Advanced Biotherapy, Inc., Form 10KSB/A

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 þ No o

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

The aggregate market value of Registrant’s common stock held by non-affiliates computed by reference to the average of the high and low price of such stock on February 28, 2003, was $4,746,606, which market value excludes 14,161,502 shares of common stock held by directors, executive officers and stockholders whose beneficial ownership exceeds ten percent (10%) of the shares outstanding on February 28, 2003.

As of February 28, 2003, the Registrant had outstanding 43,827,793 shares of common stock.

Advanced Biotherapy, Inc. filed its Form 10-KSB on March 26, 2003 (“Form 10-KSB”). The Form 10-KSB contains certain typographical errors and inconsistencies which the Company hereby corrects by reason of the filing of this Form 10-KSB/A. The specific Items of this Form 10-KSB/A which contain corrections to the Form 10-KSB are set forth below:


	(a) “General Introduction” — In the final paragraph of the Form 10-KSB, beginning with the word “The Company anticipates...” is hereby deleted, as it repeats a sentence in the previous paragraph.

	(b) Item 6. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” — The first paragraph which begins with the words “The Company anticipates”, has been corrected to disclose that the Company has adequate cash to maintain operations during the next 12 months, and the first paragraph has been replaced in its entirety to read as follows:

“The Company anticipates that its minimum cash requirements to continue as a going concern for the next twelve months will be less than $1,500,000, and therefore, believes that it has adequate cash to maintain operations during that period. The Company’s objective is to establish collaborative relationships with one or more pharmaceutical or biotechnological companies that could result in the generation of licensing, milestone and royalty payments to the Company. The Company is, therefore, seeking out-licensing or co-development arrangements of its intellectual property that will generate recurring revenue and cash flow. As of the date hereof, the Company has not entered into any agreement with a pharmaceutical or biotechnological company, or any such out-licensing arrangements.”

Advanced Biotherapy, Inc. is a corporation organized and existing under the laws of the State of Delaware, headquartered in Woodland Hills, California. We are 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 overproduced, 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 (ADs). The Company plans to develop drugs designed to reduce the levels of certain cytokines. To date, our activities have consisted primarily of research, development and non-United States clinical trials. Such activities have resulted in accumulated losses at December 31, 2001.

We plan to develop drugs through out-licensing or co-development arrangements that may effectively treat a range of autoimmune diseases. Our technology is based upon the work of Dr. Simon Skurkovich and Dr. Boris Skurkovich who first suggested that autoimmune disease may be the result of augmented cytokine production (Nature, Vol. 241, P 551-552, 1974). We have conducted a number of clinical trials at major institutes of the Medical Academy of Sciences in Russia, in which we have 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 certain skin diseases.

In two randomized, placebo-controlled, double blind trials conducted in Russia, we believe we have demonstrated efficacy of our anti-cytokine strategy in both RA and MS. These studies have permitted us 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. More recently, we conducted an open-label trial using antibodies to gamma interferon to treat 13 patients who were rejecting their corneas after transplantation. In all cases, we were able to halt rejection in all patients with our investigational biological drug. The results of the studies have been published in the peer-reviewed journals “Multiple Sclerosis,” “Scandinavian Journal of Rheumatology,” the “American Journal of Opthalmology,” and the journal, “Medical Hypothesis.”

As of December 25, 2001, the Company has been issued United States Patent No. 6,333,032 for the exclusive use of interferon-gamma (IFN-(gamma) antibodies including humanized and fully human (as well as other antibody types) as a monotherapy to treat five diseases of autoimmune etiology: Multiple Sclerosis, Rheumatoid Arthritis, Juvenile Rheumatoid Arthritis, Psoriatic Arthritis and Ankylosing Spondylitis. Management believes that this patent is a critical milestone for the Company. The Company believes that this recently issued patent gives the Company patent protection for a new anti-cytokine approach to treating different autoimmune diseases, including the foregoing five specific diseases, principally as an injectable treatment. The Company’s patented treatment also 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 that certain other patented treatments. The Company has also been issued United States Patent No. 6,534,059 for the use of antibodies to gamma interferon (IFN-g) to treat corneal transplant rejection.

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 deficit of $6,592,961 at December 31, 2002. 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 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 business strategy of the Company involves the engagement of, or licensing to, 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 new drug application regulatory approvals. The Company does not intend to market its drug products if they are approved by the FDA, but will instead seek a licensing and royalty arrangement with a corporate partner who will market the product when and if it is approved.

The amount spent on research and development by the Company for the fiscal years ended December 31, 2002, 2001 and 2000 was $313,597, $133,747, and $39,579, respectively.

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 autoimmune diseases (ADs), such as RA, MS, Type I diabetes and certain skin diseases, 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 ADs.

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 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.

The cytokine pseudo-cascade is initiated by gamma interferon (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 the drug products Enbrel® and Remicade® for the treatment of RA, 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 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.

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, Psoriasis and Crohn’s disease. The therapeutic proof of principle therefore already exists for the usefulness of cytokine mediating strategies as therapeutic interventions in autoimmune disease.

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.

Many current treatments of autoimmune diseases are inadequate and involve 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 Rebif®, Betaseron® and Avonex® for treating MS. Also, two anti-TNF-(alpha) products (Enbrel® and Remicade®) have further demonstrated the efficacy of the cytokine mediation therapeutic strategy. Although each of these products is useful in treating ADs, they only represent the first generation 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 MS, RA, Psoriasis, Crohn’s Diseases and corneal transplant rejection. The mission of the Company is to develop these improved cytokine mediating therapeutic strategies and bring them to market as new drugs.

In an effort to demonstrate clinical proof of principle that IFN-(gamma) antibodies are well tolerated and show efficacy, two clinical trials were sponsored in Russia with 67 patients with RA (62) and PA (5). An open-label trial was conducted using both anti-IFN-(gamma) and anti-TNF-(alpha) antibodies separately. Anti-IFN-(gamma) and anti-TNF-(alpha) both showed efficacy, but patients receiving anti-IFN-(gamma) maintained a longer period of remission. After this preliminary study, a double-blind, randomized, placebo-controlled trial was conducted in RA patients. The patients received intramuscular injections of antibodies to IFN-(gamma), TNF-(alpha), or placebo for 5 consecutive days as they did in the open-label trial. No other treatments were administered. They were clinically assessed daily for 7 days, then weekly up to the 28^th day. Clinical, laboratory, and ultrasound indices were used to evaluate treatment efficacy.

The results indicated that anti-IFN-(gamma) therapy provided rapid and statistically significant reduction of joint pain, swelling, and inflammation. The thickness of the inflamed synovial membrane assessed by ultrasound decreased significantly only with anti-IFN-(gamma) (both by the 7th and the 28th days). Some patients receiving anti-IFN-(gamma) achieved remission of 4-60 months, and one receiving anti-TNF-(alpha), 7 months. The results of these studies have been published in the peer-reviewed journals International Journal of Immunotherapy (14:23-32, 1998) and Scandinavian Journal of Rheumatology (30:203-207, August, 2001). Management believes that both studies provide supportive proof in principle in humans that sequestering IFN-(gamma) is a viable therapeutic strategy in RA.

The Company sponsored two trials in Russia of 83 MS patients on the use of anti-cytokine therapy. The first was an open-label trial with patients with secondary progressive MS. Following promising results in this trial, a double-blind, placebo-controlled trial was conducted in a study design similar to that used in RA. The study compared anti-IFN-(gamma) and anti-TNF-(alpha) with placebo. Only patients with MS who received antibodies to IFN-(gamma) showed statistically significant improvement compared to the placebo group — a significant increase in the number of patients without confirmed disability progression. Positive clinical changes in this group at six months were supported by MRI data showing a decrease in the number of active enhancing lesions. After 12 months of follow-up, 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, in management’s opinion, a proof-of-principle that anti-IFN-(gamma) is a promising and perhaps superior therapeutic strategy for both of these autoimmune disorders. It is reasonable to speculate that longer-term treatments with anti-IFN-(gamma) could provide longer remission. The results of this study have been reported in the peer-reviewed journal Multiple Sclerosis (7 (5):277-284, October 2001).

In a clinical trial sponsored in Russia, 13 patients experiencing corneal transplant rejection were administered anti-IFN-(gamma) antibodies in eye drop form. Patients were chosen from those for whom standard treatment with steroids, antibiotics, anti-inflammatory drugs, and vitamins produced no improvement after rejection. In all patients prior to treatment, vision was limited to distinguishing hand movement in front of the eyes. Standard treatment was stopped, and the Company’s antibodies were given at 2-3 drops three times a day for 7-10 days. Patients were observed for 3-6 months. Two to three days after the start of treatment, transplant transparency improved, edema dropped, and visual acuity increased. At the end of the first week, the transplants became almost fully transparent and inflammation of the patients’ eyes (13 eyes) disappeared. Improvement was sustained for about 6 months in all 13 patients including 2 patients given re-treatment. All patients experienced improvement in vision. The results of this study have been reported in the peer-reviewed journal American Journal of Ophthalmology (v.133, 829-830).

It is emphasized that polyclonal antibodies were used in all three clinical trials only and solely for the purpose of establishing proof-of-principle. Commercialization of a drug product will be in the form of fully-human or humanized antibodies.

Subsequent to the completion of the trials for RA and MS, the Company was issued United States Patent No. 6,333,032 and, subsequent to the completion of the trials for Corneal Transplant rejection, the Company was issued United States Patent No. 6,534,059 as more fully described under “Patent Status and Protection of Proprietary Technology.”

