 (See Note 5). In accordance with Statement of 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 of 5%, expected life of 5 years, and expected volatility of 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 s tock options are exercisable immediately, and expire on December 31, 2005 (See Note 5). During the nine-month period ended September 30, 2000, 350,000 options were exercised at $0.01 per share, and for the year ending December 31, 1999 no options were exercised.

Grant date Expiration date Number of shares Exercise price
   02/25/91    02/25/01    650,000   $ .20  
   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  
     
  
   Subtotal         2,527,953       
     
  

             Options exercisable at September 30, 2000 are 2,527,953 and at December 31, 1999 are 2,877,953. The average exercise price of the options at September 30, 2000 and December 31, 1999 is $0.13 per share.

Note 11.   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) adjusted for the interest expense on the convertible debt by the weighted average number of basic shares outstanding increased by the number of shares that would be outstanding assuming conversion of the stock options, warrants, and convertible debt. Diluted net loss per share is the same as basic net loss per share as inclusion of the common stock equivalents would be antidilutive.

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Note 12.   Non-Cash Commitment and Warrants

             On January 19, 2000, the Company engaged an investment banking firm and, as partial compensation for its services, issued warrants to purchase up to 4,685,135 shares of Company Common Stock with an exercise price of $0.15 per share. The warrants are exercisable for ten years. In accordance with Statement of Financial Accounting Standards No. 123, the fair value of the warrants was estimated using the Black Scholes Option Price Calculation. The following assumptions were made to value the warrants: strike price at $0.09, risk free interest rate of 6.2%, expected life of 10 years, and expected volatility of 30%. During the nine months ended September 30, 2000, the Company recorded $168,665 as consulting fees for the aforementioned investment banking firm services. A cash-less exercise may be used for all warrant transactions. No fees are payable to the investment advisor in connection with the exercise of t he warrants, which contain full, unconditional piggy-back registration rights without any holdback obligations. Should the investment firm elect to cancel its agreement with the Company within the first twelve months, 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 notice of cancellation.

Note 13.   Concentrations

Credit Risk for Cash Held at Banks

             The Company maintains cash accounts at a California bank. These funds are insured to a maximum of $100,000.

Note 14.   Convertible Debt

             During the nine months ended September 30, 2000, the Company sold in a private placement, to accredited investors, $1,176,750 of convertible subordinated debt due and payable September 30, 2004. The debt bears interest at the rate of 10% per annum payable semi-annually in cash or additional convertible subordinated debt. This debt is convertible into shares of Company common stock at a conversion price equal to $0.25 per share, subject to certain anti-dilution provisions. The Company offered the convertible subordinated debt pursuant to Section 4(2) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D, promulagated under the Securities Act. In connection with the placement of the debt, the Company is obligated to pay a loan origination fee of $88,256 and related expenses of $1,875, to its financial advisor, together with an option to purchase an equivalent principal amount of convertibl e subordinated debt at the face amount thereof exercisable for a period of ten years. This fee is currently included in accounts payable on the balance sheet.

             Subsequent to the date of these financial statements, the Company sold an additional $167,500 in convertible debt.

Note 15.   Commitments and Contingencies

Office Lease

             The Company leases office space from a related party at a minimum annual rate of $4,800. This lease expires December 31, 2002.

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

             Except for the historical information contained herein, the following discussion contains forward-looking statements that involves risks and uncertainties, including statements regarding the period of time which the company's existing capital resources from various resources will be adequate to satisfy its capital requirements. The company's actual results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include but are not limited to, those discussed in this section, as well as in the sections entitled business, technical background, risk factors, description of properties, legal proceedings, submission of matters to a vote of security holders, market for registrant's common equity and related stockholder's matters of the company's annual report (form 10-KSB/A) for the fiscal year ending December 31, 1999.

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Results of Operations

Liquidity and Capital Resources

             As of September 30, 2000, the Company has issued and outstanding 39,848,265 shares of its Common Stock to officers, directors and others. The Company is a development stage company and has no material assets other than cash. The Company had $853,428 in cash as of September 30, 2000.

             For the three months ended September 30, 2000, the Company realized a net loss from operations of $251,303 compared to a net loss from operations of $16,144 for the three months ended ending September 30, 1999. The Company’s increase in net loss was principally attributable to increased salaries over 1999 in the amount of $81,773, increased contract services over 1999 in the amount of $12,419, increased professional fees over 1999, principally increased legal fees related to its regulatory filing requirements with the Securities and Exchange Commission and other corporate matters, in the amount of $72,858, and increased general and administrative costs over 1999 in the amount of $37,485.

             For the nine months ended September 30, 2000, the Company realized a net loss from operations of $421,391 compared to a net loss from operations of $45,514 for the nine months ended ending September 30, 1999. The Company’s increase in net loss was principally attributable to increased salaries over 1999 in the amount of $95,530, increased contract services over 1999 in the amount of $50,495, increased professional fees over 1999 in the amount of $273,632, principally related to the valuation of warrants issued to the Company's investment banking firm and financial advisor, Cappello Capital Corp., and increased legal fees related to its regulatory filing requirements with the Securities and Exchange Commission and other corporate matters, and increased general and administrative costs over 1999 in the amount of $51,173.

             During the quarter ending March 31, 2000, two officers of the Company sold stock at a gain after purchasing stock through a stock bonus plan. In compliance with the Securities and Exchange Rule 16b, the stockholders remitted the gains to the Company. The gains amounted to $129,445 for one officer, $28,075 for the other officer, both which are reflected in the income statement as internal gain on sale of securities.

