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<SEC-DOCUMENT>0000912057-01-506418.txt : 20010409
<SEC-HEADER>0000912057-01-506418.hdr.sgml : 20010409
ACCESSION NUMBER:		0000912057-01-506418
CONFORMED SUBMISSION TYPE:	10KSB
PUBLIC DOCUMENT COUNT:		6
CONFORMED PERIOD OF REPORT:	20001231
FILED AS OF DATE:		20010402

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			ADVANCED BIOTHERAPY INC
		CENTRAL INDEX KEY:			0000791833
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH [8731]
		STATE OF INCORPORATION:			NV
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10KSB
		SEC ACT:		
		SEC FILE NUMBER:	000-26323
		FILM NUMBER:		1591205

	BUSINESS ADDRESS:	
		STREET 1:		6355 TOPANGA CANYON BLVD
		STREET 2:		SUITE 510
		CITY:			WOODLAND HILLS
		STATE:			CA
		ZIP:			91367
		BUSINESS PHONE:		8188833956

	MAIL ADDRESS:	
		STREET 1:		6355 TOPANGA CANYON BLVD
		STREET 2:		SUITE 510
		CITY:			WOODLAND HILLS
		STATE:			CA
		ZIP:			91367

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	ADVANCED BIOTHERAPY CONCEPTS INC
		DATE OF NAME CHANGE:	19990524
</SEC-HEADER>
<DOCUMENT>
<TYPE>10KSB
<SEQUENCE>1
<FILENAME>a2043353z10ksb.txt
<DESCRIPTION>10KSB
<TEXT>

<PAGE>


================================================================================
                                   FORM 10-KSB

                       SECURITIES AND EXCHANGE COMMISSION
                                              Washington, D. C. 20549

[x]       ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934
                  For the fiscal year ending December 31, 2000

                           OR

[ ]       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934
          For the transition period from

                         Commission file number 0-26323

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

Delaware                                                        51-0402415
(State or other jurisdiction of                                (IRS Employer
incorporation or organization)                               Identification No.)

                         5950 La Place Court, Suite 210
                       Carlsbad, California 92008 (Address
              of principal executive offices, including zip code.)

                                 (760) 431-4282
              (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:    None

Securities registered pursuant to Section 12(g) of the Act:    Common Stock

Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES [ X ] NO [ ]

Check if no disclosure of delinquent filers pursuant to Item 405 of Regulation
S-B is contained herein, and no disclosure will be contained, to the best of
Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]

State Issuer's revenues for its most recent fiscal year.
         December 31, 2000:  $-0-

================================================================================

<PAGE>


The aggregate market value of the voting stock held by non-affiliates computed
by reference to the average of the bid and ask price of such stock on March 28,
2001 was $7,595,270. Excludes 12,722,299 shares of Common Stock held by
directors, executive officers and shareholders whose beneficial ownership
exceeds ten percent (10%) of the shares outstanding on March 28, 2001.

Issuers involved in Bankruptcy Proceedings during the past Five Years:

         Not Applicable.

State the number of shares outstanding of each of the Issuer's classes of common
equity, as of the latest practicable date:

         March 28, 2001 - 39,848,265 shares of Common Stock

Documents Incorporated by Reference:

None.


<PAGE>


ITEM 1.  BUSINESS

GENERAL INTRODUCTION

         Advanced Biotherapy Inc. (the "Company") is a corporation organized and
existing under the laws of the State of Delaware, headquartered in Carlsbad,
California. It is a biotechnology company developing therapeutics for a range of
autoimmune diseases based on an anti-cytokine platform technology. Cytokines are
soluble components of the immune system that are largely responsible for
regulating the immune response. When over produced, as in certain autoimmune
diseases, interferons and cytokines can lead to immune system disturbance and
inflammation. This results in localized tissue damage and leads to the pathology
seen in autoimmune diseases (AD). The Company's drugs are designed to reduce the
levels of certain cytokines.

         Prior to marketing the Company's development stage products, the
Company must obtain regulatory approval from the United States Food and Drug
Administration ("FDA"). The Company is not sufficiently funded to allow it to
complete the product development process, obtain FDA approval, and market its
products. However, the Company plans to seek additional financing through the
private sale of restricted securities to investors, enter into joint ventures or
licensing or similar arrangements with large pharmaceutical companies to provide
the funding necessary for additional activities. There can be no assurance that
the Company will enter into any such arrangements, obtain the appropriate
regulatory approvals, or develop, manufacture, market, or distribute
commercially viable products.

         To date, the Company's activities have consisted primarily of research,
development and human clinical testing. Such activities have resulted in
accumulated losses at December 31, 2000. The Company anticipates that it will
incur substantial losses in the foreseeable future as a result of its continued
product development. There are no assurances that the Company will be successful
in completing its product development, receive FDA approval, implement
manufacturing operations and commercially market its development stage products.

         The Company develops drugs that may effectively treat a range of
autoimmune diseases. The technology of the Company is based upon the work of
Drs. Simon and Boris Skurkovich who first suggested that autoimmune disease may
be the result of augmented cytokine production (Nature, Vol. 241, P 551-552,
1974). The Company has conducted a number of clinical trials (conducted at major
institutes of the Medical Academy of Sciences in Russia), in which it has
evaluated the efficacy of a series of polyclonal antibodies, raised against a
variety of cytokines, in autoimmune diseases such as rheumatoid arthritis (RA),
multiple sclerosis (MS) and acquired immunodeficiency disease (AIDS).

         In four randomized, placebo-controlled, double blind trials conducted
in Russia, the Company has demonstrated efficacy of its anti-cytokine strategy
in both RA and MS. These studies have permitted the Company to determine which
cytokines are most active in the AD process, and therefore, which need to be
reduced to treat the disorder. With a five-day treatment course, statistically
significant and clinically relevant responses were obtained that persisted for
as long as one year after treatment termination in the MS studies and for one
month in the RA studies.


                                       2
<PAGE>


BUSINESS OBJECTIVE

         The business strategy of the Company is twofold in nature and involves
the engagement of a corporate partner to assist in the clinical development of
its drug treatments for autoimmune disorders. This will involve, upon the
identification of such a partner, the filing of the necessary documents with the
FDA, conducting clinical trials and obtaining the necessary regulatory
approvals, (New Drug Application (NDA) or a 510K device approval). The Company
does not intend to market its drug products if they are approved by the FDA, but
will instead seek a royalty arrangement with a corporate partner who will market
the product when and if it is approved.

         The second element of the Company's business strategy is to seek out
merger and acquisition candidates that can either expand the Company's
technology base in the area of autoimmune disease therapeutics or bring approved
products into the Company that will generate recurring revenue.

TECHNICAL BACKGROUND

         The Company's main biotechnology platform involves the use of
antibodies directed against certain carefully selected cytokines. An antibody is
a protein that is secreted by cells in the blood and is part of the body's
natural defense system against foreign invaders such as viruses or bacteria.
Antibodies seek out and selectively bind to their targets, triggering such
effects as neutralizing toxins and marshaling the immune system against
infectious microorganisms and cancer cells. The Company believes that its
development-stage antibody treatment removes or neutralizes certain interferons
and cytokines. These are soluble components of the immune system that are
largely responsible for regulating the immune response and inflammation. During
certain ADs, such as RA, MS and Type I diabetes, certain interferons (IFN) and
other cytokines are over produced by the human body which results in localized
damage to organs and tissues and constitutes the pathology of AD.

         In particular, interferon-alpha (IFN-(alpha)) or interferon-gamma
(IFN-(gamma)) is known to trigger or exacerbate ADs in animals prone to AD, and
in patients who have had underlying autoimmune conditions or a predisposition to
them. In animal models of a number of human ADs, the administration of
antibodies to IFN-(alpha) or IFN-(gamma) halted or delayed these diseases. This
includes antibodies to IFN-(gamma) given to:

         1.       New Zealand Black and White mice known to develop a severe AD
                  similar to systemic lupus erythematosus in humans.

         2.       Lewis rats afflicted with actively-induced experimental AD of
                  the peripheral nervous system.

         3.       NOD mice, an animal model of human Type I Diabetes.

         4.       BB/Wor rats, a diabetes-prone strain, and CBA/J mice, a strain
                  susceptible to experimental autoimmune thyroiditis (EAT). In
                  all cases, the anti-IFN-y antibodies suppressed or reduced the
                  disease.

         The biological basis for which the immune system launches an immune
response directed against a "self antigen" is still considered unclear. Many of
the autoimmune


                                       3
<PAGE>


diseases are, however, associated with identifiable antigens of the Human
Leukocyte Antigen (HLA) complex, specifically, the Class II proteins. The cells
which constitute the immune system are not confined to one location or organ, so
there is a need for them to communicate with each other in order for the various
components (mediator cells, phagocytic cells, T-cells and B-cells) of the system
to function in a coordinated manner. The agents, which effect this
communication, are the cytokines. Biochemically, the cytokines are small
proteins or polypeptides and include the interferons, IFN, (alpha, beta and
gamma), as well as the Interleukins (IL) and the Tumor Necrosis Factors (TNF),
that include TNF alpha (TNF-(alpha)) and TNF beta (TNF-(beta)).

         The cytokines are divisible into the pro-inflammatory (IL-1, 2 and 12,
INF-(gamma), INF-(alpha), TNF-alpha and TNF-beta) and the anti-inflammatory
cytokines (IL-4, 5, 6, 10, 13 and IFN-Beta). Transforming growth factor
(TGF)-beta is also an anti-inflammatory cytokine.

         There is substantial data in the literature documenting that upon
immune system activation, the cytokines spring into action in a coordinated
manner that can best be described as a pseudo-cascade. Each cytokine has a
specific role in the coordination of the immune response and in the inflammatory
process. Cytokine interactions with cells can result in cell proliferation,
suppression, or differentiation and may also result in the synthesis of other
cytokines by the target cell.

IFN-(GAMMA) AS A THERAPEUTIC TARGET

         The cytokine pseudo-cascade is initiated by IFN-(gamma) which is
followed by the production of other inflammatory cytokines such as TNF-(alpha)
and IFN-(alpha) that exert effects on yet other cells which result in the actual
pathology of various ADs. The relevant cascade for the production of killer
T-Cells (TH-1 Line) is as follows:

         IFN-(gamma)+IL1+antigen--Killer T cell--TNF-(alpha) + IFN-(gamma) +
         IFN-(alpha) secretion

         Simply sequestering TNF-(alpha), as do Embrel(TM) and Remicade(TM), two
products that are already on the market, may not effectively deal with the
overproduction of IFN-(alpha) and IFN-(gamma), both of which are
pro-inflammatory. Removing IFN-(gamma) would, however, remove or lower all three
inflammatory cytokines since IFN-(gamma) is upstream in location to TNF-(alpha)
in the cytokine cascade. IFN-(gamma) is responsible for the activation of killer
T-cells that produce many inflammatory cytokines. It, therefore, is upstream to
many of the other cytokines and its reduction in AD may represent an effective
therapeutic strategy. The Company's drug development strategy therefore centers
on the reduction of IFN-(gamma) levels in AD patients.

         A global effect on reducing the cytokine cascade may be possible by
removing or reducing IFN-(gamma). The Company believes that treatment by
TNF-(alpha) lowering drugs alone has little to no effect on the activation of
killer T-cells that produce many of the harmful cytokines. The Company's product
development is conceptually based on this immunological postulate.

         IFN-(gamma) also leads to the synthesis of MHC class II antigens in a
variety of cell types. Induction of these antigens is thought to be associated
with the autoimmune pathology in a number of diseases. The induction of
activated T-cells requires that these specific MHC class II antigens be
expressed, and this induction is a component of the


                                       4
<PAGE>


resulting tissue destruction and inflammation in autoimmune disorders. Reduction
of IFN-(gamma) would, therefore, be expected to inhibit activation of killer
T-cells and, therefore, reduce or avoid the autoimmune reaction.

         In addition, a recent study has shown that IFN-(gamma) levels correlate
with the disability score in MS patients (Mult. Scler, Feb. 2000, Vol. 6, P.
19-23), and another study showed that sequestering of IFN-(gamma) in mice
prevented the onset of autoimmune Diabetes Mellitus (Gene Ther., May 1999, Vol.
6, P. 771-7). Both of these observations provide further support the central
role of IFN-(gamma) in the etiology of autoimmune diseases, and further suggest
that reducing the levels of this cytokine may have therapeutic benefit.

PRODUCT DEVELOPMENT PLAN

         The process of the cytokine pseudo-cascade is extremely complex and not
fully understood, but it appears that this process results in the overproduction
of the inflammatory cytokines, IFN-(gamma) and TNF-(alpha), that can contribute
to the pathology of AD. The Company, and much of the immunology community,
agrees that the regulation of TNF-(alpha) and IFN-(gamma) presents an
opportunity for new drug development in a variety of autoimmune diseases.
Clearly the autoimmune diseases are associated with high levels of cytokines in
the blood, and there is now ample evidence that sequestration of certain
cytokines, such as TNF-(alpha) and IFN-(gamma), is associated with symptomatic
relief of autoimmune diseases such as RA, MS and Crohn's disease. The two
products that are already on the market that target the reduction of
TNF-(alpha), Embrel(TM) and Remicade(TM), are, in the Company's opinion, not
optimal for the management of AD. The therapeutic proof of principle therefore
already exists for the usefulness of cytokine mediating strategies as
therapeutic interventions in autoimmune disease.

         The Company believes that the existing cytokine mediating drugs
(TNF-(alpha) based) only represent the first approximation of the full potential
of this therapeutic strategy, and that enhanced efficacy may be obtained by
targeting other cytokines such as IFN-(gamma), which occupies a more upstream
position in the cytokine cascade than TNF-(alpha). The Company also believes
that the systemic administration of anti-cytokine biologically based drugs is
not the ideal strategy because of the development of neutralizing antibodies and
the potential for the development of hyperimmune sensitization. These issues are
becoming increasingly apparent with the biologically based products currently on
the market and constitute the rationale for the Company's anti-cytokine
extracorporeal device development program which will employ antibodies to both
IFN-(gamma) and TNF-(alpha) that are coupled to a solid phase matrix on a
filtration column. The patient's blood is passed through the column and the
antibodies coupled to the column effect a removal of the targeted cytokines.
This treatment strategy has the advantage of avoiding completely the exposure of
the patient to any drug or foreign substance and in so doing removing any
toxicity issues in the drug development process. Toxic side effects are a major
reason drugs fail to be approved by the FDA.

         ADs probably represent one of the single largest disease classes,
comparable to the cardiovascular, central nervous system, and type II diabetes
markets. The major autoimmune diseases are RA, MS, Crohn's disease, and type I
diabetes, but also include a host of other disorders, (See Table I). In addition
to the extensive list of diseases that have been demonstrated to be autoimmune
in character, there are numerous other large market indications that have been
suggested to have an autoimmune etiology. These include Alzheimer's disease,
schizophrenia and others.


                                       5
<PAGE>


<TABLE>
<CAPTION>

- -------------------------------------------------------------------------------------------------------------
                                                  TABLE I
- -------------------------------------------------------------------------------------------------------------
                                         MAJOR AUTOIMMUNE DISEASES
- -------------------------------------------------------------------------------------------------------------
<S>                                                     <C>
Addison's disease
- ------------------------------------------------------- -----------------------------------------------------
Amyotrophic lateral sclerosis                           Systemic lupus erythematosus
(Lou Gehrig's disease)
- ------------------------------------------------------- -----------------------------------------------------
Autoimmune diseases of the ear                          Male infertility
- ------------------------------------------------------- -----------------------------------------------------
Autoimmune diseases of the eye                          Multiple sclerosis
- ------------------------------------------------------- -----------------------------------------------------
Autoimmune hepatitis                                    Myasthenia Gravis
- ------------------------------------------------------- -----------------------------------------------------
Crohn's disease                                         Psoriasis
- ------------------------------------------------------- -----------------------------------------------------
Diabetes (Type I)                                       Rheumatic fever
- ------------------------------------------------------- -----------------------------------------------------
Epididymitis                                            Rheumatoid arthritis
- ------------------------------------------------------- -----------------------------------------------------
Glomerulonephritis                                      Sarcoidosis
- ------------------------------------------------------- -----------------------------------------------------
Graves' disease                                         Scleroderma
- ------------------------------------------------------- -----------------------------------------------------
Guillan-Barre syndrome                                  Sjogren's syndrome
- ------------------------------------------------------- -----------------------------------------------------
Hasimoto's disease                                      Thyroiditis
- ------------------------------------------------------- -----------------------------------------------------
                                                        Vasculitis
- ------------------------------------------------------- -----------------------------------------------------

</TABLE>

<TABLE>
<CAPTION>

- -------------------------------------------------------------------------------------------------------------
                        NEUROLOGICAL DISEASES WITH A SUSPECTED AUTOIMMUNE COMPONENT
- -------------------------------------------------------------------------------------------------------------
ALZHEIMER'S DISEASE                                     DEPRESSION
- ------------------------------------------------------- -----------------------------------------------------
<S>                                                     <C>
Autism                                                  Parkinson's disease
- ------------------------------------------------------- -----------------------------------------------------
Schizophrenia
- ------------------------------------------------------- -----------------------------------------------------

</TABLE>

         Current treatment of autoimmune diseases is inadequate and involves
rather primitive and global immunosuppression by using adrenal steroids,
cytotoxic agents, immunosuppressants, and antimitotics, all of which have
substantial toxicity associated with them due to their lack of specificity.
Recently, the cytokine strategy has emerged in the therapeutic arena in the form
of administering anti-inflammatory cytokines, such as Beta Interferon
(IFN-(beta)) and specifically Betaseron(TM) and Avonex(TM) for treating MS.
Also, the recent introduction of two anti-TNF-alpha products (Embrel(TM) and
Remicade(TM)) has further demonstrated the efficacy of the cytokine mediation
therapeutic strategy. Although each of these products is useful in treating ADs,
they clearly only represent the first wave of products based on this strategy
and were conceived and developed at a time when the knowledge of the cytokine
cascade was far less understood than it is today.

         The now appreciated pivotal position of IFN-(gamma) in the cytokine
cascade, coupled with the clinical data generated in our studies, suggests that
the Anti-IFN-(gamma) therapeutic strategy may be superior to existing therapies
for both MS and RA, with regard to both


                                       6
<PAGE>


efficacy and safety. The mission of the Company is to develop these improved
cytokine mediating therapeutic strategies and bring them to market as new drugs.

CLINICAL STUDIES / RHEUMATOID ARTHRITIS (RA)

         In an effort to demonstrate clinical proof of principle that
IFN-(gamma) antibodies show clinical efficacy, two double-blind, randomized,
placebo-controlled studies were conducted in RA patients in Russia. These
studies employed the Company's polyclonal antibodies to IFN-(gamma), which were
raised in goats. The IgG fraction was obtained by purification and used directly
via intramuscular injection. The results of both clinical studies were similar,
showing that a five-day treatment course with Anti-IFN-(gamma) given twice a day
produces a marked and statistically significant response within the first week
of treatment. In addition, the patients in the Anti-IFN-(gamma) treatment group
showed a therapeutic response at one month post-treatment, suggesting a rather
long lasting effect of the therapy.

         Being mindful of the study limitations, the data indicate that the
Anti-IFN-(gamma) group had a significant and clinically relevant response to the
drug. The rather long response experienced by the patients who received
Anti-IFN-(gamma) could be of substantial clinical significance, especially given
the fact that the treatment course was only five days. Management believes that
both studies provide supportive proof of principle in humans that sequestering
IFN-(gamma) is a viable therapeutic strategy in RA. Longer treatment periods may
further enhance the duration of Anti-IFN-(gamma) therapeutic efficacy. The
application of the extracorporeal treatment strategy may further enhance
therapeutic efficacy and the Company intends to seek out a corporate partner to
evaluate this possibility.

CLINICAL DATA / MULTIPLE SCLEROSIS (MS)

         Although smaller in size, the MS market is substantial and lucrative.
Avonex(TM) and Betaseron(TM) have made significant inroads into this market but
they still leave much to be desired from an efficacy standpoint. These two drugs
are different forms of interferon-beta, an anti-inflammatory cytokine that is
thought to act by reducing the blood levels of IFN-The Company has sponsored a
30-patient trial in secondary progressive MS patients comparing Anti-IFN-(gamma)
to placebo and employing a similar study design to that used in the two RA
studies. The Anti-IFN-(gamma) treatment group experienced statistically
significant improvements in a variety of clinical outcomes, including magnetic
resonance imaging data and degree of progression.

         As seen in the pilot RA studies, the Anti-IFN-(gamma) treatment group
experienced a protracted therapeutic effect. After 12 months post-treatment, the
Anti-IFN-(gamma) patients still showed significant improvement relative to the
placebo group on a number of endpoints, including disease progression and the
number of active MRI lesions.

         Although preliminary in nature, both the RA and MS pilot clinical trial
results provide a proof of concept that Anti-IFN-(gamma) is a potentially viable
therapeutic strategy for both of these ADs. The data suggest that the autoimmune
cascade may be more permanently blunted, (compared to reducing TNF-(alpha)
levels) by reducing IFN-(gamma) levels for a relatively short period of time.
The Company believes that longer-term treatments with Anti-IFN-(gamma) or
employing the extracorporeal treatment strategy could provide enhanced efficacy
and longer remission.


                                       7
<PAGE>


         The amount spent on research and development by the Company for the
fiscal year ending December 31, 2000 and 1999 was $39,579 and $156,280,
respectively.

MANUFACTURING

         The Company intends to out-source product manufacturing and has
identified several contract manufacturers as having suitable facilities for
manufacturing large quantities of antibodies and the requisite extracorporeal
devices.

         The raw materials are used as base components in a number of drug
products and are commercially available nationally and internationally.

         The Company has not entered into any manufacturing agreement for fully
human antibodies and there is no assurance that any agreements will be entered
into in the future.

GOVERNMENT REGULATION

         The Company's activities are subject to extensive federal, state,
county and local laws and regulations controlling the development, testing,
manufacture and distribution of medical treatments. The type of antibody-based
products described in the section entitled "Product Development Plan" above will
be subject to regulation as therapeutics or devices by the FDA, as well as
varying degrees of regulation by a number of foreign governmental agencies. To
comply with the FDA regulations regarding the manufacture and marketing of such
products, the Company would likely incur substantial costs relating to
laboratory and clinical testing of new products, and for the preparation and
filing of documents in the formats required by the FDA. There are no assurances
that the Company will receive FDA approval necessary to commercially market its
products, if any, and that if the Company is successful, it will not encounter
delays in bringing its new products to market as a result of being required by
the FDA to conduct and document additional investigations of product safety and
effectiveness.

FEDERAL DRUG ADMINISTRATION REGULATION

         The FDA approved process for conducting clinical trials in the United
States (U.S.) consists of four steps that all new drugs, antibiotics and
biologicals must follow.

They are:

         1.       Investigational new drug application (IND)
         2.       Clinical trials
         3.       New drug application (review and approval) or 510K device
                  application
         4.       Post-marketing surveys

         On January 11, 1993, the FDA approved new procedures to accelerate the
approval of certain new drugs and biological products directed at serious or
life-threatening illnesses. These new procedures will expedite the approvals for
patients suffering from terminal illness when the drugs provide a therapeutic
advantage over existing treatments. The Company believes that the products under
consideration by the Company will fall under the FDA guidelines for accelerated
approval for drugs and biological products directed at serious and life
threatening disease because the Company's products are targeted as potential
treatments for RA and MS and are expected to be non-toxic in the extracorporeal
treatment paradigm.


                                       8
<PAGE>


         The Company believes that the first step in the approval process, IND
approval, will take approximately 24 to 36 months. The Company will provide the
FDA with the results of comprehensive human clinical trials already conducted
outside the U.S.

         Upon successful completion of the IND phase, the next step typically
would be to commence large-scale clinical trials with the Company's compounds.
Clinical trials are conducted in three phases, normally involving progressively
larger numbers of patients. The Company, in conjunction with its FDA consultant
and to-be-identified corporate partner, would plan to select key physicians and
hospitals to actively conduct these studies. Phase I clinical trials will be
concerned primarily with learning more about the safety of the drug, though they
may also provide some information about the safety of the drug and information
about effectiveness. Phase I testing is normally performed on healthy volunteers
although for drugs directed at HIV/AIDS and cancer, testing on infected people
is permitted. The test subjects are paid to submit to a variety of tests to
learn what happens to a drug in the human body; how it is absorbed, metabolized
and excreted, what effect it has on various organs and tissues; and what side
effects occur as the dosages are increased. The principal objective is to
determine the drugs' toxicity. Phase I trials generally involve 20-40 people at
an estimated cost of $10,000 per patient, taking three to six months to
complete.

         Assuming the results of Phase I testing present no toxic or
unacceptable safety problems, Phase II trials may begin. In many cases, Phase II
trials may commence before all the Phase I trials are completely evaluated if
the disease is life threatening and preliminary toxicity data in Phase I shows
no toxic side effects. In the case of clinical trials on drugs to treat life
threatening disease, Phase I and Phase II trials are sometimes combined to show
initial toxicity and efficacy in a shorter period of time. The primary objective
of this stage of clinical testing is designed to show whether the drug is
effective in treating the disease or condition for which it is intended, and to
establish the optimal dose level for pivotal efficacy phase III trials. Phase II
studies may take one or more years or longer and involve a few hundred patients
in randomized, controlled trials that also attempt to disclose short-term side
effects and risks in people whose health is impaired. A number of patients with
the disease or illness will receive the treatment while a control group will
receive a placebo. The cost per patient is estimated at $10,000.

         At the conclusion of Phase II trials, the FDA and the Company will have
a clear understanding of the short-term safety and effectiveness of the drugs
and their optimal dosage levels. Phase III clinical trials will generally begin
after the results of Phase II are evaluated. The objective of Phase III is to
develop information that will allow the drug to be marketed and used safely.
Phase III trials will involve hundreds, and sometimes thousands, of people with
the objective of expanding on the research.

         Patient estimates for each phase of the clinical trial process are as
follows for both the MS and RA indications to support a 510K-device registration
for the Company's extracorporeal drug development program.

            Phase I-    30
            Phase II-  200
            Phase III- 500


                                       9
<PAGE>


         The third step that is necessary prior to marketing a new drug is the
New Drug Application (NDA) submission and approval for an injectable product
that is administered directly to a patient or a 510K-device registration for a
device such as the Company's extracorporeal device. In this step, all the
information generated by the clinical trials will be reviewed and if successful,
the drug will be approved for marketing.

         The final step is the post-marketing surveillance or surveys of
patients being treated with the drug to determine its long-term effects. This
has no effect on the marketing of the drug unless highly toxic conditions arise.
The time required to complete the above procedures averages seven years,
however, there is no assurance that the Company will ever receive FDA approval
of any of its products.

         The Company's clinical trials are at a very early stage and the Company
has not received approval from the FDA or any other governmental agency for the
manufacturing or marketing of any products under development. Consequently, the
commencement of manufacturing and marketing of any products in the U.S. is, in
all likelihood, a number of years away. The FDA may also require post-marketing
testing and surveillance to monitor the effects of approved products or place
conditions on any approvals that could restrict the commercial applications of
such products. Product approvals may be withdrawn if compliance with regulatory
standards is not maintained or if problems occur following initial marketing.
With respect to patented products or technologies, delays imposed by the
governmental approval process may materially reduce the period during which the
Company will have the exclusive right to exploit them.

          Upon contracting with a strategic partner, the Company anticipates
that it will take up to 60 months before an injectable product and 36 months
before an extracorporeal device will be available for FDA investigation and
approval.

COMPETITION

         The Company will encounter significant competition from firms currently
engaged in the biotechnology industries. The majority of these companies will be
substantially larger than the Company, and have substantially greater resources
and operating histories. The Company is aware of other competitors seeking
treatments for ADs such as MS and RA, however, the Company is not aware of any
competitors seeking to produce the same antibody-based products as the Company.

PRODUCT LIABILITY EXPOSURE

         The Company does not maintain any product liability insurance. Even if
the Company obtains product liability insurance, there is no assurance that
available amounts of coverage will be sufficient to adequately protect the
Company in the event of a successful product liability claim. Accordingly, if
litigation is initiated against the Company, the Company will have to pay all
costs associated with the litigation as well as any judgment rendered against
the Company. In the event a large judgment is entered against the Company, the
Company may not be able to pay the same and the Company could be forced to cease
operations. However, the Company believes that it would not be held liable for
injuries suffered by participants in its clinical trials because it plans to
require each participating patient to execute a waiver of claims as a result of
adverse reaction to the Company's products.


                                       10
<PAGE>


GLOSSARY OF TERMS

Antibody                                    A protein in the blood that is
                                            generated by B-lymphocytes or plasma
                                            cells in reaction to foreign
                                            proteins or antigens. Antibodies
                                            neutralize antigens and may result
                                            in immunity to the antigens.

Antigen                                     A substance (usually foreign) that
                                            induces the formation of antibodies.

Autoimmune disease                          A disease in which the body
                                            produces an immune response to some
                                            constituent of its own tissue. Such
                                            diseases include MS, RA, insulin
                                            dependent diabetes, systemic lupus
                                            erythematosis, and AIDS.

Cytokine                                    A soluble substance produced by
                                            cells of the immune system to
                                            communicate with other immune system
                                            cells. These include
                                            colony-stimulating factors,
                                            interferons, interleukins, and tumor
                                            necrosis factors. Cytokines can be
                                            either pro or anti-inflammatory in
                                            nature. Also referred to as soluble
                                            mediators.

Extracorporeal Treatment                    A treatment strategy where
                                            the blood of a patient is passed
                                            through a device that is designed to
                                            selectively remove a molecular
                                            component of the blood, for example,
                                            IFN-(gamma) and/or TNF-(alpha).

Humanized antibody                          An antibody produced by
                                            generating human antibodies with
                                            fully human protein sequences using
                                            genetically engineered strains of
                                            mice in which mouse antibody gene
                                            expression is suppressed and
                                            functionally replaced with human
                                            antibody gene expression, while
                                            leaving intact the rest of the mouse
                                            immune system.

Ig (immunoglobulin)                         (IgA, IgD, IgE, IgG, and IgM)
                                            A group of serum proteins
                                            representing antibodies. See
                                            Antibody.

Immune response                             The events that occur in humans and
                                            other vertebrate animals when
                                            the body is invaded by foreign
                                            protein. It is characterized by
                                            the production of antibodies
                                            and may be stimulated by an
                                            infectious organism or parasite
                                            (bacteria, yeast, fungi,
                                            protozoa, etc.), transplanted
                                            material, vaccine, sperm or
                                            even the host's own tissue.

Immunegenecity                              The study of genetic aspects of the
                                            type and formation of
                                            immunoglobulins (antibodies).

Immune System                               The cells and tissues that
                                            collectively recognize and eliminate
                                            invading foreign substances like
                                            microorganisms, parasites, and tumor
                                            cells from the body.


                   11
<PAGE>


Immunosuppressive                           Something that suppresses the immune
                                            system response.

Interferon-gamma                            A glycoprotein inflammatory cytokine
                                            induced in different cell sites and
                                            in response to a appropriate
                                            stimulus.

Lymphocyte                                  A type of white blood cell arising
                                            from tissue of the lymphoid systems.
                                            There are two types of lymphocytes:
                                            B cells and T cells. These cells are
                                            capable of being stimulated by an
                                            antigen to produce a specific
                                            antibody to that antigen and to
                                            proliferate to produce a population
                                            of such antibody-producing cells.

Lymphokine                                  Any of a number of soluble
                                            physiologically active factors
                                            produced by T lymphocytes in
                                            response to specific antigens.
                                            Important in cell-mediated immunity,
                                            lymphokines include interferon,
                                            macrophage arming factor, lymphocyte
                                            inhibition factor, macrophage
                                            inhibition factor, chemotactic
                                            factor and various cytotoxic
                                            factors.

Macrophage                                  A motile white cell type found in
                                            vertebrate tissue, including
                                            connective tissue, the spleen, lymph
                                            nodes, liver, adrenal glands and
                                            pituitary, as well as, in the
                                            endothelial lining of blood vessels
                                            and the sinusoids of bone marrow,
                                            and in the monocytes. They display
                                            phagocytic activity and process
                                            antigens for presentation to
                                            lymphocytes, which then prepare
                                            antigen-specific antibodies.