The Company intends to co-develop product development and manufacturing and has identified several companies that have suitable facilities for manufacturing large quantities of antibodies. We are also considering the out-licensing of certain indications protected under our patents.

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

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.

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


	1. Investigational new drug application (IND)

	2. Clinical trials

	3. New drug application (review and approval)

	4. Post-marketing surveys

On January 11, 1993, the FDA approved new procedures to accelerate the approval of certain new drugs and biological products directed at serious or life-threatening illnesses. These new procedures will expedite the approvals for patients suffering from terminal illness when the drugs provide a therapeutic advantage over existing treatments. The Company believes that 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.

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:

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. 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 will be available for FDA investigation and approval.

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.

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.


		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 basic structural units. Proteins are found in all living matter and are required for the growth and repair of tissue.

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

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

The Company has been issued United States Patent No. 6,333,032 for the use of interferon-gamma (IFN-(gamma)) antibodies as a monotherapy to treat five diseases of autoimmune etiology: Multiple Sclerosis, Rheumatoid Arthritis, Juvenile Rheumatoid Arthritis, Psoriatic Arthritis and Ankylosing Spondylitis. Management believes that this patent is a critical milestone for the Company. The Company believes that this recently issued patent gives the Company patent protection for a new anti-cytokine approach to treating different autoimmune diseases, including the foregoing five specific diseases principally as an injectable treatment. The Company’s patented treatment also 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. In addition, the Company was recently issued United States Patent No. 6,534,059 covering the use of interferon gamma antibodies for treatment of corneal transplant rejection. The Company also has been issued United States Patent Nos. 5,626,843 and 5,888,511, and Australia Patent No. 730498. The Company also has seven United States utility patents pending filed

The Company relies greatly in its efforts on the services and expertise of its key staff, such as the Chief Executive Officer, the Director of Research and Development and other 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.

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.

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 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.

In addition to historical facts or statements of current condition, this Annual Report on Form 10-KSB contains forward-looking statements. Forward-looking statements provide our current expectations or forecasts of future events. These may include statements regarding anticipated scientific progress in our research programs, development of potential pharmaceutical products, prospects for regulatory approval, manufacturing capabilities, market prospects for our products, sales and earnings projections, and other statements regarding matters that are not historical facts. Some of these forward-looking statements may be identified by the use of words in the statements such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe” or other words and terms of similar meaning. Our performance and results could differ materially from those reflected in these forward-looking statements due to general financial, economic, regulatory and political conditions affecting the biotechnology and pharmaceutical industries as well as more specific risks and uncertainties such as those set forth above and in this report. Given these risks and uncertainties, any or all of these forward-looking statements may prove to be incorrect. Therefore, you should not rely on any such forward-looking statements. Furthermore, we do not intend (and we are not obligated) to update publicly any forward-looking statements. You are advised, however, to consult any further disclosures we make on related subjects in our reports to the Securities and Exchange Commission. Other unanticipated occurrences besides those listed in this Form 10-KSB could also adversely affect us.

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 risks, uncertainties and assumptions that could affect the outcome of the forward-looking statements in this Form 10-KSB, and other risks are discussed elsewhere in this Form 10-KSB.


	1. Because Of Continuing Operating Losses, There Is A Need for Additional Financing, Which If Not Successfully Met Will Likely Result In A Lack Of Liquidity Which Could Adversely Affect The


	Company. For the fiscal year ended December 31, 2002, we realized a net loss of $1,524,535 and expect such losses to continue for the foreseeable future. Therefore, we believe that we will need to raise additional capital during the next twelve months. If we are unable to raise additional capital and/or generate a positive cash flow before our cash is depleted, we will be required to curtail operations substantially. We are seeking to obtain additional funds through public and private equity and debt financings, collaborative or other arrangements with corporate partners, acquisitions or mergers with companies with strong capital positions or cash flow from product sales or from other sources. There is no assurance that we will be able to obtain additional capital if required, or if capital is available, to obtain it on terms favorable to us. We may suffer from a lack of liquidity in the future that could impair our research and development efforts and adversely affect our results of operations.

	2. There Can Be No Assurance That Any Products The Company Develops Will Satisfy The Extensive And Rigorous Standards Set By The Various Governmental Authorities Or Even If Satisfied, That Approvals Will Be Either Delayed Or Restricted And Therefore Have A Material Adverse Effect On Commercialization Of Our Products And Our Sales Revenues. Our products are in the development stage, have not been subjected to clinical studies in the United States, have limited clinical data based upon studies conducted in Russia, have not been cleared for marketing by the FDA or foreign regulatory authorities, and cannot be commercially distributed in the United States and/or in foreign markets unless and until such clearance is obtained. Failure to obtain FDA clearance would delay sales of our products and would materially affect our financial condition.

	The development, manufacture and sale of drug products are subject to extensive and rigorous regulation by federal, state, local and foreign governmental authorities. In particular, products for human health are subject to substantial preclinical and clinical testing and other approval requirements by the FDA and comparable foreign regulatory authorities. The process for obtaining the required regulatory approvals from the FDA and other regulatory authorities takes many years and is very expensive. There can be no assurance that any product developed by us will prove to meet all of the applicable standards to receive marketing approval. There can be no assurance that any such approvals will be granted on a timely basis, if at all. Delays in and costs of obtaining these approvals could adversely affect our ability to commercialize our products, if any, and to generate sales revenues. If regulatory approval of a product is obtained, such approval may involve restrictions and limitations on the use of the product.

	3. Our Research And Development And Marketing Efforts Are Dependent On Corporate Collaborators And Other Third Parties Who May Not Devote Sufficient Time, Resources And Attention To Our Programs, Which May Limit Our Efforts To Successfully Develop And Market Potential Products. Because we have limited resources, we anticipate entering into a number of collaboration agreements with other companies. At present, however, we have no such agreements. These agreements may be expected to call for our partners to control the supply of bulk or formulated drugs for commercial use or for use in clinical trials; design and execution of clinical studies; process of obtaining regulatory approval to market the product; and/or marketing and selling of any approved product.

	In each of these areas, our partners may not support fully our research and commercial interests since our program may compete for time, attention and resources with the internal programs of our corporate collaborators. As such, we cannot be sure that our corporate collaborators will share our perspectives on the relative importance of our program, that they will commit sufficient resources to our program to move it forward effectively, or that the program will advance as rapidly as it might if we had retained complete control of all research, development, regulatory and commercialization decisions. We also rely on several of these collaborators and other third parties for the production of compounds and the manufacture and supply of pharmaceutical products. Additionally, we may find it necessary from time to time to seek new or additional partners to assist us in commercializing our products. It is uncertain whether we would be successful in establishing any such new or additional relationships.

	4. The Results And Timing Of Our Research And Development Activities, Including Future Clinical Trials Are Difficult To Predict, Subject To Future Setbacks And, Ultimately, May Not Result In Any Pharmaceutical Products, Which May Adversely Affect Our Business. Preclinical testing and


	clinical trials must demonstrate that a product candidate is safe and efficacious. The results from preclinical testing and early clinical trials may not be predictive of results obtained in subsequent clinical trials, and we cannot be sure that these clinical trials will demonstrate the safety and efficacy necessary to obtain regulatory approval for any product candidates. A number of companies in the biotechnology industries have suffered significant setbacks in advanced clinical trials, even after obtaining promising results in earlier trials. In addition, certain clinical trials are conducted with patients having the most advanced stages of disease. During the course of treatment, these patients often die or suffer other adverse medical effects for reasons that may not be related to the pharmaceutical agent being tested. Such events can have a negative impact on the statistical analysis of clinical trial results.

	We cannot be sure that we will be permitted by regulatory authorities to undertake clinical trials for any of our product candidates, or that if such trials are conducted, any of our product candidates will prove to be safe and efficacious or will receive regulatory approvals. Any delays in or termination of these clinical trial efforts may have a material adverse effect on our business.

	The completion of clinical trials, if any, of our product candidates may be delayed by many factors. One such factor is the rate of enrollment of patients. Neither we nor our prospective collaborators can control the rate at which patients present themselves for enrollment, and we cannot be sure that the rate of patient enrollment will be consistent with our expectations or be sufficient to enable clinical trials of our product candidates to be completed in a timely manner or at all. Any significant delays in, or termination of, clinical trials of our product candidates may have a material adverse effect on our business.

	5. Manufacturing, Sales And Distribution Related Problems May Create Disruptions That Could Result In A Reduction Of Product Sales Revenue And Damage Commercial Prospects For Products We May Successfully Develop. Our management has limited sales, distribution and marketing experience, and therefore, if the necessary regulatory approvals are obtained, we intend to market, distribute and sell our 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 we can establish the necessary relationships for marketing and selling products or that the network will successfully implement an effective marketing and sales strategy. We expect to rely on third parties to provide customer service activities and accept and process returns. Although it is anticipated that we will employ a small number of persons to coordinate and manage the activities undertaken by these third parties, we have relatively limited experience in this regard. Any disruption in these activities could impede our ability to sell our products and could reduce sales revenues.

	6. Manufacturing Problems Would Materially Impair Our Competitive Position And Our Possibility Of Conducting Clinical Trials. We lack the facilities to manufacture our products and do not have an adequate supply of product to begin clinical studies in the United States. If we are unable to contract for manufacturing capabilities on acceptable terms, it would result in the delay of the manufacturing of antibodies for clinical trial purposes.