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PART II

Item 2.   Changes in Securities

             (a) Effective as of September 1, 2000, the registrant reincorporated to Delaware from Nevada by reason of the merger (“Merger”) of Advanced Biotherapy Concepts, Inc., a Nevada corporation (“Advanced Biotherapy - Nevada”) with and into its wholly-owned subsidiary, Advanced Biotherapy, Inc., a Delaware corporation (“Advanced Biotherapy - Delaware”), which was the surviving corporation in the Merger. Pursuant to the Merger, the name of the registrant was changed to Advanced Biotherapy, Inc., and the registrant adopted the Certificate of Incorporation and the Bylaws, each of which is furnished as an Exhibit to this Form 10-QSB. Each issued and outstanding share of Advanced Biotherapy - Nevada common stock has been converted automatically into one share of common stock, $.001 par value, of Advanced Biotherapy - Delaware. For the purposes of this Part II of Form 10-QSB, the term “Company” refers to Advanced Biotherapy - Delaware, the registrant. The Certificate of Incorporation permits the Company’s Board of Directors to adopt, amend or repeal any or all of the Company’s Bylaws without stockholder action and provides that such Bylaws may also be adopted, amended or repealed by its stockholders, but only if approved by holders of 66 2/3% or more of the voting power of all outstanding shares of voting stock. However, the only stockholder vote required if the adoption, amendment or repeal is approved by a majority of the Company’s directors is the affirmative vote of a majority of the voting power of all outstanding shares of voting stock. The foregoing provisions will make it more difficult for the stockholders to make changes to the Company’s Certificate of Incorporation and Bylaws, including changes designed to facilitate the exercise of control over the Company, as compared to the provisions of the articles and bylaws of Advanced Biotherapy&nb sp;- Nevada.

             (c) (i) During the quarter ended September 30, 2000, the Company sold in a private placement to accredited investors approximately $1,176,750 of convertible subordinated debt due and payable September 30, 2004 (“Convertible Subordinated Debt”). The sale of $570,000 of such $1,176,750 of Convertible Subordinated Debt was reported previously by the Company in its Form 10-QSB for the quarter ended June 30, 2000. During the period commencing October 1, 2000, through November 8, 2000, the Company placed with accredited investors an additional $167,500 of Convertible Subordinated Debt. The Convertible Subordinated Debt bears interest at the rate of 10% per annum payable semi-annually in cash or additional Convertible Subordinated Debt. In connection with the placement of such Convertible Subordinated Debt, the Company is obligated to pay its financial advisor, Cappello Capital Corp., a placement fee of 7.5%, either in cash or, at the financial advisor’s option, in shares of Company Common Stock, together with an option to purchase an equivalent principal amount of Convertible Subordinated Debt at the face amount thereof exercisable for a period of ten years. The Convertible Subordinated Debt is convertible into shares of Company Common Stock at a conversion price per share equal to twenty-five cents ($0.25), subject to certain anti-dilution provisions. The Company offered the Convertible Subordinated Debt pursuant to Section 4(2) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D. The Company paid the placement fee in cash for Convertible Subordinated Debt sold through September 30, 2000. The net proceeds from the placement of Convertible Subordinated Debt will be used for the following primary purposes: approximately 50% of the proceeds raised as of November 8, 2000, for working capital, including salaries of management, legal and accounting fees, and the balanc e of the proceeds raised as of November 8, 2000, for payment of scientific development costs and for continued patent application legal costs, and to pursue certain collaborative relationships with other biotechnology or pharmaceutical companies.

             The form of Convertible Subordinated Debt Instrument was filed as an Exhibit to the Company’s Form 10-QSB for the quarter ended June  30, 2000.

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

(a)   On August 24, 2000, the Company held its annual meeting of stockholders (“Annual Meeting”).

(c)   A brief description of each matter voted upon at the Annual Meeting is set forth below:

             (1) The stockholders elected eight directors to hold office until the next annual meeting of the stockholders and until their respective successors are elected and qualified, or until death, resignation or removal:

   Name of Director For Withhold Authority
Simon Skurkovich, M.D.    33,354,846     44,050  
Edmond Buccellato    33,354,846     44,050  
Boris Skurkovich, M.D.    33,354,846     44,050  
Lawrence Loomis    33,354,846     44,050  
Leonard Millstein    33,355,846     43,050  
Paul J. Marangos    33,354,846     44,050  
Alexander L. Cappello    33,355,846     43,050  
John M. Bendheim    33,355,646     43,250  

             (2)     The stockholders approved the Merger pursuant to which the registrant was merged into its wholly owned Delaware subsidiary resulting in the reincorporation of the registrant to Delaware from Nevada, the adoption of a new corporate name, “Advanced Biotherapy, Inc.,” and the adoption of the registrant’s Certificate of Incorporation and Bylaws.

For: 27,363,771
Against: 91,675
Abstain: 26,530

             (3)     The stockholders approved the authority of the Board of Directors, which authority is contingent upon the Board of Directors making a determination within one year after date of the Annual Meeting that such action is in the best interest of the Company’s stockholders, to effect a decrease in the number of issued and outstanding shares of the Company’s common stock by means of a reverse stock split in a range not to exceed a one-for-four reverse split, i.e., at a ratio of at least 1:4.

For: 26,114,032
Against: 1,266,594
Abstain: 101,350

Item 6.   Exhibits and Reports on Form 8-K.

 Exhibit
Number		  Description
 (3)(i)  Certificate of Incorporation
 (3)(ii)  Bylaws
 (27)  Financial Data Schedule
19

SIGNATURES




      ADVANCED BIOTHERAPY, INC.


Dated: November 13, 2000   By:   /s/ Edmond Buccellato
    
       President




     


  By:   /s/ Jeanne Kelly
    
       Secretary/Treasurer



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