<PAGE>
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 June 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
--------------
Commission file number 0-26323
ADVANCED BIOTHERAPY CONCEPTS, INC.
(Exact name or registrant as specified in its charter)
Nevada 95-4066865
(State of 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)
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.
[X] YES [ ] NO
As of June 30, 2000, the Registrant had 39,398,265 shares of common stock,
$0.001 par value, issued and outstanding.
---------------------------------------------------------------------
<PAGE>
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
JUNE 30, 2000
TABLE OF CONTENTS
ITEM PAGE
PART I.
1. Financial Statements:
a. Accountant's Review Report 1
b. Balance Sheets 2
c. Statements of Operations 3
d. Statement of Stockholders' Equity (Deficit) 4
e. Statements of Cash Flows 5
f. Notes to Financial Statements 6
2 Management Discussion and Analysis of Financial
Conditions and Results of Operations 15
PART II.
2. Changes in Securities 17
6. Exhibits and Reports on Form 8-K 18
<PAGE>
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 Concepts,
Inc. (a development stage enterprise), as of June 30, 2000, and the related
statements of operations, stockholders' equity, and cash flows for the quarter
and six months then ended. All information included in these financial
statements is the representation of the management of Advanced Biotherapy
Concepts, 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 suffered recurring losses from operations,
has generated little revenue in the past years, and has a working capital
deficit of $177,998 at June 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, 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.
Williams & Webster, P.S.
CERTIFIED PUBLIC ACCOUNTANTS
Spokane, Washington
August 9, 2000
<PAGE>
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30,
2000 December 31,
(Unaudited) 1999
------------- --------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 7,584 $ 34,958
------------- --------------
TOTAL CURRENT ASSETS 7,584 34,958
------------- --------------
PROPERTY AND EQUIPMENT, net of depreciation - -
------------- --------------
OTHER ASSETS
Notes receivable-related party 246,619 -
Interest receivable 7,489 -
Patents and patents pending, net of
accumulated amortization 131,389 113,319
------------- --------------
TOTAL OTHER ASSETS 385,497 113,319
------------- --------------
TOTAL ASSETS $ 393,081 148,277
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 84,018 $ 93,934
Accrued interest 1,564 -
Notes payable, related parties 100,000 -
Loan payable to related party - 257,076
TOTAL CURRENT LIABILITIES 185,582 351,010
------------- --------------
LONG-TERM LIABILITIES
Notes payable, related parties 127,631 213,381
------------- --------------
TOTAL LIABILITIES 313,213 564,391
------------- --------------
COMMITMENTS AND CONTINGENCIES - -
------------- --------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, par value $0.001 per share;
50,000,000 shares authorized; 39,398,265 and
30,198,265 shares issued and outstanding 39,398 30,198
Subscriptions receivable - (32,500)
Stock options 210,738 210,738
Stock warrants 168,665 -
Additional paid-in capital 3,226,010 2,770,305
Deficit accumulated during the development stage (3,564,943) (3,394,855)
------------- --------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 79,868 (416,114)
------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $ 393,081 $ 148,277
============= ==============
</TABLE>
See accompanyiong notes and accountant's review report.
2
<PAGE>
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
From Inception
Quarter Ended Six Months Ended December 2, 1985
---------------------------------- -------------------------------
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999 Through
June 30, 2000
-----------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------- -------------- ------------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
REVENUES $ - $ - $ - $ - $ 89,947
------------- -------------- ------------- ------------- -----------------
OPERATING EXPENSES
Research and development 5,044 6,540 5,692 10,819 2,110,738
Professional fees 53,865 29,911 243,203 42,429 1,364,954
Depreciation and amortization 2,975 1,500 5,602 3,000 413,384
Salaries and benefits 13,757 - 13,757 - 765,258
Contract services 28,076 - 38,076 - 38,076
Shareholder relations and transfer fees 5,485 1,600 7,210 4,600 135,356
Rent 450 - 900 - 111,954
General and administrative 12,021 531 15,231 943 578,224
------------- -------------- ------------- ------------- -----------------
121,673 40,082 329,671 61,791 5,517,944
------------- -------------- ------------- ------------- -----------------
Loss from operations (121,673) (40,082) (329,671) (61,791) (5,427,997)
Other income (expense)
Miscellaneous income - - - - 22,000
Internal gain on sale of securities 28,075 - 157,520 - 157,520
Interest income 4,066 97 7,632 133 8,728
Interest expense (3,579) - (5,569) - (372,631)
------------- -------------- ------------- ------------- -----------------
28,562 97 159,583 133 (184,383)
------------- -------------- ------------- ------------- -----------------
Loss before extraordinary item (93,111) (39,985) (170,088) (61,658) (5,612,380)
Extraordinary item, forgiveness of debt - - - - 2,047,437
NET LOSS $ (93,111) $ (39,985) $ (170,088) $ (61,658) $ (3,564,943)
============= ============== ============= ============= =================
BASIC AND DILUTED NET LOSS
PER COMMON STOCK SHARE
OUTSTANDING $ nil $ nil $ nil $ nil $ (0.17)
============= ============== ============= ============= =================
WEIGHTED AVERAGE NUMBER OF
BASIC AND DILUTED COMMON
STOCK SHARES OUTSTANDING 39,398,265 28,671,802 38,842,221 28,144,741 21,560,892
============= ============== ============= ============= =================
</TABLE>
See accompanying notes and accountant's review report.