Pathogenic                                  Descriptive of a substance or
                                            organism that produces a disease.

Placebo                                     An indifferent substance in the form
                                            of a medicine given for the
                                            suggestive effect.

Polyclonal antibody                         An antibody produced in the
                                            normal immune response to an
                                            antigen consisting of a number
                                            of closely related, but not
                                            identical, proteins. The
                                            variation in Polyclonal
                                            antibodies reflects the fact
                                            that they are formed by a
                                            number of different
                                            lymphocytes, in contrast to
                                            monoclonal antibodies, which
                                            are formed by a clone of
                                            identical cells.

Protein                                     Any group of complex nitrogenous
                                            organic compounds of high molecular
                                            weight that has amino acids as their
                                            basis structural units. Proteins are
                                            found in all living matter and are
                                            required for the growth and repair
                                            of tissue.


                                       12
<PAGE>


T-Cell                                      A type of lymphocyte that matures in
                                            the thymus gland. These cells are
                                            responsible for the cellular
                                            immunity processes, such as direct
                                            cell binding to an antigen, thus
                                            destroying it. T lymphocytes also
                                            act as regulators of the immune
                                            response as helper T cells, or
                                            suppressor T cells.

Tumor Necrosis Factor (TNF)                 A substance that is capable of
                                            killing tumor cells and eliciting
                                            inflammatory responses. It is
                                            produced by host monocytes and
                                            macrophages and is also referred to
                                            as cachectin.

PATENT STATUS AND PROTECTION OF PROPRIETARY TECHNOLOGY

         The Company has been issued U.S. patent nos. 5,626,843 and 5,888,511,
and Australia patent no. 730498. It also has eleven U.S. patents pending filed
between December 22, 1997 and February 24, 2000, and two foreign applications
pending in the European Union and Canada.

         The Company's most recently issued patent gives the Company patent
protection for a new anti-cytokine approach to treating different autoimmune
diseases via both the extracorporeal and the injectable treatment route. These
include RA, MS, and insulin-dependent diabetes, among others. The patented
treatment uses various methods to neutralize or block specific combinations of
cytokines and their receptors. In management's opinion, the Company's patented
approach is broader in scope than certain other patented treatments.

DEPENDENCE UPON KEY PERSONNEL

         The Company relies greatly in its efforts on the services and expertise
of its key staff, such as the Chairman and Chief Executive Officer, Director of
Operations and internal counsel and officers and directors. The operation and
future success of the Company would be adversely affected in the event that any
of them is incapacitated or the Company otherwise loses their services.

UNCERTAINTIES ASSOCIATED WITH RESEARCH AND DEVELOPMENT ACTIVITIES

         The Company intends to continue its research and development activities
on its products and for the purpose of developing proprietary products. Research
and development activities, by their nature, preclude definitive statements as
to the time required and costs involved in reaching certain objectives. If
research and development requires more funding than anticipated, the Company may
have to reduce product development efforts or seek additional financing. There
can be no assurance that the Company would be able to secure any necessary
additional financing or that such financing would be available on favorable
terms

MARKETING

         Assuming the Company is able to obtain FDA approval of its products
currently in development, it intends to market the same through collaborative
relationships with other companies. It is the Company's intention that joint
venture partners will be selected


                                       13
<PAGE>


on the basis of experience and the degree of financial success they exhibit in
the industry. There are no assurances that the Company will obtain FDA approval
for its products, and there are no assurances that the Company will be
successful in entering into agreements with established multinational companies.

FACTORS THAT MAY AFFECT THE COMPANY

         The Company operates in a rapidly changing environment that involves a
number of risk factors, many of which are beyond the Company's control. The
following discussion highlights some of these risk factors and others are
discussed elsewhere in this Form 10-KSB.

         1. LIQUIDITY. NEED FOR ADDITIONAL FINANCING. The Company believes that
it will need to raise additional capital during the next twelve months. If the
Company is unable to raise additional capital and/or generate a positive cash
flow before its cash is depleted, it will be required to curtail operations
substantially. There is no assurance that the Company will be able to obtain
additional capital if required, or if capital is available, to obtain it on
terms favorable to the Company. The Company may suffer from a lack of liquidity
in the future that could impair its research and development efforts and
adversely affect its results of operations. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

         2. LACK OF REGULATORY CLEARANCE/APPROVAL AND LIMITED CLINICAL DATA. The
Company's products are in the development stage, have limited clinical data and
have not been cleared for marketing by the FDA or foreign regulatory
authorities, and cannot be commercially distributed in the U.S. and/or in
foreign markets unless and until such clearance is obtained. Failure to obtain
FDA clearance would delay sales of the Company's products and would materially
affect the financial condition of the Company.

         3. DEPENDENCE ON PRODUCTS. The Company expects to derive a substantial
majority of its revenues from its proprietary development stage products through
product licensing and royalty fees. The life cycle of the Company's products, if
approved for marketing, is difficult to estimate in terms of current and future
technological developments, competition, and other factors. Failure of the
Company to successfully commercialize its products or to realize significant
revenues from the products would have a material adverse effect on the financial
condition of the Company. As of the date hereof, the Company has not realized
any revenues from the sale of products.

         4. LACK OF MARKETING AND SALES EXPERIENCE. The Company's management has
limited sales and marketing experience, and therefore, if the necessary
regulatory approvals are obtained, the Company intends to market and sell its
products, through a network of qualified independent distributors, agents, and
key strategic partners, none of which are currently in place. There are no
assurances that the Company can establish the necessary relationships for
marketing and selling its products or that the network will successfully
implement an effective marketing and sales strategy.

         5. MANUFACTURING. The Company lacks the facilities to manufacture any
products and does not have an adequate supply of product to begin clinical
studies in the United States. If the Company is unable to contract for
manufacturing capabilities on acceptable terms, it would result in the delay of
sales, which in turn could materially


                                       14
<PAGE>


impair the Company's competitive position, and the possibility of the Company
achieving profitability.

         6. UNCERTAINTY RELATING TO FAVORABLE THIRD-PARTY REIMBURSEMENT. In the
United States, success in obtaining favorable third-party payment for a new
product depends greatly on the ability to present data which demonstrates
positive outcomes and reduced utilization of other products or services, as well
as cost data which shows that treatment costs using the new product are equal to
or less than what is currently covered for other products. Failure by the
Company to present such clinical data would adversely affect the Company's
ability to obtain favorable third-party reimbursement as well as the commercial
success of its products.

         7. PATENTS AND PROPRIETARY RIGHTS. The Company's success and ability to
compete effectively will depend, in part, on the strength of its patents and the
ability to obtain protection for its products in foreign markets. No assurance
can be given that any patents issued to the Company will not be challenged,
invalidated, or circumvented. Litigation, which could result in substantial cost
to the Company, may also be necessary to enforce any patents issued to the
Company and/or determine the scope and validity of other's proprietary rights.

ITEM 2.  DESCRIPTION OF PROPERTY

         The Company's administrative offices are located at 5950 La Place
Court, Suite 210, Carlsbad, California 92008. The phone number of these offices
is 760-431-4282. The Company has a three-year lease on 1,944 square feet at this
location, which provides for an annual rental of $43,200, $44,900 and $46,740,
respectively, during the term of the lease.

EMPLOYEES

         The Company is a development stage company and currently has four
employees. See "Management." Management of the Company expects to hire employees
as necessary.

ITEM 3.  LEGAL PROCEEDINGS

         The Company is not the subject of any pending legal proceedings; and to
the knowledge of management, no proceedings are presently contemplated against
the Company by any federal, state or local governmental agency.

         Further, to the knowledge of management, no director or executive
officer is party to any action in which any has an interest adverse to the
Company.


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

           No matters were submitted to a vote of the Company's security holders
during the fourth quarter of the fiscal year ending December 31, 2000.


                                       15
<PAGE>


                                     PART II

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

           As of February 15, 2000, the Company's Common Stock was quoted again
on the Bulletin Board operated by the National Association of Securities
Dealers, Inc. (the "Bulletin Board") under the symbol "ADVB." During 1999, the
Common Stock was quoted on the Bulletin Board for part of the year and quoted on
other electronic marketplaces for the rest of the year. The table shows the high
and low bid quotations of the Company's Common Stock during each of the four
quarters of the 1999 and 2000 fiscal years, and reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not represent actual
transactions:

<TABLE>
<CAPTION>

1999 FISCAL QUARTER ENDING:               HIGH BID           LOW BID
<S>                                       <C>                <C>
                  March 31                  $0.20             $0.10
                  June 30                   $0.08             $0.05
                  September 30              $0.10             $0.01
                  December 31               $0.35             $0.05

2000 FISCAL QUARTER ENDING:

                  March 31                  $2.63             $1.75
                  June 30                   $1.81             $0.44
                  September 30              $1.00             $0.50
                  December 31               $0.75             $0.20

</TABLE>

HOLDERS

           As of December 31, 2000, the Company had 1,562 holders of record of
its Common Stock. This number does not include those beneficial owners whose
securities are held in street name. The total number of record and beneficial
stockholders is estimated to be more than 3,500.

DIVIDENDS

           The Company has never paid a cash dividend on its Common Stock and
has no present intention to declare or pay cash dividends on the Common Stock in
the foreseeable future. The Company intends to retain any earnings that it may
realize in the future to finance its operations. Future dividends, if any, will
depend on earnings, financing requirements and other factors.

SALE OF UNREGISTERED SECURITIES

         During the quarter ended December 31, 2000, the Company sold in a
private placement to accredited investors an additional $333,750 in principal
amount of convertible subordinated debt of which $167,500 was previously
reported in the Company's Form 10-QSB for the quarter ended September 30, 2000.
Under the terms of the notes, the principal bears interest at 10% per annum
payable semi-annually in cash or in additional convertible subordinated debt and
is convertible into shares of Common Stock of the Company at a conversion price
per share equal to twenty five cents ($0.25), subject to certain anti-dilution
provisions. The Company sold the debt to the accredited investors pursuant to
Section 4(2) of the Securities Act of 1933, as amended (the "Act"), and Rule 506
of Regulation D, promulgated under the Act. The proceeds from the


                                       16
<PAGE>


placement of the debt will be used for working capital purposes, principally
salaries, professional fees and expenses to pursue additional financings,
corporate partnerships and mergers and acquisitions. During the year ending
December 31, 2000, the Company sold a total of $1,510,500 in principal amount of
this debt.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT
OF OPERATIONS

         The Company anticipates that its minimum cash requirements to continue
as a going concern for the next twelve months will be approximately $800,000,
and therefore, believes that it has inadequate cash to maintain operations
during that period. In order to meet the foregoing cash requirements, the
Company will have to raise additional capital or obtain a loan. There is no
assurance, however, that the Company will be able to raise additional capital or
obtain a loan. The Company's objective is to establish collaborative
relationships with either a pharmaceutical or biotechnological company that
could result in the generation of royalty payments to the Company. As of the
date hereof, the Company has not entered into agreements with any pharmaceutical
or biotechnological companies. In the event that the Company does not raise
additional capital from any of the foregoing sources, it may have to curtail
operations. The Company is also seeking out merger and acquisition candidates
that can either expand the Company's technology base in the area of autoimmune
disease therapeutics or bring FDA-approved products into the Company that will
generate recurring revenue and cash flow.

           The Company's development goal is to produce, or have produced, a
series of antibody-based products through collaborations with other
biotechnology companies. The Company has identified several biotechnology
companies that can develop and manufacture such antibodies and extracorporeal
devices for the Company. The availability of this technology will make it
possible to produce safer and more standardized antibodies for commencement of
human clinical trials, under FDA guidelines, in the United States.

           The Company has no expected purchases or sales of significant
equipment.

           There are no expected significant changes in the number of employees
of the Company.

RESULTS OF OPERATIONS - FROM INCEPTION THROUGH DECEMBER 31, 2000.

           The Company is considered to be in the development stage as defined
in Statement of Financial Accounting Standards No. 7. There have been no
operations since incorporation.

LIQUIDITY AND CAPITAL RESOURCES.

           As of December 31, 2000, the Company has issued and outstanding
39,848,265 shares of its Common Stock. The Company is a development stage
company. The Company had $758,267 in cash as of December 31, 2000.

FISCAL 2000 COMPARED TO FISCAL 1999.

           For the year ending December 31, 2000, the Company realized a net
loss of $653,270 and a loss from operations of $827,084, compared to net income
of $1,143,892


                                       17
<PAGE>


and a loss from operations of $334,278 for the year ending December 31, 1999.
The loss from operations for the current year is principally due to a
substantial increase in outside expense relating general corporate, SEC and
patent legal costs, accounting, investment banking, investor relations,
strategic partnering and other contract services, as the Company became an SEC
reporting company, moved the listing of its Common Stock to the OTC Bulletin
Board and embarked on an investor relations program, reincorporated in Delaware,
raised additional capital, expanded its intellectual property portfolio and
began an active corporate partnering initiative. All of these activities also
caused salary, travel, entertainment, telephone and other office expenses to
increase substantially during the year. The operating loss was partially offset
by total other income of $173,814, principally as the result of an internal gain
of $157,520 on the sale of Common Stock by certain officers of the Company, as a
result of Section 16(b) of the Securities Exchange Act of 1934, which requires
insiders to disgorge "short-swing profits". Total other income also benefited
from the forgiveness of $45,396 of accounts payable, resulting from the failure
of the vendors to pursue payment from the Company within the applicable statute
of limitations.

         The net income for the year ending December 31, 1999 was the result of
recognizing an extraordinary item related to an agreement by three key employees
to forgive the Company of the cumulative accrued salaries owed to them through
December 31, 1999 in the aggregate amount of $1,472,247 for salaries and $9,962
for interest. The Company also issued 842,953 non-qualified stock options to
these employees, exercisable immediately and expiring on December 31, 2005 at an
exercise price of $0.05 per share of Common Stock.

         Except for the historical information contained herein, the matters
discussed herein are by their nature forward-looking. Investors are cautioned
that forward-looking statements or projections made by the Company, including
those made in this document, are subject to risks and uncertainties that may
cause actual results to differ materially from those projected. Reference is
made in particular to forward-looking statements regarding product development,
capital sources, plan of operations and expenses. The Company operates in a
rapidly changing environment that involves a number of risks, some of which are
beyond the Company's control. Future operating results and the Company's stock
price may be affected by a number of factors, including, without limitation: (i)
availability of capital for research and development; (ii) availability of
capital for clinical trials; (iii) opportunities for joint ventures and
corporate partnering; (iv) opportunities for mergers and acquisitions to expand
the Company's biotechnology base or acquire revenue generating products; (v) the
results of preclinical and clinical trials; (vi) regulatory approvals of product
candidates, new indications and manufacturing facilities; (vii) health care
guidelines and policies relating to prospective Company products; (viii)
intellectual property matters (patents) and (ix) competition.

ITEM 7.  FINANCIAL STATEMENTS

            The financial statements are included herewith and incorporated
herein by reference beginning with the Table of Contents on Page F- 1.

                                       18
<PAGE>


ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

           There have been no disagreements on accounting and financial
disclosures from the inception of the Company through the date of this Form
10-KSB for the year ending December 31, 2000.

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(a) OF THE EXCHANGE ACT

IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS

         The following table sets forth the names and nature of all positions
and offices held by all directors and executive officers of the Company for the
calendar year ending December 31, 2000, and to the date hereof, and the period
or periods during which each such director or executive officer served in his or
her respective positions.

<TABLE>
<CAPTION>

         ---------------------------------- ------- ------------------------------------- ---------------
                       Name                  Age               Position Held                 Date of
                                                                                             Election
         ---------------------------------- ------- ------------------------------------- ---------------
         <S>                                <C>     <C>                                   <C>
         Paul J. Marangos                   53      Chairman of the Board of  Directors,  09/01/00
                                                    President and Chief Executive
                                                    Officer (2)(3)
         ---------------------------------- ------- ------------------------------------- ---------------
         John M. Bendheim                   47      Member of the Board of Directors      06/19/00
                                                    (1)(2)
         ---------------------------------- ------- ------------------------------------- ---------------
         Edmond Buccellato                  56      Member of the Board of Directors (1)  11/16/95
         ---------------------------------- ------- ------------------------------------- ---------------
         Alexander L. Cappello              45      Member of the Board of Directors (1)  04/21/00
         ---------------------------------- ------- ------------------------------------- ---------------
         Lawrence Loomis                    58      Member of the Board of Directors (2)  12/06/86
         ---------------------------------- ------- ------------------------------------- ---------------
         Leonard Millstein                  59      Member of the Board of Directors      12/06/86
         ---------------------------------- ------- ------------------------------------- ---------------
         Boris Skurkovich, M.D.             46      Member of the Board of Directors (2)  12/06/86
         ---------------------------------- ------- ------------------------------------- ---------------
         Simon Skurkovich, M.D.             80      Member of the Board of Directors      11/06/85
         ---------------------------------- ------- ------------------------------------- ---------------
         Margo Dockendorf, J.D.             45      Treasurer and Secretary               12/12/00
         ---------------------------------- ------- ------------------------------------- ---------------

</TABLE>

- -------------
(1)      Member of the Audit Committee of the Board of Directors.
(2)      Member of the Compensation Committee of the Board of Directors.
(3)      Dr. Marangos was elected to the Board of Directors of the Company in
         April 2000.

TERM OF OFFICE

         Each director serves for a term of one year or until his successor is
duly elected once qualified. The Company's officers are appointed by the Board
of Directors and hold office at the discretion of the Board.


                                       19
<PAGE>


BIOGRAPHICAL DESCRIPTIONS OF OFFICERS AND DIRECTORS

         Paul J. Marangos - Since April 2000, Dr. Marangos has served as a
member of the Board of Directors. In September 2000, he was elected as the
Chairman of the Board of the Company and hired as its Chief Executive Officer,
and in December 2000, he was elected President. Previously, Dr. Marangos was
founder, Chairman of the Board of Directors, President and Chief Executive
Officer of Cypros Pharmaceutical Corporation from 1991 to November 1999, when it
was merged with Ribogene, Inc. to form Questcor Pharmaceuticals, Inc. Cypros was
an American Stock Exchange listed company with three drug products on the market
and two compounds in late stage clinical trials to treat diseases caused by
ischemia. Dr. Marangos is also a principal in BioMedica Partners, LLC, ("BMP") a
strategic consulting and executive staffing company. His role in BMP does not
require a substantial time commitment, and thus, does not conflict with his role
in the Company. Dr. Marangos received his B.A. degree (magna cum laude) and his
Ph.D. from the University of Rhode Island in biochemistry in 1973, and completed
his postdoctoral fellowship at the Roche Institute of Molecular Biology in 1975.

         John M. Bendheim - Since June 2000, Mr. Bendheim has served as a member
of the Board of Directors. Mr. Bendheim is Chairman of the Cedars-Sinai Medical
Center Board of Governors in Los Angeles, California and President of Bendheim
Enterprises, Inc., a real estate investment holding company. He received his
B.S. degree in Business Administration in 1975 and his M.B.A. in 1976 from the
University of Southern California.

         Edmond Buccellato - Mr. Buccellato served as President and Chief
Operating Officer of the Company from September 1, 2000 to December 12, 2000.
Mr. Buccellato served as Chief Executive Officer and a member of the Board of
Directors from 1995 to August 31, 2000. He was co-founder, member of the Board
of Directors and Vice President of Finance of Phase Medical, Inc., an infusion
therapy company sold to Becton Dickinson in 1994. He was also co-founder, member
of the Board of Directors and Vice President of Finance of Synergistic Systems,
Inc., a company that became the largest medical billing company in the western
United States. He is also co-founder and member of the Board of Directors of
Polymer Safety, LLC, a manufacturer of synthetic medical and industrial
examination gloves. He is also co-founder and member of the Board of Directors
of Physicians' choice LLC, a medical billing company. Mr. Buccellato received
his undergraduate degree From California State University at San Diego, and his
graduate degree from the University of Southern California.

         Alexander L. Cappello - Since May 2000, Mr. Cappello has served as a
member of the Board of Directors. Mr. Cappello is Chairman and C.E.O. of
Cappello Group, Inc. and has been an investment and merchant banker,
facilitating project financing and equity capital to biotechnology companies and
companies in other industries since 1975. Currently, he is a Member of the Board
of Directors of the following: Chairman and Chief Executive Officer of Cappello
Group, Inc., RAND Corporation (Center for Middle East Public Policy), CytRx
Corporation (NASDAQ), (ICSC) Independent Colleges of Southern California, USC
Entrepreneur Advisory Council, USC Advancement Council, USC Marshall School of
Business, Chairman of Catholic Big Brothers of Los Angeles, and President of YPO
International (Young Presidents' Organization) for 2003-2004. He received his
B.S. Degree in finance (awarded the prestigious Order of the Palm) from the
University of Southern California in 1977.


                                       20
<PAGE>


         Formerly, he was a Member of the Board of Directors of the following;
Koo Koo Roo, Inc. (NASDAQ), Geothermal Resources International (AMEX), Arcus
Data Security, Inc. (NASDAQ), Maritime Bank of California (OTC), Summa Medical
Corp. (AMEX), Swiss American Financial, Euro American Financial Corporation,
Coffees of Hawaii, Inc., Executive Publications, Inc. (Chairman), and The
Joffrey Foundation.

         Lawrence Loomis - Since 1986, Mr. Loomis has served as a member of
the Board of Directors. Mr. Loomis is President and majority shareholder of
New Horizons Diagnostics, Inc., a company that develops bacteriological
screening methods, monoclonal antibodies for detection of various infectious
disease agents, and rapid bacterial and viral assay kits. Prior to founding
New Horizons Diagnostics, Inc. in 1980, Mr. Loomis was in charge of the
Immunology Department for BBL, a division of Becton Dickinson. Mr. Loomis
received his undergraduate degree in Chemistry from New York University and
his graduate degree in Chemistry from City University.

         Leonard Millstein - Since 1986, Mr. Millstein has served as a member of
the Board of Directors. Mr. Millstein received his MSCE and Ph.D. in Civil
Engineering from Moscow State Construction University in 1964 and 1974,
respectively. After immigrating to the United States in 1978, he held teaching
positions at Howard University in Washington D.C. and Johns Hopkins University
in Baltimore, Maryland. He has over 200 publications and is a member of the
American Concrete Institute and American Society of Civil Engineers. From 1981
to the present, he has been a CEO of Radcon Products, a company involved in
manufacturing of proprietary concrete sealants. From 1990 until the present, he
has been a Chairman of the Board of TTLTIC, a private consulting company.

         Boris Skurkovich, M.D. - Since 1986, Mr. Skurkovich has served as a
member of the Board of Directors, and from that same date until December 2000,
he was a Vice President of the Company. He completed a clinical and research
fellowship at the Maxwell Finland Laboratory for Infectious Diseases, Boston
City Hospital, Boston, Massachusetts, and presently is a professor at Brown
University Medical School. He has collaborated with his father, Simon, on the
development of the Company's treatment of autoimmune diseases. Dr. Skurkovich
received his M.D. from the Moscow State Medical Institute.

         Simon Skurkovich, M.D. - From 1985 until September 2000, Dr. Skurkovich
served as Chairman of the Board. He has previously been granted five patents in
Russia, and eight in the U.S. He is the creator of immune preparations from
human blood against antibiotic resistant bacteria that saved thousands of lives
in the Soviet Union and Eastern Europe. In Russia, he was professor and Chief of
the Immunology Laboratory of the Institute of Hematology and Blood Transfusion
and was awarded gold and silver medals for his scientific discoveries. His
laboratory was also awarded the nation's highest honor, the Lenin Prize, for his
patented work. Dr. Skurkovich received an M.D., Ph.D. and a Doctorate in Medical
Sciences (D.Sc.) from Pirogov State Medical Institute in Moscow. He has written
more than 200 articles for scientific publications.

         Margo J. Dockendorf, Esq. - Ms. Dockendorf became the Treasurer and
Secretary of the Company in December 2000. Ms. Dockendorf is a member of the
California Bar Association and has been a practicing attorney at law for 18
years. She has built successful law practices in Southern California, and has
extensive experience as a litigation attorney, as well as in business
operations, contracts and corporate matters. With the inception of her
responsibilities at the Company, Ms. Dockendorf now limits


                                       21
<PAGE>


her law practice to selective matters on a part-time basis. Ms Dockendorf is
also a principal in BioMedica Partners, LLC, ("BMP") a strategic consulting and
executive staffing company. Her role in BMP does not require a substantial time
commitment, and thus, does not conflict with her role in the Company.

FAMILY RELATIONSHIPS

         The only known relationship between any directors is Simon Skurkovich,
father to Boris Skurkovich, and father-in-law to Leonard Millstein.

INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS

         During the past five years, no present director or executive officer
of the Company has been the subject matter of any legal proceedings,
including bankruptcy, criminal proceedings, or civil proceedings. Further, no
legal proceedings are known to be contemplated by governmental authorities
against any director or executive officer.

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

         A Form 3 was required to be filed by each of Dr. Marangos, Mr.
Bendheim, Ellen Millstein and Ms. Dockendorf and has not been filed yet. A
Form 5 was required to be filed by each of Dr. Marangos and Mr. Bendheim
related to the receipt of stock options for Board service and has not been
filed yet. A Form 5 was required to be filed by Dr. Simon Skurkovich relating
to his gift of 4,000,000 bonus shares to various individuals and has not been
filed yet. Form 5s were required to be filed by Ellen Millstein, Leonard
Millstein and Dr. Boris Skurkovich relating to their receipt of gifts of
shares of Common Stock from Simon Skurkovich. A Form 5 was required to be
filed by Mr. Bendheim relating to his purchase of notes convertible into
Common Stock of the Company and has not been filed yet. A Form 5 was filed by
Mr. Alexander Cappello subsequent to December 31, 2000, relating to his
receipt of stock options in 2000 for Board service.

ITEM 10.  EXECUTIVE COMPENSATION.

         The following table sets forth the compensation paid by the Company
since January 1, 1998 through December 31, 2000, for the Chief Executive Officer
of the Company and each other executive officer of the Company who was paid more
than $100,000 during the year (the "Named Executive Officers"):

<TABLE>
<CAPTION>

                                         SUMMARY COMPENSATION TABLE

              ------------------------------------ ------- ----------------- -------------------
                       Name and Position            Year        Salary             Bonus
              ------------------------------------ ------- ----------------- -------------------
              <S>                                  <C>     <C>               <C>
              Paul J. Marangos                     2000    $40,000           $25,000
              Chief Executive Officer (1)
              ------------------------------------ ------- ----------------- -------------------
              Edmond Buccellato                    2000    $72,500           $0
              Chief Executive Officer (2)          1999    $75,000           $0
                                                   1998    $50,000           $0
              ------------------------------------ ------- ----------------- -------------------
              Simon Skurkovich                     2000    $30,000           $0
              Chairman of the Board (3)            1999   $100,000           $0
                                                   1998   $100,000           $0
              ------------------------------------ ------- ----------------- -------------------

</TABLE>

(1)      Dr. Marangos joined the Company in August 2000 at an annual salary of
         $120,000. In addition, he was paid a signing bonus of $25,000.
(2)      Mr. Buccellato was the Chief Executive Officer of the Company prior to
         the hiring of Dr. Marangos.
(3)      Dr. Skurkovich was the Chairman of the Board prior to the hiring of
         Dr. Marangos.

                                       22
<PAGE>


         During 2000, Mr. Loomis refused a $40,000 salary offer from the
Company.

         There are no retirement, pension, or profit sharing plans for the
benefit of the Company's officers and directors. The Company has previously
granted non-qualified stock options and warrants for the benefit of officers and
directors, and in December 2000, the Board of Directors of the Company approved
the 2000 Omnibus Equity Incentive Plan (the "OEI Plan") and reserved 4,000,000
shares of Common Stock to be issued thereunder, subject to annual increases
equal to the lesser of 2.5% of outstanding shares or 250,000 shares. No shares
have been issued under the OEI Plan to date.

OPTION/SAR GRANTS.

         None of the named executive officers received any grants of stock
options, whether or not in tandem with stock appreciation rights ("SARs") and
freestanding SARs during the fiscal year ending December 31, 2000 in their
capacity as officers. During that period though, Dr. Marangos received a
5-year warrant exercisable into 100,000 shares of Common Stock at $0.25 per
share for Board service.

         None of the Named Executive Officers exercised any options/SARs during
the year. Set forth below are the fiscal year end Option/SAR values:

<TABLE>
<CAPTION>

         ---------------------------- ----------------------- -------------------- ---------------------
                    Name              Number of unexercised   Exercise Price       Value of
                                      options/SARs at         Per Share            unexercised
                                      FY-end(#)                                    in-the-money
                                      exercisable/                                 options/SARs at
                                      unexercisable                                FY-end ($)
                                                                                   exercisable/
                                                                                   unexercisable(1)
         ---------------------------- ----------------------- -------------------- ---------------------
         <S>                          <C>                     <C>                  <C>
         Paul J. Marangos             100,000/0               $0.25                       $0/$0
         ---------------------------- ----------------------- -------------------- ---------------------
         Edmond Buccellato            50,000/0                $0.20                     $1,500/$0
                                      50,000/0                $0.10                     $6,500/$0
                                      105,453/0               $0.05                     $18,998/$0
         ---------------------------- ----------------------- -------------------- ---------------------
         Simon Skurkovich             300,000/0               $0.10                     $39,000/$0
                                      623,000/0               $0.65                    $112,140/$0
</TABLE>

- ----------
(1) The dollar amounts calculated in this table use the closing bid on the
Common Stock of the Company on the last trading day in December 2000, which was
$0.23 per share.

LONG-TERM INCENTIVE PLAN AWARDS

THE STOCK BONUS PLAN

         The Board of Directors of the Company adopted the Stock Bonus Plan in
January 2000 as an incentive for performance by eligible employees (the "Plan").

         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.

         During the fiscal year ending December 31, 2000, as previously
disclosed in the Company's Form 10-KSB for the fiscal year ended December 31,
1999, the following directors were awarded 8.0 million shares of the Company's
Common Stock under the Plan at a price of $0.05 per share:


                                       23
<PAGE>


<TABLE>
<CAPTION>

         ----------------------------------------- -------------------------------------------
                        Individual                           Number of Bonus Shares
         ----------------------------------------- -------------------------------------------
         <S>                                       <C>
         Edmond Buccellato                                         1,500,000
         ----------------------------------------- -------------------------------------------
         Larry Loomis                                              1,000,000
         ----------------------------------------- -------------------------------------------
         Boris Skurkovich                                          1,500,000
         ----------------------------------------- -------------------------------------------
         Simon Skurkovich (1)                                      4,000,000
         ----------------------------------------- -------------------------------------------

</TABLE>

 ----------
(1)       Dr. Skurkovich subsequently gifted all of these shares to various
          individuals, including 1,935,000 to Boris Skurkovich and 1,735,000 to
          Leonard Millstein and three members of his family.

         Such stock bonuses were issued at the weighted average price at which
the Company has been selling shares of stock out of authorized but yet unissued
common stock to third parties during the six months immediately preceding the
issuance of the bonus shares, or $0.05 per share.

         Consideration for the purchase of such shares was in the form of a note
in favor of the Company by each individual to whom the stock was awarded, except
for Dr. Simon Skurkovich, whose $200,000 purchase obligation was set off against
an obligation of the Company to him for accrued but unpaid salary. The notes for
Messrs. Buccellato and Loomis and Dr. Boris Skurkovich have a maturity of two
(2) years and bear interest at 6.5% per annum.

THE OEI PLAN

         The Board of Directors of the Company adopted the OEI Plan in December
2000. The purpose of the OEI Plan is to promote the long-term success of the
Company and the creation of stockholder value by (a) encouraging employees,
outside directors and consultants to focus on critical long-term objectives, (b)
encouraging the attraction and retention of employees, outside directors and
consultants with exceptional qualifications and (c) linking employees, outside
directors and consultants directly to stockholder interests through increased
stock ownership. The OEI Plan seeks to achieve this purpose by providing for
awards in the form of restricted shares, stock units, incentive and nonstatutory
stock options and stock appreciation rights. The OEI Plan will be administered
by the Board of Directors unless and until the Board delegates administration to
a committee.