	7. Uncertainty Relating To Favorable Third-Party Reimbursement May Have A Material Adverse Effect On The Commercial Success Of Products We Develop. 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. Our failure to present such clinical data would adversely affect our ability to obtain favorable third-party reimbursement as well as the commercial success of our products.

	8. Our Dependence On Products Could Have A Material Adverse Affect On The Company’s Financial Condition. We expect to derive a substantial majority of our revenues from our proprietary development stage products through product licensing and royalty fees. The life cycle of our products, if approved for marketing, is difficult to estimate in terms of current and future technological developments, competition, and other factors. Our failure to successfully commercialize products or to realize significant revenues from the products would have a material adverse effect on our financial condition. As of the date hereof, we have not realized any revenues from the sale of products.


	9. We May Not Be Able To Maintain Adequate Patent Protection Which Would Have A Material Adverse Impact On Our Ability To Develop Commercial Products And A Patent Application Appeal, If Not Successful, May Have A Material Adverse Impact On The Company. We have four issued United States patents and one patent issued in Australia. Our success and ability to compete effectively will depend, in part, on the strength of our patents and the ability to obtain protection for our products, if any, in foreign markets. No assurance can be given that any patents issued to us will not be challenged, invalidated, or circumvented. Litigation, which could result in substantial cost to us, may also be necessary to enforce any patents issued to us and/or determine the scope and validity of other parties’ proprietary rights.

	We have seven United States utility patent applications pending. The United States patent position of pharmaceutical companies involves many complex legal and technical issues and has recently been the subject of much litigation. There is no clear policy establishing the breadth of claims or the degree of protection afforded under such patents. As a result, there can be no assurance that any of our patent applications will be approved, except where claims under an application have already been examined and allowed, nor that we will develop additional proprietary products that are patentable. There can be no assurance that any United States patents issued to us will provide us with any competitive advantages or will not be challenged by third parties or that patents issued to others will not have an adverse effect on our ability to conduct our business. We could incur substantial costs in asserting our patent rights and in defending patent infringement suits against us or our executives relating to ownership of, or rights to, patents and other intellectual property of third parties. Such disputes could substantially delay our drug development or commercialization.

	Furthermore, we cannot be certain that we were the first chronologically to make the inventions covered by each of our pending patent applications or that we were the first to file patent applications for such inventions because prior to November 29, 2000, patent applications in the United States were maintained in secrecy until issue, and are only published now following certain rules, and because publication of discoveries in the scientific and patent literature often lag behind actual discoveries. In the event that a third party has also filed a patent application for any of its inventions, we may have to participate in interference proceedings declared by the United States Patent and Trademark Office (PTO) to determine priority of the invention, which could result in substantial cost to us, even if the eventual outcome is favorable to us. In the event of an adverse decision as to priority of invention, we would not be entitled to a patent on the invention at issue in the interference proceeding. The PTO or a private party could also institute reexamination proceedings involving us in connection with one or more of our patents, and such proceedings could result in an adverse decision as to the validity or scope of the patents. In addition, there can be no assurance that our patents would be held valid by a court of law of competent jurisdiction. We could be forced to either seek a license to intellectual property rights of others, which may not be available to us on acceptable terms, if at all, or alter our products or processes so that they no longer infringe on the proprietary rights of others.

	10. There Can Be No Assurance That We Can Successfully Compete Against Our Competition, Some Of Whom Have Substantially Greater Capital Research And Development Staff And Facilities Than The Company Or That Technological Advances Will Not Render Our Products Less Competitive Or Obsolete. The products that we are planning to develop may compete for market share with alternate therapies. A number of companies are pursuing the development of novel products which target the same diseases as we are targeting. Many of these competitors have substantially greater capital resources, research and development staffs and facilities than we do. They may develop and introduce products and processes competitive with those of ours. They represent significant long-term competition for us. For certain of our products, an important factor in competition may be the timing of market introduction of these competitive products. This timing will be based on the effectiveness with which we or the competition can complete clinical trials and approval processes and supply quantities of these products to market. Competition among products approved for sale will be based on, among other things, efficacy, safety, reliability, price, marketing capability and patent position.

Our executive offices are located at 6355 Topanga Canyon Boulevard, Woodland Hills, California 91367, and our telephone number is (818) 883-6716.

During the year ended December 31, 2002, the Company received the use of approximately 3,500 square feet of commercial building space on a rent-free basis from a firm that is partially owned by director Lawrence Loomis. As of January 1, 2003, the Company began paying $5,110 in rent on a month-to-month basis. During the year ended December 31, 2002, the Company also received the use of office space and facilities on a rent-free basis from a firm owned by Edmond F. Buccellato. As of January 1, 2003, the Company began paying $700 in rent on a month-to-month basis. No formal agreement memorializes these month-to-month arrangements.

The Company owns a nominal amount of lab equipment, office equipment and furniture, all of which have been entirely or substantially written off as depreciated assets.

The Company is not the subject of any pending legal proceeding 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 such director or executive officer has an interest adverse to the Company.

On December 12, 2002, the Company held its annual meeting of stockholders (“Annual Meeting”).

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


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


	(2) The stockholders approved an amendment to the Company’s Certificate of Incorporation to increase the authorized number of shares of Common Stock from 100,000,000 shares to 200,000,000 shares.

Item 5. Market for Registrant’s Common Stock and Related Stockholder Matters

The Company’s Common Stock is quoted on the OTC Bulletin Board operated by the National Association of Securities Dealers, Inc. (the “Bulletin Board”) under the symbol “ADVB.” The table below shows the high and low bid quotations of the Company’s Common Stock during each of the four quarters of the 2001 and 2002 calendar years, and reflects inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. The quotation information has been obtained from Commodity Systems, Inc., available through Yahoo!Finance.

As of February 28, 2003, the Company had approximately 1568 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 3700.

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, and the payment of cash dividends, if any, will be at the sole discretion of the Board of Directors.

During the quarter ended December 31, 2002, the Company sold the principal amount of $500,000 of its Subordinated Convertible Pay-In-Kind Notes due June 6, 2006 (“2002 Convertible Notes Due 2006”) in a private placement to an accredited investor, paid in cash. Those 2002 Convertible Notes Due 2006 bear interest at the rate of 12.5% per annum payable semi-annually in cash or additional 2002 Convertible Notes Due 2006. The 2002 Convertible Notes Due 2006 are convertible into shares of Company Common Stock at a conversion price per share equal to twenty-five cents ($0.25), subject to certain anti-dilution provisions. The 2002 Convertible Notes Due 2006 are to be paid ratably with the Company’s Subordinated Convertible Debt due September 30, 2004, the Company’s Subordinated Convertible Pay-In-Kind Notes due September 30, 2004, and the Company’s Subordinated Convertible Pay-In-Kind Notes due June 6, 2006 (which bear interest at 11% per annum). The holders of 2002 Convertible Notes Due 2006 are entitled to certain piggyback registration rights.

The Company offered the 2002 Convertible Notes Due 2006 pursuant to Section 4(2) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D. The proceeds from the placement of 2002 Convertible Notes Due 2006 will be used for working capital, including salaries of management, scientific

development costs and patent application legal costs, preclinical trial costs, Phase I Investigational New Drug Applications for two specific autoimmune diseases, including related clinical studies, and to pursue certain collaborative relationships with other biotechnology or pharmaceutical companies.

Effective as of December 31, 2002, pursuant to the Company’s 2000 Omnibus Equity Incentive Plan, the Company granted its directors non-qualified stock options to purchase an aggregate 180,000 shares of Common Stock, at $0.21 per share, for services. See “ITEM 10. EXECUTIVE COMPENSATION” for additional information.

Item 6. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The Company anticipates that its minimum cash requirements to continue as a going concern for the next twelve months will be less than $1,500,000, and therefore, believes that it has adequate cash to maintain operations during that period. The Company’s objective is to establish collaborative relationships with one or more pharmaceutical or biotechnological companies that could result in the generation of licensing, milestone and royalty payments to the Company. The Company is, therefore, seeking out-licensing or co-development arrangements of its intellectual property that will generate recurring revenue and cash flow. As of the date hereof, the Company has not entered into any agreement with a pharmaceutical or biotechnological company, or any such out-licensing arrangements.

The Company’s development goal is to produce, or have produced, a series of human or humanized antibody-based products through collaborations with other biotechnology companies. The Company has identified several biotechnology companies that can develop and manufacture such antibodies for the Company, although no such development arrangements have been entered into by the Company. Management believes that 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.

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

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.

As of December 31, 2002, the Company had issued and outstanding 43,601,327 shares of its Common Stock. The Company is a development stage company. The Company had $3,031,081 in cash as of December 31, 2002.

For the year ended December 31, 2002, the Company realized a net loss of $1,524,535 compared to a net loss of $1,020,301 for the year ended December 31, 2001. The Company had increases in expenses over the year ended December 31, 2001, consisting primarily of the following: increased research and development expenses in the amount of $179,850, increased expenditures in the aggregate amount of $40,903 for professional fees primarily related to amendments to its registration statement and other regulatory filing requirements with the Securities and Exchange Commission and other corporate matters, increased interest expense in the amount of $215,546 related to the Company’s convertible subordinated debt and subordinated convertible pay-in-kind notes, increased depreciation and amortization in the amount of $27,426, increased travel expenses in the amount of $36,181 related to business development and other Company matters,

increased salaries and benefits in the amount of $14,872, increased general and administrative expenses in the amount of $29,414, increased Directors’ fees of $8,720, decreased rent of $33,962, decreased telephone and communications of $8,624 and decreased office expenses in the amount of $3,109.