3
<PAGE>
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
COMMON STOCK ADDITIONAL DURING
------------------------
PAID-IN STOCK STOCK STOCK DEVELOPMENT
SHARES AMOUNT CAPITAL SUBSCRIPTIONS WARRANTS OPTIONS STAGE
------------ ---------- ------------ ------------- ---------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
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 - - 4,905 - - - -
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
Net income for the six month
period ended June 30, 2000 - - - - - - (170,088)
------------ ---------- ------------ ------------- ---------- --------- --------------
Balance, June 30, 2000
(Unaudited) 39,398,265 $ 39,398 $ 3,226,010 $ - $ 168,665 $210,738 $ (3,564,943)
============ ========== ============ ============= ========== ========= ==============
</TABLE>
Required information regarding stock issuances prior to January 1, 1999 can be
found in Note 8.
See accompanying notes and accountant's review report.
4
<PAGE>
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
From Inception
December 2, 1985
Quarter Ended June 30, Six Months Ended June 30, through
----------------------------- -----------------------------
2000 1999 2000 1999 June 30, 2000
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------- ------------- ------------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (93,111) $ (39,985) $ (170,088) $ (61,658) $ (3,564,943)
Adjustments to reconcile net loss
to cash used in operating activities:
Depreciation and amortization 2,975 1,500 5,602 3,000 413,384
Extraordinary gain - - - - (1,684,068)
Investment income (28,075) - (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 2,465 - 4,905 - 33,003
Organization costs - - - - (9,220)
Decrease (increase) in:
Interest receivable (3,986) - (7,489) - (7,489)
Increase (decrease) in:
Accounts payable 15,600 893 (9,916) (7,323) 84,018
Accounts payable, related parties - - (129,444) - 127,632
Salaries payable - (12,756) - (12,756) 1,682,984
Accrued interest 1,564 - 1,564 - 11,526
------------- ------------- ------------- ------------- -----------------
Net cash used in operating activities (102,568) (50,348) (293,721) (78,737) (2,670,688)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets - - - - (36,973)
Internal gain on sale of securities 28,075 - 157,520 - 157,520
Acquisition of patents (22,860) - (23,673) - (201,910)
------------- ------------- ------------- ------------- -----------------
Net cash provided (used) in investing activities 5,215 - 133,847 - (81,363)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock - 15,550 - 88,670 2,413,754
Proceeds from stock subscriptions - - 32,500 - 32,500
Proceeds from notes payable 100,000 - 100,000 - 388,508
Payments on notes payable - - - - (75,127)
------------- ------------- ------------- ------------- -----------------
Net cash provided by financing activities 100,000 15,550 132,500 88,670 2,759,635
------------- ------------- ------------- ------------- -----------------
Net increase (decrease) in cash 2,647 (34,798) (27,374) 9,933 7,584
Cash, beginning 4,937 45,913 34,958 1,182 -
------------- ------------- ------------- ------------- -----------------
Cash, ending $ 7,584 $ 11,115 $ 7,584 $ 11,115 $ 7,584
============= ============= ============= ============= =================
Supplemental disclosures:
Interest paid $ - $ - $ - $ - $ 339,927
============= ============= ============= ============= =================
Income taxes paid $ - $ - $ - $ - $ -
============= ============= ============= ============= =================
NON-CASH FINANCING AND INVESTING ACTIVITIES:
Professional fees and expenses $ - $ - $ - $ - $ 368,967
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
</TABLE>
See accompanying notes and accountant's review report.