         The Board reserved 4,000,000 shares of Common Stock to be issued under
the OEI Plan, subject to annual increases equal to the lesser of 2.5% of
outstanding shares or 250,000 shares. No shares have been issued under the OEI
Plan to date.

COMPENSATION OF DIRECTORS

         Directors did not receive any cash compensation for serving as members
of the Board of Directors for the year ending December 31, 2000, but several
Board members received stock grants under the Plan as described above under
"Stock Bonus Plan" and Board members are eligible for awards under the OEI Plan.
In addition, during the fiscal year ended December 31, 2000, each of Dr.
Marangos and Messrs. Cappello and Bendheim received one-time grants of warrants
exercisable into 100,000 shares of Common Stock of the Company at $0.25 per
share. There are no other contractual arrangements with any member of the Board
of Directors.


                                       24
<PAGE>


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The following table sets forth the Common Stock ownership, including
options to purchase stock, of each person known by the Company to be the
beneficial owner of five percent (5%) or more of the Company's Common Stock,
each director individually and all officers and directors of the Company as a
group as of December 31, 2000. Each person has sole voting and investment power
with respect to the shares of Common Stock shown, unless otherwise noted, and
all ownership is of record and beneficial. As of December 31, 2000, the Company
had 39,848,265 shares of Common Stock outstanding.

<TABLE>
<CAPTION>

     -------------------------------------- ------------------------------ ------------------------------
     Name and Address of Owner              Number of Shares               Percentage of Total
                                            Beneficially Owned
     -------------------------------------- ------------------------------ ------------------------------
     <S>                                    <C>                            <C>
     Boris V. Skurkovich, M.D.              5,177,270(1)                              12.9%
     18 Blaisdell Ave.
     Pawtucket, RI 01860

     -------------------------------------- ------------------------------ ------------------------------
     Leonard and Ellen Millstein            3,403,459(2)                               8.5%
     1677 Calle Alta
     La Jolla, CA 92037

     -------------------------------------- ------------------------------ ------------------------------
     Gerard K. Cappello                     2,161,460(3)                               5.1%
     1299 Ocean Avenue
     Suite 306
     Santa Monica, CA 90401

     -------------------------------------- ------------------------------ ------------------------------
     Edmond Buccellato                      2,143,343(4)                               5.3%
     6355 Topanga Canyon Boulevard
     Suite 510
     Woodland Hills, CA 91367

     -------------------------------------- ------------------------------ ------------------------------
     Simon Skurkovich, M.D.                 2,126,770(5)                               5.2%
     802 Rollins Avenue
     Rockville, MD 20852

     -------------------------------------- ------------------------------ ------------------------------
     Lawrence Loomis                        1,610,000(6)                               4.0%
     9110 Red Branch Road
     Columbia, MD 21045

     -------------------------------------- ------------------------------ ------------------------------
     Alexander L. Cappello                  1,315,061(7)                               3.2%
     1299 Ocean Avenue
     Suite 306
     Santa Monica, CA 90401

     -------------------------------------- ------------------------------ ------------------------------
     John M. Bendheim                         200,000(8)                                 *
     2001 S. Barrington Street
     Suite 100
     Los Angeles, CA 90025

     -------------------------------------- ------------------------------ ------------------------------
     Paul J. Marangos                         100,000(9)                                 *
     7402 Cadencia Street
     Carlsbad, CA 92009
     -------------------------------------- ------------------------------ ------------------------------
     Margo Dockendorf, J.D.                         0                                    *
     4090 Rosenda Court #200
     San Diego, CA 92122
     -------------------------------------- ------------------------------ ------------------------------
     All officers and directors as a        18,237,363(10)                            40.2%
     group (9)
     -------------------------------------- ------------------------------ ------------------------------
</TABLE>
                                       25
<PAGE>


- -----------
(1)           Shares held in the name of Boris Skurkovich (2,505,270 shares),
              Carol Marjorie Dorros (550,000), Samuel Skurkovich (701,000
              shares), and Samuel Aaron Skurkovich (1,121,000 shares). Includes
              options to purchase up to 100,000 shares of common stock at an
              exercise price of $0.01 per share; options to purchase up to
              150,000 shares of common stock at an exercise price of $0.02 per
              share, and options to purchase 50,000 shares of common stock at an
              exercise price of $0.10 per share.
(2)           Leonard and Ellen Millstein are husband and wife. Shares held in
              their names comprise shares held in his name (565,100), shares
              held in her name (2,713,359) and options in his name to purchase
              up to 125,000 shares of common stock at an exercise price of
              $0.20 per share. The Millsteins disclaim beneficial ownership of
              the shares in the other's name and disclaim that they are part
              of any "group" for SEC purposes.
(3)           Shares held in the name of Gerard Cappello include warrants held
              in his name to purchase 655,919 shares at an exercise price of
              $0.15 per share of Common Stock and warrants to purchase 1,405,541
              shares at an exercise price of $0.15 per share of Common Stock
              held in the name of Cappello Capital Corporation, a company
              wholly-owned by Mr. Cappello. Shares held also include the right
              to acquire 100,000 shares of Common Stock upon conversion of
              convertible demand notes at a conversion price of $0.25 per share.
(4)           Shares held in the names of the Edmond Buccellato (1,754,000),
              Edmond and Leana Buccellato Family Trust (153,000 shares), Edmond
              Buccellato and Leana Buccellato FBO the Buccellato Living Trust
              (20,000 shares), Amy Buccellato (8,400 shares), and Matthew
              Buccellato (10,490 shares). Includes options to purchase up to
              50,000 shares of common stock at an exercise price of $0.10 per
              share and options to purchase up to 50,000 shares of common stock
              at an exercise price of $0.20 per share. Includes options to
              purchase up to 105,543 shares of common stock at an exercise price
              of $0.10 per share.
(5)           Shares held in the name of Simon Skurkovich include the right
              to acquire 100,000 shares of Common Stock upon conversion of
              convertible demand notes at a conversion price of $0.25 per share.
              Includes options to purchase up to 300,000 shares of common stock
              at an exercise price of $0.10 per share, and options to purchase
              up to 623,000 shares of common stock at an exercise price of
              $0.10 per share. Simon Skurkovich is the father of Boris
              Skurkovich and Ellen Millstein but disclaims beneficial ownership
              of the shares attributed to both of them and disclaims that the
              three of them are part of a "group" for SEC purposes.
(6)           Shares held in the names of Larry Loomis (1,325,000 shares) and
              New Horizons Diagnostics, Inc. (200,000 shares). Includes options
              to purchase up to 75,000 shares of common stock at an exercise
              price of $0.20 per share and options to purchase up to 10,000
              shares of common stock at an exercise price of $0.10 per share.
(7)           Shares held in the name of Alexander Cappello include warrants
              held in his name to purchase 100,000 shares at an exercise price
              of $0.25 per share of Common Stock and warrants to purchase
              1,115,061 shares at an exercise price of $0.15 per share of Common
              Stock. Also includes the right to acquire 100,000 shares of Common
              Stock upon conversion of convertible demand notes at a conversion
              price of $0.25 per share. Alexander Cappello is the brother of
              Gerard Cappello.
(8)           Shares held in the name of John Bendheim comprise warrants to
              purchase 100,000 shares of Common Stock at an exercise price of
              $0.25 per share and the right to acquire 100,000 shares of
              Common Stock upon conversion of convertible demand notes at a
              conversion price of $0.25 per share.


                                       26
<PAGE>


(9)           Warrants held in the name of Paul J. Marangos to purchase 100,000
              shares of Common Stock at an exercise price of $0.25 per share.
(10)          Includes 3,476,521 shares of Common Stock underlying warrants,
              1,638,543 shares of Common Stock underlying options and 400,000
              shares of Common Stock underlying convertible subordinated notes.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         In connection with issuance of bonus shares under the Plan to various
individuals, the Company financed the $0.05 per share purchase price for the
shares for Messrs. Buccellato, Loomis and Boris Skurkovich in
the amounts of $75,000, $50,000 and $75,000, respectively. The notes
for these amounts mature in two years and bear interest at 6.5% per annum.
The Company also set off the $200,000 purchase obligation of Simon Skurkovich
against an obligation of the Company to him for accrued but unpaid salary.

         Alexander L. Cappello is the brother of Gerard K. Cappello, the owner,
President and Chief Executive Officer of Cappello Capital Corporation. Cappello
Capital Corporation raised $1,510,500 in convertible subordinated debt for the
Company and was paid $124,981 in fees and expenses related thereto and it and
certain related parties were issued warrants to purchase 4,685,135 shares of
Common Stock at $0.15 per share.

                                     PART IV

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K.

EXHIBITS

Exhibit No.       Description

2.1               Agreement of Merger dated as of July 14, 2000, between the
                  Registrant, a Delaware corporation, and Advanced Biotherapy
                  Concepts, Inc., a Nevada corporation (1)

3.1               Certificate of Incorporation of Registrant. (2)

3.2               Bylaws of Registrant. (2)

4.1               Form of Registrant's Common Stock Certificate. (3)

10.1              Form of Stock Bonus Plan. (4)

10.2              Form of Common Stock Purchase Warrant in favor of Cappello
                  Capital Corporation. (5)

10.3              Form of 2000 Omnibus Equity Incentive Plan.

10.4              Form of Option Agreement.

10.5              Form of 10% Convertible Subordinated Debt Instrument. (6)

10.6              Form of Convertible Subordinated Debt Purchase Agreement.

10.7              Form of Investor Rights Agreement.


                                       27
<PAGE>


23.1              Consent of Williams & Webster PS, Certified Public
                  Accountants.

- --------------------------------------------------------------------------------
(1)    Filed as Appendix A to Registrant's Proxy Statement dated July 14, 2000,
       and incorporated herein by reference.

(2)    Filed as an exhibit to Registrant's Form 10-QSB for the quarter ending
       September 30, 2000, and incorporated herein by reference.

(3)    Filed as an exhibit to Registrant's Form 10-SB filed on June 10, 1999,
       and incorporated herein by reference.

(4)    Filed as an exhibit to Registrant's Form 10-KSB for the fiscal year
       ending December 31, 1999.

(5)    Filed as an exhibit to Registrant's Form 10-QSB for the quarter ending
       March 31, 2000, and incorporated herein by reference.

(6)    Filed as an exhibit to Registrant's Form 10-QSB for the quarter ending
       June 30, 2000, and incorporated herein by reference.

The financial statements are incorporated herein by reference from Exhibit 99.1,
which begins with the Table of Contents on Page F- 1.

REPORTS ON FORM 8-K

         No reports on Form 8-K have been filed during the last quarter of the
period covered by this report.


                                       28
<PAGE>


                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, on this 28th
day of March, 2001.

                              Advanced Biotherapy, Inc.
                                    (Registrant)

                              By:      /s/ Paul J. Marangos
                                       -----------------------------------------
                                       Paul J. Marangos, Chief Executive Officer

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person on behalf of the
Registrant and in the capacities and on this 28th day of March, 2001.

<TABLE>
<CAPTION>

                     SIGNATURE                            TITLE                         DATE
                     ---------                            -----                         ----
         <S>                                 <C>                                       <C>
                                             Chairman, President and Chief          March 28, 2001
         /s/ Paul J. Marangos, Ph.D.         Executive Officer
         ----------------------------        (Chief  Executive Officer and
         Paul J. Marangos, Ph.D.             Principal Financial and
                                             Accounting Officer)


         /s/ Margo J. Dockendorf, Esq.       Treasurer and Secretary                March 28, 2001
         ----------------------------
         Margo J. Dockendorf, Esq.


         /s/ John Bendheim                   Director                               March 28, 2001
         ----------------------------
         John Bendheim


         /s/ Edmond Buccellato               Director                               March 28, 2001
         ----------------------------
         Edmond Buccellato


         /s/ Alexander L. Cappello           Director                               March 28, 2001
         ----------------------------
         Alexander L. Cappello


         /s/ Lawrence Loomis                 Director                               March 28, 2001
         ----------------------------
         Lawrence Loomis


         /s/ Leonard Millstein               Director                               March 28, 2001
         ----------------------------
         Leonard Millstein


         /s/ Boris Skurkovich, M.D.          Director                               March 28, 2001
         ----------------------------
         Boris Skurkovich, M.D.


         /s/ Simon Skurkovich, M.D.          Director                               March 28, 2001
         ----------------------------
         Simon Skurkovich, M.D.

</TABLE>


                                       29
<PAGE>


                            ADVANCED BIOTHERAPY, INC.
                  (FORMERLY ADVANCED BIOTHERAPY CONCEPTS, INC.)
                        (A DEVELOPMENT STAGE ENTERPRISE)

                                DECEMBER 31, 2000



                                    CONTENTS



Independent Auditor's Report                                               F-2

Financial Statements:

         Balance Sheets                                                    F-3

         Statements of Operations                                          F-4

         Statement of Stockholders' Equity (Deficit)                       F-5

         Statements of Cash Flows                                          F-6

Notes to Financial Statements                                              F-7


                                      F-1
<PAGE>


Board of Directors
Advanced Biotherapy, Inc.
Carlsbad, CA


                          INDEPENDENT AUDITOR'S REPORT


We have audited the accompanying balance sheets of Advanced Biotherapy, Inc., a
development stage enterprise (formerly Advanced Biotherapy Concepts, Inc.) (a
Delaware corporation) as of December 31, 2000 and 1999, and the related
statements of operations, stockholders' equity (deficit) and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Advanced Biotherapy, Inc. as of
December 31, 2000 and 1999, and the results of its operations and its cash flows
for the years then ended in conformity with accounting principles generally
accepted in the United States of America.

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 $4,048,125 at December 31, 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
March 6, 2001


                                      F-2
<PAGE>


                           ADVANCED BIOTHERAPY, INC.
                 (FORMERLY ADVANCED BIOTHERAPY CONCEPTS, INC.)
                        (A DEVELOPMENT STAGE ENTERPRISE)
                                 BALANCE SHEETS

                                     ASSETS

<TABLE>
<CAPTION>

                                                                               December 31,           December 31,
                                                                                   2000                   1999
                                                                              ---------------        ----------------
<S>                                                                           <C>                    <C>
CURRENT ASSETS
Cash                                                                          $      758,267         $        34,958
Prepaid expenses                                                                      32,692                       -
                                                                              ---------------        ----------------
          Total Current Assets                                                       790,959                  34,958
                                                                              ---------------        ----------------

PROPERTY AND EQUIPMENT, net of depreciation                                           10,287                       -
                                                                              ---------------        ----------------

OTHER ASSETS
   Notes receivable - related party                                                  246,619                       -
   Interest receivable                                                                15,548                       -
   Deferred loan origination fees, net of
      accumulated amortization                                                       102,503                       -
   Patents and patents pending, net of
      accumulated amortization                                                       173,509                 113,319
                                                                              ---------------        ----------------
          Total Other Assets                                                         538,179                 113,319
                                                                              ---------------        ----------------

TOTAL ASSETS                                                                  $    1,339,425         $       148,277
                                                                              ===============        ================


                      LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES
Accounts payable and accrued liabilities                                      $       46,609         $        93,934
Loan payable to related party                                                              -                 257,076
                                                                              ---------------        ----------------
          Total Current Liabilities                                                   46,609                 351,010
                                                                              ---------------        ----------------

LONG-TERM DEBT
Convertible notes payable                                                          1,560,169                       -
Notes payable to related parties                                                     127,631                 213,381
                                                                              ---------------        ----------------
          Total Long-Term Debt                                                     1,687,800                 213,381
                                                                              ---------------        ----------------

          Total Liabilities                                                        1,734,409                 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
   Additional paid-in capital                                                      3,233,890               2,770,305
   Subscriptions receivable                                                                -                 (32,500)
   Stock options and warrants                                                        379,403                 210,738
   Deficit accumulated during development stage                                   (4,048,125)             (3,394,855)
                                                                              ---------------        ----------------
               Total Stockholders' Equity (Deficit)                                 (394,984)               (416,114)
                                                                              ---------------        ----------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                          $    1,339,425         $       148,277
                                                                              ===============        ================

</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      F-3

<PAGE>


                           ADVANCED BIOTHERAPY, INC.
                 (FORMERLY ADVANCED BIOTHERAPY CONCEPTS, INC.)
                        (A DEVELOPMENT STAGE ENTERPRISE)
                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                                                                 From Inception
                                                                                                               (December 2, 1985)
                                                                 Years Ended December 31,                           Through
                                                             2000                      1999                    December 31, 2000
                                                      -------------------       -------------------      --------------------------
<S>                                                   <C>                       <C>                      <C>
REVENUES                                              $                -        $                -       $                  89,947
                                                      -------------------       -------------------      --------------------------

OPERATING EXPENSES
       Research and development                                   39,579                   156,280                       2,144,625
       Promotional fees                                            7,558                         -                           7,558
       Professional fees                                         430,608                    35,308                       1,552,359
       Depreciation and amortization                              24,222                     9,134                         432,004
       Salaries and benefits                                     174,613                   120,000                         926,114
       Insurance                                                  10,898                         -                          10,898
       Shareholder relations and transfer fees                    19,613                     7,600                         147,759
       Rent                                                       11,100                     1,800                         122,154
       Travel and entertainment                                   60,816                       544                          61,360
       Telephone and communications                               12,238                     2,378                          14,616
       Office                                                     27,222                       690                          27,912
       General and administrative                                  8,617                       544                         567,998
                                                      -------------------       -------------------      --------------------------
            Total Operating Expenses                             827,084                   334,278                       6,015,357
                                                      -------------------       -------------------      --------------------------

Loss from operations                                            (827,084)                 (334,278)                     (5,925,410)

Other income (expense)
       Miscellaneous income                                            -                    22,000                          22,000
       Interest income                                            29,995                       259                          31,091
       Internal gain on sale of securities                       157,520                         -                         157,520
       Accounts payable forgiveness                               45,396                         -                          45,396
       Interest expense                                          (59,097)                  (26,298)                       (426,159)
                                                      -------------------       -------------------      --------------------------
            Total Other Income (Expense)                         173,814                    (4,039)                       (170,152)
                                                      -------------------       -------------------      --------------------------

Loss before extraordinary  item                                 (653,270)                 (338,317)                     (6,095,562)

Extraordinary item, forgiveness of debt                                -                 1,482,209                       2,047,437
                                                      -------------------       -------------------      --------------------------

NET INCOME (LOSS)                                     $         (653,270)       $        1,143,892       $              (4,048,125)
                                                      ===================       ===================      ==========================

BASIC NET INCOME (LOSS)
  PER COMMON SHARE                                    $            (0.02)       $             0.04       $                   (0.18)
                                                      ===================       ===================      ==========================

DILUTED NET INCOME (LOSS)
  PER COMMON SHARE                                    $            (0.02)       $             0.04       $                   (0.18)
                                                      ===================       ===================      ==========================

WEIGHTED AVERAGE NUMBER OF
BASIC COMMON STOCK
SHARES OUTSTANDING                                            39,278,866                28,946,467                      22,170,415
                                                      ===================       ===================      ==========================

WEIGHTED AVERAGE NUMBER OF
DILUTED COMMON STOCK
SHARES OUTSTANDING                                            39,278,866                30,981,467                      22,170,415
                                                      ===================       ===================      ==========================

</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      F-4
<PAGE>


                           ADVANCED BIOTHERAPY, INC.
                 (FORMERLY ADVANCED BIOTHERAPY CONCEPTS, INC.)
                        (A DEVELOPMENT STAGE ENTERPRISE)
                  STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>


                                                            COMMON STOCK
                                               --------------------------------------        ADDITIONAL
                                                                                              PAID-IN                  STOCK
                                                    SHARES               AMOUNT               CAPITAL              SUBSCRIPTIONS
                                               ------------------   -----------------   ---------------------   --------------------
<S>                                            <C>                  <C>                 <C>                     <C>
Balance, December 31, 1998                            27,141,075    $         27,141    $          2,552,654    $                 -

Common stock issued at
approximately $0.05 per share                          3,158,000               3,158                 151,993                      -

Cancellation of escrowed shares                         (850,000)               (850)                    850                      -

Common stock issued for services
at approximately $0.05 per share                          99,190                  99                   4,860                      -

Contribution of capital by
shareholders in form of
foregone interest and rent                                     -                   -                  28,098                      -

Stock subscriptions issued                               650,000                 650                  31,850                (32,500)

Stock options issued in exchange
for forgiveness of accrued wages                               -                   -                       -                      -

Net income for the year ended
December 31, 1999                                              -                   -                       -                      -
                                               ------------------   -----------------   ---------------------   --------------------

Balance, December 31, 1999                            30,198,265              30,198               2,770,305                (32,500)

Contribution of capital by
shareholders in form of
foregone interest and rent                                     -                   -                   9,735                      -

Stock subscriptions paid                                       -                   -                       -                 32,500

Stock issued as part of stock
   bonus plan in exchange for loan
   payable and notes receivable
   at $0.05 per share                                  9,200,000               9,200                 450,800                      -

Stock warrants issued in exchange
  for services                                                 -                   -                       -                      -

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 year ended
   December 31, 2000                                           -                   -                       -                      -
                                               ------------------   -----------------   ---------------------   --------------------


Balance, December 31, 2000                            39,848,265    $         39,848    $          3,233,890    $                 -
                                               ==================   =================   =====================   ====================

</TABLE>

<TABLE>
<CAPTION>

                                                                             DEFICIT
                                                                           ACCUMULATED
                                                      STOCK                   DURING
                                                   OPTIONS AND             DEVELOPMENT
                                                     WARRANTS                  STAGE
                                               --------------------    ---------------------
<S>                                            <C>                     <C>
Balance, December 31, 1998                     $                 -     $         (4,538,747)

Common stock issued at
approximately $0.05 per share                                    -                        -

Cancellation of escrowed shares                                  -                        -

Common stock issued for services
at approximately $0.05 per share                                 -                        -

Contribution of capital by
shareholders in form of
foregone interest and rent                                       -                        -

Stock subscriptions issued                                       -                        -

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                                 210,738               (3,394,855)

Contribution of capital by
shareholders in form of
foregone interest and rent                                       -                        -

Stock subscriptions paid                                         -                        -

Stock issued as part of stock
   bonus plan in exchange for loan
   payable and notes receivable
   at $0.05 per share                                            -                        -

Stock warrants issued in exchange
  for services                                             168,665                        -

Stock issued for cash at $0.01 from
  the exercise of options                                        -                        -

Stock adjustment                                                 -                        -

Net loss for the year ended
   December 31, 2000                                             -                 (653,270)
                                               --------------------    ---------------------


Balance, December 31, 2000                     $           379,403     $         (4,048,125)
                                               ====================    =====================

</TABLE>

Summary of required information regarding stock issuances can be found in Note
8.

   The accompanying notes are an integral part of these financial statements.


                                      F-5
<PAGE>


                           ADVANCED BIOTHERAPY, INC.
                 (FORMERLY ADVANCED BIOTHERAPY CONCEPTS, INC.)
                        (A DEVELOPMENT STAGE ENTERPRISE)
                            STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                                               From Inception
                                                                                                             (December 2, 1985)
                                                                     Years Ended December 31,                      through
                                                                   2000                    1999              December 31, 2000
                                                             -----------------       -----------------      ---------------------
<S>                                                          <C>                     <C>                    <C>
CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss)                                            $       (653,270)       $      1,143,892       $         (4,048,125)
     Extraordinary gain                                                     -              (1,482,209)                (1,684,068)
Adjustments to reconcile net loss to cash used in
     operating activities:
     Depreciation and amortization                                     24,222                   9,134                    432,004
     Investment income                                               (157,520)                      -                   (157,520)
     Expenses paid through issuance
       of common stock                                                      -                   4,959                    231,340
     Expenses paid through issuance
       of common stock warrants                                       168,665                       -                    168,665
     Interest expense accrued to convertible debt                      49,669                       -                     49,669
     Expenses paid through contribution
       of additional paid in capital                                    9,735                  28,098                     37,833
     Organization costs                                                     -                       -                     (9,220)
     Decrease (increase) in:
         Prepaid expenses                                             (32,692)                      -                    (32,692)
         Interest receivable                                          (15,548)                      -                    (15,548)
         Deferred loan origination cost                              (113,288)                      -                   (113,288)
     Increase (decrease) in:
         Accounts payable                                             (47,325)                 39,052                     46,609
         Accounts and notes payable, related parties                 (129,445)                      -                    127,631
         Payroll and payroll taxes payable                                  -                 181,624                  1,682,984
         Accrued interest                                                   -                       -                      9,962
                                                             -----------------       -----------------      ---------------------

Net cash used in operating activities                                (896,797)                (75,450)                (3,273,764)

CASH FLOWS FROM INVESTING ACTIVITIES
     Purchase of fixed assets                                         (11,030)                      -                    (48,003)
     Internal gain on sale of securities                              157,520                       -                    157,520
     Acquisition of patents                                           (72,884)                (45,925)                  (251,121)
                                                             -----------------       -----------------      ---------------------

Net cash used in investing activities                                  73,606                 (45,925)                  (141,604)

CASH FLOWS FROM FINANCING ACTIVITIES
     Proceeds from issuance of common stock                            36,000                 155,151                  2,449,754
     Proceeds from convertible note                                 1,510,500                       -                  1,510,500
     Proceeds from notes payable                                      100,000                       -                    388,508
     Payments on notes payable                                       (100,000)                      -                   (175,127)
                                                             -----------------       -----------------      ---------------------
Net cash provided by financing activities                           1,546,500                 155,151                  4,173,635
                                                             -----------------       -----------------      ---------------------

Net increase (decrease) in cash                                       723,309                  33,776                    758,267

Cash, beginning                                                        34,958                   1,182                          -
                                                             -----------------       -----------------      ---------------------

Cash, ending                                                 $        758,267        $         34,958       $            758,267
                                                             =================       =================      =====================

Supplemental cash flow disclosures:

     Interest expense paid                                   $            984        $              -       $            339,927
                                                             =================       =================      =====================
     Income taxes paid                                       $              -        $              -       $                  -
                                                             =================       =================      =====================

NON-CASH FINANCING AND INVESTING ACTIVITIES:

     Common stock issued in exchange for
         professional fees and expenses                      $              -        $          4,959       $            340,869
     Contributed expenses                                    $          9,735        $         28,098       $             37,833
     Common stock subscribed                                 $              -        $         32,500       $             32,500
     Common stock issued for a loan payable                  $        213,381        $              -       $            213,381
     Common stock issued for notes receivable                $        246,619        $              -       $            246,619
     Warrants issued for services                            $        168,665        $              -       $            168,665
     Accrued interest paid by convertible debt               $         49,669        $              -       $             49,669

</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      F-6
<PAGE>


                           ADVANCED BIOTHERAPY, INC.
                  (FORMERLY ADVANCED BIOTHERAPY CONCEPTS, INC.)
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 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. During 2000, the Company conducted research in Maryland. The
Company's fiscal year-end is December 31. The Company is a development stage
enterprise.

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 accounting principles generally accepted in the United
States of America, 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 $653,270 for the year ended December 31, 2000. At December 31, 2000, the
Company has an accumulated deficit during the development stage of $4,048,125.
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 December 31, 2000, the
Company anticipates that its minimum cash requirements 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 debt and/or equity instruments. (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.


                                      F-7
<PAGE>


                           ADVANCED BIOTHERAPY, INC.
                  (FORMERLY ADVANCED BIOTHERAPY CONCEPTS, INC.)
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2000


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

ACCOUNTING METHOD

The Company's financial statements are prepared using the accrual method of
accounting.

CASH AND CASH EQUIVALENTS

For purposes of the Statement of Cash Flows, the Company considers all bank
accounts, certificates of deposit, 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 December 31, 2000, the Company had net operating loss carryforwards of
approximately $4,000,000 which may be offset against future taxable income
through 2020. 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 accounting
principles generally accepted in the United States of America, requires the use
of estimates and assumptions regarding certain types of assets, liabilities,
revenues, and expenses. Such estimates primarily relate to unsettled
transactions and events as of the date of the financial statements. Accordingly,
upon settlement, actual results may differ from estimated amounts.

IMPAIRED ASSET POLICY

In March 1995, the Financial Accounting Standards Board issued a statement
titled "Accounting for Impairment of Long-lived Assets." In complying with this
standard, the Company reviews its long-lived assets quarterly to determine if
any events or changes in circumstances have transpired which indicate that the
carrying value of its assets may not be recoverable. The Company determines
impairment by comparing the undiscounted future cash flows estimated to be
generated by its assets to their respective carrying amounts. The Company does
not believe any adjustments are needed to the carrying value of its assets at
December 31, 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. Promotional
fees amounted to $7,558 for the year ended December 31, 2000. No promotional
fees were paid in 1999.


                                      F-8
<PAGE>


                           ADVANCED BIOTHERAPY, INC.
                  (FORMERLY ADVANCED BIOTHERAPY CONCEPTS, INC.)
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2000


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 RESEARCH AND DEVELOPMENT COSTS

Costs of research and development are expensed as incurred.

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.

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 December 31, 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, prepaid expenses, receivables, accounts payable,
loans and notes payable, accrued liabilities, and convertible debt approximate
their fair value.

DEFERRED LOAN ORIGINATION FEES

During the year ended December 31, 2000, the Company entered into convertible
subordinated debt which required the payment of loan origination fees. See Note
13. These loan origination fees, which totaled $113,288 at December 31, 2000,
are amortized over the life of the related debt. During the year ended December
31, 2000, the Company recorded amortization expense in the amount of $10,785
related to these fees.


                                      F-9
<PAGE>


                           ADVANCED BIOTHERAPY, INC.
                  (FORMERLY ADVANCED BIOTHERAPY CONCEPTS, INC.)
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2000


NOTE 3 - PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets. The
following is a summary of property, equipment and accumulated depreciation at
December 31, 2000:

<TABLE>
<CAPTION>

                                                   Cost                Accumulated Depreciation
                                                   ----                ------------------------
          <S>                                <C>                           <C>
          Lab equipment                      $     27,582                  $      27,582
          Office equipment                         15,869                          5,582
          Furniture and fixtures                    1,302                          1,302
                                             ------------                  -------------
                                             $     44,753                  $      34,466
                                             ============                  =============

</TABLE>

Depreciation expense for the year ended December 31, 2000 was $743. There was no
depreciation taken in 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 Company's patents relate to
the treatment of autoimmune diseases.

The following is a summary of the costs of patents and patents pending at
December 31, 2000:

<TABLE>
<CAPTION>

                                                                     Accumulated
                                                        Cost         amortization             Net amount
                                                 ---------------    --------------         ---------------
      <S>                                        <C>                <C>                    <C>
      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                                       72,884           (12,694)                 60,190
                                                 ---------------     -------------          --------------
      Balance, December 31, 2000                 $       251,120     $     (77,611)         $      173,509
                                                 ===============     =============          ==============

</TABLE>

NOTE 5 - RELATED PARTY TRANSACTIONS

TRANSACTIONS IN 2000

The Company has notes receivable in the amount of $246,619 from shareholders of
the Company in connection with an payment plan for the purchase of Company
stock. The notes accrue interest at a rate of 6.5% per annum and are payable on
December 31, 2002.

Notes payable to related parties consist of notes payable to the former chairman
and principal shareholder. During 2000, $85,750 of the notes was used to offset
a bonus stock sale. The note has no specific due date, is currently
uncollateralized, and is non-interest bearing, however, interest is calculated
at the applicable federal rate each quarter. This interest was recorded as
interest expense and contributed capital in the accompanying financial
statements.


                                      F-10
<PAGE>


                           ADVANCED BIOTHERAPY, INC.
                  (FORMERLY ADVANCED BIOTHERAPY CONCEPTS, INC.)
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2000


NOTE 5 - RELATED PARTY TRANSACTIONS (CONTINUED)

TRANSACTIONS IN 1999

The Company's former 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 him for expenses amount to $257,076.
Even though the he 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 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, he 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 his accrued salary. See Note 10. In 1999, he 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 in
1999.

At December 31, 1999, the Company owed its then 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 this employee
$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 she 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 in 1999.