For the year ended December 31, 2001, the Company realized a net loss of $1,020,301 and a loss from operations of $890,754, compared to net loss of $653,270 and a loss from operations of $827,084 for the year ended December 31, 2000. The loss from operations for the current year is principally due to increases in research and development of $94,168, director’s fees of $29,080 related to the granting of stock options issued for services during the year, depreciation and amortization of $25,657, insurance of $37,178 and rent of $22,862 related the opening and subsequent closure of an executive office in San Diego, California. These increases in expenses were offset by decreases in professional fees of $35,534, salaries and benefits of $90,867 principally related to the reduction in staff and decrease in the salary of the chief executive officer, as well as a reduction in travel and entertainment expenses of $23,020 and a decrease in office expenses of $12,014.

The Company’s financial statements for the years ended December 31, 2000 and 1999, respectively, have been restated to reflect the correction of an error in common stock outstanding and weighted average number of shares outstanding as of December 31, 2000. It was discovered that the Company mistakenly cancelled 850,000 shares of common stock in 1999. Under the terms of a settlement agreement and mutual general release and an escrow agreement each dated July 31, 1991 (collectively referred to as “settlement agreements”) among the Company, Dr. Simon Skurkovich, a consultant and certain other parties, the Company issued 850,000 shares in the name of the consultant and placed into escrow. These shares were to be released to the consultant upon performance of certain services that were to be provided by the consultant no later than January 15, 1993. The settlement agreements also stated that the 850,000 shares of common stock would be distributed to Dr. Simon Skurkovich, if such services were not provided by the consultant. Such services were not provided by the consultant, in whole or in part, and all 850,000 shares were cancelled by the Company in 1999. Instead of being cancelled, however, the shares should have been distributed to Dr. Simon Skurkovich in 1999 pursuant to the settlement agreements. Therefore, the shares were reissued to Dr. Simon Skurkovich and are reflected in the accompanying financial statements as if they were never cancelled.

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. See “ITEM 1. BUSINESS FACTORS THAT AFFECT THE COMPANY.”

The financial statements are included herewith and incorporated herein by reference beginning with Page F-1.

Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

There have been no disagreements with the Company’s accountants, Williams & Webster P.C., on accounting and financial disclosures during the Company’s two most recent fiscal years, i.e. January 1, 2001, through December 31, 2002, and through the date hereof.

The following table sets forth the names and nature of all positions and offices held by all directors and executive officers of the Company as of February 28, 2003, and the period or periods during which each such director or executive officer served in his or her respective positions.


(1)	Member of the Audit Committee of the Board of Directors.

(2)	Member of the Compensation Committee of the Board of Directors.

(3)	Member of the Executive Committee of the Board of Directors.

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.

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 F. Buccellato — Since October, 2002, Mr. Buccellato has served as Chairman of the Board, and since April 2001, he has served as President and Chief Executive Officer. Mr. Buccellato served as President and Chief Operating Officer of the Company from September 1, 2000 to December 12, 2000, and he served as Chief Executive Officer from 1995 to August 31, 2000. He has served as a member of the Board of Directors since 1995. 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 and co-founder and member of the Board of Directors of Physicians’ Choice LLC, a medical billing company. He is a shareholder of Buccellato & Finkelstein, a public accountancy firm. 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 also served as Chairman of the Board from April 2001, through October, 2002. Mr. Cappello is Chairman and Chief Executive Officer of Cappello Group, Inc., a merchant banking firm specializing in principal transactions, corporate finance, institutional equity placements for public companies, project finance and merger and acquisitions services since 1975. He also serves as Chairman of the International Board of the Young Presidents’ Organization for 2003-2004. Currently, he is a Member of the Board of Directors of the following: Cappello Group, Inc., RAND Corporation (Center for Middle East Public Policy), CytRx Corporation (NASDAQ), Independent Colleges of Southern California (ICSC), USC Marshall School of Business, Greif Center for Entrepreneurial Studies, USC Advancement Council, Trustee Friends of Florence (Florence Italy), Chairman Emeritus of Catholic Big Brothers of Los Angeles. He received his B.S. Degree in Finance (Order of the Palm) from the University of Southern California in 1977.

Formerly, Mr. Cappello was a Member of the Board of Directors of the following: Koo Koo Roo, Inc. (NASDAQ), Arcus Data Security, Inc. (NASDAQ), Maritime Bank of California (OTC), Executive Publications, Inc., and The Joffrey Foundation.

Richard P. Kiphart — Since June, 2002, Mr. Kiphart has served as a member of the Board of Directors. He currently serves as Chairman of the Board of Concord EFS Inc. and a member of the Board of Directors of Photo Control Inc. Mr. Kiphart is the Head of Corporate Finance for the Investment Firm of William Blair & Company, L.L.C. Mr. Kiphart has been with William Blair for over 36 years. Mr. Kiphart received his B.A. from Dartmouth College and his M.B.A. from Harvard Business School.

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.

Thomas J. Pernice — Since April 2001, Mr. Pernice has served as the Treasurer and Secretary of the Company and as a member of the Board of Directors. Mr. Pernice is President of Modena Holding Corporation, a financial consulting services company, and most recently, was also a managing director of Cappello Group, Inc., a merchant banking firm, from January 1999 to July 2002. Prior to joining the Cappello Group, Mr. Pernice served as a senior corporate executive in government and industry for more than 17 years. Most recently, he was Vice President, Public Affairs and a corporate officer for Dole Food Co. Inc. (NYSE:DOL), reporting to the chairman and CEO, David H. Murdock. He also served in similar capacities for the conglomerate of publicly and privately held business interests of Murdock, including the Castle & Cooke Inc. real estate company, formerly (NYSE:CCS), now privately held. Prior to joining Dole Food Co., Mr. Pernice served in the White House for more than seven years in various capacities for the Reagan and Bush administrations. Mr. Pernice earned a bachelor of arts degree from the University of Southern California in 1984 .

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. — Founder of Advanced Biotherapy, Inc., serves as Director of Research and Development. From 1985 until September 2000, Dr. Skurkovich served as Chairman of the Board of Directors. 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 240 articles for scientific publications. In 1974, he published in the journal Nature a new explanation for the pathogenesis and treatment of autoimmune diseases, which has been the basis for successful clinical trials and is now well accepted around the world.

William M. Finkelstein. — Since April, 2001, Mr. Finkelstein has served as Chief Financial Officer. For the past eight years, he has been a shareholder of Buccellato & Finkelstein, Inc., a public accountancy firm. Mr. Finkelstein received his undergraduate degree in Accounting from the University of Houston in 1982 and became licensed as a certified public accountant in 1984. He is a member of the American Institute of Certified Public Accounts, and the California Society of Certified Public Accountants.

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

During the past five years, no present director or executive officer of the Company has been the subject matter of any of the following legal proceedings:


	(a) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

	(b) any criminal convictions;

	(c) any order, judgment, or decree permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; and

	(d) any finding by a court, the SEC or the CFTC to have violated a federal or state securities or commodities law.

Further, no such legal proceedings are known to be contemplated by governmental authorities against any director or executive officer.

A Form 5 was filed by Boris Skurkovich, M.D. relating to his gifts of shares of Common Stock, which transactions otherwise were not timely reported. A Form 5 was filed by Leonard Millstein, Ph.D. relating to the sale of shares of Common Stock by his minor son, which transactions were otherwise not timely reported. A Form 5 was filed by John Bendheim and Alexander Cappello regarding the payment of accrued interest on Company convertible subordinated debt in the form of additional convertible subordinated debt, which transactions otherwise were not timely reported due to filing difficulties at the Company’s financial printer.

The following table sets forth the compensation paid by the Company since January 1, 2000 through December 31, 2002, for the Chief Executive Officer of the Company and the Company’s other executive officers who were compensated during the year ended December 31, 2002 (the “Named Executive Officers”):


(1)	Mr. Buccellato was the Chief Executive Officer of the Company prior to the hiring of Dr. Marangos. Since April, 2001, Mr. Buccellato has served as President and Chief Executive Officer of the Company.

(2)	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. In April, 2001, Dr. Marangos resigned as an officer and employee of the Company.

(3)	Dr. Skurkovich also served as the Chairman of the Board prior to August, 2000.

(4)	During January, 2003, the Company granted stock options to purchase 20,000 shares of the Company’s Common Stock at $0.21 per share to each director for services rendered during the year ended December 31, 2002. The fair value of the stock options was estimated at $3,800 per director using the Black Scholes option price method.

(5)	During May, 2001, the Company issued to Dr. Marangos warrants to purchase 100,000 shares of the Company’s Common Stock at $0.25 per share for his service on the Board of Directors. The warrants expire in May, 2005. The fair value of the warrants was estimated at $7,800 using the Black Scholes option price method.

(6)	During the first six months of 2002, Edmond Buccellato and Simon Skurkovich, M.D. were compensated as contract consultants at the annual rate of $120,000 and $80,000, respectively, and effective July 1, 2002, their salaries were set at $180,000, respectively.

During fiscal year 2002, William M. Finkelstein did not receive any compensation directly from the Company, although the Company paid to Buccellato & Finkelstein, Inc., the sum of $16,014 for accounting services and tax preparation. Mr. Finkelstein and Mr. Buccellato are shareholders of Buccellato & Finkelstein, Inc.

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. 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.

The stockholders approved the OEI Plan at the Company’s Annual Stockholders Meeting on December 13, 2001. 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.