5
<PAGE>
ADVANCED BIOTHERAPY CONCEPTS, INC
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND DECEMBER 31, 1999
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. The Company's
fiscal year-end is December 31.
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
loss of $170,088 for the first six-months of 2000. At June 30, 2000, current
liabilities exceed current assets by $177,998 and the Company has an accumulated
deficit during the development stage at June 30, 2000 of $3,564,943. 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 June 30, 2000, the Company anticipates that
its minimum cash requirements to continue as a going concern will be less than
$500,000. The anticipated source of funds will be the issuance of additional
common stock of the Company for cash 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.
6
<PAGE>
ADVANCED BIOTHERAPY CONCEPTS, INC
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND DECEMBER 31, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 June 30, 2000, the Company had net operating loss carryforwards of
approximately $3,500,000 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
June 30, 2000 and December 31, 1999.
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.
INTERIM FINANCIAL STATEMENTS
The interim financial statements as of and for the quarter and six months ended
June 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.
7
<PAGE>
ADVANCED BIOTHERAPY CONCEPTS, INC
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND DECEMBER 31, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 June 30, 2000, the Company has not engaged in any transactions that would be
considered derivative instruments or hedging activities.
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
June 30, 2000 and December 31, 1999.
COST ACCUMULATED 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 period ended June 30, 2000 or 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.
ACCUMULATED
COST 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 23,672 (5,602) 18,070
------------- --------------- -------------
Balance, June 30, 2000 $ 201,908 $ (70,519) $ 131,389
============= =============== =============
8
<PAGE>
ADVANCED BIOTHERAPY CONCEPTS, INC
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 and December 31, 2000
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,
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 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 9. 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 9.
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 9. 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.
$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.
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 was calculated at the applicable federal rate in place at June
30, 2000 in the amount of 6.35%. This interest was recorded as interest expense
and contributed capital in the accompanying financial statements.
9
<PAGE>
ADVANCED BIOTHERAPY CONCEPTS, INC
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 and December 31, 2000
NOTE 5 - RELATED PARTY TRANSACTIONS (CONTINUED)
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.
NOTE 6 - INTERNAL GAIN ON SALE OF SECURITIES
During the six months ending June 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 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. 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.
NOTE 8 - COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL
Information regarding the number of shares issued and consideration received is
as follows:
<TABLE>
<CAPTION>
Common stock
----------------------------------------------
Amount per Additional
share Shares Amount Paid-in Capital
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock issued for cash:
1985 $ .50 100,000 $ 100 $ 49,900
1986 1.00 639,500 640 678,861
1987 1.00 850,500 850 759,650
1988 1.00 25,000 25 24,975
1993 .25 2,402,000 2,402 475,900
1995 .05 1,000,000 1,000 49,000
1996 .05 520,000 520 25,480
1997 .05 490,000 490 24,010
1997 .10 1,310,500 1,311 129,739
1997 .01 325,000 325 2,925
1998 .10 305,000 305 30,195
1999 .05 3,158,000 3,158 151,993
--------------------------------------------------
11,125,500 $ 11,126 $ 2,402,628
--------------------------------------------------
</TABLE>
10
<PAGE>
ADVANCED BIOTHERAPY CONCEPTS, INC
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 and December 31, 2000
NOTE 8 - COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL (CONTINUED)
<TABLE>
<CAPTION>
Common stock
--------------------------------------------
Amount per Additional
share Shares Amount Paid-in Capital
----------------------------------------------------------------
<S> <C> <C> <C> <C>
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 - - - 2,440
--------------------------------------------------
- - 30,538
--------------------------------------------------
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
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
</TABLE>
11
<PAGE>
ADVANCED BIOTHERAPY CONCEPTS, INC
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 and December 31, 2000
NOTE 8 - COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL (CONTINUED)
<TABLE>
<CAPTION>
Common stock
--------------------------------------------
Amount per Additional
share Shares Amount Paid-in Capital
----------------------------------------------------------------
<S> <C> <C> <C> <C>
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)
--------------------------------------------------
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 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 39,398,265 $ 39,398 $ 3,223,545
==================================================
</TABLE>
(1) Per share amounts determined by information deemed most reliable based
on circumstances of each case: trading price at time of issuance or
value of services received.
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 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.
12
<PAGE>
ADVANCED BIOTHERAPY CONCEPTS, INC
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 and December 31, 1999
NOTE 9 - 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 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 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 stock options are
exercisable immediately, and expire on December 31, 2005. See Note 5. No options
were exercised or cancelled in the six-month period ended June 30, 2000, or the
year ending December 31, 1999.