At December 31, 1998, the then 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, he 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 10. In 1999, he 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 in 1999.

TRANSACTIONS INVOLVING LEASED SPACE

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.


                                      F-11
<PAGE>


                           ADVANCED BIOTHERAPY, INC.
                  (FORMERLY ADVANCED BIOTHERAPY CONCEPTS, INC.)
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2000


NOTE 5 - RELATED PARTY TRANSACTIONS (CONTINUED)

During 2000 the Company leased office space from a company owned in part by a
shareholder. The minimum base lease payment is $4,800 annually. See Note 14.

NOTE 6 - INTERNAL GAIN ON SALE OF SECURITIES

During the year ending December 31, 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 - CONCENTRATIONS

The Company maintains cash accounts at a California investment institution. The
funds on deposit are insured by the SIPC up to $100,000 with balance insured by
an independent insurer.

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
                                                     ----------------------------------------------
                                                        Average         Shares            Amount         Additional
                                                       price per                                       Paid-in Capital
                                                         share
                                                     ------------    --------------     -----------    ----------------
<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                                                        .09          1,800,500           1,801             153,749
1998                                                        .10            305,000             305              30,195
1999                                                        .05          3,158,000           3,158             151,993
                                                                     --------------     -----------    ----------------
                                                                        10,800,500          10,801           2,399,703
                                                                     --------------     -----------    ----------------

</TABLE>


                                      F-12
<PAGE>


                           ADVANCED BIOTHERAPY, INC.
                  (FORMERLY ADVANCED BIOTHERAPY CONCEPTS, INC.)
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2000


NOTE 8 - COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL (CONTINUED)

<TABLE>
<CAPTION>

                                                                     Common Stock
                                                     ----------------------------------------------
                                                        Average         Shares            Amount         Additional
                                                       price per                                       Paid-in Capital
                                                         share
                                                     ------------    --------------     -----------    ----------------
<S>                                                  <C>             <C>                <C>            <C>
Common stock issued for patents assigned:
1984                                                 $      .01            550,000      $    5,500     $             -
1985, adjustment to reflect change in number and
par value of shares outstanding                               -          2,750,000          (2,200)              2,200
                                                                     --------------     -----------    ----------------
                                                                         3,300,000           3,300               2,200
                                                                     --------------     -----------    ----------------

Common stock issued for acquisitions:
1985                                                        .01         13,333,500          13,334             (41,112)
                                                                     --------------     -----------    ----------------

Common stock issued for note receivable:
1986                                                       1.00             10,000              10               9,990
2000                                                        .05          4,932,380           4,932             241,687
                                                                     --------------     -----------    ----------------
                                                                         4,942,380           4,942             251,677
                                                                     --------------     -----------    ----------------

Contribution of additional paid-in capital:
1991                                                          -                  -               -              35,825
1999                                                          -                  -               -              28,098
2000                                                          -                  -               -               9,735
                                                                     --------------     -----------    ----------------
                                                                                 -               -              73,658
                                                                     --------------     -----------    ----------------

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                                                        .38             25,000              25               9,475
1990                                                        .66             37,375              37              24,635
1991                                                        .51            159,500             160              81,010
1992                                                        .75             62,500              62              46,563
1993                                                        .25            120,000             120              29,880
1996                                                        .05            308,500             308              13,832
1997                                                        .05            155,500             155               7,619
1999                                                        .05             99,190              99               4,860
                                                                     --------------     -----------    ----------------
                                                                           992,565             991             230,349
                                                                     --------------     -----------    ----------------

</TABLE>


                                      F-13
<PAGE>


                           ADVANCED BIOTHERAPY, INC.
                  (FORMERLY ADVANCED BIOTHERAPY CONCEPTS, INC.)
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2000


NOTE 8 - COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL (CONTINUED)

<TABLE>
<CAPTION>

                                                                     Common Stock
                                                     ----------------------------------------------
                                                        Average         Shares            Amount         Additional
                                                       price per                                       Paid-in Capital
                                                         share
                                                     ------------    --------------     -----------    ----------------
<S>                                                  <C>             <C>                <C>            <C>
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):
1993                                                        .25            200,000             200              49,800
2000                                                        .05          1,714,995           1,715              84,035
                                                                     --------------     -----------    ----------------
                                                                         1,914,995           1,915             133,835
                                                                     --------------     -----------    ----------------

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 exercised:
1997                                                        .01            325,000             325               2,929
2000                                                        .01            350,000             350               3,150
                                                                     --------------     -----------    ----------------
                                                                           675,000             675               6,079
                                                                     --------------     -----------    ----------------
Total                                                                   39,848,265      $   39,848     $     3,233,890
                                                                     ==============     ===========    ================

</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.

Effective with the merger of Advanced Biotherapy Concepts, Inc. into its wholly
owned subsidiary, 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.


                                      F-14
<PAGE>


                           ADVANCED BIOTHERAPY, INC.
                  (FORMERLY ADVANCED BIOTHERAPY CONCEPTS, INC.)
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2000


NOTE 8 - COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL (CONTINUED)

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

OMNIBUS EQUITY INCENTIVE PLAN

During December 2000, the Board of Directors of the Company approved an Equity
Incentive Plan. A maximum of 4,000,000 shares of common stock will be available
for the incentive plan with annual increases equal to the lesser of 2.5% of
outstanding shares or 250,000 shares.

NOTE 9 - PREFERRED STOCK

With the merger into its Delaware subsidiary, the Company has authorized
20,000,000 shares of $0.001 par value preferred stock authorized. As of December
31, 2000 and as of the date of these financial statements, 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 $0.20 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 $0.01 per share, with an exercise period of
February 1, 1993, to February 1, 2003. During 1995, options for 50,000 shares
were granted at $0.20 per share which expire in 2005. Also in 1995, options for
350,000 shares were granted at $0.01 per share expiring in 2005. During 1996,
options for 525,000 shares were granted at $0.10 per share which expire in 2006.
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 stock options are
exercisable immediately, and expire on December 31, 2005 (See Note 5). During
the year ended December 31, 2000, 350,000 options were exercised at $0.01 per
share, and for the year ending December 31, 1999 no options were exercised.


                                      F-15
<PAGE>


                           ADVANCED BIOTHERAPY, INC.
                  (FORMERLY ADVANCED BIOTHERAPY CONCEPTS, INC.)
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2000


NOTE 10 - STOCK OPTIONS AND ISSUANCE COMMITMENTS (CONTINUED)

Following is a summary of the status of the options during the years ended
December 31, 2000 and 1999:

<TABLE>
<CAPTION>

                                                                                                  Weighted Average
                                                                    Number of Shares               Exercise Price
                                                                  ----------------------        ---------------------
<S>                                                               <C>                           <C>
Outstanding at January 1, 1999                                             2,035,000                  $      .12
Granted                                                                      842,953                         .05
Exercised                                                                          -                           -
Forfeited                                                                          -                           -
                                                                  ----------------------        ---------------------
Outstanding at December 31, 1999                                           2,877,953                  $      .10
                                                                  ======================        =====================
Options exercisable at December 31, 1999                                   2,877,953                  $      .10
                                                                  ======================        =====================

Outstanding at January 1, 2000                                             2,877,953                  $      .10
Granted                                                                            -                           -
Exercised                                                                   (350,000)                        .01
Forfeited                                                                          -                           -
                                                                  ----------------------        ---------------------
Outstanding at December 31, 2000                                           2,527,953                  $      .11
                                                                  ======================        =====================
Options exercisable at December 31, 2000                                   2,527,953                  $      .11
                                                                  ======================        =====================

</TABLE>

During January 2001, the Company enacted an Equity Incentive Plan for the
issuance of stock options to employees, outside directors and consultants. See
Note 15.

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 interest expense on 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. All effective
dilutions are reflected in the accompanying statements of operations.

Required earnings per share information related to extraordinary income is as
follows:

<TABLE>
<CAPTION>

                                                                                                    From Inception
                                                                                                  (December 2, 1985)
                                                                                                        through
                                                                2000               1999            December 31, 2000
                                                            ------------     ---------------    ------------------------
<S>                                                         <C>              <C>                <C>
Earnings per share
         Extraordinary gains                                    $  -             $ 0.05                 $ 0.09
                                                            ============     ===============    ========================

Earnings per share - assuming dilution
         Extraordinary gains                                    $  -             $ 0.05                 $ 0.09
                                                            ============     ===============    ========================

</TABLE>


                                      F-16
<PAGE>


                           ADVANCED BIOTHERAPY, INC.
                  (FORMERLY ADVANCED BIOTHERAPY CONCEPTS, INC.)
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2000


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 the Company's 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 year ended December 31, 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 the warrants, which contain full,
unconditional piggy-back registration rights without any hold back
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.

At December 31, 2000, the exercisable warrants are 4,685,135. The average
exercise price of the warrants at December 31, 2000 is $0.15 per share.

NOTE 13 - CONVERTIBLE DEBT

During the year ended December 31, 2000, the Company sold in a private placement
to accredited investors $1,510,500 of convertible subordinated debt due and
payable September 30, 2004. The debt bears interest at the rate of 10% per annum
and is payable semi-annually in cash or additional convertible subordinated
debt. The unpaid accrued interest at December 31, 2000 of $49,669 was
re-characterized as additional convertible 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, promulgated under the Securities Act. In
connection with the placement of the debt, the Company paid a loan origination
fee of $113,288 to its financial advisor, in additional to the granting of an
option to purchase an equivalent principal amount of convertible subordinated
debt at the face amount thereof over a period of ten years. The aforementioned
fee is currently included in other assets and is being amortized over the term
of the debt. Amortization for the year ended December 31, 2000 was $10,785.

NOTE 14 - COMMITMENTS AND CONTINGENCIES

OFFICE LEASE

The Company leased office space from a related party during 2000 at a minimum
annual rate of $4,800. This lease was terminated effective December 31, 2000.

CONSULTING CONTRACT

During July 2000, the Company signed a contract with a consultant to provide
information on possible partnering companies to divest or license certain rights
to its technologies or products. The contract calls for the payment of a $5,000
monthly retainer. This contract can be cancelled with a 60 day written notice.
On January 24, 2001, the contract was modified to waive the termination notice.
The contract was terminated effective February 1, 2001.


                                      F-17
<PAGE>


                           ADVANCED BIOTHERAPY, INC.
                  (FORMERLY ADVANCED BIOTHERAPY CONCEPTS, INC.)
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2000


NOTE 15 - SUBSEQUENT EVENTS

OFFICE LEASE

During January 2001, the Company signed an office lease agreement for three
years beginning March 1, 2001. The lease calls for monthly rental payments of
$3,600 plus its portion of operating expenses with an annual escalation clause
of 4%. The lease required a $15,580 deposit.

FINANCIAL SERVICES AGREEMENT

During January 2001, the Company signed a contract with a financial advisor to
provide information on possible candidates for acquisition, merger or
combination. The contract term is for two months and continues thereafter on a
month-to-month basis. A monthly retainer of $3,000 is payable and is credited
toward the fee if a successful candidate is found.


                                      F-18


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>2
<FILENAME>a2043353zex-10_3.txt
<DESCRIPTION>EXHIBIT 10.3
<TEXT>

<PAGE>
                                                                 EXHIBIT 10.3





                            ADVANCED BIOTHERAPY, INC.



                       2000 OMNIBUS EQUITY INCENTIVE PLAN





<PAGE>


                                TABLE OF CONTENTS
<TABLE>
<CAPTION>


<S>      <C>
ARTICLE 1.  INTRODUCTION.......................................................................................

ARTICLE 2.  DEFINITIONS........................................................................................

ARTICLE 3.  SHARES AVAILABLE FOR GRANTS........................................................................
         3.1      BASIC LIMITATION.............................................................................
         3.2      ANNUAL INCREASE IN SHARES....................................................................
         3.3      ADDITIONAL SHARES............................................................................
         3.4      DIVIDEND EQUIVALENTS.........................................................................

ARTICLE 4.  ELIGIBILITY........................................................................................
         4.1      INCENTIVE STOCK OPTIONS......................................................................
         4.2      OTHER GRANTS.................................................................................
         4.3      NONASSIGNABILITY.............................................................................
         4.4      REQUIREMENT OF NOTIFICATION OF ELECTION UNDER SECTION 83(b) OF THE CODE......................
         4.5      REQUIREMENT OF NOTIFICATION UPON DISQUALIFYING DISPOSITION UNDER SECTION 421(b) OF THE CODE..

ARTICLE 5.  OPTIONS............................................................................................
         5.1      STOCK OPTION AGREEMENT.......................................................................
         5.2      NUMBER OF SHARES.............................................................................
         5.3      EXERCISE PRICE...............................................................................
         5.4      EXERCISABILITY AND TERM......................................................................
         5.5      MANNER OF EXERCISE...........................................................................
         5.6      EFFECT ON OPTION OF DEATH OR OTHER TERMINATION OF EMPLOYMENT, DIRECTORSHIP OR CONSULTANCY....
         5.7      EFFECT OF CHANGE IN CONTROL..................................................................
         5.8      MODIFICATION OR ASSUMPTION OF OPTIONS........................................................
         5.9      BUYOUT PROVISIONS............................................................................
         5.10     COMPANY'S RIGHT OF FIRST REFUSAL.............................................................
         5.11     COMPANY'S RIGHT OF RECAPTURE. ...............................................................

ARTICLE 6.  PAYMENT FOR OPTION SHARES..........................................................................
         6.1      GENERAL RULE.................................................................................
         6.2      SURRENDER OF STOCK...........................................................................
         6.3      NET EXERCISE.................................................................................
         6.4      EXERCISE/SALE................................................................................
         6.5      EXERCISE/PLEDGE..............................................................................
         6.6      PROMISSORY NOTE..............................................................................
         6.7      OTHER FORMS OF PAYMENT.......................................................................


                                         ii

<PAGE>

ARTICLE 7.  OPTION GRANTS TO OUTSIDE DIRECTORS/AFFILIATES.....................................................

ARTICLE 8.  STOCK APPRECIATION RIGHTS.........................................................................
         8.1      SAR AGREEMENT...............................................................................
         8.2      NUMBER OF SHARES............................................................................
         8.3      EXERCISE PRICE..............................................................................
         8.4      EXERCISABILITY AND TERM.....................................................................
         8.5      EFFECT OF CHANGE IN CONTROL.................................................................
         8.6      EXERCISE OF SARS............................................................................
         8.7      MODIFICATION OR ASSUMPTION OF SARS..........................................................

ARTICLE 9.  RESTRICTED SHARES.................................................................................
         9.1      RESTRICTED STOCK AGREEMENT..................................................................
         9.2      PAYMENT FOR AWARDS..........................................................................
         9.3      VESTING CONDITIONS..........................................................................
         9.4      VOTING AND DIVIDEND RIGHTS..................................................................
         9.5      REPURCHASE OPTION...........................................................................

ARTICLE 10.  STOCK UNITS......................................................................................
         10.1     STOCK UNIT AGREEMENT........................................................................
         10.2     PAYMENT FOR AWARDS..........................................................................
         10.3     VESTING CONDITIONS..........................................................................
         10.4     VOTING AND DIVIDEND RIGHTS..................................................................
         10.5     FORM AND TIME OF SETTLEMENT OF STOCK UNITS..................................................
         10.6     DEATH OF RECIPIENT..........................................................................
         10.7     CREDITORS' RIGHTS...........................................................................

ARTICLE 11.  PROTECTION AGAINST DILUTION......................................................................
         11.1     ADJUSTMENTS.................................................................................
         11.2     DISSOLUTION OR LIQUIDATION..................................................................
         11.3     REORGANIZATIONS.............................................................................

ARTICLE 12.  DEFERRAL OF AWARDS...............................................................................

ARTICLE 13.  AWARDS UNDER OTHER PLANS.........................................................................

ARTICLE 14.  PAYMENT OF DIRECTOR'S FEES IN SECURITIES.........................................................
         14.1     EFFECTIVE DATE..............................................................................
         14.2     ELECTIONS TO RECEIVE NSOs, RESTRICTED SHARES OR STOCK UNITS.................................
         14.3     NUMBER AND TERMS OF NSOs, RESTRICTED SHARES OR STOCK UNITS..................................

ARTICLE 15.  LIMITATION ON RIGHTS.............................................................................
         15.1     RETENTION RIGHTS............................................................................
         15.2     STOCKHOLDERS' RIGHTS........................................................................
         15.3     CONDITIONS UPON ISSUANCE OF COMMON SHARES...................................................

                                       iii
<PAGE>

ARTICLE 16.  WITHHOLDING TAXES................................................................................
         16.1     GENERAL.....................................................................................
         16.2     SHARE WITHHOLDING...........................................................................

ARTICLE 17.  FUTURE OF THE PLAN...............................................................................
         17.1     TERM OF THE PLAN............................................................................
         17.2     AMENDMENT OR TERMINATION....................................................................
         17.3     STOCKHOLDER APPROVAL........................................................................
         17.4     EFFECT OF AMENDMENT OR TERMINATION..........................................................

ARTICLE 18.  LIMITATION ON PARACHUTE PAYMENTS.................................................................
         18.1     SCOPE OF LIMITATION.........................................................................
         18.2     BASIC RULE..................................................................................
         18.3     REDUCTION OF PAYMENTS.......................................................................
         18.4     OVERPAYMENTS AND UNDERPAYMENTS..............................................................
         18.5     RELATED CORPORATIONS........................................................................

ARTICLE 19.  INDEMNIFICATION..................................................................................

ARTICLE 20.  PROVISION OF INFORMATION.........................................................................

ARTICLE 21.  ADMINISTRATION...................................................................................
         21.1     COMMITTEE COMPOSITION.......................................................................
         21.2     POWERS OF THE BOARD.........................................................................
         21.3     COMMITTEE FOR NON-OFFICER GRANTS............................................................

ARTICLE 22.  EXECUTION........................................................................................

</TABLE>

                                        iv
<PAGE>


                            ADVANCED BIOTHERAPY, INC.

                       2000 OMNIBUS EQUITY INCENTIVE PLAN

ARTICLE 1.  INTRODUCTION.

         The purpose of the Plan is to promote the long-term success of the
Company and the creation of stockholder value by (a) encouraging Employees,
Outside Directors and Consultants to focus on critical long-range objectives,
(b) encouraging the attraction and retention of Employees, Outside Directors and
Consultants with exceptional qualifications and (c) linking Employees, Outside
Directors and Consultants directly to stockholder interests through increased
stock ownership. The Plan seeks to achieve this purpose by providing for Awards
in the form of Restricted Shares, Stock Units, Options (which may constitute
incentive stock options or nonstatutory stock options) and Stock Appreciation
Rights. Terms defined herein shall have the meanings set forth in "Article 2 -
Definitions."

         The Plan shall be governed by, and construed in accordance with, the
laws of the State of California.

ARTICLE 2.  DEFINITIONS.

         2.1 "AFFILIATE" means any entity other than a Subsidiary, if the
Company and/or one or more Subsidiaries own not less than fifty percent (50%) of
such entity.

         2.2 "AWARD" means any award of an Option, an SAR, a Restricted Share or
a Stock Unit under the Plan.

         2.3 "BOARD" means the Company's Board of Directors, as constituted from
time to time.

         2.4 "CHANGE IN CONTROL" shall mean:

                  a. The consummation of a merger or consolidation of the
Company with or into another entity or any other corporate reorganization, if
more than fifty percent (50%) of the combined voting power of the continuing or
surviving entity's securities, entitled to vote generally in the election of
directors and outstanding immediately after such merger, consolidation or other
reorganization is owned by persons who were not stockholders of the Company
immediately prior to such merger, consolidation or other reorganization;

                  b. The sale, transfer or other disposition of all or
substantially all of the Company's assets, if more than fifty percent (50%) of
the combined voting power of the acquiring entity's securities, entitled to vote
generally in the election of directors and outstanding immediately after such
sale, transfer or other disposition is owned by persons who were not
stockholders of the Company immediately prior to such sale, transfer or other
disposition;


<PAGE>


                  c. A change in the composition of the Board, as a result of
which fewer than fifty percent (50%) of the directors are continuing directors,
where the term "continuing director" means at any date a member of the Board (i)
who was a member of the Board on the date of the initial adoption of the Plan by
the Board or (ii) who was nominated or elected subsequent to such date by (x) at
least a majority of the directors who were continuing directors at the time of
such nomination or election or whose election to the Board was recommended or
endorsed by at least a majority of the directors who were continuing directors
at the time of such nomination or election; PROVIDED, HOWEVER, that there shall
be excluded from this clause (ii) any individual whose initial assumption of
office occurred as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents, by or on behalf of a person other than the
Board; or

                  d. Any transaction as a result of which any person is the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing at least thirty percent
(30%) of the total voting power of the then-outstanding securities of the
Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"). For purposes of this Paragraph (d),
the term "person" shall have the same meaning as when used in sections 13(d) and
14(d) of the Exchange Act but shall exclude (i) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or of a Parent
or Subsidiary and (ii) a corporation owned directly or indirectly by the
stockholders of the Company in substantially the same proportions as their
ownership of the common stock of the Company. For purposes of this paragraph
(d), the following acquisitions shall not constitute a Change in Control: (x)
any acquisition directly from the Company of less than fifty percent (50%) of
the Outstanding Company Voting Securities (excluding an acquisition pursuant to
the exercise, conversion or exchange of any security exercisable for,
convertible into or exchangeable for common stock or voting securities of the
Company, unless the Person exercising, converting or exchanging such security
acquired such security directly from the Company or an underwriter or agent of
the Company), or (y) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled by
the Company.

A transaction shall not constitute a Change in Control if its sole purpose is to
change the state of the Company's incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who held
the Company's securities immediately before such transaction.

         2.5 "CODE" means the Internal Revenue Code of 1986, as amended.

         2.6 "COMMITTEE" means a committee of the Board, as described in
Article 21.

         2.7 "COMMON SHARE" means one share of the common stock of the Company.

         2.8 "COMPANY" means Advanced Biotherapy, Inc., a Delaware corporation.

         2.9 "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services,

<PAGE>

provided that the term "Consultant" shall not include Outside Directors who are
paid only a director's fee by the Company or who are not compensated by the
Company for their services. Service as a Consultant shall be considered
employment for all purposes of the Plan, except as provided in Section 4.1.

         2.10 "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company, a Parent, a Subsidiary or an Affiliate of the Company.
Neither services as an Outside Director nor payment of a director's fee by the
Company shall alone be sufficient to constitute "employment" by the Company.

         2.11 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

         2.12 "EXERCISE PRICE," in the case of an Option, means the amount for
which one Common Share may be purchased upon exercise of such Option, as
specified in the applicable Stock Option Agreement. "Exercise Price," in the
case of an SAR, means an amount, as specified in the applicable SAR Agreement,
which is subtracted from the Fair Market Value of one Common Share in
determining the amount payable upon exercise of such SAR.

         2.13 "FAIR MARKET VALUE" means with respect to each Common Share the
last reported sale price of the Company's Common Shares sold on the principal
national securities exchanges on which the Common Shares are at the time
admitted to trading or listed, or, if there have been no sales of any such
exchange on such day, the average of the highest bid and lowest ask price on
such day as reported by the NASDAQ system, or any similar organization if the
NASDAQ is no longer reporting such information, either (i) on the date which the
notice of exercise is deemed to have been sent to the Company (the "Notice
Date") or (ii) over a period of five (5) trading days preceding the Notice Date,
whichever of (i) or (ii) is greater. If on the date for which the current fair
market value is to be determined, the Common Shares are not listed on any
securities exchange or quoted on the NASDAQ system or the over-the-counter
market, the current fair market value of Common Shares shall be the highest
price per share which the Company could then obtain from a willing buyer (not a
current employee or director) for Common Shares sold by the Company, from
authorized but unissued shares, as determined in good faith by the Board of the
Company, unless prior to such date the Company has become subject to a binding
agreement for a merger, acquisition or other consolidation pursuant to which the
Company is not the surviving party, in which case the current fair market value
of the Common Shares shall be deemed to be the value to be received by the
holders of the Company's Common Shares for each share thereof pursuant to the
Company's acquisition. Such determination shall be conclusive and binding on all
persons.

         2.14 "ISO" means an incentive stock option described in Section 422(b)
of the Code.

         2.15 "NSO" means a stock option not described in Sections 422 or 423 of
the Code.

         2.16 "OPTION" means an ISO or NSO granted under the Plan and entitling
the holder to purchase Common Shares.


<PAGE>

         2.17 "OPTIONEE" means an individual or estate who holds an Option or
SAR.

         2.18 "OUTSIDE DIRECTOR" shall mean a member of the Board who is not an
Employee. Service as an Outside Director shall be considered employment for all
purposes of the Plan, except as provided in Section 4.1.

         2.19 "PARENT" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain. A corporation that attains the status of a
Parent on a date after the adoption of the Plan shall be considered a Parent
commencing as of such date.

         2.20 "PARTICIPANT" means an individual or estate who holds an Award.

         2.21 "PLAN" means this Advanced Biotherapy, Inc. 2000 Omnibus Equity
Incentive Plan, as amended from time to time.

         2.22 "RESTRICTED SHARE" means a Common Share awarded under the Plan,
subject to the Restricted Stock Agreement.

         2.23 "RESTRICTED STOCK AGREEMENT" means the agreement between the
Company and the recipient of a Restricted Share which contains the terms,
conditions and restrictions pertaining to such Restricted Share.

         2.24 "SAR" means a stock appreciation right granted under the Plan.

         2.25 "SAR AGREEMENT" means the agreement between the Company and an
Optionee which contains the terms, conditions and restrictions pertaining to his
or her SAR.

         2.26 "SERVICE PROVIDER" means any provider of services to the Company
for which the individual or the individual's employer or company is compensated,
and includes employees, directors and consultants.

         2.27 "STOCK OPTION AGREEMENT" means the agreement between the Company
and an Optionee that contains the terms, conditions and restrictions pertaining
to his or her Option.

         2.28 "STOCK UNIT" means a bookkeeping entry representing the equivalent
of one Common Share, as awarded under the Plan.

         2.29 "STOCK UNIT AGREEMENT" means the agreement between the Company and
the recipient of a Stock Unit which contains the terms, conditions and
restrictions pertaining to such Stock Unit.


<PAGE>

         2.30 "SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain. A corporation
that attains the status of a Subsidiary on a date after the adoption of the Plan
shall be considered a Subsidiary commencing as of such date.

ARTICLE 3.  SHARES AVAILABLE FOR GRANTS.

         3.1 BASIC LIMITATION. Common Shares issued pursuant to the Plan may be
authorized but unissued shares or reacquired shares, bought on the market or
otherwise. The aggregate number of Options, SARs, Stock Units and Restricted
Shares awarded under the Plan shall not exceed (a) [Four Million (4,000,000)]
Common Shares plus (b) the additional Common Shares described in Sections 3.2
and 3.3. The limitation of this Section 3.1 shall be subject to adjustment
pursuant to Article 11.

         3.2 ANNUAL INCREASE IN SHARES. As of January 1 of each year, commencing
with the year 2001, the aggregate number of Options, SARs, Stock Units and
Restricted Shares that may be awarded under the Plan shall automatically
increase by a number equal to the lesser of (a) two and one-half percent (2.5%)
of the total number of Common Shares then outstanding or (b) [250,000] Common
Shares. At no time shall (a) the total number of Common Shares issuable upon
exercise of all outstanding Options and the total number of Common Shares
provided for under any stock bonus or similar plan of the Company exceed the
applicable percentage as calculated in accordance with the conditions and
exclusions of applicable state law, rules and regulations, or (b) the amount of
securities offered and sold under the Plan exceed the limitations provided in
Rule 701 under the Securities Act of 1933, as amended.

         3.3 ADDITIONAL SHARES. If Restricted Shares or Common Shares issued
upon the exercise of Options are forfeited, then such Common Shares shall again
become available for Awards under the Plan. If Stock Units, Options or SARs are
forfeited or terminate for any other reason before being exercised, then the
corresponding Common Shares shall again become available for Awards under the
Plan. If Stock Units are settled, then only the number of Common Shares (if any)
actually issued in settlement of such Stock Units shall reduce the number
available under Section 3.1 and the balance shall again become available for
Awards under the Plan. If SARs are exercised, then only the number of Common
Shares (if any) actually issued in settlement of such SARs shall reduce the
number available under Section 3.1 and the balance shall again become available
for Awards under the Plan. The foregoing notwithstanding, the aggregate number
of Common Shares that may be issued under the Plan upon the exercise of ISOs
shall not be increased when Restricted Shares or other Common Shares are
forfeited.


         3.4 DIVIDEND EQUIVALENTS. Any dividend equivalents paid or credited
under the Plan shall not be applied against the number of Restricted Shares,
Stock Units, Options or SARs available for Awards, whether or not such dividend
equivalents are converted into Stock Units.


<PAGE>

ARTICLE 4.  ELIGIBILITY.

         4.1 INCENTIVE STOCK OPTIONS. Only Employees of the Company, a Parent
or a Subsidiary shall be eligible for the grant of ISOs. In addition, an
Employee who owns more than ten percent (10%) of the total combined voting power
of all classes of outstanding stock of the Company or any of its Parents or
Subsidiaries shall not be eligible for the grant of an ISO only when the
requirements set forth in section 422(c)(6) of the Code are satisfied.

         4.2 OTHER GRANTS. Only Employees, Outside Directors and Consultants,
or other Service providers that might be included later, shall be eligible for
the grant of Restricted Shares, Stock Units, NSOs or SARs under the Plan.

         4.3 NONASSIGNABILITY. Except as otherwise specifically set forth in
this Plan or as approved by the Committee, no Award or right granted to any
person under the Plan shall be assignable or transferable other than by will or
by the laws of descent and distribution, and all such Awards and rights shall be
exercisable during the life of the Participant only by the Participant or the
Participant's legal representative.

         4.4 REQUIREMENT OF NOTIFICATION OF ELECTION UNDER SECTION 83(b) OF THE
CODE. If a Participant, in connection with the acquisition of Common Shares
under the Plan, is permitted under the terms of the Award agreement to make the
election permitted under Section 83(b) of the Code (i.e., an election to include
in gross income in the year of transfer the amounts specified in Code Section
83(b) notwithstanding the continuing transfer restrictions) and the Participant
makes such an election, the Participant shall notify the Company of such
election within ten (10) days of filing notice of the election with the Internal
Revenue Service, in addition to any filing and notification required pursuant to
regulations issued under the authority of Code Section 83(b).

         4.5 REQUIREMENT OF NOTIFICATION UPON DISQUALIFYING DISPOSITION UNDER
SECTION 421(b) OF THE CODE. If any Participant shall make any disposition of
Common Shares issued pursuant to the exercise of an incentive stock option under
the circumstances described in Section 421(b) of the code (relating to certain
disqualifying dispositions), such Participant shall notify the Company of such
disposition within 10 days thereof.

ARTICLE 5.  OPTIONS.

         5.1 STOCK OPTION AGREEMENT. Each grant of an Option under the Plan
shall be evidenced by a Stock Option Agreement between the Optionee and the
Company. Such Option shall be subject to all applicable terms of the Plan and
may be subject to any other terms that are not inconsistent with the Plan. The
Stock Option Agreement shall specify whether the Option is an ISO or an NSO. The
provisions of the various Stock Option Agreements entered into under the Plan
need not be identical. Options may be granted in consideration of a reduction in
the Optionee's other compensation. A Stock Option Agreement may provide that a
new



<PAGE>

Option will be granted automatically to the Optionee when he or she exercises a
prior Option and pays the Exercise Price in the form described in Section 6.2.

         5.2 NUMBER OF SHARES. Each Stock Option Agreement shall specify the
number of Common Shares subject to the Option and shall provide for the
adjustment of such number in accordance with Article 11.

         5.3 EXERCISE PRICE. Each Stock Option Agreement shall specify the
Exercise Price; provided that the Exercise Price under an ISO shall in no event
be less than one hundred percent (100%) (one hundred ten percent (110%) in the
case of any person who owns more than ten percent (10%) of the total combined
voting power of all classes of capital stock of the Company or any of its
Subsidiaries) of the Fair Market Value of a Common Share on the date of grant
and the Exercise Price under an NSO shall in no event be less than eighty-five
percent (85%) of the Fair Market Value of a Common Share on the date of grant.