Effective January 1, 2003, the Company granted each director non-qualified options to purchase 20,000 shares of Common Stock at an exercise price of $0.21 per share for Board services rendered during the year ended December 1, 2002. During the quarter ending March 31, 2003, the Company granted additional options to purchase an aggregate 3,950,000 shares of Common Stock at an exercise price of $0.16 per share to certain directors and officers under the OEI Plan, which options vest in three equal installments commencing February 7, 2004.

None of the Named Executive Officers received any grants of stock options, whether or not in tandem with stock appreciation rights (“SARs”), or freestanding SARs during the fiscal year ending December 31, 2002, in their capacity as officers, however, as described above, during that period Mr. Buccellato and Simon Skurkovich, M.D., were each granted stock options to purchase 10,000 shares of Common Stock for Board services, during the year ended December 31, 2001.

None of the Named Executive Officers exercised any options or SARs during the 2002 fiscal year.

The information concerning individual grants of stock options (whether or not in tandem with SARs) and freestanding SARs, including options and SARs that subsequently have been transferred) made during the fiscal year ended December 31, 2002 to each of the Named Executive Officer is provided in tabular format below:


(1)	Options to purchase 10,000 shares of Common Stock were granted to all directors for services rendered during fiscal year 2001. No other options were granted to employees in fiscal year 2002.

During January, 2003, the Company granted stock options to purchase 20,000 shares of the Company’s Common Stock at $0.21 per share to each director, including Edmond F. Buccellato and Simon Skurkovich, M.D., as described in the Summary Compensation table above, for directorship services rendered during the year ended December 31, 2002.


(1)	All options were exercisable as of December 31, 2002

(2)	Determined on the basis of the share closing price of $0.21 on December 31, 2002, as published by Commodity Systems, Inc., available through Yahoo!Finance.

Directors did not receive any cash compensation for serving as members of the Board of Directors for the year ended December 31, 2002, but Board members were granted stock options under the OEI Plan as described above. There are no other contractual arrangements for compensation with any member of the Board of Directors.


(1)	This figure excludes stock options granted by the Company during January, 2003, to each director, to purchase 20,000 shares of the Company’s Common Stock at $0.21 per share (aggregate 180,000 stock options), including Edmond F. Buccellato and Simon Skurkovich, M.D., as described in the Summary Compensation Table above, for directorship services rendered during the year ended December 31, 2002.

(2)	Stock Bonus Plan

(3)	This figure excludes 1,603,787 shares of the Company’s Common Stock repurchased by the Company as of February 26, 2003, from an officer and two directors, in satisfaction of outstanding notes receivable, issued by the three individuals in consideration for shares issued to them under the Stock Bonus Plan on January 11, 2000. Such notes were due and payable on December 31, 2002, and could not be extended under provisions of federal legislation known as the Sarbanes-Oxley Act of 2002. These shares are now available for future issuance under the Stock Bonus Plan.

The Company adopted a Stock Bonus Plan (“Stock Bonus Plan”) in January 2000 and reserved 10,000,000 shares of Common Stock to be issued thereunder, of which 9,200,000 shares have been granted as of December 31, 2002. In December 2000, the Board of Directors approved the Company’s 2000 Omnibus Equity Incentive Plan (“OEI Plan”) and reserved 4,000,000 shares of Common Stock to be issued thereunder to employees, consultants and directors, subject to annual increases equal to the lesser of 2.5% of the then outstanding shares of Common Stock or 250,000 shares. As of December 31, 2002, no shares have been granted under the OEI Plan. As of December 31, 2002, options to purchase approximately 440,000 shares have been granted under the OEI, and during the quarter ending March 31, 2003, additional options have been granted under the OEI Plan. Prior to January, 2001, the Company granted other stock options and warrants to purchase Company Common Stock which were not granted pursuant to any equity compensation plan

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 February 28, 2002. 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 February 28, 2003, the Company had 43,827,793 shares of Common Stock outstanding.


	(1)	Shares held in the name of Richard P. Kiphart include the right to acquire 2,156,708 shares, upon the conversion of $539,177 principal amount of the Company’s 2002 Subordinated Convertible Pay-In-Kind Notes due September 30, 2004 (“2002 Convertible Notes Due 2004”) and the right to acquire 10,653,124 shares, upon the conversion of $2,663,281 principal amount of the Company’s 2002 Subordinated Convertible Pay-In-Kind Notes Due June 1, 2006 (“2002 Convertible Notes Due 2006”), and options to purchase up to 20,000 shares of Common Stock at an exercise price of $0.21 per share.

	(2)	Shares held in the name of Boris Skurkovich include shares held in his name (1,404,829), and shares held in the name of Carol Marjorie Dorros (1,935,000), and Samuel Aaron Skurkovich (2,880,770), options to purchase up to 10,000 shares of Common Stock at an exercise price of $0.25 per share, and options to purchase up to 20,000 shares of Common Stock at an exercise price of $0.21 per share.

	(3)	Leonard and Ellen Millstein are husband and wife. Shares held in their names comprise shares held in his name (615,100), shares held in her name (2,763,359); shares held in the name of William Millstein (688,250 shares), options to purchase up to 10,000 shares of Common Stock at an exercise price of $0.25 per share, and options to purchase up to 20,000 shares of Common Stock at an exercise price of $0.21 per share. Mr. Millstein and Mrs. Millstein disclaim beneficial ownership of the shares held in the other’s name and disclaim that they are part of any “group” for SEC purposes.

	(4)	Shares held in the name of Simon Skurkovich include options to purchase up to 300,000 shares of Common Stock at an exercise price of $0.10 per share, options to purchase up to 623,000 shares of Common Stock at an exercise price of $0.10 per share, options to purchase up to 10,000 shares of Common Stock at an exercise price of $0.25 per share, and options to purchase up to 20,000 shares of Common Stock at an exercise price of $0.21 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.

	(5)	Shares held in the name of Alexander L. Cappello include warrants held in his name to purchase 100,000 shares of Common Stock at an exercise price of $0.25 per share, warrants assigned by Cappello Capital Corp. (“CCC”) to the Alexander L. and Linda Cappello Family Trust (“Family Trust”) to purchase 1,598,216 shares of Common Stock at an exercise price of $0.15 per share, options to purchase up to 10,000 shares of Common Stock at an exercise price of $0.25 per share, and options to purchase up to 20,000 shares of Common Stock at an exercise price of $0.21 per share. Also includes the right of the Family Trust to acquire 126,332 shares of Common Stock upon conversion of Company’s Convertible Subordinated Debt due September 30, 2004 (“Convertible Debt”), and the right to acquire 207,696 shares of Common Stock upon exercise of an option to purchase up to $51,924 principal amount of Convertible Debt at par and the conversion of such Convertible Debt, which option CCC assigned to the Family Trust.

	(6)	Shares held in the name of Edmond F. Buccellato comprise shares held in the names of Edmond F. and Leana J. Buccellato Living Trust (1,130,245 shares), Matthew Buccellato (60,490 shares) and Buccellato & Finkelstein, Inc. (88,334). Includes options to purchase up to 105,543 shares of Common Stock at an exercise price of $0.10 per share, options to purchase up to 50,000 shares of Common Stock at an exercise price of $0.10 per share, options to purchase up to 50,000 shares of Common Stock at an exercise price of $0.20 per share, options to purchase up to 10,000 shares of Common Stock at an exercise price of $0.25 per share, options to purchase up to 20,000 shares of Common Stock at an exercise price of $0.21 per share, and the right to acquire 122,024 shares of Common Stock upon the conversion of $30,506 principal amount of the Company’s 2002 Convertible Notes Due 2004.

	(7)	Shares held in the name of Thomas J. Pernice include warrants to purchase 100,000 shares of Common Stock at an exercise price of $0.25 per share, warrants assigned by CCC to purchase 1,042,443 shares of Common Stock at an exercise price of $0.15 per share, options to purchase up to 10,000 shares of Common Stock at an exercise price of $0.25 per share, and options to purchase up to 20,000 shares of Common Stock at an exercise price of $0.21 per share. Also, includes the right to acquire 166,156 shares of Common Stock upon exercise of an option to purchase up to $41,539 principal amount of Convertible Debt at par and the conversion of such Convertible Debt, which option CCC assigned to him.


	(8)	Includes shares held in the names of Lawrence Loomis (924,053 shares) and New Horizons Diagnostics, Inc. (200,000 shares), options to purchase up to 10,000 shares of Common Stock at an exercise price of $0.25 per share, and options to purchase up to 20,000 shares of Common Stock at an exercise price of $0.21 per share.

	(9)	Shares held in the name of John M. 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 125,936 shares of Common Stock upon conversion of Convertible Debt held by a trust for the benefit of his minor child, options to purchase up to 10,000 shares of Common Stock at an exercise price of $0.25 per share, and options to purchase up to 20,000 shares of Common Stock at an exercise price of $0.21 per share.


(10)	Includes 2,940,659 shares of Common Stock underlying warrants, 1,388,543 shares of Common Stock underlying options and 13,557,976 shares of Common Stock underlying Convertible Debt.

The Company is currently indebted to Simon Skurkovich, M.D., the Company’s Chairman Emeritus of the Board of Directors, and Director of Research and Development, in the amount of $127,631.

During fiscal year 2002, the Company paid $23,855 to Boris Skurkovich, M.D. for consulting services and out-of-pocket expenses, and paid $71,131 to New Horizons Diagnostics, Inc., of which Director Lawrence Loomis is the majority shareholder, for productions of monoclonal antibodies. During the fiscal year 2002, the Company paid a $60,000 fee in cash to Lawrence Loomis in connection with the placement of $3,000,000 principal amount of the Company’s Subordinated Convertible Pay-In-Kind Notes to Director Richard Kiphart. Mr. Loomis has personally guaranteed the repayment by the Company of approximately $500,000 principal amount of such Convertible Notes held by Mr. Kiphart.