<TABLE>
<CAPTION>
Grant date Expiration date Number of shares Exercise price
---------------------------- ------------------------- ------------------------- ------------------
<S> <C> <C> <C> <C>
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
=========
</TABLE>
Options exercisable at June 30, 2000 and December 31, 1999 are 2,877,953.
NOTE 10 - 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 net loss per share is the same as basic net loss per share as inclusion
of the common stock equivalents would be antidilutive.
13
<PAGE>
ADVANCED BIOTHERAPY CONCEPTS, INC
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 and December 31, 1999
NOTE 11 - NON-CASH COMMITMENT
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. 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 the 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 12 - SUBSEQUENT EVENTS
Subsequent to the date of these financial statements, but prior to their
issuance, the Company sold in a private placement, to accredited investors,
approximately $570,000 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. In connection
with the placement of such debt, the Company is obligated to pay a placement fee
of 7.5% in the form of cash or convertible subordinated debt, to its financial
advisor, 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. 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.
14
<PAGE>
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.
Results of Operations
Liquidity and Capital Resources.
As of June 30, 2000, the Company has issued and outstanding 39,398,265
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 $7,584 in
cash as of June 30, 2000.
Three Months Ended June 30, 2000 and 1999
For the three months ended June 30, 2000, the Company realized a net loss from
operations of $121,673 compared to a net loss from operations of $40,082 for the
three months ended June 30, 1999. The Company increased professional fees
over 1999 in the amount of $23,954 principally increased legal fees related to
its regulatory filing requirements with the Securities and Exchange Commission
and other corporate matters. The Company also paid salaries of $13,757 and
contract services in the amount of $28,076. During the quarter ended June 30,
2000, an officer of the Company, in compliance with the Securities and Exchange
Rule 16b, remitted to the Company the gain realized from the sale of stock after
purchasing such stock through a stock bonus plan. The gain amounted to $28,075
which is reflected in the income statement as internal gain on sale of
securities.
15
<PAGE>
Six Months Ended June 30, 2000 and 1999.
For the six months ended June 30, 2000, the Company realized a net loss
from operations of $329,671 compared to a net loss from operations of $61,791
for the six months ended June 30, 1999. The Company increased
professional fees over 1999 in the amount of $200,774 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. During the 6 months ended June 30, 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.
16
<PAGE>
Part II
Item 2. (c) (i) During the quarter ended June 30, 2000, the Company sold
in a private placement to accredited investors certain
convertible demand notes in aggregate principal amount of
$100,000 ("Notes"), of which the sale of $25,000 of such Notes is
initially reported in this Form 10-QSB, and the sale of $75,000
of such Notes was reported previously by the Company in its Form
10-QSB for the quarter ended March 31, 2000. The Company did not
pay any underwriting discounts or commissions in connection with
such private placement. The Notes are payable upon 15 days'
written demand. The Notes are convertible into shares of Company
Common Stock at the rate of one share of Common Stock for each
twenty-five cents ($0.25) of the amount of principal and/or
accrued interest so converted. The foregoing conversion price is
subject to adjustment for stock splits, stock dividends or
similar distributions in respect of the Common Stock occurring
after the date of such Notes. The Notes were sold to John M.
Bendheim, a director of the Company, Alexander L. Cappello, a
director of the Company, and certain principals and affiliates of
Cappello Capital Corp., the Company's financial advisor.
(ii) For the period July 1, 2000, through August 9, 2000, the
Company sold in a private placement to accredited investors
approximately $570,000 of convertible subordinated debt due and
payable September 30, 2004 ("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
17
<PAGE>
Section 4(2) of the Securities Act of 1933, as amended, and Rule
506 of Regulation D. The proceeds from the placement of
Convertible Subordinated Debt will be used for the following
primary purposes: approximately 50% of the proceeds raised as of
August 9, 2000, for payment of operating costs, including certain
salaries to key personnel, and the balance of the proceeds raised
as of August 9, 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 is filed as an
Exhibit to this Form 10-QSB.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit (10) Convertible Subordinated Debt Instrument
Exhibit (27) Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter
for which this report on Form 10-QSB is filed.
Dated: August 14, 2000
Advanced Biotherapy Concepts, Inc.
By: \s\ Edmond Buccellato By: \s\ Jeanne Kelly
President Secretary/Treasurer