         5.4 EXERCISABILITY AND TERM. Each Stock Option Agreement shall specify
the date or event when all or any installment of the Option is to become
exercisable, which may include vesting requirements and/or performance criteria
with respect to the Company and/or the Optionee, provided, however, that an
Option granted to a non-officer Employee shall vest at least twenty percent
(20%) of the grant per year. The Stock Option Agreement shall also specify the
term of the Option; provided that the term of an ISO shall in no event exceed
ten (10) years from the date of grant. A Stock Option Agreement may provide for
accelerated exercisability in the event of the Optionee's death, disability or
retirement or other events and may provide for expiration prior to the end of
its term in the event of the termination of the Optionee's service. Options may
be awarded in combination with SARs, and such an Award may provide that the
Options will not be exercisable unless the related SARs are forfeited.

         5.5 MANNER OF EXERCISE. An Option shall be deemed exercised when the
Company receives: (i) notice of exercise (in accordance with the Stock Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Common Shares with respect to which the Option is exercised.
Full payment may consist of any consideration and method of payment authorized
by the Committee and permitted by the Stock Option Agreement. Common Shares
issued upon exercise of an Option shall be issued in the name of the Optionee
or, if requested by the Optionee, in the name of the Optionee and his or her
spouse. Until the Common Shares are issued (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company), no right to vote or receive dividends or any other rights as a
stockholder shall exist with respect to the Common Shares subject to the Option,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such Common Shares promptly after the Option is exercised. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the Common Shares are issued, except as provided in Article
11 of the Plan.

         Exercising an Option in any manner shall decrease the number of Common
Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Common Shares as to which the Option is exercised.


<PAGE>

         5.6   EFFECT ON OPTION OF DEATH OR OTHER TERMINATION OF EMPLOYMENT,
DIRECTORSHIP OR CONSULTANCY.

                  a. In the event of termination of the employment, directorship
or consultancy (as applicable) of a Participant, including, without limitation,
retirement other than (i) a termination for cause, or (ii) a termination by
reason of disability as determined by the Board in accordance with applicable
Company personnel policies ("Disability") or death, the Participant may exercise
his Option at any time within three (3) months after such termination, or such
other time as the Board shall authorize, to the extent his Option was
exercisable by him at the date of such termination, but in no event after the
expiration of the term thereof; PROVIDED, HOWEVER, that in no event shall such
exercise right expire fewer than thirty (30) days after such termination. In the
event of the termination of the employment, directorship or consultancy (as
applicable) of a Participant that is for cause, any Option held by him, to the
extent not theretofore exercised, shall forthwith terminate. Options shall not
be affected by any change of employment, directorship or consultancy (as
applicable) so long as the Participant continues to be an employee, director or
consultant (as applicable) of the Company or a Subsidiary. The Stock Option
Agreement may contain such provisions as the Board shall approve with reference
to the effect of approved leaves of absence. "Termination for cause" shall
include the meaning of that term as set forth in California Labor Code Sections
2924 and 2925 and case law related thereto and, in addition, shall include for
cause termination under the terms of the Plan, any Stock Option Agreement and
any employment agreement applicable to the person in question as well as
voluntary termination on the part of the Participant without the prior written
consent of the Company.

                  b. In the event of the death or Disability of a Participant
while he is employed by, engaged as a consultant to or serving as a director (as
applicable) of the Company or a Subsidiary (or within three (3) months after
termination thereof), such Option (unless it shall have been previously
terminated pursuant to the provisions of clause (a) above) may be exercised (to
the extent the Participant's Option was exercisable at the date of death or
Disability) by a beneficiary or beneficiaries of such Participant under the
Participant's will, or by his personal representatives or distributees or such
Participant (as applicable), at any time within a period of six (6) months after
his death or Disability, but not after the expiration of the term thereof;
provided, however, that in no event shall such exercise right expire fewer than
six (6) months after the date of termination of employment, consultancy or
directorship (as applicable).

                  c. No transfer of an Option by the Participant by will or by
the laws of descent and distribution shall be effective to bind the Company
unless the Company shall have been furnished with written notice thereof and an
authenticated copy of the will and/or such other evidence as the Board may deem
necessary to establish the validity of the transfer and the acceptance by the
transferee or transferees of the terms and conditions of such Option.

         5.7 EFFECT OF CHANGE IN CONTROL. The Committee may determine, at the
time of granting an Option or thereafter, that such Option shall become
exercisable as to all or part of the Common Shares subject to such Option in the
event that a Change in Control occurs



<PAGE>

with respect to the Company, subject to Section 11.1 below and subject to the
following limitations:

         a. In the case of an ISO, the acceleration of exercisability shall not
occur without the Optionee's written consent.

         b. If the Company and the other party to the transaction constituting a
Change in Control agree that such transaction is to be treated as a "pooling of
interests" for financial reporting purposes, and if such transaction in fact is
so treated, then the acceleration of exercisability shall not occur to the
extent that the Company's independent accountants and such other party's
independent accountants separately determine in good faith that such
acceleration would preclude the use of "pooling of interests" accounting.

         5.8 MODIFICATION OR ASSUMPTION OF OPTIONS. Within the limitations of
the Plan, the Committee may modify, extend or assume outstanding options or may
accept the cancellation of outstanding options (whether granted by the Company
or by another issuer) in return for the grant of new options for the same or a
different number of Common Shares and at the same or a different exercise price.
The foregoing notwithstanding, no modification of an Option shall, without the
consent of the Optionee, alter or impair his or her rights or obligations
determined pursuant to the Option Agreement representing such Option.

         5.9 BUYOUT PROVISIONS. The Committee may at any time (a) offer to buy
out for a payment in cash or cash equivalents an Option previously granted or
(b) authorize an Optionee to elect to cash out an Option previously granted, in
either case at such time and based upon such terms and conditions as the
Committee shall establish.

         5.10 COMPANY'S RIGHT OF FIRST REFUSAL. Before any Common Shares held by
Optionee or any transferee (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift or
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Common Shares on the terms and conditions set forth in
this Section (the "Right of First Refusal").

                  a. NOTICE OF PROPOSED TRANSFER. The Holder of the Common
Shares shall deliver to the Company a written notice (the "Notice") stating: (i)
the Holder's bona fide intention to sell or otherwise transfer such Common
Shares; (ii) the name of each proposed purchaser or other transferee (the
"Proposed Transferee"); (iii) the number of Common Shares to be transferred to
each Proposed Transferee; and (iv) the bona fide cash price or other
consideration for which the Holder proposes to transfer the Common Shares (the
"Offered Price"), and the Holder shall offer the Common Shares at the Offered
Price to the Company or its assignee(s).

                  b. EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within
thirty (30) days after receipt of the Notice, the Company and/or its assignee(s)
may, by giving written notice to the Holder, elect to purchase all, but not less
than all, of the Common Shares proposed to be


<PAGE>

transferred to any one or more of the Proposed Transferees, at the purchase
price determined in accordance with subsection (c) below.

                  c. PURCHASE PRICE. The purchase price (the "Purchase Price")
for the Common Shares purchased by the Company or its assignee(s) under this
Section shall be the Offered Price. If the Offered Price includes consideration
other than cash, the cash equivalent value of the non-cash consideration shall
be determined by the Company in good faith.

                  d PAYMENT. Payment of the Purchase Price shall be made, at the
option of the Company or its assignee(s), in cash, by check, by cancellation of
all or a portion of any outstanding indebtedness of the Holder to the Company
(or, in the case of repurchase by an assignee, to the assignee), or by any
combination thereof within 30 days after receipt of the Notice or in the manner
and at the times set forth in the Notice.

                  e. HOLDER'S RIGHT TO TRANSFER. If all of the Common Shares
proposed in the Notice to be transferred to a given Proposed Transferee are not
purchased by the Company and/or its assignee(s) as provided in this Section,
then the Holder may sell or otherwise transfer such Common Shares to that
Proposed Transferee at the Offered Price or at a higher price, provided that
such sale or other transfer is consummated within 120 days after the date of the
Notice and provided further that any such sale or other transfer is effected in
accordance with any applicable securities laws and the Proposed Transferee
agrees in writing that the provisions of this Section shall continue to apply to
the Common Shares in the hands of such Proposed Transferee. If the Common Shares
described in the Notice are not transferred to the Proposed Transferee within
such period, a new Notice shall be given to the Company, and the Company and/or
its assignees shall again be offered the Right of First Refusal before any
Common Shares held by the Holder may be sold or otherwise transferred.

                  f. EXCEPTION FOR CERTAIN FAMILY TRANSFERS. Anything to the
contrary contained in this Section notwithstanding, the transfer of any or all
of the Common Shares during the Optionee's lifetime or on the Optionee's death
by will or intestacy to the Optionee's immediate family or to trusts
established, in whole or in part, for the benefit of the Optionee and/or one or
more of such immediate family members shall be exempt from the provisions of
this Section. For purposes of the Plan, (i) the term "immediate family" shall
mean the Optionee's spouse and issue (including adopted and stepchildren) and
(ii) the phrase "immediate family members and trusts established in whole or in
part for the benefit of the Optionee and/or one or more of such immediate family
members" shall be further limited, if necessary, so that neither the transfer of
an NSO to such immediate family member or trust, nor the ability of an Optionee
to make such a transfer shall have adverse consequences to the Company or the
Optionee by reason of Section 162(m) of the Code. In such case, the transferee
or other recipient shall receive and hold the Common Shares so transferred
subject to the provisions of this Section, and there shall be no further
transfer of such Common Shares except in accordance with the terms of this
Section.

                  g. TERMINATION OF RIGHT OF FIRST REFUSAL. The Right of First
Refusal shall terminate upon the earlier of (i) two (2) years after the date of
issuance to the Optionee of such



<PAGE>

Common Shares or (ii) the date on which such Common Shares shall be registered
pursuant to a registration statement filed with and declared effective by the
Securities and Exchange Commission under the Securities Act of 1933, as amended.

         5.11 COMPANY'S RIGHT OF RECAPTURE. To the extent provided in the
Restricted Stock Agreement, Stock Option Agreement, or Stock Unit Agreement, as
applicable, if at any time within one (1) year after the date on which a
Participant exercises an Option or SAR, or on which Restricted Shares vest, or
which is the maturity date of Stock Units, or on which income is realized by a
Participant in connection with any other stock-based Award (each of which events
is a "realization event"), the Participant is terminated for cause (or, if still
employed by the Company, engages in any activity that would constitute a basis
for a termination for cause), then any gain realized by the Participant from the
realization event shall be paid by the Participant to the Company upon notice
from the Company. Such gain shall be determined on a gross basis, without
reduction for any taxes incurred, as of the date of the realization event,
without regard to any subsequent change in the Fair Market Value of a Common
Share. The Company shall have the right to offset such gain against any amounts
otherwise owed to the Participant by the Company (whether as wages, vacation
pay, or pursuant to any benefit plan or other compensatory arrangement).

ARTICLE 6.  PAYMENT FOR OPTION SHARES.

         6.1 GENERAL RULE. The entire Exercise Price of Common Shares issued
upon exercise of Options shall be payable in cash or cash equivalents at the
time when such Common Shares are purchased, except as follows:

         a. In the case of an ISO granted under the Plan, payment shall be made
only pursuant to the express provisions of the applicable Stock Option
Agreement. The Stock Option Agreement may specify that payment may be made in
any form(s) described in this Article 6.

         b. In the case of an NSO, the Committee may at any time accept payment
in any form(s) described in this Article 6.

         6.2 SURRENDER OF STOCK. To the extent that this Section 6.2 is
applicable, all or any part of the Exercise Price may be paid by surrendering,
or attesting to the ownership of, Common Shares that are already owned by the
Optionee. Such Common Shares shall be valued at their Fair Market Value on the
date when the new Common Shares are purchased under the Plan. The Optionee shall
not surrender, or attest to the ownership of, Common Shares in payment of the
Exercise Price if such action would cause the Company to recognize compensation
expense (or additional compensation expense) with respect to the Option for
financial reporting purposes.

         6.3 NET EXERCISE. Instead of exercising the Option by paying the
Exercise Price in cash, check or other appropriate consideration, the
Optionee may elect to exercise the Option in whole or in part by receiving
Common Shares equal to the value (as determined below) of the Option, or any
part hereof, upon surrender of the Option at the principal office of the
Company

<PAGE>

together with the notice of exercise annexed to the Stock Option Agreement in
which event the Company shall issue to the Optionee a number of Common Shares
computed using the following formula:

                             X=Y(A-B)
                               ------
                                  A

         Where    X = the number of Common Shares to be issued to the Holder;

                  Y = the number of Common Shares underlying the Option to
                      be exercised;

                  A = the current fair market value of one Common Share; and

                  B = the Exercise Price of the Option.

         As used herein, current fair market value of Common Share shall mean
with respect to each Common Share the last reported sale price of the Company's
Common Shares sold on the principal national securities exchanges on which the
Common Shares are at the time admitted to trading or listed, or, if there have
been no sales of any such exchange on such day, the average of the highest bid
and lowest ask price on such day as reported by the National Association of
Securities Dealers Automated Quotation system ("NASDAQ"), or any similar
organization if the NASDAQ is no longer reporting such information, either (i)
on the date which the notice of exercise is deemed to have been sent to the
Company (the "Notice Date") or (ii) over a period of five (5) trading days
preceding the Notice Date, whichever of (i) or (ii) is greater. If on the date
for which the current fair market value is to be determined, the Common Shares
are not listed on any securities exchange or quoted on the NASDAQ system or the
over-the-counter market, the current fair market value of Common Shares shall be
the highest price per share which the Company could then obtain from a willing
buyer (not a current employee or director) for Common Shares sold by the
Company, from authorized but unissued shares, as determined in good faith by the
Board of the Company, unless prior to such date the Company has become subject
to a binding agreement for a merger, acquisition or other consolidation pursuant
to which the Company is not the surviving party, in which case the current fair
market value of the Common Shares shall be deemed to be the value to be received
by the holders of the Company's Common Shares for each share thereof pursuant to
the Company's acquisition.

         6.4 EXERCISE/SALE. To the extent that this Section 6.4 is applicable,
all or any part of the Exercise Price and any withholding taxes may be paid by
delivering (on a form prescribed by the Company) an irrevocable direction to a
securities broker approved by the Company to sell all or part of the Common
Shares being purchased under the Plan and to deliver all or part of the sales
proceeds to the Company.

         6.5 EXERCISE/PLEDGE. To the extent that this Section 6.5 is applicable,
all or any part of the Exercise Price and any withholding taxes may be paid by
delivering (on a form prescribed by the Company) an irrevocable direction to
pledge all or part of the Common Shares



<PAGE>

being purchased under the Plan to a securities broker or lender approved by the
Company, as security for a loan, and to deliver all or part of the loan proceeds
to the Company.

         6.6 PROMISSORY NOTE. To the extent that this Section 6.6 is applicable,
all or any part of the Exercise Price and any withholding taxes may be paid by
delivering (on a form prescribed by the Company) a full-recourse promissory
note. However, the par value of the Common Shares being purchased under the
Plan, if newly issued, shall be paid in cash or cash equivalents.

         6.7 OTHER FORMS OF PAYMENT. To the extent that this Section 6.7 is
applicable, all or any part of the Exercise Price and any withholding taxes may
be paid in any other form that is consistent with applicable laws, regulations
and rules.

ARTICLE 7.  OPTION GRANTS TO OUTSIDE DIRECTORS/AFFILIATES.

         The Committee may provide in its sole discretion that the NSOs that
otherwise would be granted to an Outside Director under this Plan shall instead
be granted to an affiliate of such Outside Director. Such affiliate shall then
be deemed to be an Outside Director for purposes of the Plan, provided that the
service-related vesting and termination provisions pertaining to the NSOs shall
be applied with regard to the service of the Outside Director.

ARTICLE 8.  STOCK APPRECIATION RIGHTS.

         8.1 SAR AGREEMENT. Each grant of an SAR under the Plan shall be
evidenced by an SAR Agreement between the Optionee and the Company. Such SAR
shall be subject to all applicable terms of the Plan and may be subject to any
other terms that are not inconsistent with the Plan. The provisions of the
various SAR Agreements entered into under the Plan need not be identical. SARs
may be granted in consideration of a reduction in the Optionee's other
compensation.

         8.2 NUMBER OF SHARES. Each SAR Agreement shall specify the number of
Common Shares to which the SAR pertains and shall provide for the adjustment of
such number in accordance with Article 11.

         8.3 EXERCISE PRICE. Each SAR Agreement shall specify the Exercise
Price. An SAR Agreement may specify an Exercise Price that varies in accordance
with a predetermined formula while the SAR is outstanding.

         8.4 EXERCISABILITY AND TERM. Each SAR Agreement shall specify the date
when all or any installment of the SAR is to become exercisable. The SAR
Agreement shall also specify the term of the SAR. An SAR Agreement may provide
for accelerated exercisability in the event of the Optionee's death, disability
or retirement or other events and may provide for expiration prior to the end of
its term in the event of the termination of the Optionee's service. SARs may be
awarded in combination with Options, and such an Award may provide that the SARs
will not be exercisable unless the related Options are forfeited. An SAR may be
included in an ISO only at the time of grant but may be included


<PAGE>

in an NSO at the time of grant or thereafter. An SAR granted under the Plan may
provide that it will be exercisable only in the event of a Change in Control.

         8.5 EFFECT OF CHANGE IN CONTROL. The Committee may determine, at the
time of granting an SAR or thereafter, that such SAR shall become fully
exercisable as to all Common Shares subject to such SAR in the event that a
Change in Control occurs with respect to the Company, subject to Section 11.3
and subject to the following sentence. If the Company and the other party to the
transaction constituting a Change in Control agree that such transaction is to
be treated as a "pooling of interests" for financial reporting purposes, and if
such transaction in fact is so treated, then the acceleration of exercisability
shall not occur to the extent that the Company's independent accountants and
such other party's independent accountants separately determine in good faith
that such acceleration would preclude the use of "pooling of interests"
accounting.

         8.6 EXERCISE OF SARS. Upon exercise of an SAR, the Optionee (or any
person having the right to exercise the SAR after his or her death) shall
receive from the Company (a) Common Shares, (b) cash or (c) a combination of
Common Shares and cash, as the Committee shall determine. The amount of cash
and/or the Fair Market Value of Common Shares received upon exercise of SARs
shall, in the aggregate, be equal to the amount by which the Fair Market Value
(on the date of surrender) of the Common Shares subject to the SARs exceeds the
Exercise Price. If, on the date when an SAR expires, the Exercise Price under
such SAR is less than the Fair Market Value on such date but any portion of such
SAR has not been exercised or surrendered, then such SAR shall automatically be
deemed to be exercised as of such date with respect to such portion.

         8.7 MODIFICATION OR ASSUMPTION OF SARS. Within the limitations of the
Plan, the Committee may modify, extend or assume outstanding SARs or may accept
the cancellation of outstanding SARs (whether granted by the Company or by
another issuer) in return for the grant of new SARs for the same or a different
number of Common Shares and at the same or a different exercise price. The
foregoing notwithstanding, no modification of an SAR shall, without the consent
of the Optionee, alter or impair his or her rights or obligations under such
SAR.

ARTICLE 9.  RESTRICTED SHARES.

         9.1 RESTRICTED STOCK AGREEMENT. Each grant of Restricted Shares under
the Plan shall be evidenced by a Restricted Stock Agreement between the
recipient and the Company. Such Restricted Shares shall be subject to all
applicable terms of the Plan and may be subject to any other terms that are not
inconsistent with the Plan. The provisions of the various Restricted Stock
Agreements entered into under the Plan need not be identical.

         9.2 PAYMENT FOR AWARDS. Subject to the following sentence, Restricted
Shares may be sold or awarded under the Plan for such consideration as the
Committee may determine, including (without limitation) cash, cash equivalents,
full-recourse promissory notes, past services and future services. To the extent
that an Award consists of newly issued Restricted


<PAGE>

Shares, the Award recipient shall furnish consideration with a value not less
than the par value of such Restricted Shares in the form of cash, cash
equivalents or past services rendered to the Company (or a Parent or
Subsidiary), as the Committee may determine.

         9.3 VESTING CONDITIONS. Each Award of Restricted Shares may or may not
be subject to vesting. Vesting shall occur, in full or in installments, upon
satisfaction of the conditions specified in the Restricted Stock Agreement. A
Restricted Stock Agreement may provide for accelerated vesting in the event of
the Participant's death, disability or retirement or other events. The Committee
may determine, at the time of granting Restricted Shares or thereafter, that all
or part of such Restricted Shares shall become vested in the event that a Change
in Control occurs with respect to the Company, except as provided in the next
following sentence. If the Company and the other party to the transaction
constituting a Change in Control agree that such transaction is to be treated as
a "pooling of interests" for financial reporting purposes, and if such
transaction in fact is so treated, then the acceleration of vesting shall not
occur to the extent that the Company's independent accountants and such other
party's independent accountants separately determine in good faith that such
acceleration would preclude the use of "pooling of interests" accounting.

         9.4 VOTING AND DIVIDEND RIGHTS. The holders of Restricted Shares
awarded under the Plan shall have the same voting, dividend and other rights as
the Company's other stockholders. A Restricted Stock Agreement, however, may
require that the holders of Restricted Shares invest any cash dividends received
in additional Restricted Shares. Such additional Restricted Shares shall be
subject to the same conditions and restrictions as the Award with respect to
which the dividends were paid.

         9.5 REPURCHASE OPTION. Unless the Committee determines otherwise, the
Restricted Stock Agreement shall grant the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
employment with the Company for any reason (including death or disability). The
purchase price for Common Shares repurchased pursuant to the Restricted Stock
Agreement shall be the original purchase price paid by the purchaser and may be
paid by cancellation of any indebtedness of the purchaser to the Company. The
repurchase option for non-officer employees shall lapse at such rate as the
Committee may determine, but at a minimum rate of twenty percent (20%) per year.

ARTICLE 10.  STOCK UNITS.

         10.1 STOCK UNIT AGREEMENT. Each grant of Stock Units under the Plan
shall be evidenced by a Stock Unit Agreement between the recipient and the
Company. Such Stock Units shall be subject to all applicable terms of the Plan
and may be subject to any other terms that are not inconsistent with the Plan.
The provisions of the various Stock Unit Agreements entered into under the Plan
need not be identical. Stock Units may be granted in consideration of a
reduction in the recipient's other compensation.

         10.2 PAYMENT FOR AWARDS. To the extent that an Award is granted in the
form of Stock Units, no cash consideration shall be required of the Award
recipients.


<PAGE>

         10.3 VESTING CONDITIONS. Each Award of Stock Units may or may not be
subject to vesting. Vesting shall occur, in full or in installments, upon
satisfaction of the conditions specified in the Stock Unit Agreement. A Stock
Unit Agreement may provide for accelerated vesting in the event of the
Participant's death, disability or retirement or other events. The Committee may
determine, at the time of granting Stock Units or thereafter, that all or part
of such Stock Units shall become vested in the event that a Change in Control
occurs with respect to the Company, subject to Section 11.3, and except as
provided in the next following sentence. If the Company and the other party to
the transaction constituting a Change in Control agree that such transaction is
to be treated as a "pooling of interests" for financial reporting purposes, and
if such transaction in fact is so treated, then the acceleration of vesting
shall not occur to the extent that the Company's independent accountants and
such other party's independent accountants separately determine in good faith
that such acceleration would preclude the use of "pooling of interests"
accounting.

         10.4 VOTING AND DIVIDEND RIGHTS. The holders of Stock Units shall have
no voting rights. Prior to settlement or forfeiture, any Stock Unit awarded
under the Plan may, at the Committee's discretion, carry with it a right to
dividend equivalents. Such right entitles the holder to be credited with an
amount equal to all cash dividends paid on one Common Share while the Stock Unit
is outstanding. Dividend equivalents may be converted into additional Stock
Units. Settlement of dividend equivalents may be made in the form of cash, in
the form of Common Shares, or in a combination of both. Prior to distribution,
any dividend equivalents which are not paid shall be subject to the same
conditions and restrictions as the Stock Units to which they attach.

         10.5 FORM AND TIME OF SETTLEMENT OF STOCK UNITS. Settlement of vested
Stock Units may be made in the form of (a) cash, (b) Common Shares or (c) any
combination of both, as determined by the Committee. The actual number of Stock
Units eligible for settlement may be larger or smaller than the number included
in the original Award, based on predetermined performance factors. Methods of
converting Stock Units into cash may include (without limitation) a method based
on the average Fair Market Value of Common Shares over a series of trading days.
Vested Stock Units may be settled in a lump sum or in installments. The
distribution may occur or commence when all vesting conditions applicable to the
Stock Units have been satisfied or have lapsed, or it may be deferred to any
later date. The amount of a deferred distribution may be increased by an
interest factor or by dividend equivalents. Until an Award of Stock Units is
settled, the number of such Stock Units shall be subject to adjustment pursuant
to Article 11.

         10.6 DEATH OF RECIPIENT. Any Stock Units Award that becomes payable
after the recipient's death shall be distributed to the recipient's beneficiary
or beneficiaries. Each recipient of a Stock Units Award under the Plan shall
designate one or more beneficiaries for this purpose by filing the prescribed
form with the Company. A beneficiary designation may be changed by filing the
prescribed form with the Company at any time before the Award recipient's death.
If no beneficiary was designated or if no designated beneficiary survives the
Award recipient, then


<PAGE>

any Stock Units Award that becomes payable after the recipient's death shall be
distributed to the recipient's estate.

         10.7 CREDITORS' RIGHTS. A holder of Stock Units shall have no rights
other than those of a general creditor of the Company. Stock Units represent an
unfunded and unsecured obligation of the Company, subject to the terms and
conditions of the applicable Stock Unit Agreement.

ARTICLE 11.  PROTECTION AGAINST DILUTION.

         11.1 ADJUSTMENTS. In the event of a subdivision of the outstanding
Common Shares, a declaration of a dividend payable in Common Shares, a
declaration of a dividend payable in a form other than Common Shares in an
amount that has a material effect on the price of Common Shares, a combination
or consolidation of the outstanding Common Shares (by reclassification or
otherwise) into a lesser number of Common Shares, a recapitalization, a spin-off
or a similar occurrence, the Committee shall make such adjustments as it, in its
sole discretion, deems appropriate in one or more of:

         a. The number of Options, SARs, Restricted Shares and Stock Units
available for future Awards under Article 3;

         b. The limitations set forth in Sections 5.2 and 8.2;

         c. The number of NSOs to be granted to Outside Directors under
Article 7;

         d. The number of Common Shares covered by each outstanding Option and
SAR;

         e. The Exercise Price under each outstanding Option and SAR; or

         f. The number of Stock Units included in any prior Award which has not
yet been settled.

Except as provided in this Article 11, a Participant shall have no rights by
reason of any issue by the Company of stock of any class or securities
convertible into stock of any class, any subdivision or consolidation of shares
of stock of any class, the payment of any stock dividend or any other increase
or decrease in the number of shares of stock of any class.

         11.2 DISSOLUTION OR LIQUIDATION. To the extent not previously exercised
or settled, Options, SARs and Stock Units shall terminate immediately prior to
the dissolution or liquidation of the Company.

         11.3 REORGANIZATIONS. In the event that the Company is a party to a
merger, consolidation or other corporate reorganization, outstanding Awards
shall be subject to the



<PAGE>

agreement of merger, consolidation or corporate reorganization, or subject to
determination by the Board. Such agreement shall provide for one or more of the
following events:

         a. The continuation of the outstanding Awards by the Company, if the
Company is a surviving corporation;

         b. The assumption of the outstanding Awards by the surviving
corporation or its parent or subsidiary;

         c. The substitution by the surviving corporation or its parent or
subsidiary of its own awards for the outstanding Awards;

         d. Full exercisability or vesting and accelerated expiration of the
outstanding Awards; or

         e. Settlement of the full value of the outstanding Awards in cash or
cash equivalents followed by cancellation of such Awards.

Notwithstanding anything to the contrary herein, this Section 11.3 shall control
in the event of a Change in Control.

ARTICLE 12.  DEFERRAL OF AWARDS.

         The Committee, in its sole discretion, may permit or require a
Participant to:

         a. Have cash that otherwise would be paid to such Participant as a
result of the exercise of an SAR or the settlement of Stock Units credited to a
deferred compensation account established for such Participant by the Committee
as an entry on the Company's books;

         b. Have Common Shares that otherwise would be delivered to such
Participant as a result of the exercise of an Option or SAR converted into an
equal number of Stock Units; or

         c. Have Common Shares that otherwise would be delivered to such
Participant as a result of the exercise of an Option or SAR or the settlement of
Stock Units converted into amounts credited to a deferred compensation account
established for such Participant by the Committee as an entry on the Company's
books. Such amounts shall be determined by reference to the Fair Market Value of
such Common Shares as of the date when they otherwise would have been delivered
to such Participant.

A deferred compensation account established under this Article 12 may be
credited with interest or other forms of investment return, as determined by the
Committee. A Participant for whom such an account is established shall have no
rights other than those of a general creditor of the Company. Such an account
shall represent an unfunded and unsecured obligation of the Company and shall be
subject to the terms and conditions of the applicable agreement between



<PAGE>


such Participant and the Company. If the deferral or conversion of Awards is
permitted or required, the Committee (in its sole discretion) may establish
rules, procedures and forms pertaining to such Awards, including (without
limitation) the settlement of deferred compensation accounts established under
this Article 12.

ARTICLE 13.  AWARDS UNDER OTHER PLANS.

         The Company may grant awards under other plans or programs. Such awards
may be settled in the form of Common Shares issued under this Plan. Such Common
Shares shall be treated for all purposes under the Plan like Common Shares
issued in settlement of Stock Units and shall, when issued, reduce the number of
Common Shares available under Article 3.

ARTICLE 14.  PAYMENT OF DIRECTOR'S FEES IN SECURITIES.

         14.1 EFFECTIVE DATE. No provision of this Article 14 shall be effective
unless and until the Board has determined to implement such provision.

         14.2 ELECTIONS TO RECEIVE NSOs, RESTRICTED SHARES OR STOCK UNITS. An
Outside Director may elect to receive his or her annual retainer payments and/or
meeting fees from the Company in the form of cash, NSOs, Restricted Shares or
Stock Units, or a combination thereof, as determined by the Board. Such NSOs,
Restricted Shares and Stock Units shall be issued under the Plan. An election
under this Article 14 shall be filed with the Company on the prescribed form.

         14.3 NUMBER AND TERMS OF NSOs, RESTRICTED SHARES OR STOCK UNITS. The
number of NSOs, Restricted Shares or Stock Units to be granted to Outside
Directors in lieu of annual retainers and meeting fees that would otherwise be
paid in cash shall be calculated in a manner determined by the Board. The terms
of such NSOs, Restricted Shares or Stock Units shall also be determined by the
Board.

ARTICLE 15.  LIMITATION ON RIGHTS.

         15.1 RETENTION RIGHTS. Neither the Plan nor any Award granted under the
Plan shall be deemed to give any individual a right to remain an Employee,
Outside Director or Consultant. The Company and its Parents, Subsidiaries and
Affiliates reserve the right to terminate the service of any Employee, Outside
Director or Consultant at any time, with or without cause, subject to applicable
laws, the Company's certificate of incorporation and by-laws and a written
employment agreement (if any).

         15.2 STOCKHOLDERS' RIGHTS. A Participant shall have no dividend rights,
voting rights or other rights as a stockholder with respect to any Common Shares
covered by his or her Award prior to the time when a stock certificate for such
Common Shares is issued or, if applicable, the time when he or she becomes
entitled to receive such Common Shares by filing any required notice of exercise
and paying any required Exercise Price. No adjustment shall be



<PAGE>

made for cash dividends or other rights for which the record date is prior to
such time, except as expressly provided in the Plan.