During fiscal year 2002, the Company received the use of approximately 3,500 square feet of commercial building space on a rent-free basis from a company owned by Lawrence Loomis. As of January 1, 2003, the Company began paying $5,110 in rent on a month-to-month basis. During fiscal year 2002, the Company received use of office space on a rent-free basis from Buccellato & Finkelstein, Inc., of which Edmond F. Buccellato is a shareholder. As of January 1, 2003, the Company began paying $700 in rent on a month-to-month basis. During fiscal year 2002, the Company paid to Buccellato & Finkelstein, Inc., the sum of $16,014 for accounting services and tax preparation.

Alexander L. Cappello is the brother of Gerard K. Cappello, the sole shareholder, president and chief executive officer of Cappello Capital Corp., which was retained by the Company in January, 2000 to render financial advisory and investment banking services and thereupon was granted warrants to purchase 4,685,135 shares of Common Stock at $0.15 per share. Such warrants have been assigned to certain individuals, including Alexander L. Cappello. Cappello Capital Corp. raised $1,510,500 in convertible subordinated debt for the Company, was paid $124,981 in fees and expenses related thereto, and was granted an option to purchase $151,050 principal amount of Convertible Debt at par, which option has been assigned to certain individuals including Alexander L. Cappello. Thomas J. Pernice was formerly a managing director of Cappello Group, Inc., a merchant banking firm, which is owned by Alexander L. Cappello. Mr. Pernice was assigned a portion of the foregoing warrants and options.

John M. Bendheim, Edmond F. Buccellato and Alexander L. Cappello each beneficially own the Company’s Convertible Debt or Convertible Notes, upon which the Company is indebted to such individuals.

As of December 31, 2002, the following directors and officers were indebted to the Company in the principal amount, together with accrued interest, set forth opposite such person’s name, in connection with the grant of shares of Common Stock pursuant to the Company’s Stock Bonus Plan:

The same three directors each issued a promissory note dated as of January 11, 2000, in favor of the Company evidencing such obligations, which notes, until paid, accrued interest at a rate of 6.5% per annum and matured on December 31, 2002. The notes, as of December 31, 2002, were in default. Effective July 30, 2002, the new federal laws, known as the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”) prohibit a public company, among other matters, to extend or maintain a loan to any director or officer of the company, including the extension of loans then existing on July 30, 2002, subject to certain exceptions inapplicable to the Company. The Company was not in compliance with the Sarbanes-Oxley Act on December 31, 2002, because the three directors were in default of their notes and the Sarbanes-Oxley Act prohibited the extension of such notes. As of February 26, 2003, the Company repurchased an aggregate 1,603,787 shares of the Company’s Common Stock from these three directors, in satisfaction of the outstanding notes principal together with accrued interest, because these notes could not be extended under the Sarbanes-Oxley Act. These shares had been previously issued under the Stock Bonus Plan on January 11, 2000, and are now available for future issuance under the Stock Bonus Plan.

The financial statements are incorporated herein by reference and begin with Page F-1.

The Registrant filed the following reports on Form 8-K during the quarter ended December 31, 2002:


	1. November 26, 2002. The Form 8-K reported that the Registrant has a patent application pending for the exclusive use of any form of antibody to gamma interferon (IFN-g) for the treatment of Pemphigus Vulgaris.

	2. December 2, 2002. The Form 8-K reported that the Registrant closed the private placement of its 2002 Subordinated Convertible Pay-In-Kind Notes, and has reported its financial results for the nine months ended September 30, 2002.

	3. December 3, 2002. The Form 8-K reported that the Registrant received a Notice of Allowance from the United States Patent and Trademark Office for a utility patent for the use of any form of antibody to gamma interferon to treat corneal transplant rejection.

	4. December 9, 2002. The Form 8-K reported that the Registrant met with the United States Food and Drug Administration (FDA) and discussed the pathway and additional efforts needed to submit an Investigational New Drug Application to conduct Phase I clinical trials to treat corneal transplant rejection with antibodies to gamma interferon.

In accordance with Item 307 of Regulation S-B promulgated under the Securities Act of 1933, as amended, and within 90 days of the date of this Annual Report on Form 10-KSB, the Chief Executive Officer and Chief Financial Officer of the Company (the “Certifying Officers”) have conducted evaluations of the Company’s disclosure controls and procedures. As defined under Sections 13a-14(c) and 15d-14(c) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the term “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Certifying Officers have reviewed the Company’s disclosure controls and procedures and have concluded that those disclosure controls and procedures are effective in causing information to be recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms and communicated to management of the Company to allow timely decisions regarding the Company’s public disclosures. In compliance with Section 302 of the Sarbanes-Oaxley Act of 2002, (18 U.S.C. 1350), each of the Certifying Officers executed an Officer’s Certification included in this Annual Report on Form 10-KSB.

As of the date of this Annual Report on Form 10-KSB, there have not been any significant changes in the Company’s internal controls or in other factors that could significantly affect these internal controls subsequent to the date of the Certifying Officers’ evaluation.

As of the date of this Amendment No. 1 to the Annual Report on Form 10-KSB/A, there have not been any significant changes in the Company’s internal controls or in other factors that could significantly affect these internal controls subsequent to the date of the Certifying Officers’ evaluation.

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 31st day of March, 2003.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on this 31st day of March, 2003.

Certification by Edmond F. Buccellato, President and Chief Executive Officer
of
Advanced Biotherapy, Inc.

1. I have reviewed this Amendment No. 1 to the Annual Report on Form 10-KSB/A of Advanced Biotherapy, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this annual report;

4. The Registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and have:

a) designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b) evaluated the effectiveness of the Registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions);

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant’s ability to record, process, summarize and report financial data and have identified for the Registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal controls; and

6. The Registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Certification by William M. Finkelstein, Chief Financial Officer
of
Advanced Biotherapy, Inc.

1. I have reviewed this Amendment No. 1 to the Annual Report on Form 10-KSB/A of Advanced Biotherapy, Inc.;

b) evaluated the effectiveness of the Registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal controls; and

We have audited the accompanying balance sheets of Advanced Biotherapy, Inc. (a Delaware corporation and development stage enterprise) as of December 31, 2002 and 2001, and the related statements of operations, stockholders’ equity (deficit) and cash flows for the years then ended and for the period from December 2, 1985 (inception) through December 31, 2002. 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 audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides 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, 2002 and 2001 and the results of its operations, stockholders’ equity (deficit) and cash flows for the years then ended and for the period from December 2, 1985 (inception) through December 31, 2002, 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 no revenue in the past years, and has suffered recurring losses from operations resulting in an accumulated deficit of $6,592,961 at December 31, 2002. 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
February 25, 2003

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

ADVANCED BIOTHERAPY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

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

ADVANCED BIOTHERAPY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS

ADVANCED BIOTHERAPY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
December 31, 2002

Advanced Biotherapy, Inc. was originally incorporated December 2, 1985 under the laws of the State of Nevada. The Company is involved in the research and development of the treatment of autoimmune diseases in humans, most notably, multiple sclerosis and rheumatoid arthritis. The Company conducts its 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.

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.

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.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

For the year ended December 31, 2002, the Company incurred a net loss of $1,524,535 and had an accumulated deficit during the development stage of $6,592,961 for the period then ended. Although the Company raised over $4.2 million in convertible debt during the year ended December 31, 2002 to fund research and development costs and operations, it does not have a source of revenues to continue its operations, research and development costs or to service its debt at maturity beyond such funding. For the twelve-month period subsequent to December 31, 2002, the Company anticipates that its minimum cash requirements to continue as a going concern will be less than $1,500,000, and therefore, believes that it has adequate resources to maintain operations during that period. 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. Management’s goal is to actively seek a collaborative relationship with either a pharmaceutical or biotechnology company. If successful, future cash requirements may be met through licensing fees and royalties. 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.

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

ADVANCED BIOTHERAPY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
December 31, 2002

In December 2002, the Financial Accounting Standards Board issued Statement No. 148 (“SFAS No. 148”) on “Accounting for Stock-Based Compensation — Transition and Disclosure.” This statement provides alternative methods of transition for companies that choose to switch to the fair value method of accounting for stock options. SFAS No. 148 also makes changes in the disclosure requirements for stock-based compensation, regardless of which method of accounting is chosen. Under the new standard, companies must report certain types of information more prominently and in a more understandable format in the footnotes to the financial statements, and this information must be included in interim as well as annual financial statements. The Company has complied with the disclosure requirements of SFAS No. 148 in these financial statements.

In October 2002, the Financial Accounting Standards Board issued Statement No. 147 (“SFAS No. 147”) on “Acquisitions of Certain Financial Institutions.” This statement provides guidance on the accounting for the acquisition of a financial institution. The Company’s adoption of this standard does not have an effect on its financial statements.

In June 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” (“SFAS No. 146”). SFAS No. 146 addresses significant issues regarding the recognition, measurement, and reporting of costs associated with exit and disposal activities, including restructuring activities. SFAS No. 146 also addresses recognition of certain costs related to terminating a contract that is not a capital lease, costs to consolidate facilities or relocate employees, and termination benefits provided to employees that are involuntarily terminated under the terms of a one-time benefit arrangement that is not an ongoing benefit arrangement or an individual deferred-compensation contract. SFAS No. 146 is effective for activities after December 31, 2002. There has been no impact on the Company’s financial position or results of operations from adopting SFAS No. 146.