         15.3 CONDITIONS UPON ISSUANCE OF COMMON SHARES.

         a. LEGAL COMPLIANCE. Common Shares shall not be issued pursuant to the
exercise of an Award unless the exercise of such Award and the issuance and
delivery of such Common Shares shall comply with all relevant provisions of law,
including, without limitation, the Securities Act, as amended, the Exchange Act,
the securities laws of applicable states, the rules and regulations promulgated
thereunder, applicable laws, and the requirements of any stock exchange or
quotation system upon which the Common Shares may then be listed or quoted, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance.

         b. INVESTMENT REPRESENTATIONS RE: FEDERAL SECURITIES LAWS. The Common
Shares underlying the Awards, as of the date the Plan was approved by the Board,
have not been registered under the Securities Act. The Participant shall be
required to represent that if Awards are exercised in whole or in part at a time
when there is not in effect, under the Securities Act, a registration statement
applicable to the Common Shares issuable upon exercise, then the purchase of
such Common Shares shall be subject to obtaining such representation, warranties
and covenants from the Participants as the Committee shall determine, including,
without limitation:

              (i) INVESTMENT INTENT. Participant is acquiring the Common
Shares for its own account, not as a nominee or agent, and not with a view to
their resale or distribution and is prepared to hold the Common Shares for an
indefinite period and has no present intention to sell, distribute, or grant
any participating interests in the Common Shares. Participant acknowledges
the Common Shares have not been registered under the Securities Act or the
securities laws of any other state, province or country (collectively, with
the 1933 Act, the "Securities Laws"), and that the Company is issuing the
Common Shares to it in reliance on such representations.

              (ii) RESTRICTED SECURITIES. Participant confirms it has been
informed that the Common Shares may not be resold or transferred unless such
Common Shares are first registered under the applicable Securities Laws or
unless an exemption from such registration is available.

               (iii) INVESTMENT EXPERIENCE. In connection with the investment
representations made, Participant represents that it is able to fend for
itself in the transactions contemplated by the Plan, has such knowledge and
experience in financial and business matters as to be capable of evaluating
the merits and risks of its investment, has the ability to bear the economic
risks of its investment, and has been furnished with and has had access to
such information as is normally made available in the form of a registration
statement, together with such additional information as is necessary to
verify the accuracy of the information supplied and to have all questions
answered by the Company.

<PAGE>

              (iv) DISPOSITION OF SHARES. Participant shall make no
disposition of the Common Shares, unless and until:

                   (1) Participant shall have complied with all requirements
of the Plan and any stock exchange on which such Common Shares (or any
substituted securities) may be listed;

                   (2) Participant shall have notified the Company of the
proposed disposition and furnished it with a written summary of the terms and
conditions of the proposed disposition; and

                   (3) Participant shall have provided an opinion to the
Company's counsel (at its expense), in form and substance reasonably
satisfactory to the Company, that (i) the proposed disposition does not
require registration of the Common Shares under the applicable Securities
Laws or (ii) all appropriate action necessary for compliance with the
registration requirements of the applicable Securities Laws or of any
exemption from registration available under the applicable Securities Laws
has been taken.

ARTICLE 16.  WITHHOLDING TAXES.

         16.1 GENERAL. To the extent required by applicable federal, state,
local or foreign law, a Participant or his or her successor shall make
arrangements satisfactory to the Company for the satisfaction of any withholding
tax obligations that arise in connection with the Plan. The Company shall not be
required to issue any Common Shares or make any cash payment under the Plan
until such obligations are satisfied.

         16.2 SHARE WITHHOLDING. The Committee may permit a Participant to
satisfy all or part of his or her withholding or income tax obligations by
having the Company withhold all or a portion of any Common Shares that otherwise
would be issued to him or her or by surrendering all or a portion of any Common
Shares that he or she previously acquired. Such Common Shares shall be valued at
their Fair Market Value on the date when taxes otherwise would be withheld in
cash.

ARTICLE 17.  FUTURE OF THE PLAN.

         17.1 TERM OF THE PLAN. The Plan, as set forth herein, shall become
effective as of November 1, 2000. The Plan shall remain in effect until it is
terminated under Section 17.2, except that no ISOs shall be granted on or after
the 10th anniversary of the later of (a) the date when the Board adopted the
Plan or (b) the date when the Board adopted the most recent increase in the
number of Common Shares available under Article 3 which was approved by the
Company's stockholders.

         17.2 AMENDMENT OR TERMINATION. The Board may at any time amend, alter,
suspend or terminate the Plan for any reason.


<PAGE>

         17.3 STOCKHOLDER APPROVAL. The Company shall obtain stockholder
approval of any Plan amendment to the extent required by applicable law, rule or
regulation, including the requirements of any exchange or quotation system on
which the Common Shares are listed or quoted. Such stockholder approval, if
required shall be obtained in such a manner and to such a degree as is required
by the applicable laws, rules or regulations.

         17.4 EFFECT OF AMENDMENT OR TERMINATION. No amendment, alteration,
suspension or termination of the Plan shall materially impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the Board,
which agreement must be in writing and signed by the Optionee and the Company.
For purposes of the Plan, any amendment, alteration, suspension or termination
that is required to enable an Option designated as an Incentive Stock Option to
qualify as a Nonqualified Stock Option or is necessary to comply with any
applicable laws or government regulations, shall not be considered to materially
impair any rights of the Optionee. For purposes of the Plan, any action of the
Board or the Committee that alters or affects the tax treatment of any Award
shall not be considered to materially impair any rights of the respective
Participant.

ARTICLE 18.  LIMITATION ON PARACHUTE PAYMENTS.

         18.1 SCOPE OF LIMITATION. This Article 18 shall apply to an Award
unless the Committee, at the time of making an Award under the Plan or at any
time thereafter, specifies in writing that such Award shall not be subject to
this Article 18. If this Article 18 applies to an Award, it shall supersede any
contrary provision of the Plan or of any Award granted under the Plan.

         18.2 BASIC RULE. In the event that the independent auditors most
recently selected by the Board (the "Auditors") determine that any payment or
transfer by the Company under the Plan to or for the benefit of a Participant (a
"Payment") would be nondeductible by the Company for federal income tax purposes
because of the provisions concerning "excess parachute payments" in Section 280G
of the Code, then the aggregate present value of all Payments shall be reduced
(but not below zero) to the Reduced Amount. For purposes of this Article 18, the
"Reduced Amount" shall be the amount, expressed as a present value, which
maximizes the aggregate present value of the Payments without causing any
Payment to be nondeductible by the Company because of Section 280G of the Code.

         18.3 REDUCTION OF PAYMENTS. If the Auditors determine that any Payment
would be nondeductible by the Company because of Section 280G of the Code, then
the Company shall promptly give the Participant notice to that effect and a copy
of the detailed calculation thereof and of the Reduced Amount, and the
Participant may then elect, in his or her sole discretion, which and how much of
the Payments shall be eliminated or reduced (as long as after such election the
aggregate present value of the Payments equals the Reduced Amount) and shall
advise the Company in writing of his or her election within 10 days of receipt
of notice. If no such election is made by the Participant within such 10-day
period, then the Company may elect which and how much of the Payments shall be
eliminated or reduced (as long as after such election the aggregate present
value of the Payments equals the Reduced Amount) and shall


<PAGE>


notify the Participant promptly of such election. For purposes of this Article
18, present value shall be determined in accordance with Section 280G(d)(4) of
the Code. All determinations made by the Auditors under this Article 18 shall be
binding upon the Company and the Participant and shall be made within 60 days of
the date when a Payment becomes payable or transferable. As promptly as
practicable following such determination and the elections hereunder, the
Company shall pay or transfer to or for the benefit of the Participant such
amounts as are then due to him or her under the Plan and shall promptly pay or
transfer to or for the benefit of the Participant in the future such amounts as
become due to him or her under the Plan.

         18.4 OVERPAYMENTS AND UNDERPAYMENTS. As a result of uncertainty in the
application of Section 280G of the Code at the time of an initial determination
by the Auditors hereunder, it is possible that Payments will have been made by
the Company that should not have been made (an "Overpayment") or that additional
Payments that will not have been made by the Company could have been made (an
"Underpayment"), consistent in each case with the calculation of the Reduced
Amount hereunder. In the event that the Auditors, based upon the assertion of a
deficiency by the Internal Revenue Service against the Company or the
Participant that the Auditors believe has a high probability of success,
determine that an Overpayment has been made, such Overpayment shall be treated
for all purposes as a loan to the Participant which he or she shall repay to the
Company, together with interest at the applicable federal rate provided in
Section 7872(f)(2) of the Code; provided, however, that no amount shall be
payable by the Participant to the Company if and to the extent that such payment
would not reduce the amount subject to taxation under Section 4999 of the Code.
In the event that the Auditors determine that an Underpayment has occurred, such
Underpayment shall promptly be paid or transferred by the Company to or for the
benefit of the Participant, together with interest at the applicable federal
rate provided in Section 7872(f)(2) of the Code.

         18.5 RELATED CORPORATIONS. For purposes of this Article 18, the term
"Company" shall include affiliated corporations to the extent determined by the
Auditors in accordance with Section 280G(d)(5) of the Code.

ARTICLE 19.  INDEMNIFICATION.

         In addition to such other rights of indemnification as they may be
entitled as members of the Board or officers or employees of the Company and any
Parent or Subsidiary or as a matter of law or otherwise, members of the Board
and any officers or employees of the Company and any Parent or Subsidiary to
whom authority to act for the Board is delegated shall be indemnified and held
harmless, to the fullest extent permissible under applicable law, by the Company
against all loss, expense, liability and cost, including, without limitation,
reasonable attorneys' fees, incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal therein, to which
they or any of them may be a party by reason of any action taken or failure to
act under or in connection with the Plan, or any right granted hereunder, and
against all amounts paid by them in settlement thereof (provided such settlement
is approved by independent legal counsel selected by the Company) or paid by
them in satisfaction of a judgment in any such action, suit or proceeding,
except in relation to matters as to which it shall be adjudged in such action,
suit or proceeding that such person is liable for bad faith or intentional
misconduct in


<PAGE>

duties; provided, however, that within sixty (60) days after the institution of
such action, suit or proceeding, such person shall offer to the Company, in
writing, the opportunity at its own expense to handle and defend the same before
they undertake to handle or defend it on their own behalf.

         It is the Company's intention that all expenses incurred in connection
with the administration of the Plan shall be borne by the Company rather than
any member of the Board.

ARTICLE 20.  PROVISION OF INFORMATION.

         Each Participant will receive a copy of the Plan. At least annually, a
copy of the Company's annual financial statements for the just-completed fiscal
year shall be made available to each Participant and purchaser of Common Shares
upon exercise of an Award, subject, at the Company's sole discretion, to the
requirement that such Participant or purchaser, as applicable, execute a
confidentiality agreement in form and substance satisfactory to the Company. The
Company shall not be required to provide such information to key employees whose
duties in connection with the Company assure them access to equivalent
information.

ARTICLE 21.  ADMINISTRATION.

         21.1 COMMITTEE COMPOSITION. The Plan shall be administered by the Board
of Directors unless and until the Board delegates administration to a Committee,
as provided herein. The Board may delegate administration of the Plan to a
Committee composed of not fewer than two (2) members of the Board. If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board (and references in this Plan to the Board shall thereafter be to
the Committee), subject, however, to such decisions, not inconsistent with the
provisions of the Plan, as may be made from time to time by the Board. The Board
may abolish the Committee at any time and revest in the Board the administration
of the Plan. In addition, the composition of the Committee shall satisfy:

         a. Such requirements as the Securities and Exchange Commission may
establish for administrators acting under plans intended to qualify for
exemption under Rule 16b-3 (or its successor) under the Exchange Act; and

         b. Such requirements as the Internal Revenue Service may establish for
outside directors acting under plans intended to qualify for exemption under
section 162(m)(4)(C) of the Code.

In the absence of a Committee, all references in this Plan to the Committee
shall mean and refer to the Board.

         21.2 POWERS OF THE BOARD. Subject to the provisions of the Plan, and,
subject to the duties delegated by the Board to a Committee, the Board shall
have plenary authority, in its discretion:



<PAGE>


         a. to determine the Fair Market Value of the Common Stock, in
accordance with Section 2 of the Plan;

         b. to select the Employees, Consultants and Outside Directors to whom
Awards may be granted hereunder;

         c. to determine whether and to what extent Awards or any combination
thereof are granted hereunder;

         d. to determine the number of Common Shares to be covered by each Award
granted hereunder;

         e. to approve forms of agreement for use under the Plan;

         f. to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any Award granted hereunder. Such terms and conditions
include, but are not limited to, the exercise price, the time or times when
Awards may be exercised (which may be based on performance criteria), any
vesting, acceleration or waiver of forfeiture restrictions, and any restriction
or limitation regarding any Awards or the Common Shares relating thereto, based
in each case on such factors as the Board, in its sole discretion, shall
determine;

         g. to construe and interpret the terms of the Plan;

         h. to prescribe, amend and rescind rules and regulations relating to
the Plan;

         i. to determine whether and under what circumstances an Award may be
settled in cash instead of Common Shares or Common Shares instead of cash;

         j. to reduce the exercise price of any Award;

         k. to modify or amend each Award (subject to Section 17 of the Plan);

         l. to authorize any person to execute on behalf of the Company any
instrument required to effect the grant of an Award previously granted by the
Board;

         m. to determine the terms and restrictions applicable to Awards and any
Restricted Stock; and

         n. to make all other determinations deemed necessary or advisable for
administering the Plan.

The Board's determination on the foregoing matters and matters incidental
thereto shall be conclusive. In exercising such authority, the Board need not
treat all Awards in the same manner.


<PAGE>

         21.3     COMMITTEE FOR NON-OFFICER GRANTS. The Board may also appoint a
secondary committee of the Board, which shall be composed of one or more
directors of the Company who need not satisfy the requirements of Section 21.1.
Such secondary committee may administer the Plan with respect to Employees and
Consultants who are not considered officers or directors of the Company under
section 16 of the Exchange Act, may grant Awards under the Plan to such
Employees and Consultants and may determine all features and conditions of such
Awards. Within the limitations of this Section 21.3, any reference in the Plan
to the Committee shall include such secondary committee.

ARTICLE 22.  EXECUTION.

         To record the adoption of the Plan by the Board, the Company has caused
its duly authorized officer to execute this document in the name of the Company.

         Advanced Biotherapy, Inc.

         By:  /s/ Paul J. Marangos
                  Chief Executive Officer



<PAGE>

                            ADVANCED BIOTHERAPY, INC.
                       2000 OMNIBUS EQUITY INCENTIVE PLAN

                                 NOTICE OF GRANT

         Unless otherwise defined herein, the terms defined in the 2000 Omnibus
Equity Incentive Plan (the "Plan") shall have the same defined meanings in this
Notice of Grant.

                                                        Name
                                                       Address

         You have been granted an option to purchase Common Stock of the
Company, subject to the terms and conditions of the Plan and this Stock Option
Agreement, as follows:

         Grant Number                                XXX

         Date of Grant                               _____________ 2000

         Vesting Commencement Date  ______________ 20xx

         Exercise Price per Share           $xx.xx

         Total Number of Shares Granted     xxx

         Total Exercise Price               $xxxxxxxxx

         Type of Option:                    __________ Incentive Stock Option

                                            __________ Nonstatutory Stock Option

         Term/Expiration Date:              ___________, 20xx

         VESTING SCHEDULE:
         ----------------

         This Option may be exercised, in whole or in part, in accordance with
the following schedule:

  NUMBER OF SHARES (INSTALLMENT)            DATE OF EARLIEST EXERCISE (VESTING)
  ------------------------------            -----------------------------------







<PAGE>

TERMINATION PERIOD:

         This Option may be exercised for six (6) months after termination of
employment or consulting relationship as a result of the death or Disability of
Optionee, but in no event later than the Term/Expiration Date as provided above.
Upon termination of employment for any reason other than death or Disability,
this Option may be exercised for three (3) months after termination of
employment or consulting relationship, but in no event later than the
Term/Expiration Date as provided above. Notwithstanding the foregoing, if
Optionee shall be terminated "for cause" (as defined in Section 6 of the Option
Agreement), this Option shall terminate automatically on the termination date.

ADDITIONAL TERMS/ACKNOWLEDGMENTS:

         The Optionee acknowledges receipt of, and understands and agrees to,
this Notice of Grant, the Stock Option Agreement and the Plan. Optionee further
acknowledges that as of the date of grant set forth above, this Notice of Grant,
the Stock Option Agreement and the Plan set forth the entire understanding
between the Optionee and the Company regarding the acquisition of stock in the
Company and supersede all prior oral and written agreements on that subject.

ADVANCED BIOTHERAPY, INC.,               OPTIONEE:
a Delaware corporation

By:
     -------------------------------    -------------------------------------

Title:                                   Printed Name:
        ----------------------------                  -----------------------

Date:                                    Date Signed:
       -----------------------------                  ------------------------




Attachment I:     Stock Option Agreement
Attachment II:    2000 Omnibus Equity Incentive Plan


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.4
<SEQUENCE>3
<FILENAME>a2043353zex-10_4.txt
<DESCRIPTION>EXHIBIT 10.4
<TEXT>

<PAGE>

                                                                EXHIBIT 10.4


                            ADVANCED BIOTHERAPY, INC.
                       2000 OMNIBUS EQUITY INCENTIVE PLAN

                                OPTION AGREEMENT

         1. GRANT OF OPTION. Advanced Biotherapy, Inc. (the "Company"), hereby
grants to the Optionee (the "Optionee") named in the Notice of Grant, an option
(the "Option") to purchase the total number of shares of Common Stock (the
"Shares") set forth in the Notice of Grant, at the exercise price per share set
forth in the Notice of Grant (the "Exercise Price") subject to the terms,
definitions and provisions of the 2000 Omnibus Equity Incentive Plan (Common
Stock) (the "Plan") adopted by the Company, which is incorporated herein by
reference. Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.

         If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option as
defined in Section 422 of the Code. However, if this Option is intended to be an
Incentive Stock Option, to the extent that it exceeds the $100,000 rule of Code
Section 422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").

         2. EXERCISE OF OPTION. This Option shall be exercisable during its term
in accordance with the Vesting Schedule set out in the Notice of Grant and with
the provisions of Section 9 of the Plan as follows:

         (i)      RIGHT TO EXERCISE.
                           -----------------

         (A) This Option may not be exercised for a fraction of a Share.

         (B) In the event Optionee ceases to be a Service Provider, the
exercisability of the Option is governed by Sections 6, 7 and 8 below, subject
to the limitation contained in subsection 2(i)(c).

         (C) In no event may this Option be exercised after the date of
expiration of the term of this Option as set forth in the Notice of Grant.

         (ii) METHOD OF EXERCISE. This Option shall be exercisable by written
Exercise Notice (in the form attached as EXHIBIT A, the terms and provisions of
which are incorporated herein by reference) which shall state the election to
exercise the Option, the number of Shares in respect of which the Option is
being exercised, and such other representations and agreements as to the
holder's investment intent with respect to such shares of Common Stock as may be
required by the Company pursuant to the provisions of the Plan. Such written
notice shall be signed by the Optionee and shall be delivered in person or by
certified mail to the Secretary of the Company. The written notice shall be
accompanied by payment of the Exercise Price. This Option shall be deemed to be
exercised upon receipt by the Company of such written notice accompanied by the
Exercise Price.


<PAGE>

         No Shares will be issued pursuant to the exercise of an Option unless
such issuance and such exercise shall comply with all relevant provisions of law
and the requirements of any stock exchange or national market system upon which
the Common Stock is then listed. Assuming such compliance, for income tax
purposes the Shares shall be considered transferred to the Optionee on the date
on which the Option is exercised with respect to such Shares.

         3 OPTIONEE'S REPRESENTATIONS. In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act, at the time this Option is exercised, Optionee shall, if
required by the Company, concurrently with the exercise of all or any portion of
this Option, deliver to the Company his or her Investment Representation
Statement in the form attached hereto as EXHIBIT B.

         4 METHOD OF PAYMENT. Payment of the Exercise Price shall be by any of
the following, or a combination thereof, at the election of the Optionee:

                  (i)      cash; or

                  (ii)     check; or

                  (iii) surrender of other shares of Common Stock (or other
equity securities) of the Company which (A) in the case of Shares acquired
pursuant to the exercise of a Company option, have been owned by the Optionee
for more than six (6) months on the date of surrender, and (B) have a Fair
Market Value on the date of surrender equal to the Exercise Price of the Shares
as to which the Option is being exercised; or

                  (iv) to the extent authorized by the Company, delivery of a
properly executed exercise notice together with such other documentation as the
Company's Board of Directors and the broker, if applicable, shall require to
effect an exercise of the Option and delivery to the Company of the sale or loan
proceeds required to pay the Exercise Price; or

                  (v) to the extent authorized by the Plan, delivery of a
properly executed exercise notice together with such other documentation as the
Company's Board of Directors shall require to effect a "cashless exercise" of
the Option.

         5 RESTRICTIONS ON EXERCISE. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations as promulgated by the
Federal Reserve Board. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.

         6 TERMINATION OF RELATIONSHIP. In the event an Optionee ceases to be a
Service Provider, Optionee may, to the extent otherwise so entitled at the date
of such termination (the "Termination Date"), exercise this Option during the
Termination Period set out in the Notice of


<PAGE>


Grant. To the extent that Optionee was not entitled to exercise this Option at
the date of such termination, or if Optionee does not exercise this Option
within the time specified herein, the Option shall terminate. Notwithstanding
the foregoing, if Optionee is terminated "for cause" by the Company, any
Subsidiary or any Parent, the Option shall automatically terminate on the
Termination Date. For purposes of this Option Agreement, "for cause" shall mean:

              (i) with respect to employees or directors of the Company:

         (A) the failure or refusal by such person to perform his or her duties
to the Company; or

         (B) such person's willful disobedience of any orders or directives of
the Board or any officers thereof acting under the authority thereof or such
person's deliberate interference with the compliance by other employees of the
Company with any such orders or directives; or

         (C) the failure or refusal of such person to abide by or comply with
the written policies, standard procedures or regulations of the Company; or

         (D) any willful or continued act or course of conduct by such person
which the Board in good faith determines might reasonably be expected to have a
material detrimental effect on the Company or the business, operations, affairs
or financial position thereof; or

         (E) the committing by such person of any fraud, theft, embezzlement or
other dishonest act against the Company; or

         (F) the determination by the Board, in good faith and in the exercise
of reasonable discretion, that such person is not competent to perform his or
her duties of employment; and

              (iii) with respect to consultants, any material breach of their
consulting agreement with the Company, or the expiration or termination of
their consulting agreement, or when they are no longer providing services to
the Company for which they are being compensated.

         7 DISABILITY OF OPTIONEE. Notwithstanding the provisions of Section 6
above, in the event an Optionee ceases to be a Service Provider as a result of
his or her Disability, Optionee may, but only within six (6) months from the
date of such termination (and in no event later than the expiration date of the
term of such Option as set forth in the Notice of Grant) exercise the Option to
the extent otherwise entitled to exercise it at the date of such termination. To
the extent that Optionee is not entitled to exercise the Option at the date of
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.


<PAGE>


         8 DEATH OF OPTIONEE. In the event an Optionee ceases to be a Service
Provider as a result of the death of Optionee, the Option may be exercised at
any time within six (6) months following the date of death (but in no event
later than the date of expiration of the term of this Option as set forth in
Section 10 below), by Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent the
Optionee could exercise the Option at the date of death. If such person does not
exercise such Option to the extent so entitled within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan.

         9 NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by Optionee. The terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.

         10 TERM OF OPTION. This Option may be exercised only within the term
set out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option. The limitations set out
in the Plan regarding Options designated as Incentive Stock Options and Options
granted to more than ten percent (10%) shareholders shall apply to this Option.

         11 TAX CONSEQUENCES. Set forth below is a brief summary as of the date
of this Option of some of the federal tax consequences of exercise of this
Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE,
AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT
A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.

         (i) EXERCISE OF AN ISO. If this Option qualifies as an ISO, there will
be no regular federal income tax liability upon the exercise of the Option,
although the excess, if any, of the Fair Market Value of the Shares on the date
of exercise over the Exercise Price will be treated as an adjustment to the
alternative minimum tax for federal tax purposes and may subject the Optionee to
the alternative minimum tax in the year of exercise.

         (ii) EXERCISE OF AN NSO. There may be a regular federal income tax
liability upon the exercise of an NSO. The Optionee will be treated as having
received compensation income (taxable at ordinary income tax rates) equal to the
excess, if any, of the Fair Market Value of the Shares on the date of exercise
over the Exercise Price. If Optionee is an Employee, the Company will be
required to withhold from Optionee's compensation or collect from Optionee and
pay to the applicable taxing authorities an amount equal to a percentage of this
compensation income at the time of exercise.

         (iii) DISPOSITION OF SHARES. In the case of an NSO, if Shares are held
for at least one year, any gain realized on disposition of the Shares will be
treated as long-term capital gain for federal income tax purposes. In the case
of an ISO, if Shares transferred pursuant to the Option are held for at least
one year after exercise and are disposed of at least two years after the Date of
Grant, any gain realized on disposition of the Shares will also be treated as
long-term



<PAGE>

capital gain for federal income tax purposes. If Shares purchased under an ISO
are disposed of within such one-year period or within two years after the Date
of Grant, any gain realized on such disposition will be treated as compensation
income (taxable at ordinary income rates) to the extent of the difference
between the Exercise Price and the lesser of (1) the Fair Market Value of the
Shares on the date of exercise, or (2) the sale price of the Shares.

         (iv) NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the Option
granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.

         12       COMPANY'S REPURCHASE RIGHT.
                  --------------------------

         (i) GRANT OF REPURCHASE RIGHT. The Company is hereby granted the right
(the "Repurchase Right"), exercisable at any time (a) during the ninety (90) day
period following the Termination Date, or (b) during the ninety (90) day period
following an exercise of the Option that occurs after the Termination Date, to
repurchase all or any portion of the Shares.

         (ii) EXERCISE OF THE REPURCHASE RIGHT. The Repurchase Right shall be
exercisable by written notice delivered to each Optionee of the Shares prior to
the expiration of the applicable ninety (90) day period specified above. The
notice shall indicate the number of Shares to be repurchased and the date on
which the repurchase is to be effected, such date to be not more than thirty
(30) days after the date of notice. On the date on which the repurchase is to be
effected, the Company and/or its assigns shall pay to the Optionee in cash or
cash equivalents (including the cancellation of any purchase-money indebtedness)
an amount equal to the GREATER of the Fair Market Value of the Shares on the
Termination Date, if any, or the Exercise Price previously paid for the Shares
which are to be repurchased from the Optionee. Upon such payment to the
Optionee, or into escrow for the benefit of the Optionee, the Company and/or its
assigns shall become the legal and beneficial owner of the Shares being
repurchased and all rights and interest thereon or related thereto, and the
Company shall have the right to transfer to its own name or its assigns the
number of Shares being repurchased, without further action by the Optionee.

         (iii) ASSIGNMENT. Whenever the Company shall have the right to purchase
Shares under this Repurchase Right, the Company may designate and assign one or
more employees, officers, directors or shareholders of the Company or other
persons or organizations, to exercise all or a part of the Company's Repurchase
Right.

         (iv) TERMINATION OF THE REPURCHASE RIGHT. The Repurchase Right shall
terminate with respect to any Shares for which it is not timely exercised. In
addition, the Repurchase Right shall terminate, and cease to be exercisable,
with respect to all Shares upon the EARLIEST to occur of: (A) the first date on
which shares of Common Stock are held of record by


<PAGE>


more than five hundred persons; (B) a determination by the Board of Directors of
the Company that a public market exists for the outstanding shares of Common
Stock; or (C) the closing of an underwritten public offering of the Company's
Common Stock pursuant to an effective registration statement files with the
Securities and Exchange Commission under the Securities Act, with respect to
which there are gross proceeds to the Company of at least $5,000,000.

         (v) ADDITIONAL SHARES OR SUBSTITUTED SECURITIES. In the event of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
effected without the Company's receipt of consideration, any new, substituted or
additional securities or other property (including money paid other than as a
regular cash dividend) which is by reason of any such transaction distributed
with respect to the Shares shall be immediately subject to the Repurchase Right,
but only to the extent the Shares are at the time covered by such right.
Appropriate adjustments to reflect the distribution of such securities or
property shall be made to the price per share to be paid upon the exercise of
the Repurchase Right in order to reflect the effect of any such transaction upon
the Company's capital structure.

         (vi) CERTAIN CORPORATE TRANSACTIONS. Immediately prior to the
consummation of a transaction of the type described in Article 11 of the Plan,
the Repurchase Right shall automatically lapse in its entirety, except to the
extent the Repurchase Right is to be assigned to a successor corporation (or its
Parent company) in connection with such transaction, the right shall apply to
the new capital stock or other property (including cash paid other than as a
regular cash dividend) received in exchange for the Shares in consummation of
such transaction, but only to the extent the Shares are at the time covered by
such right. Appropriate adjustments shall be made to the price per share payable
upon exercise of the Repurchase Right to reflect the effect of such transaction
upon the Company's capital structure.

                          ADVANCED BIOTHERAPY, INC.


                          By:
                               -----------------------------
                                   [name, title]



<PAGE>


         OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE
WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S 2000 OMNIBUS EQUITY
INCENTIVE PLAN WHICH IS INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON
OPTIONEE ANY RIGHT WITH RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY
THE COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE
COMPANY'S RIGHT TO TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME,
WITH OR WITHOUT CAUSE.

         Optionee acknowledges receipt of a copy of the Plan and represents that
he is familiar with the terms and provisions thereof, and hereby accepts this
Option subject to all of the terms and provisions thereof. Optionee has reviewed
the Plan and this Option in their entirety, has had an opportunity to obtain the
advice of counsel prior to executing this Option and fully understands all
provisions of the Option. Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Company's Board of
Directors upon any questions arising under the Plan or this Option. Optionee
further agrees to notify the Company upon any change in the residence address
indicated below.


Dated:
        ----------------------------        --------------------------------
                                                  Optionee (signature)

                                            --------------------------------
                                                      Name (print)

                                            --------------------------------
                                                 Social Security Number


                                                   Residence Address:

                                            --------------------------------

                                            --------------------------------

                                            --------------------------------



<PAGE>


                                CONSENT OF SPOUSE

         The undersigned spouse of Optionee has read and hereby approves the
terms and conditions of the Plan and this Option Agreement. In consideration of
Advanced Biotherapy, Inc.'s granting his or her spouse the right to purchase
Shares as set forth in the Plan and this Option Agreement, the undersigned
hereby agrees to be irrevocably bound by the terms and conditions of the Plan
and this Option Agreement and further agrees that any community property
interest shall be similarly bound. The undersigned hereby appoints the
undersigned's spouse as attorney-in-fact for the undersigned with respect to any
amendment or exercise of rights under the Plan or this Option Agreement.



                                            --------------------------------
                                            Spouse of Optionee

                                            --------------------------------
                                            Printed Name

                                            --------------------------------
                                            Date



<PAGE>


                                    EXHIBIT A

                            ADVANCED BIOTHERAPY, INC.

                       2000 OMNIBUS EQUITY INCENTIVE PLAN

                                 EXERCISE NOTICE


ADVANCED BIOTHERAPY, INC.
964 Fifth Avenue, Suite 300
San Diego, California 92101

Attention:  Secretary

         1. EXERCISE OF OPTION. Effective as of today, ___________, 20__, the
undersigned ("OPTIONEE") hereby elects to exercise Optionee's option to purchase
_________ shares of the Common Stock (the "Shares") of ADVANCED BIOTHERAPY, INC.
under and pursuant to the 2000 Omnibus Equity Incentive Plan, as amended (the
"Plan") and the [ ] Incentive [ ] Nonstatutory Stock Option Agreement dated
________, 20   (the "Stock Option Agreement").

         2.       REPRESENTATIONS OF OPTIONEE.  Optionee acknowledges that
Optionee has received, read and understood the Plan and the Stock Option
Agreement and agrees to abide by and be bound by their terms and conditions.

         3. RIGHTS AS SHAREHOLDER. Until the stock certificate evidencing such
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a shareholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock certificate
is issued, except as may be provided in the Plan.

         Optionee shall enjoy rights as a shareholder until such time as
Optionee disposes of the Shares or the Company and/or its assignee(s) exercises
the Right of First Refusal hereunder. Upon such exercise, Optionee shall have no
further rights as a holder of the Shares so purchased except the right to
receive payment for the Shares so purchased in accordance with the provisions of
this Agreement, and Optionee shall forthwith cause the certificate(s) evidencing
the Shares so purchased to be surrendered to the Company for transfer or
cancellation.

         4. COMPANY'S RIGHT OF FIRST REFUSAL. Before any Shares held by Optionee
or any transferee (either being sometimes referred to herein as the "Holder")
may be sold or otherwise transferred (including transfer by gift or operation of
law), the Company or its assignee(s) shall have a right of first refusal to
purchase the Shares on the terms and conditions set forth in this Section (the
"Right of First Refusal").


<PAGE>

              (i) NOTICE OF PROPOSED TRANSFER. The Holder of the Shares shall
deliver to the Company a written notice (the "Notice") stating: (i) the
Holder's bona fide intention to sell or otherwise transfer such Shares; (ii)
the name of each proposed purchaser or other transferee (the "Proposed
Transferee"); (iii) the number of Shares to be transferred to each Proposed
Transferee; and (iv) the bona fide cash price or other consideration for
which the Holder proposes to transfer the Shares (the "Offered Price"), and
the Holder shall offer the Shares at the Offered Price to the Company or its
assignee(s).

              (ii) EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within
thirty (30) days after receipt of the Notice, the Company and/or its
assignee(s) may, by giving written notice to the Holder, elect to purchase
all, but not less than all, of the Shares proposed to be transferred to any
one or more of the Proposed Transferees, at the purchase price determined in
accordance with subsection (c) below.

              (iii) PURCHASE PRICE. The purchase price (the "Purchase Price")
for the Shares purchased by the Company or its assignee(s) under this Section
shall be the Offered Price. If the Offered Price includes consideration other
than cash, the cash equivalent value of the non-cash consideration shall be
determined by the Company in good faith.

              (iv) PAYMENT. Payment of the Purchase Price shall be made, at
the option of the Company or its assignee(s), in cash, by check, by
cancellation of all or a portion of any outstanding indebtedness of the
Holder to the Company (or, in the case of repurchase by an assignee, to the
assignee), or by any combination thereof within 30 days after receipt of the
Notice or in the manner and at the times set forth in the Notice.

              (v) HOLDER'S RIGHT TO TRANSFER. If all of the Shares proposed
in the Notice to be transferred to a given Proposed Transferee are not
purchased by the Company and/or its assignee(s) as provided in this Section,
then the Holder may sell or otherwise transfer such Shares to that Proposed
Transferee at the Offered Price or at a higher price, provided that such sale
or other transfer is consummated within 120 days after the date of the Notice
and provided further that any such sale or other transfer is effected in
accordance with any applicable securities laws and the Proposed Transferee
agrees in writing that the provisions of this Section shall continue to apply
to the Shares in the hands of such Proposed Transferee. If the Shares
described in the Notice are not transferred to the Proposed Transferee within
such period, a new Notice shall be given to the Company, and the Company
and/or its assignees shall again be offered the Right of First Refusal before
any Shares held by the Holder may be sold or otherwise transferred.

              (vi) EXCEPTION FOR CERTAIN FAMILY TRANSFERS. Anything to the
contrary contained in this Section notwithstanding, the transfer of any or
all of the Shares during the Optionee's lifetime or on the Optionee's death
by will or intestacy to the Optionee's immediate family or to trusts
established, in whole or in part, for the benefit of the Optionee and/or one
or more of such Optionee's immediate family members shall be exempt from the
provisions of this Section. "Immediate Family" as used herein shall mean the
Optionee's spouse and issue (including adopted and stepchildren). In such
case, the transferee or other recipient shall receive

<PAGE>

and hold the Shares so transferred subject to the provisions of this Section,
and there shall be no further transfer of such Shares except in accordance with
the terms of this Section.

              (vii) TERMINATION OF RIGHT OF FIRST REFUSAL. The Right of First
Refusal shall terminate upon the earlier of (i) two (2) years after the date
of issuance to the Optionee of such Common Shares or (ii) the date on which
such Common Shares shall be registered pursuant to a registration statement
filed with and declared effective by the Securities and Exchange Commission
under the Securities Act of 1933.

         5. TAX CONSULTATION. Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.

         6. MARKET STANDOFF AGREEMENT. Each Optionee hereby agrees that if so
requested by the Company or any representative of the underwriters in connection
with any registration of the offering of any Shares of the Company under the
Securities Act, such Optionee shall not sell or otherwise transfer, pledge,
hypothecate or otherwise decrease his market risk or beneficial ownership in any
Shares or other securities of the Company during the 180-day period following
the date of the final Prospectus contained in a registration statement of the
Company filed under the Securities Act; provided, however, that such restriction
shall only apply to the first registration statement of the Company to become
effective under the Securities Act which includes securities to be sold on
behalf of the Company to the general public in an underwritten public offering
under the Securities Act. The Company may impose stop-transfer instructions with
respect to securities subject to the foregoing restrictions until the end of
such 180-day period.

         7.       RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.

              (i) LEGENDS. Optionee understands and agrees that the Company
shall cause the legends set forth below, or legends substantially equivalent
thereto, to be placed upon any certificate(s) evidencing ownership of the
Shares together with any other legends that may be required by state or
federal securities laws at the time of the issuance of the Shares:

                  THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
                  THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY
                  NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
                  HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR THE
                  ISSUER OF THE SHARES (THE "ISSUER") HAS RECEIVED AN OPINION OF
                  COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER THAT
                  SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN
                  COMPLIANCE WITH THE ACT.


<PAGE>

                  THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
                  CERTAIN RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL
                  HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE
                  EXERCISE NOTICE BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF
                  THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL
                  OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF
                  FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THE SHARES
                  REPRESENTED HEREBY.

                  (ii) STOP-TRANSFER NOTICES. Optionee agrees that, in order to
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.

                  (iii) REFUSAL TO TRANSFER. The Company shall not be required
(i) to transfer on its books any Shares that have been sold or otherwise
transferred in violation of any of the provisions of this Agreement or (ii) to
treat as owner of such Shares or to accord the right to vote or pay dividends to
any purchaser or other transferee to whom such Shares shall have been so
transferred.

         8. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Optionee and his or her heirs, executors, administrators, successors and
assigns.

         9. INTERPRETATION. Any dispute regarding the interpretation of this
Agreement shall be submitted by Optionee or by the Company forthwith to the
Board of Directors (or Committee if applicable), which shall review such dispute
promptly. The resolution of such a dispute by the Board of Directors (or
Committee if applicable) shall be final and binding on the Company and on
Optionee.

         10. GOVERNING LAW; SEVERABILITY. This Agreement shall be governed by
and construed in accordance with the laws of the State of California excluding
that body of law pertaining to conflicts of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.

         11. NOTICES. Any notice required or permitted hereunder shall be given
in writing and shall be deemed effectively given upon personal delivery or three
(3) days after deposit in the United States mail by certified mail, with postage
and fees prepaid, addressed to the other party at its address as shown below
beneath its signature, or to such other address as such party may designate in
writing from time to time to the other party.


<PAGE>

         12. FURTHER INSTRUMENTS. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.

         13. DELIVERY OF PAYMENT. Optionee herewith delivers to the Company the
full Exercise Price for the Shares.

         14. ENTIRE AGREEMENT. The Plan, the Notice of Grant, and the Stock
Option Agreement are incorporated herein by reference. This Agreement, the Plan,
the Notice of Grant, the Stock Option Agreement and the Investment
Representation Statement (if applicable) constitute the entire agreement of the
parties and supersede in their entirety all prior undertakings and agreements of
the Company and Optionee with respect to the subject matter hereof.

Submitted by:                            Accepted by:

OPTIONEE:                                ADVANCED BIOTHERAPY, INC.


                                         By:
                                            -----------------------------------
                  (Signature)

                                         Its:
                                            ----------------------------------
         (Social Security Number)


ADDRESS:                                   ADDRESS:
- -------                                    -------

                                           964 Fifth Avenue, Suite 300
                                           San Diego, California 92101


Date:                                      Date:
      ------------------------------            -------------------------------




<PAGE>


                                    EXHIBIT B

                       INVESTMENT REPRESENTATION STATEMENT


OPTIONEE          :
                         -----------------------------------------------------

COMPANY           :        ADVANCED BIOTHERAPY, INC.

SECURITY          :        COMMON STOCK

AMOUNT            :
                         -----------------------------------------------------

DATE              :
                         -----------------------------------------------------

In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:

         (i) Optionee is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Securities. Optionee is
acquiring these Securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").

         (ii) Optionee acknowledges and understands that the Securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Optionee's investment intent as expressed herein. In this connection,
Optionee understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Optionee's representation was predicated solely upon a present intention to hold
these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. Optionee further understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register
the Securities. Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel satisfactory to the Company and any other legend required
under then applicable state or federal securities laws.


         (iii) Optionee is familiar with the provisions of Rule 701 and Rule
144, each promulgated under the Securities Act, which, in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions. Rule 701 provides that if the issuer




<PAGE>

qualifies under Rule 701 at the time of the grant of the Option to the Optionee,
the exercise will be exempt from registration under the Securities Act. In the
event the Company becomes subject to the reporting requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
ninety (90) days thereafter (or such longer period as any market stand-off
agreement may require) the Securities exempt under Rule 701 may be resold,
subject to the satisfaction of certain of the conditions specified by Rule 144,
including: (1) the resale being made through a broker in an unsolicited
"broker's transaction" or in transactions directly with a market maker (as said
term is defined under the Exchange Act); and, in the case of an affiliate, (2)
the availability of certain public information about the Company, (3) the amount
of Securities being sold during any three month period not exceeding the
limitations specified in Rule 144(e), and (4) the timely filing of a Form 144,
if applicable.

         In the event that the Company does not qualify under Rule 701 at the
time of grant of the Option, then the Securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which requires the
resale to occur not less than one year after the later of the date the
Securities were sold by the Company or the date the Securities were sold by an
affiliate of the Company, within the meaning of Rule 144; and, in the case of
acquisition of the Securities by an affiliate, or by a non-affiliate who
subsequently holds the Securities less than two years, the satisfaction of the
conditions set forth in sections (1), (2), (3) and (4) of the paragraph
immediately above.

         (iv) Optionee hereby agrees that if so requested by the Company or any
representative of the underwriters (the "Managing Underwriter") in connection
with any registration of the offering of any securities of the Company under the
Securities Act, Optionee shall not sell or otherwise transfer any Shares or
other securities of the Company during the 180-day period (or such longer period
of time as may be requested in writing by the Managing Underwriter and agreed to
in writing by the Company) (the "Market Standoff Period") following the date of
the final Prospectus included in a registration statement of the Company filed
under the Securities Act; provided, however, that such restriction shall only
apply to the first registration statement of the Company to become effective
under the Securities Act which includes securities to be sold on behalf of the
Company to the general public in an underwritten public offering under the
Securities Act. The Company may impose stop-transfer instructions with respect
to securities subject to the foregoing restrictions until the end of such Market
Standoff Period.

         (v) Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A under the Securities Act, or
some other registration exemption will be required; and that, notwithstanding
the fact that Rules 144 and 701 are not exclusive, the Staff of the Securities
and Exchange Commission has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rules 144 or 701 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk. Optionee understands that no
assurances can be given that any such other registration exemption will be
available in such event.


<PAGE>


                             Signature of Optionee:


                             ------------------------------------------------

                            Date:
                                  --------------------------------------------



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.6
<SEQUENCE>4
<FILENAME>a2043353zex-10_6.txt
<DESCRIPTION>EXHIBIT 10.6
<TEXT>

<PAGE>
                                                                    Exhibit 10.6







                        ADVANCED BIOTHERAPY COMPANY, INC.


                CONVERTIBLE SUBORDINATED DEBT PURCHASE AGREEMENT

                                  June 29, 2000


<PAGE>

                        ADVANCED BIOTHERAPY COMPANY, INC.

                CONVERTIBLE SUBORDINATED DEBT PURCHASE AGREEMENT

       This Convertible Subordinated Debt Purchase Agreement (the "AGREEMENT")
is made as of the 29th day of June 2000, by and between Advanced Biotherapy
Company, Inc., a Nevada corporation (the "COMPANY"), and each of the investors
listed on EXHIBIT A attached hereto (each a "PURCHASER" and together the
"PURCHASERS").

                                    RECITALS

       Simultaneously with execution hereof, the Company, the Purchasers and the
other parties named therein are entering an Investor Rights Agreement (the
"Investor Rights Agreement").

       The parties hereby agree as follows:

       1.     PURCHASE AND SALE OF CONVERTIBLE SUBORDINATED DEBT.

              1.1    SALE AND ISSUANCE OF CONVERTIBLE SUBORDINATED DEBT.

                     Subject to the terms and conditions of this Agreement, each
Purchaser agrees to purchase at the Closing and the Company agrees to sell and
issue to each Purchaser at the Closing that aggregate principal amount of the
Company's 10% Convertible Subordinated Debt due September 30, 2004 ("Convertible
Subordinated Debt"), set forth opposite each such Purchaser's name on EXHIBIT A
attached hereto at a purchase price equal to the face amount thereof purchased
by such Purchaser. The debt instruments issued to the Purchaser pursuant to this
Agreement shall be hereinafter referred to as the "DEBT INSTRUMENTS" and the
Convertible Subordinated Debt evidenced thereby as the "DEBT." The Company's
agreement with each of the Purchasers hereunder is a separate agreement, the
obligations of each of the Purchasers hereunder are several and not joint, and
the sale of the Debt to each of the Purchasers is a separate transaction. The
Debt is convertible to shares of the Company's common stock, $.001 par value, in
accordance with the applicable provisions set forth in the Debt Instruments
evidencing the Debt, the form of which instruments is set forth in EXHIBIT B
attached hereto. Shares of capital stock issued to the Purchaser pursuant to the
Debt Instruments conversion provisions are referred to hereafter as the "STOCK".

              1.2    CLOSING; DELIVERY.

                     (a) CLOSING. The initial purchase and sale of the Debt
shall take place at the offices of the Company, 6355 Topanga Canyon Boulevard,
Suite 510, Woodland Hills, California 91367 at 10:00 a.m. on July 7, 2000, or at
such other time and place as the Company and the Purchasers mutually agree
orally or in writing (which time and place are designated as


<PAGE>

the "INITIAL CLOSING"). At the Initial Closing and each Closing (as defined
below), the Company shall deliver to each Purchaser a Debt Instrument
representing the Debt that such Purchaser is purchasing against payment of the
purchase price therefor by check, wire transfer, cancellation of indebtedness or
any combination thereof. In the event that payment by a Purchaser is made, in
whole or in part, by cancellation of indebtedness, then such Purchaser shall
surrender to the Company for cancellation at such Initial Closing or Closing any
evidence of such indebtedness or shall execute an instrument of cancellation in
form and substance acceptable to the Company.

                     (b) SUBSEQUENT SALE OF DEBT. The Company may sell up to the
balance of the authorized aggregate principal amount of Two Million Dollars
($2,000,000) of Debt not sold at the Initial Closing to such Purchasers as it
shall select, at a price not less than the face amount thereof, provided the
agreement for sale is executed not later than one hundred fifty (150) days
immediately following the date of the Initial Closing. Any such Purchaser shall
become a party to this Agreement, and shall have the rights and obligations
hereunder, by executing and delivering to the Company an additional counterpart
signature page to this Agreement. In the event there is more than one closing,
the term "Closing" shall apply to the Initial Closing and each such other
closing unless otherwise specified.

       2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to each Purchaser that, except as set forth on a
Schedule of Exceptions attached hereto as EXHIBIT C, which exceptions shall be
deemed to be representations and warranties as if made hereunder:

              2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Nevada and has all requisite corporate power and authority
to carry on its business. The Company is duly qualified to transact business and
is in good standing in each jurisdiction in which the failure so to qualify
would have a material adverse effect on its business or properties.

              2.2 CAPITALIZATION. The authorized capital of the Company
consists, or will consist, immediately prior to the Closing, of:

                     (a) 50,000,000 shares of capital stock, 39,398,265 shares
of which are issued and outstanding immediately prior to the Closing. All of the
outstanding shares of capital stock have been duly authorized, validly issued,
fully paid and are nonassessable, issued in compliance with all applicable
federal and state securities laws.

                     (b) Options to purchase 2,877,953 shares of Company Stock
have been granted and are currently outstanding; warrants to purchase 4,685,135
shares of Company Stock have been granted and are currently outstanding.


<PAGE>

                     (c) Except as disclosed pursuant to Section 6.7 and except
for outstanding options and warrants described in Section 2.2(b) above or as
contemplated by this Agreement, there are no outstanding options, warrants,
rights (including conversion or preemptive rights and rights of first refusal or
similar rights) or agreements, orally or in writing, for the purchase or
acquisition from the Company of any shares of its capital stock.

              2.3 SUBSIDIARIES. The Company does not currently own or control,
directly or indirectly, any interest in any other corporation, association, or
other business entity, and is not a participant in any joint venture or
partnership.

              2.4 AUTHORIZATION. All corporate action on the part of the
Company, its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement, the performance of all
obligations of the Company hereunder and the authorization, issuance and
delivery of the Debt has been taken or will be taken prior to the Closing, and
this Agreement constitutes the valid and legally binding obligation of the
Company, enforceable against the Company in accordance with their terms except
(i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, and other laws of general application affecting
enforcement of creditors' rights generally, as limited by laws relating to the
availability of specific performance, injunctive relief, or other equitable
remedies, or (ii) to the extent any indemnification provisions may be limited by
applicable federal or state securities laws.

              2.5 VALID ISSUANCE OF DEBT AND STOCK. The Debt that is being
issued to the Purchasers hereunder, when issued, sold and delivered in
accordance with the terms hereof for the consideration expressed herein, will be
duly and validly issued and free of restrictions on transfer other than
restrictions on transfer under this Agreement, the Debt Instrument and the
Investor Rights Agreement and applicable state and federal and securities laws.
Based in part upon the representations of the Purchasers in this Agreement and
subject to the provisions of Section 2.6 below, the Debt will be issued in
compliance with all applicable federal and state securities laws. The underlying
Stock to be issued to the Purchasers hereunder, when issued and then, sold and
delivered in accordance with the terms hereof for the consideration expressed
herein and therein, will be duly and validly issued, fully paid and
nonassessasble and free of restrictions on transfer other than restrictions on
transfer under this Agreement, the Debt Instruments, the Investor Rights
Agreement and applicable state and federal securities laws. Based in part upon
the representations of the Purchasers in this Agreement and subject to the
provisions of Section 2.6 below, the Stock will be issued in compliance with all
applicable federal and state securities laws.

              2.6 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement, except for filings pursuant to


<PAGE>

applicable state securities laws and Regulation D of the Securities Act of 1933,
as amended (the "SECURITIES ACT") or, as provided in the Investor Rights
Agreement.

              2.7 LITIGATION. There is no action, suit, proceeding or
investigation pending or, to the Company's knowledge, currently threatened
against the Company that questions the validity of this Agreement or the right
of the Company to enter into them, or to consummate the transactions
contemplated hereby or thereby, or that might result, either individually or in
the aggregate, in any material adverse changes in the assets, condition or
affairs of the Company, financially or otherwise, or any change in the current
equity ownership of the Company, nor is the Company aware that there is any
basis for the foregoing. The Company is not a party or subject to the provisions
of any order, writ, injunction, judgment or decree of any court or government
agency or instrumentality. There is no action, suit, proceeding or investigation
by the Company currently pending or which the Company intends to initiate.

              2.8 INTELLECTUAL PROPERTY. To the Company's knowledge, the Company
owns or possesses sufficient legal rights to all trademarks, service marks,
tradenames, and, to its knowledge, all patents, copyrights, trade secrets,
licenses, information and proprietary rights and processes necessary for its
business without any conflict with, or infringement of, the rights of others.
There are no outstanding options, licenses or agreements of any kind relating to
the foregoing, nor is the Company bound by or a party to any options, licenses
or agreements of any kind with respect to the patents, trademarks, servicemarks,
tradenames, copyrights, trade secrets, licenses, information, proprietary rights
and processes of any other person or entity. The Company has not received any
communications alleging that the Company has violated or, by conducting its
business, would violate any of the patents, trademarks, service marks,
tradenames, copyrights, trade secrets or other proprietary rights or processes
of any other person or entity. The Company is not aware that any of its
employees is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere with
the use of such employee's best efforts to promote the interest of the Company
or that would conflict with the Company's business. Neither the execution or
delivery of this Agreement, nor the carrying on of the Company's business by the
employees of the Company, nor the conduct of the Company's business as proposed,
will, to the Company's knowledge, conflict with or result in a breach of the
terms, conditions, or provisions of, or constitute a default under, any
contract, covenant or instrument under which any such employee is now obligated.
The Company does not believe it is or will be necessary to use any inventions of
any of its employees (or persons it currently intends to hire) made prior to or
outside the scope of their employment by the Company.

              2.9 COMPLIANCE WITH OTHER INSTRUMENTS.

                     (a) The Company is not in violation or default of any
provisions of its articles of incorporation or of any instrument, judgment,
order, writ, decree or contract to which


<PAGE>

it is a party or by which it is bound or, to its knowledge, of any provision of
federal or state statute, rule or regulation applicable to the Company. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby will not result in any such violation or be
in conflict with or constitute, with or without the passage of time and giving
of notice, either a default under any such provision, instrument, judgment,
order, writ, decree or contract or an event which results in the creation of any
lien, charge or encumbrance upon any assets of the Company, or the suspension,
revocation, impairment, forfeiture or nonrenewal of any material permit,
license, authorization applicable to the Company, its business or operations or
any of its assets or properties, which suspension, revocation, impairment,
forfeiture or nonrenewal will have a material adverse effect on the Company's
business and operations.

                     (b) To its knowledge, the Company has avoided every
condition, and has not performed any act, the occurrence of which would result
in the Company's loss of any right granted under any license, distribution
agreement or other agreement.

              2.10 AGREEMENTS; ACTION.

                     (a) There are no agreements, understandings or proposed
transactions between the Company and any of its officers, directors, affiliates,
or any affiliate thereof.

                     (b) Except for agreements explicitly contemplated by this
Agreement, there are no agreements, understandings, instruments, contracts or
proposed transactions to which the Company is a party or by which it is bound
that involve (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of $50,000, (ii) the license of any patent, copyright, trade
secret or other proprietary right to or from the Company, or (iii) the grant of
rights to manufacture, produce, assemble, license, market, or sell its products
to any other person or affect the Company's exclusive right to develop,
manufacture, assemble, distribute, market or sell its products.

                     (c) Except for agreements explicitly contemplated by this
Agreement, the Company has not (i) declared or paid any dividends, or authorized
or made any distribution upon or with respect to any class or series of its
capital stock, (ii) incurred any indebtedness for money borrowed or incurred any
other liabilities individually in excess of $50,000 or in excess of $100,000 in
the aggregate, (iii) made any loans or advances to any person, other than
ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise
disposed of any of its assets or rights, other than the sale of its inventory in
the ordinary course of business.

                     (d) For the purposes of subsections (b) and (c) above, the
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity shall be
aggregated for the purpose of meeting the individual minimum dollar amounts with
such subsections.


<PAGE>

                     (e) The Company is not a party to and is not bound by any
contract, agreement or instrument, or subject to any restriction under its
articles of incorporation or bylaws, that adversely affects its business, its
properties or its financial condition.

              2.11 DISCLOSURE. The Company has fully provided the Purchasers
with all information requested by the Purchasers in connection with their
decisions to acquire the Debt including all information that the Company
believes is reasonably necessary to enable the Purchasers to make such a
decision. To the Company's knowledge, no representation or warranty of the
Company contained in this Agreement and the exhibits attached hereto, any
certificate furnished or to be furnished to Purchasers at the Closing, or any
other document (when read together) contain any untrue statement of a material
fact, nor, to the Company's knowledge, omit to state a material fact necessary
in order to make the statements contained herein or therein not misleading in
light of the circumstances under which they were made. To the Company's
knowledge, there are no facts which (individually or in the aggregate)
materially adversely affect the business, assets, liabilities, financial
condition or operations of the Company that have not been set forth in this
Agreement, the exhibits hereto or in other documents delivered to the Purchasers
or their attorneys or agents in connection herewith. For purposes of this
Agreement, the Company shall be deemed to have "knowledge" if any director or
officer of the Company has actual knowledge of a particular fact or other
matter. As of the date of the Agreement, the Company is current as to its
periodic reporting requirements under the Securities Exchange Act of 1934, as
amended.

              2.12 NO CONFLICT OF INTEREST. The Company is not indebted,
directly or indirectly, to (i) any of its officers or directors or to their
respective spouses or children, in any amount whatsoever other than in
connection with expenses or advances of expenses incurred in the ordinary course
of business or relocation expenses of employees and (ii) any affiliates of the
Company. To the Company's knowledge, none of the Company's officers or directors
are, directly or indirectly, indebted to the Company (other than in connection
with purchases of the Company's stock) or have any direct or indirect ownership
interest in any firm or corporation with which the Company is affiliated or with
which the Company has a business relationship, or any firm or corporation which
competes with the Company except that officers and directors of the Company may
own stock in any publicly traded companies that may compete with the Company. To
the Company's knowledge, none of the Company's officers or directors are,
directly or indirectly, interested in any material contract with the Company.
The Company is not a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation.

              2.13 RIGHTS OF REGISTRATION AND VOTING RIGHTS. Except for
agreements explicitly contemplated by this Agreement, the Company has not
granted or agreed to grant any registration rights, including piggyback rights,
to any person or entity. To the Company's knowledge, no stockholder of the
Company has entered into any agreements with respect to the voting of capital
shares of the Company.


<PAGE>

              2.14 PRIVATE PLACEMENT. Subject in part to the truth and accuracy
of the Purchasers' representations set forth in this Agreement, the offer, sale
and issuance of the Debt as contemplated by this Agreement is exempt from the
registration requirements of the Securities Act.

              2.15 TITLE TO PROPERTY AND ASSETS. The Company owns its property
and assets free and clear of all mortgages, liens, loans and encumbrances,
except such encumbrances and liens which arise in the ordinary course of
business and do not materially impair the Company's ownership or use of such
property or assets. With respect to the property and assets it leases, the
Company is in compliance with such leases and, to its knowledge, holds a valid
leasehold interest free of any liens, claims or encumbrances.

              2.16 EMPLOYEE BENEFIT PLAN. The Company does not have any Employee
Benefit Plan as defined in the Employee Retirement Income Security Act of 1974.

              2.17 TAX RETURNS AND PAYMENTS. The Company has filed all tax
returns and reports as required by law. These returns and reports are true and
correct in all material respects. The Company has paid all taxes and other
assessments due. The Company has never had any tax deficiency proposed or
assessed against it and has not executed any waiver of any statute of
limitations on the assessment or collection of any tax or governmental charge.
None of the Company's federal income tax returns and none of its state income or
franchise tax or sales or use tax returns have ever been audited by governmental
authorities. The Company has not incurred any taxes, assessments or governmental
charges other than in the ordinary course of business and the Company has made
adequate provisions on its books or accounts for all taxes, assessments and
governmental charges with respect to its business, properties and operations for
such period. The Company has withheld or collected from each payment made to
each of its employees, the amount of all taxes (including, but not limited to,
federal income taxes, Federal Insurance Contribution Act taxes and Federal
Unemployment Tax Act taxes) required to be withheld or collected therefrom, and
has paid the same to the proper tax receiving officers or authorized
depositories.

              2.18 LABOR AGREEMENTS AND ACTIONS. The Company is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the knowledge of the
Company, has sought to represent any of the employees, representatives or agents
of the Company. There is no strike or other labor dispute involving the Company
pending, or to the knowledge of the Company threatened, which could have a
material adverse effect on the assets, properties, financial condition,
operating results, or business of the Company, nor is the Company aware of any
labor organization activity involving its employees. The employment of each
officer and employee of the Company is terminable at the will of the Company. To
its knowledge, the Company has complied in all material respects with all


<PAGE>

applicable state and federal equal employment opportunity laws and with other
laws related to employment. The Company is not a party to or bound to any
currently effective employment contract, deferred compensation agreement, bonus
plan, incentive plan, profit sharing plan, retirement agreement or other
employee compensation agreement.

              2.19 CONFIDENTIAL INFORMATION AND INVENTION ASSIGNMENT AGREEMENTS.
Each employee, consultant and officer of the Company has (or will have) executed
an agreement with the Company as of the Initial Closing regarding
confidentiality and proprietary information substantially in the form or forms
delivered to the counsel for the Purchasers. The Company is not aware that any
of its employees or consultants is in violation thereof, and the Company will
use its best efforts to prevent any such violation. All consultants to or
vendors of the Company with access to confidential information of the Company
are parties to a written agreement substantially in the form or forms provided
to counsel for the Purchasers under which, among other things, each such
consultant or vendor is obligated to maintain the confidentiality of
confidential information of the Company. The Company is not aware that any of
its consultants or vendors are in violation thereof, and the Company will use
its best efforts to prevent any such violation.

              2.20 PERMITS. The Company has all franchises, permits, licenses
and any similar authority necessary for the conduct of its business, the lack of
which could materially and adversely affect the business, properties, prospects,
or financial condition of the Company. The Company is not in default in any
material respect under any of such franchises, permits, licenses or other
similar authority.

              2.21 CORPORATE DOCUMENTS. The articles of incorporation and bylaws
of the Company are in the form made available to counsel for the Purchasers. The
copy of the minute books of the Company made available to the Purchasers'
counsel contains minutes of all meetings of directors and stockholders and all
actions by written consent without a meeting by the directors and stockholders
since the date of incorporation and reflects all actions by the directors (and
any committee of directors) and stockholders.

              2.22 SIGNIFICANT CUSTOMERS AND SUPPLIERS. No major customer or
supplier as of the date hereof has materially reduced or threatened to terminate
or materially reduce its purchases from or provision of products or services to
the Company, as the case may be.

              2.23 REAL PROPERTY HOLDING COMPANY. The Company is not a real
property holding company within the meaning of Section 897 of the Internal
Revenue Code of 1986, as amended (the "Code").

              2.24 MANUFACTURING AND MARKETING RIGHTS. The Company has not
granted rights to manufacture, produce, assemble, lease, market or sell its
products to any other person

<PAGE>

and is not bound by any agreement that affects the Company's exclusive right to
develop, manufacture, assemble, distribute market or sell its products.

       3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser
hereby severally represents and warrants to the Company that:

              3.1 AUTHORIZATION. Such Purchaser has full power and authority to
enter into this Agreement. This Agreement constitutes the valid and legally
binding obligation of the Purchaser, enforceable in accordance with its terms,
except (a) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, and any other laws of general application
affecting enforcement of creditors' rights generally, and as limited by laws
relating to the availability of a specific performance, injunctive relief, or
other equitable remedies, or (b ) to the extent any indemnification provisions
may be limited by applicable federal or state securities laws.

              3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with
the Purchaser in reliance upon the Purchaser's representation to the Company,
which by the Purchaser's execution of this Agreement, the Purchaser hereby
confirms, that the Debt and underlying Stock to be acquired by the Purchaser
will be acquired for investment for the Purchaser's own account, not as a
nominee or agent, and not with a view to the resale or distribution of any part
thereof, and that the Purchaser has no present intention of selling, granting
any participation in, or otherwise distributing the same. By executing this
Agreement, the Purchaser further represents that the Purchaser does not
presently have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participations to such person or to any third
person, with respect to any of the Debt or the underlying Stock. The Purchaser
has not been formed for the specific purpose of acquiring the Debt or the
underlying Stock.