In April 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 145, “Rescission of SFAS Statements No. 44, 4 and 64, Amendment of SFAS Statement No. 13, and Technical Corrections” (“SFAS No. 145”), which updates, clarifies and simplifies existing accounting pronouncements. SFAS No. 4, which required all gains and losses from the extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of related tax effect was rescinded. As a result, SFAS No. 64, which amended SFAS No. 4, was rescinded, as it was no longer necessary. SFAS No. 44, “Accounting for Intangible Assets of Motor Carriers”, established the accounting requirements for the effects of transition to the provisions of the Motor Carrier Act of 1980. Since the transition has been completed, SFAS No. 44 is no longer necessary and has been rescinded. SFAS No. 145 amended SFAS No. 13 to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. The Company adopted SFAS No. 145, and as a result, has reclassified a total of $2,047,437 in debt forgiveness to other income from the previous classification as extraordinary income. The other provisions of this standard did not have an effect on the financial statements of the Company.

ADVANCED BIOTHERAPY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
December 31, 2002

In October 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”). This standard establishes a single accounting model for long-lived assets to be disposed of by sale, including discontinued operations. SFAS No. 144 requires that these long-lived assets be measured at the lower of carrying amount or fair value less cost to sell, whether reported in continuing operations or discontinued operations. The Company does not believe any adjustments are needed to the carrying value of its assets at December 31, 2002.

Accounting for Stock Options and Warrants Granted to Employees and Non-employees

Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”), defines a fair value-based method of accounting for stock options and other equity instruments. The Company has adopted this method, which measures compensation costs based on the estimated fair value of the award and recognizes that cost over the service period.

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.

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.

Income taxes are provided based upon the liability method of accounting pursuant to SFAS No. 109 “Accounting for Income Taxes.” Under this approach, deferred income taxes are recorded to reflect the tax consequences on future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year end. A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the “more likely than not” standard imposed by SFAS No. 109 to allow recognition of such an asset.

At December 31, 2002, the Company had net deferred tax assets of approximately $1,160,000, principally arising from net operating loss carryforwards for income tax purposes. As management of the Company cannot determine that it is more likely than not that the Company will realize the benefit of the net deferred tax asset, a valuation allowance equal to the net deferred tax asset has been established.

At December 31, 2002, the Company’s net operating loss carryforwards amount to approximately $4,660,000, which expire in the years 2003 through 2023. At December 31, 2002, approximately $878,000 of net operating losses expired. Approximately $195,000 of net operating losses will expire on December 31, 2003.

ADVANCED BIOTHERAPY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
December 31, 2002

Certain amounts from prior periods have been reclassified to conform with the current period presentation. These reclassifications have resulted in no changes to the Company’s accumulated deficit or net losses presented.

Promotional fees are charged to operations in the year incurred. Promotional fees amounted to $9,624 and $8,986 for the year ended December 31, 2002 and 2001, respectively.

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.

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.

The carrying amounts for cash, investments, deposits and prepaid expenses, receivables, accounts payable, accrued liabilities, notes payable, and convertible debt approximate their fair value.

During the year ended December 31, 2000, the Company entered into convertible subordinated debt, which required the payment of loan origination fees. See Note 12. These loan origination fees, which totaled $47,079, net of accumulated amortization at December 31, 2002, are amortized over the life of the related debt. During the year ended December 31, 2002, the Company recorded amortization expense in the amount of $27,712 related to these fees.

During the year ended December 31, 2002, the Company entered into convertible subordinated debt, which required the payment of loan origination fees. See Note 12. These loan origination fees, which totaled $81,831, net of accumulated amortization at December 31, 2002, are amortized over the life of the related debt. During the year ended December 31, 2002, the Company recorded amortization expense in the amount of $20,064 related to these fees.

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 stockholders remitted the gain to the Company. The gain amounted to $157,520 and is reflected in the statement of operations as internal gain on sale of securities.

ADVANCED BIOTHERAPY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
December 31, 2002

The Financial Accounting Standards Board issued Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities,– as amended by SFAS No. 137, “Accounting for Derivative Instruments and Hedging Activities — Deferral of the Effective Date of FASB No. 133”, and SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities”, which is effective for the Company as of January 1, 2001. These standards establish accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. They require that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value.

If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition on the hedging derivative with the recognition of (i) the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated as a hedging instrument, the gain or loss is recognized in income in the period of change.

Historically, the Company has not entered into derivatives contracts to hedge existing risks or for speculative purposes.

At December 31, 2002, the Company has not engaged in any transactions that would be considered derivative instruments or hedging activities.

Earnings (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 (1,957,953 shares), warrants (5,324,535 shares), and convertible debt (22,416,456 shares). Diluted net loss per share is the same as basic net loss per share as inclusion of the common stock equivalents would be antidilutive.

Property and equipment are stated at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the assets of three to five years.

ADVANCED BIOTHERAPY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
December 31, 2002

The following is a summary of property, equipment and accumulated depreciation at December 31, 2002 and 2001:

Depreciation expense for the years ended December 31, 2002 and 2001 was $3,744 and $3,174, respectively.

The Company’s investments in equity securities that are intended to be held for a short period are classified as trading securities. These securities are recorded at fair value as current assets on the balance sheet under the caption of marketable securities. The change in fair value of those securities is included in earnings during the period presented. In the year ended December 31, 2002, there was no change in the fair market value of the securities. See Note 7.

The Company’s investments in debt securities that are intended to be held for an indefinite period, yet not to maturity, are classified as available-for-sale. Available-for-sale securities are recorded at fair value under investments in other assets on the balance sheet with the change in fair value during the period excluded from earnings and recorded net of tax as a component of other comprehensive income. During the year ended December 31, 2001, the Company liquidated its investment in a single corporate bond at no gain or loss and has not had available-for-sale securities since that transaction.

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.

ADVANCED BIOTHERAPY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
December 31, 2002

The following is a summary of the costs of patents and patents pending at December 31, 2002:

During the year ended December 31, 2002, the Company sold a total of $28,000 in subordinated convertible pay-in-kind note to the Company’s chief executive officer. See Note 12.

During the year ended December 31, 2002, the Company paid $60,000 to a director in connection with the sale of subordinated debt. See Note 12.

The Company has notes receivable in the aggregate amount of $246,619 from directors and shareholders of the Company in connection with a payment plan for the purchase of Company stock. The notes accrue interest at a rate of 6.5% per annum and matured on December 31, 2002. As of the date of these financial statements, these notes receivable had not been collected and as a result are in default. The Company was not in compliance with the Sarbanes-Oxley Act on December 31, 2002 due to three directors being in default on their notes receivable. Subsequent to year-end, notes in the amount of $46,619 to non-director shareholders were extended. See Note 15 for the subsequent disposition of notes from directors.

The notes payable to related parties consist of notes payable to the Company’s former chairman and principal shareholder. 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. The calculated interest of $5,635 was recorded in 2002 as interest expense and contributed capital in the accompanying financial statements.

The Company’s former chairman and principal shareholder advanced funds to pay a significant portion of the Company’s expenses since 1989. At December 31, 1999, the cumulative amounts owed to him for expenses were $257,076. Although he was not charging interest to the Company, interest was calculated at the applicable federal rate of 5.59% at December 31, 1999 and 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 were $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 forgiveness of debt.

ADVANCED BIOTHERAPY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
December 31, 2002

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, 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, she forgave the balance of accrued salary in the amount of $200,375. This is recorded in the financial statements as forgiveness of debt.

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 forgiveness of debt.

The Company maintains cash in a money market account at a bank in California. The funds on deposit are not insured by the FDIC, and therefore, a total of $31,081 is at risk on December 31, 2002.

The Company’s marketable securities investment consists of auction rate preferred money market alternatives that rolls every seven days at the then market interest rate. This investment is not insured, and therefore, a total of $3,000,000 is at risk as of December 31, 2002. See Note 4.

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

ADVANCED BIOTHERAPY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
December 31, 2002

(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 in September 2000 of Advanced Biotherapy Concepts, Inc. into its wholly owned subsidiary, each issued and outstanding share of Advanced Biotherapy Concepts, Inc. common stock was converted automatically into one share of $0.001 par value common stock of Advanced Biotherapy, Inc.

Effective December 26, 2002, the Company amended its articles of incorporation to increase its authorize common stock to 200,000,000 shares.

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 per share. See Note 15 for subsequent repurchase of a portion of these shares by the Company. At December 31, 2002, a total of 800,000 shares are available under this plan.

During December 2000, the board of directors of the Company approved an Equity Incentive Plan, which was approved by the stockholders in December 2001. 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. At December 31, 2002, there are 4,060,000 shares available under this plan.

ADVANCED BIOTHERAPY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
December 31, 2002

With the merger into its Delaware subsidiary, the Company has authorized 20,000,000 shares of $0.001 par value preferred stock. As of December 31, 2002, the Company has not issued any preferred stock.

On February 25, 1991, the Company granted nonstatutory options to purchase stock to members of its board of directors, officers, and outside consultants. These 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. The expiration date of these options was extended to February 25, 2002 at which time all the options expired. 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 2002, options to purchase 100,000 shares of common stock were exercised. During 1995, options for 50,000 shares were granted at $0.20 per share, which expire in 2005. Also in 1995, five-year options for 350,000 shares were granted at $0.01 per share, which were exercised during 2000. During 1996, options for 525,000 shares were granted at $0.10 per share, which expire in 2006. During 2002, options for 50,000 shares of common stock were exercised. The shares purchased under the Company’s option grants will be restricted and, therefore, may not be transferred without registration under applicable federal and state securities laws.