              3.3 DISCLOSURE OF INFORMATION. The Purchaser has had an
opportunity to discuss the Company's business, management, financial affairs and
the terms and conditions of the offering of the Debt with the Company's
management as such Purchaser has requested. The Purchaser understands that such
discussions were intended to describe the aspects of the Company's business
which it believes to be material but were not a thorough or exhaustive
description. The Purchaser acknowledges having had full access to the Company's
Annual Report on Form 10-KSB/A filed May 4, 2000, for the year ended December
31, 1999 ("Annual Report") and the Company's Quarterly Report on Form 10-QSB
filed May 15, 2000, for the quarter ended March 31, 2000 ("Quarterly Report" and
together with the Annual Report, the "SEC Reports") as filed with the Securities
and Exchange Commission, as well as the Company's Notice and Proxy Statement
(preliminary and/or final) for the Company's stockholders meeting scheduled for
August 24, 2000, as filed with the Securities and Exchange Commission. The
Purchaser understands and agrees that such SEC Reports do not reflect any events
subsequent to March 31, 2000.


<PAGE>

              3.4 EXCLUSIVE RELIANCE. In deciding whether to acquire the Debt,
the Purchaser has relied exclusively upon (i) consultations with the Purchaser's
respective legal, financial and tax advisors, (ii) the representations and
warranties of the Company set forth in this Agreement, (iii) the Debt
Instrument, (iv) the Investor Rights Agreement and (v) the additional
information concerning the Company set forth in the SEC Reports, including the
exhibits thereto.

              3.5 RESTRICTED SECURITIES. The Purchaser understands that the Debt
and the Stock have not been, and the Debt and, except as provided in the
Investor Rights Agreement, the Stock will not be, registered under the
Securities Act or any state or other jurisdiction's securities laws, by reason
of a specific exemption from the registration provisions of the Securities Act
and qualification provisions of applicable state securities laws, which depends
upon, among other things, the bona fide nature of the investment intent and the
accuracy of the Purchaser's representations as expressed herein. The Purchaser
understands that the Debt and the Stock are "restricted securities" under
applicable federal and state securities laws and that, pursuant to these laws,
the Purchaser must hold the Debt indefinitely unless it is registered, and the
Stock until it is registered pursuant to the Investor Rights Agreement, with the
Securities and Exchange Commission and qualified by state authorities, or an
exemption from such registration and qualification requirements is available.
The Purchaser acknowledges that the Company has no obligation to register or
qualify the Debt for resale. The Purchaser further acknowledges that if an
exemption from registration or qualification is available, it may be conditioned
on various requirements including, but not limited to, the time and manner of
sale, the holding period for the Debt and the Stock, and on requirements
relating to the Company which are outside of the Purchaser's control, and which
the Company is under no obligation and may not be able to satisfy. The Purchaser
acknowledges that any registration rights relating to the Stock into which the
Debt may be converted (in accordance with its terms) are set forth in the
Investor Rights Agreement.

              3.6 DEBT. The Purchaser understands that the principal amount of
the Debt is subject to payment, in whole or in part, at any time and from time
to time prior to conversion, at the option of the Company and further is subject
to mandatory conversion, in whole or in part, in both cases upon the terms and
conditions set forth in the Debt Instruments.

              3.7 LEGENDS. The Purchaser understands that the Debt Instruments
evidencing the Debt and the certificates representing any Stock issued upon
conversion of the Debt, subject to the provisions of the Investor Rights
Agreement, may bear one or all of the following legends, or one substantially
similar thereto:

                     (a) "NEITHER THIS DEBT INSTRUMENT NOR ANY SECURITIES INTO
WHICH IT IS CONVERTIBLE HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, OR
ANY APPLICABLE SECURITIES LAW OF ANY JURISDICTION AND IS A "RESTRICTED SECURITY"
AS THAT TERM IS DEFINED IN


<PAGE>

RULE 144 UNDER THE SECURITIES ACT AND HAS BEEN ACQUIRED FOR INVESTMENT AND NOT
WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. THIS
DEBT INSTRUMENT AND THE SECURITIES INTO WHICH IT IS CONVERTIBLE MAY NOT BE
TRANSFERRED UNTIL (i) A REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR SUCH
APPLICABLE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR
(ii) IN THE OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY REGISTRATION UNDER SUCH
SECURITIES ACT OR SUCH APPLICABLE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION
WITH SUCH PROPOSED TRANSFER."

                     (b) Any legend required by the blue sky laws of any state
to the extent such laws are applicable to the shares represented by the
certificate so legended.

              3.8 INVESTMENT.

                     (a) If the Purchaser is an individual, he is at least 21
years of age, a citizen of the country and a bona fide resident and domiciliary
(not a temporary or transient resident) of the state indicated on the signature
page hereto, and he has no present intention of becoming a resident of any other
state or jurisdiction;

                     (b) The Purchaser has such knowledge and experience in
financial and business matters as to be capable of evaluating the risks of an
investment in the Debt and the underlying Stock and understands that (i) this
investment is suitable only for an investor who is able to bear the economic
consequences of losing its entire investment, (ii) the Company is a development
stage company with no operating revenue, (iii) an investment in the Debt and the
underlying Stock is a speculative investment which involves a high degree of
risk of loss by the Purchaser of his or its investment therein, and (iv) there
are substantial restrictions on the transferability of the Debt and the
underlying Stock.

              3.9 ACCREDITED INVESTOR. The Purchaser is an accredited investor
as defined in Rule 501(a) of Regulation D promulgated under the Securities Act.

              3.10 FOREIGN INVESTORS. If the Purchaser is not a United States
person (as defined by Section 7701(a)(30) of the Code), such Purchaser hereby
represents that it has satisfied itself as to the full observance of the laws of
its jurisdiction in connection with any invitation to subscribe for the Debt and
the underlying Stock or any use of this Agreement, including (i) the legal
requirements within its jurisdiction for the purchase of the Debt and the
underlying Stock, (ii) any foreign exchange restrictions applicable to such
purchase, (iii) any governmental or other consents that may need to be obtained,
and (iv) the income tax and other tax consequences, if any, that may be relevant
to the purchase, holding, redemption, sale, or transfer of the Debt and the
underlying Stock. Such Purchaser's subscription and payment for and continued
beneficial ownership of the Debt and the underlying Stock, will not violate any
applicable securities or other laws of the Purchaser's jurisdiction.


<PAGE>

       4. CONDITIONS OF THE PURCHASERS' OBLIGATIONS AT CLOSING. The obligations
of each Purchaser to the Company under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:

              4.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true and correct in
all material respects on and as of the Closing with the same effect as though
such representations and warranties had been made on and as of the date of the
Closing.

              4.2 PERFORMANCE. The Company shall have performed and complied
with all covenants, agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing.

              4.3 COMPLIANCE CERTIFICATE. The President of the Company shall
deliver to the Purchasers at the Closing a certificate certifying that the
conditions specified in Sections 4.1 and 4.2 have been fulfilled.

              4.4 INVESTOR RIGHTS AGREEMENT. The Company and the other parties
thereto other than Purchaser shall have duly executed and delivered the Investor
Rights Agreement to the Purchaser.

              4.5 QUALIFICATIONS. All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Debt pursuant to this Agreement shall be obtained and effective as of the
Closing.

              4.6 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings
in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in from and
substance to Purchasers' special counsel, and they shall have received all such
counterpart and certified or other copies of such documents as they may
reasonably request.

              5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The
obligations of the Company to each Purchaser under this Agreement are subject to
the fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:

              5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of each Purchaser contained in Section 3 shall be true and correct in
all material respects on and as


<PAGE>

of the Closing with the same effect as though such representations and
warranties had been made on and as of the Closing.

              5.2 PERFORMANCE. All covenants, agreements and conditions
contained in this Agreement to be performed by the Purchasers on or prior to the
Closing shall have been performed or complied with in all material respects.

              5.3 INVESTOR RIGHTS AGREEMENT. The Purchaser shall have duly
executed and delivered the Investor Rights Agreement to the Company.

              5.4 QUALIFICATIONS. All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Debt pursuant to this Agreement shall be obtained and effective as of the
Closing.

       6. MISCELLANEOUS.

              6.1 SURVIVAL OF WARRANTIES. Unless otherwise set forth in this
Agreement, the warranties, representations and covenants of the Company and the
Purchasers contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing for a period of one (1)
year following the Closing.

              6.2 TRANSFER; SUCCESSORS AND ASSIGNS. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.

              6.3 GOVERNING LAW. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.

              6.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.

              6.5 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.


<PAGE>

              6.6 NOTICES. Any notice required or permitted by this Agreement
shall be in writing and shall be deemed sufficient upon delivery, when delivered
personally or by reputable overnight courier or sent by telecopier (followed
promptly with a copy by overnight courier), or forty-eight (48) hours after
being deposited in the U.S. mail, as certified or registered mail, with postage
prepaid, addressed to the party to be notified at such party's address as set
forth on the signature page or EXHIBIT A hereto, or as subsequently modified by
written notice, and if to the Company with a copy to Joel Weinstein, Rutter,
Hobbs & Davidoff Incorporated, 1900 Avenue of the Stars, Suite 2700, Los
Angeles, CA 90017, fax number (310) 286-1728.

              6.7 INVESTMENT BANKING PLACEMENT FEE. The Company represents that
it will be obligated to pay its advisor, Cappello Capital Corp. ("CAPPELLO
CAPITAL"), an investment banking placement fee, in cash, or, at Cappello
Capital's option, a Debt Investment in principal amount (or a combination
thereof), that is equal to seven and one half percent (7.5% ) of the total
amount raised by the Company, together with an option to purchase ten percent
(10%) of the principal amount of Debt placed by the Company at each Closing, at
a price equal to the face amount of such Debt so placed, which option will
expire ten (10) years from the applicable Closing. Each Purchaser agrees to
indemnify and to hold harmless the Company from any liability for any commission
or compensation in the nature of a placement or finder's fee (and the costs and
expenses of defending against such liability or asserted liability) for which
each Purchaser or any of its officers, employees, or representatives is
responsible. The Company agrees to indemnify and hold harmless each Purchaser
from any liability for any commission or compensation in the nature of a
placement or finder's fee (and the costs and expenses of defending against such
liability or asserted liability) for which the Company or any of its officers,
employees or representatives is responsible.

              6.8 FEES AND EXPENSES. The Company shall pay the reasonable fees
and expenses of counsel for Cappello Capital incurred with respect to this
Agreement, the documents referred to here in, and the transactions contemplated
hereby and thereby, provided such fees and expenses do not exceed $10,000.

              6.9 ATTORNEY'S FEES. If any action at law or in equity (including
arbitration) is necessary to enforce or interpret the terms of any of this
Agreement, the prevailing party shall be entitled to reasonable attorney's fees,
costs and necessary disbursements in addition to any other relief to which such
party may be entitled.

              6.10 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended or waived only with the written consent of the Company and the holders
of at least a majority of the aggregate outstanding principal amount of the
Debt. Any amendment or waiver effected in accordance with this Section 6.9 shall
be binding upon the Purchasers and each transferee of the Debt, each future
holder of the underlying securities, and the Company.

              6.11 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith.


<PAGE>

In the event that the parties cannot reach a mutually agreeable and enforceable
replacement for such provision, then (a) such provision shall be excluded from
this Agreement, (b) the balance of the Agreement shall be interpreted as if such
provision were so excluded and (c) the balance of the Agreement shall be
enforceable in accordance with its terms.

              6.12 DELAYS OR OMISSIONS. No delay or omission to exercise any
right, power or remedy accruing to any party under this Agreement, upon any
breach or default of any other party under this Agreement, shall impair any such
right, power or remedy of such non-breaching or non-defaulting party nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of any
breach or default under this Agreement, or any waiver on the part of any party
of any provisions or conditions of this Agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
party, shall be cumulative and not alternative.

              6.13 ENTIRE AGREEMENT. This Agreement, and the documents referred
to herein constitute the entire agreement between the parties hereto pertaining
to the subject matter hereof, and any and all other written or oral agreements
relating to the subject matter hereof existing between the parties hereto are
expressly canceled.

              6.14 CONFIDENTIALITY. Each party hereto agrees that, except with
the prior written permission of the other party , it shall at all times keep
confidential and not divulge, furnish or make accessible to anyone any
confidential information, knowledge or data concerning or relating to the
business or financial affairs of the other parties to which such party has been
or shall become privy by reason of this Agreement, discussions or negotiations
relating to this Agreement, the performance of its obligations hereunder or the
ownership of Stock purchased hereunder. The provisions of this Section 6.13
shall be in addition to, and not in substitution for, the provisions of any
separate nondisclosure agreement executed by the parties hereto with respect to
the transactions contemplated hereby.

              6.15 EXCULPATION AMONG PURCHASERS. Except as set forth in Section
3.4 above, each Purchaser acknowledges that it is not relying upon any person,
firm or corporation, other than the Company and its officers and directors, in
making its investment or decision to invest in the Company. Each Purchaser
agrees that no Purchaser nor the respective controlling persons, officers,
directors, partners, agents, or employees of any Purchaser shall be liable to
any other Purchaser for any action heretofore or hereafter taken or omitted to
be taken by any of them in connection with the purchase of the Debt.


<PAGE>

              6.16 RESERVATION SHARES. The Company agrees that it shall reserve
sufficient duly authorized shares of Stock for issuance upon conversion of the
Convertible Debt Instruments and that upon such issuance, such shares shall be
validly issued, fully paid and nonassessable.



                            [Signature Pages Follow]


<PAGE>

         The parties have executed this Convertible Subordinated Debt Purchase
Agreement as of the date first written above.

                                            ADVANCED BIOTHERAPY COMPANY, INC.:



                                            By:
                                               ---------------------------------
                                               Name:
                                                    ----------------------------
                                               Title:
                                                      --------------------------
                                            Address:
                                                      --------------------------

                                                      --------------------------
                                            Facsimile:
                                                       -------------------------



                                            PURCHASER:



                                            By:
                                               ---------------------------------
                                               Name:
                                                    ----------------------------
                                                             (Print)
                                               Title:
                                                      --------------------------
                                            Address:
                                                      --------------------------

                                                      --------------------------
                                            Facsimile:
                                                       -------------------------

<PAGE>

                                    EXHIBITS
                                    --------

Exhibit A    -    Schedule of Purchasers

Exhibit B    -    Form of Convertible Debt Investment

Exhibit C    -    Schedule of Exceptions to Representations and Warranties


<PAGE>

                                    EXHIBIT A

                             SCHEDULE OF PURCHASERS



                                PRINCIPAL AMOUNT OF            PURCHASE PRICE
           NAME                 DEBT INSTRUMENT             (CASH/WIRE TRANSFER)
- ----------------------------    -------------------         --------------------


<PAGE>



                                    EXHIBIT B

                       FORM OF CONVERTIBLE DEBT INSTRUMENT


<PAGE>



                                    EXHIBIT C

                            SCHEDULE OF EXCEPTIONS TO
                         REPRESENTATIONS AND WARRANTIES

       2.10 AGREEMENTS; ACTION. The Company leases approximately 500 square feet
for administrative offices located at 6355 Topanga Canyon Boulevard, Suite 510,
Woodland Hills, California 91367 from Buccellato & Finkelstein, Inc., which
company is owned in part by Edmond Buccellato, a director and officer of the
Company. The annual base rental through December 31, 1999 was $-0-. The
remaining term of the lease is three years, ending December 31, 2002. The annual
base rental for each of the remaining lease years is $4,800. The Company also
subleases approximately 3,500 square feet of research and development space
located at 9110 Red Branch Road, Columbia, Maryland 21045 from New Horizons
Diagnostics, Inc., which company is owned by Lawrence Loomis, a director of the
Company. The annual base rental is $-0- and the term of the lease is
month-to-month.

       The Company has granted options and warrants to certain of its officers
and directors, the details of which are set forth in the Company's preliminary
Proxy Statement for the Company's stockholders meeting, scheduled for August 24,
2000, which Proxy Statement has been filed with the Securities and Exchange
Commission, a copy of which has been made available to Investors.

       The Company is indebted to Simon Skurkovich, the Company's Chairman of
the Board in the amount of $127,631.

       2.12 NO CONFLICT OF INTEREST. SEE paragraph 2.10 above. The Company is
indebted to Alexander L. Cappello, a director, and two (2) of his business
associates in the aggregate amount of $75,000, pursuant to the placement of
convertible demand notes to such individuals.

       The following directors and officers are indebted to the Company in the
amounts set forth opposite his or her name, respectively, in connection with the
grant of shares of Common Stock pursuant to the Company's stock bonus plan:

                  Boris Skurkovich:           $75,000
                  Lawrence Loomis:            $50,000
                  Edward Buccellato:          $75,000
                  Jeanne Kelley:              $36,619

       2.13 RIGHTS OF REGISTRATION AND VOTING RIGHTS. In connection with the
grant of warrants to Cappello Capital Corp. and its designees, the Company
granted full, unconditional piggyback registration rights without any holdback
obligations. With respect to the grant of shares of Stock through the Company's
Stock Bonus Plan to each of Simon V. Skurkovich, Edmond Buccellato, Boris V.
Skurkovich, Lawrence Loomis, and Jeanne Kelly, the Company granted full,
unconditional piggyback registration rights to such individuals.


<PAGE>

       2.21 CORPORATE DOCUMENTS. The Company has been unable to locate its
record book, including minutes and unanimous consents of shareholders and
directors, for the period prior to 1995.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.7
<SEQUENCE>5
<FILENAME>a2043353zex-10_7.txt
<DESCRIPTION>EXHIBIT 10.7
<TEXT>

<PAGE>
                                                                    Exhibit 10.7

                       ADVANCED BIOTHERAPY CONCEPTS, INC.

                            INVESTOR RIGHTS AGREEMENT

This Investor Rights Agreement (the "Agreement") is made as of the __ day of
June, 2000, by and among Advanced Biotherapy Concepts, Inc., a Nevada
corporation (the "Company"), the investors listed on Exhibit A hereto (each of
which is sometimes herein referred to as an "Investor", and collectively as the
"Investors") and the individuals listed on Exhibit B (collectively, the
"Management").

                                    RECITALS

The Company and the Investors have entered into a Convertible [Subordinated]
Debt Purchase Agreement (the "Purchase Agreement") of even date herewith
pursuant to which the Company desires to sell to the Investors, and the
Investors desire to purchase from the Company, the Company's convertible debt
("Convertible Debt") due June __, 2004 evidenced by debt instruments
substantially in the form of Exhibit B to the Purchase Agreement (the "Debt
Instruments"). A condition to the Investors' obligations under the Purchase
Agreement is that the Company and the Investors enter into this Agreement in
order to provide the Investors with (i) certain rights to register shares of the
Company's Common Stock issuable upon the conversion of the Debt Instruments and
(ii) certain rights to receive information pertaining to the Company. The
Company desires to induce the Investors to purchase Debt Instruments by agreeing
to the terms and conditions set forth herein.

                                    AGREEMENT

The parties hereby agree as follows:

1. REGISTRATION RIGHTS. The Company and the Investors covenant and agree as
follows:

1.1 DEFINITIONS. For purposes of this Agreement:

(1) The terms "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act of 1933, as amended, or
successor statute, and applicable rules and regulations thereunder (the
"Securities Act") and the declaration or ordering of effectiveness of such
registration statement or document;

(2) The term "Registrable Securities" means (i) the shares of Common Stock
issuable or issued pursuant to the conversion of the Company's Convertible Debt
and (ii) any other shares of the Company's Common Stock issued as (or issuable
upon the conversion or exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in exchange for
or in replacement of, the shares listed in (i); provided, however, that the
foregoing definition shall exclude in all cases any Registrable Securities sold
by a person in a transaction in which such person's rights under this Agreement
are not assigned. Notwithstanding the foregoing, neither the Company's Common
Stock nor its other securities shall be treated as Registrable Securities if
they have been (A) sold to or through a broker or dealer or underwriter in a
public distribution or a public securities transaction, or (B) sold in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act under Section 4(1) thereof


<PAGE>

so that all transfer restrictions, and restrictive legends with respect thereto,
if any, are removed upon the consummation of such sale;

(3) The number of shares of "Registrable Securities then outstanding" shall be
determined by the number of shares of Common Stock outstanding which are, and
the number of shares of Common Stock issuable pursuant to then exercisable or
convertible securities which are, Registrable Securities;

(4) The term "Holder" means any person owning, or having the right to acquire,
Registrable Securities or any assignee thereof in accordance with Section 1.8 of
this Agreement;

(5) The term "SEC" means the Securities and Exchange Commission; and

(6) The term "Placement Agent" means Cappello Capital Corp., the exclusive
placement agent for the offering of the Convertible Debt pursuant to the
Purchase Agreement.

1.2 REGISTRATION.

(1) On or about the date "Filing Date" the Company files its Annual Report for
the fiscal year ending December 31, 2000, on Form 10-KSB with the SEC, the
Company shall file a registration statement under the Securities Act covering
the registration of at least such number of the Registrable Securities then
outstanding and shall, subject to the limitations of subsection 1.2(b), use its
reasonable best efforts to effect as soon as practicable, the registration under
the Securities Act of such number of Registrable Securities then outstanding.

(2) If the Holders intend to distribute the Registrable Securities by means of
an underwriting, they promptly shall so advise the Company; provided, however,
the Holders shall bear full responsibility for complying with Securities Act,
the Exchange Act, and the other federal and state law applicable thereto.

(3) Notwithstanding the foregoing, if the Company shall furnish to Holders, a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period of not more than 180 days after the Filing Date; provided, however,
that the Company may not utilize this right more than once in any twelve-month
period.

(4) In addition, the Company shall not be obligated to effect, or to take any
action to effect, any registration pursuant to this Section 1.2 if the Company
gives notice to the Investors of the Company's intention to make a public
offering within ninety (90) days.

1.3 OBLIGATIONS OF THE COMPANY. When required under this SECTION 1 to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:

(1) Prepare and file with the SEC a registration statement with respect to such
Registrable Securities and use its reasonable best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration


<PAGE>

statement effective for up to nine (9) months. The Company shall be required to
file, cause to become effective or maintain the effectiveness of any
registration statement that contemplates a distribution of securities on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act,
subject to such nine (9) month limitation.

(2) Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement for up to nine (9) months.

(3) Furnish to the Holders such numbers of copies of a prospectus, including a
preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.

(4) Use its reasonable best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders
holding a majority of the Registrable Securities then outstanding, provided that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions.

(5) Notify each Holder of Registrable Securities at any time when a prospectus
relating thereto is required to be delivered under the Securities Act of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing, such obligation to continue for nine (9) months.

(6) Cause all such Registrable Securities registered pursuant to such
registration statement to be listed on any securities exchange on which similar
securities issued by the Company are then listed.

(7) Provide a transfer agent and registrar for all Registrable Securities
registered pursuant to such registration statement and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration.

1.4 FURNISH INFORMATION. It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this Section 1 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company such information regarding itself, the Registrable Securities held
by it, and the intended method of disposition of such securities as shall be
required to effect the registration of such Holder's Registrable Securities.

1.5 EXPENSES OF REGISTRATION. All expenses incurred in connection with the
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company, but not
the fees and disbursements of counsel for the selling Holders shall be borne by
the Company; provided, however, that the Holders shall bear full responsibility
for all costs and expenses of any kind occurred in connection with


<PAGE>

any underwriting, distribution, offer, sale or other transfers of Registrable
Securities, including, without limitation, underwriting discounts and
commissions.

1.6 INDEMNIFICATION. In the event any Registrable Securities are included in a
registration statement under this Section 1:

(1) To the extent permitted by law, the Company will indemnify and hold harmless
each Holder and, if applicable, any underwriter (as defined in the Securities
Act) for such Holder and each person, if any, who controls such Holder, or
underwriter within the meaning of the Securities Act or the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Securities Act, the Exchange Act, any
state securities law or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any state securities law; and the Company will pay to
each such Holder, underwriter or controlling person, as incurred, any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection 1.6(a) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability, or
action if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the Company be liable to
any Holder, underwriter or controlling person for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
any such Holder, underwriter or controlling person.

(2) To the extent permitted by law, each selling Holder will indemnify and hold
harmless the Company, each of its directors, its officers and each person who
has signed the registration statement, each person, if any, who controls the
Company within the meaning of the Securities Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Securities Act, the Exchange Act or other federal
or state law, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; and each such
Holder will pay, as incurred, any legal or other expenses reasonably incurred by
any person intended to be indemnified pursuant to this subsection 1.6(b), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this subsection 1.6(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder which consent shall not be unreasonably
withheld; further, that in no event shall the amounts payable in indemnity


<PAGE>

by a Holder under this subsection 1.6(b) in respect of a Violation exceed the
net proceeds received by such Holder in the registered offering out of which
such Violation arises.

(3) Promptly after receipt by an indemnified party under this Section 1.6 of
notice of the commencement of any action (including any governmental action),
such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party under this Section 1.6, deliver to the indemnifying party
a written notice of the commencement thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties; provided,
however , that an indemnified party (together with all other indemnified parties
which may be represented without conflict by one counsel) shall have the right
to retain one separate counsel, with the reasonable fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall relieve such indemnifying party of
liability to the indemnified party under this Section 1.6 to the extent that the
indemnifying party has been prejudiced thereby, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 1.6.

(4) If the indemnification provided for in this Section 1.6 is held by a court
of competent jurisdiction to be unavailable to an indemnified party with respect
to any loss, liability, claim, damage or expense referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party hereunder,
shall contribute to the amount paid or payable by such indemnified party as a
result of such loss, liability, claim, damage, or expense in such proportion as
is appropriate to reflect the relative fault of the indemnifying party on the
one hand and of the indemnified party on the other in connection with the
statements or omissions that resulted in such loss, liability, claim, damage or
expense as well as any other relevant equitable considerations; provided, that
in no event shall the amounts payable in contribution by a Holder under this
subsection 1.6(d) in respect of a Violation exceed the net proceeds received by
such Holder in the registered offering out of which Violation arises. The
relative fault of the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the indemnified
party and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.

(5) The obligations of the Company and Holders under this Section 1.10 shall
survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1, and otherwise.

1.7 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to making
available to the Holders the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration, the Company agrees to:


<PAGE>

(1) make and keep public information available, as those terms are understood
and defined in SEC Rule 144, so long as the Company remains subject to the
periodic reporting requirements under Sections 13 or 15(d) of the Exchange Act;

(2) file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act; and

(3) furnish to any Holder, so long as accurate and so long as the Holder owns
any Registrable Securities, forthwith upon request (i) a written statement by
the Company that it has complied with the reporting requirements of SEC Rule 144
(at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements), (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested in availing any Holder of
any rule or regulation of the SEC which permits the selling of any such
securities without registration or pursuant to such form.

1.8 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to
register Registrable Securities pursuant to this Section 1 may be assigned (but
only with all related obligations and together with the Registrable Securities
and related Convertible Debt as permitted pursuant to and in accordance with the
Debt Instrument), provided (i) the Company is, within ten (10) days after such
transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; (ii) such transferee agrees in writing
to be subject to all restrictions set forth in this Agreement and provided,
further, that such assignment shall be effective only if immediately following
such transfer the further disposition of such securities by the transferee or
assignee is restricted under the Securities Act.

1.9 "MARKET LOCK-UP" AGREEMENT. Each Management hereby agrees that, until the
initial registration of the Registrable Securities and such time as the Market
Price (as defined in the Debt Instrument) of the Company's Common Stock is at
least [$_______] [for at least a ______ (___) day consecutive trading period],
Management shall not, directly or indirectly sell, offer to sell, contract to
sell (including, without limitation, any short sale), grant any option to
purchase or otherwise transfer or in any way short sell or enter into derivative
transactions that would dispose of their economic interest in (other than to
donees who agree to be similarly bound) any securities of the Company held by it
at any time during such period; [provided, however, during the period commencing
on the Initial Closing (as defined in the Purchase Agreement) and expiring one
(1) year thereafter, only sales by Management of Common Stock which have been
approved in advance in writing by the Placement Agent shall be permitted.]
Furthermore, if any affected party is released from the obligations described in
this Section 1.9, all other affected parties shall also be released from their
obligations on a pro rata basis.

In order to enforce the foregoing covenant, the Company may impose stop-transfer
instructions with respect to the Registrable Securities of each Management (and
the shares or securities of every other person subject to the foregoing
restriction) until the end of such period.


<PAGE>

2. MISCELLANEOUS.

2.1. SUCCESSORS AND ASSIGNS. Except as otherwise provided in this Agreement, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective permitted successors and assigns of the parties
(including transferees of any Common Stock issued upon conversion or exercise
thereof). Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.

2.2. AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended or waived
only with the written consent of the Company and the holders of at least a
majority of the Registrable Securities then outstanding. Any amendment or waiver
effected in accordance with this paragraph shall be binding upon each holder of
any Registrable Securities then outstanding, each future holder of all such
Registrable Securities, and the Company.

2.3. NOTICES. Unless otherwise provided, any notice required or permitted by
this Agreement shall be in writing and shall be deemed sufficient upon delivery,
when delivered personally or one (1) day after delivery by overnight courier or
sent by telegram, fax, or e-mail provided that in each case, the sender retains
proof of receipt, or four (4) days after being deposited in the U.S. mail, as
certified or registered mail, with postage prepaid, addressed to the party to be
notified at such party's address as set forth on the signature pages hereto or
as subsequently modified by written notice.

2.4. SEVERABILITY. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, then (a) such
provision shall be excluded from this Agreement, (b) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (c) the
balance of the Agreement shall be enforceable in accordance with its terms.

2.5. GOVERNING LAW. This agreement and all acts and transactions pursuant hereto
shall be governed, construed and interpreted in accordance with the laws of the
State of California, without giving effect to principles of conflicts of laws.

2.6. COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

2.7. ENTIRE AGREEMENT. This Agreement and the documents referred to herein,
constitute the entire agreement between the parties hereto pertaining to the
subject matter hereof and any and all other written or oral agreements existing
between the parties hereto are expressly canceled.

2.8. TITLES AND SUBTITLES. The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.

2.9. MANAGEMENT. The Company represents and warrants to the Investors that the
individuals comprising "Management" listed on EXHIBIT B hereto are all the
existing officers and directors of the Company effective the date hereof.


<PAGE>

The parties hereto have executed this Investor Rights Agreement as of the date
first written above.


                                    COMPANY:

ADVANCED BIOTHERAPY CONCEPTS, INC.
a Nevada corporation

By:
   ------------------------------------------------
Name:
     ----------------------------------------------
Title:
      ---------------------------------------------

Address:
        -------------------------------------------

Fax:
    -----------------------------------------------


                     INVESTORS SIGNATURES ON FOLLOWING PAGES


<PAGE>

INVESTORS:

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Name:                                    Name:
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Address:                                 Address:
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Fax:                                     Fax:
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Address:                                 Address:
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Address:                                 Address:
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Name:                                    Name:
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Address:                                 Address:
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Name:                                    Name:
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<PAGE>

- -------------------------------------    ---------------------------------------
Name:                                    Name:
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Address:                                 Address:
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Fax:                                     Fax:
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Name:                                    Name:
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Address:                                 Address:
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Fax:                                     Fax:
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Name:                                    Name:
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Address:                                 Address:
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        -----------------------------            -------------------------------
Fax:                                     Fax:
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                     MANAGEMENT SIGNATURES ON FOLLOWING PAGE


<PAGE>

MANAGEMENT
SOLELY AS TO SECTION 1.10 ABOVE


- -------------------------------------    ---------------------------------------
Name:                                    Name:
     --------------------------------         ----------------------------------
Address:                                 Address:
        -----------------------------            -------------------------------

        -----------------------------            -------------------------------
Fax:                                     Fax:
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Name:                                    Name:
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Address:                                 Address:
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Fax:                                     Fax:
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Name:                                    Name:
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Address:                                 Address:
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Fax:                                     Fax:
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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>6
<FILENAME>a2043353zex-23_1.txt
<DESCRIPTION>EXHIBIT 23.1
<TEXT>

<PAGE>
                                                                    Exhibit 23.1

Board of Directors
Advanced Biotherapy, Inc.
Carlsbad, CA



                     CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS


We consent to the use of our audit report dated March 6, 2001, on the financial
statements of Advanced Biotherapy, Inc. as of December 31, 2000, for the filing
with and attachment to the Form 10-KSB for the year ending December 31, 2000.





Williams & Webster, P.S.
CERTIFIED PUBLIC ACCOUNTANTS
Spokane, Washington


March 29, 2001

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