On December 31, 1999, three officers of the Company received options to purchase 842,953 shares of common stock 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 6. 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% and no dividends are expected to be paid. At December 31, 1999, the Company recorded $210,738 ($0.25 per option) 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 6.

In 2000, the Company approved an Omnibus Equity Incentive Plan, which was approved by the stockholders in December 2001. A maximum of 4,000,000 shares of common stock and stock options will be available for the incentive plan with annual increases equal to the lesser of 2.5% of outstanding shares or 250,000 shares. At December 31, 2002, there are 4,060,000 shares available under this plan.

During November 2001, the Company issued stock options to purchase 250,000 shares of the Company’s stock at $0.25 per share to a consultant. The options are exercisable immediately and expire on November 15, 2011. The options have piggyback registration rights to be effective in the next SEC registration statement. See Note 13. 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 $0.25, risk free interest rate of 5%, expected life of 10 years, and expected volatility of 38% and no dividends are expected to be paid. At November 15, 2001, the Company recorded $75,000 ($0.30 per option) of expense to professional fees for the value of these options based upon these Black Scholes assumptions.

ADVANCED BIOTHERAPY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
December 31, 2002

During January 2002, the Company issued stock options to purchase 80,000 shares of the Company’s stock at $0.25 per share to its board of directors for services rendered during the year ended December 31, 2001. The options are exercisable immediately and expire on December 31, 2011. 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 $0.25, risk free interest rate of 5%, expected life of 10 years, and expected volatility of 38% with no dividends expected to be paid. The Company recorded a total of $17,200 ($0.215 per option) of expense for the value of these options based upon these Black Scholes assumptions.

Also during the year ended December 31, 2002, the Company issued stock options to purchase a total of 110,000 shares of the Company’s stock at $0.25 per share for services. The options are exercisable immediately and expire between July 28, 2007 and April 15, 2011. The options have piggyback registration rights to be effective in the Company’s next SEC registration statement. 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 $0.25, risk free interest rate of 5%, expected lives of 5 to 9 years, and expected volatility of 98% and no dividends are expected to be paid. The Company recorded a total expense of $30,800 (an average of $0.28 per option) as professional fees for the value of the options based upon these Black Scholes assumptions.

ADVANCED BIOTHERAPY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
December 31, 2002

Following is a summary of the status of the options during the years ended December 31, 2002 and 2001:

Summarized information about stock options outstanding and exercisable at December 31, 2002 is as follows:

During the year ended December 31, 2002, the Company issued warrants to two advisors to purchase 239,400 shares of common stock in connection with the sale of subordinated convertible pay-in-kind notes. The warrants are exercisable for ten years and have an exercise price of $0.25 per share. 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 $0.25, risk free interest rate of 5%, expected life of 10 years, and expected volatility of 98% with no dividends expected to be paid. During the year ended December 31, 2002, the Company recorded $54,344 ($0.23 per warrant) as professional fees for the aforementioned services. A cash-less exercise may be used for all warrant transactions.

During the year ended December 31, 2001, the Company issued to four directors of the Company warrants to purchase up to 100,000 shares of common stock with an exercise price of $0.25 per share. The warrants expire between May 2005 and April 2006. 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 $0.25, risk free interest rate of 5%, expected life of 5 years, and expected volatility of 38% with no dividends expected to be paid. During the year ended December 31, 2001, the Company recorded $23,280 ($0.23 per warrant) as directors’ fees for these warrants.

ADVANCED BIOTHERAPY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
December 31, 2002

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 $0.15, risk free interest rate of 6.2%, expected life of 10 years, and expected volatility of 30% with no dividends expected to be paid. During the year ended December 31, 2000, the Company recorded $168,665 ($0.04 per warrant) 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 holdback obligations.

At December 31, 2002, the total of the Company’s outstanding exercisable warrants is 5,324,535. The average exercise price of the warrants at December 31, 2002 is $0.16 per share.

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 to date of $310,826 has been converted to 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 addition to the granting of an option to the financial advisor 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, 2002 was $27,712.

During the year ended December 31, 2001, a total of $355,000 original debt and $46,109 of accrued interest and previously converted interest was converted into 1,605,346 shares of common stock at $0.25 per share. During the year ended December 31, 2002, a total of $245,000 original debt and $41,928 of accrued interest and previously converted interest was converted into 1,147,706 shares of common stock at $0.25 per share.

At December 31, 2002, the remaining 2000 notes, including converted accrued interest, may be converted into a total of 4,573,160 shares of common stock.

ADVANCED BIOTHERAPY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
December 31, 2002

During the year ended December 31, 2002, the Company sold in a private placement to accredited investors 2002 Subordinated Convertible Pay-in-kind Notes due September 30, 2004 (“2002-2004 convertible notes”) in the principal amount of $1,148,500 in cash. A Company director personally guaranteed a total of $500,000 worth of this debt offering. The 2002-2004 convertible notes bear interest at the rate of 11% per annum payable semi-annually in cash or additional 2002-2004 convertible notes. The unpaid accrued interest to date of $83,896 has been converted to 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 $41,895 to two advisors, together with a warrant to acquire 239,400 shares of common stock at $0.25 per share. Amortization of the loan origination fee for the year ended December 31, 2002 was $11,314.

At December 31, 2002, the remaining 2002-2004 notes, including converted accrued interest, may be converted into a total of 4,929,584 shares of common stock.

During the year ended December 31, 2002, the Company sold in a private placement to accredited investors 2002 Subordinated Convertible Pay-in-kind Notes due June 1, 2006 (“2002-2006 convertible notes”) in the principal amount of $3,055,000 in cash. The interest rate of the 2002-2006 convertible notes is 11% per annum for $2,555,000 of the debt, and 12.5% per annum for $500,000 of the debt, payable semi-annually in cash or additional 2002-2006 convertible notes. The unpaid accrued interest to date of $173,428 has been converted to additional convertible debt.

At December 31, 2002, the remaining 2002-2006 notes, including converted accrued interest, could be converted into a total of 12,913,712 shares of common stock.

The proceeds from the two aforementioned placements of 2002 convertible notes will be used to satisfy outstanding payables and to pay operating costs, scientific development costs and patent application legal costs, and to pursue certain collaborative relationships with other biotechnology or pharmaceutical companies.

ADVANCED BIOTHERAPY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
December 31, 2002

During November 2001, the Company signed a six-month contract with a consultant to provide information on possible partnering companies to divest or license certain rights to its technologies or products. The contract called for the issuance of a stock option to purchase 250,000 shares of the Company’s stock at $0.25 per share, exercisable for ten years. The option has piggyback registration rights to be effective in the next SEC registration statement. See Note 10. The Company also agreed to pay a success fee based on a percentage of the transaction value of any divestiture or license brought about by this contract. In addition, if the success fee is earned by the consultant, the Company will issue a warrant to the consultant to purchase 100,000 shares of common stock at a 10% discount of fair market value.

During January 2001, the Company signed an office lease agreement for three years beginning March 1, 2001. The lease called 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. Effective June 28, 2001, the Company cancelled this lease and has received a refund of the deposit. The cost of such cancellation included the payment of rent for the months of July and August 2001 in the amount of $7,200, and the payment of a broker’s commission of approximately $6,700.

During June 2002, the Company entered into a cooperative agreement with the Department of Energy’s (DOE) Pacific Northwest National Laboratory (PNNL) for Research and Development. According to this agreement, the Company will be responsible for up to 50% of the costs associated with the research and development, principally represented by non-cash in-kind contributions of approximately $480,000 over a period of two years. In return, DOE, has granted the Company a non-exclusive, non-transferable, royalty-free, field-of-use license to any inventions PNNL derives under the agreement. The Company also has a first option to negotiate for greater rights, such as exclusive, transferable, domestic and foreign marketing and development rights. If the Company obtains the right to sublicense, the sublicenses must be royalty-bearing, and, subject to negotiation, the Company will pay a reasonable royalty to PNNL, which will share prospective royalties with a Russian research facility, upon commercialization, if any, of the resulting research.

During the quarter ended March 31, 2002, it was discovered that the Company mistakenly cancelled 850,000 shares of common stock in 1999. Under the terms of a settlement agreement and mutual general release and an escrow agreement both dated July 31, 1991 (collectively referred to as “settlement agreements”) among the Company, a shareholder, a consultant and certain other parties, the Company issued 850,000 shares in the name of the consultant and placed these shares into escrow. These shares were to be released to the consultant upon performance of certain services that were to be provided by the consultant no later than January 15, 1993. The settlement agreements also stated that the 850,000 shares of common stock would be distributed back to the original shareholder, if such services were not provided by the consultant. Such services were not provided by the consultant, in whole or in part, and all 850,000 shares were cancelled by the Company in 1999. However, instead of being cancelled, the shares should have been returned to the original shareholder in 1999 pursuant to the settlement agreements. Therefore, the shares were reissued to the original shareholder and are reflected in the accompanying financial statements as if they were never cancelled.

ADVANCED BIOTHERAPY, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
December 31, 2002

Subsequent to the date of these financial statements, the company entered a verbal agreement to pay approximately $4,000 a month to Buccellato & Finkelstein, Inc., a firm owned by the Company’s Chief Executive Officer and Chief Financial Officer, for rent, monthly accounting and tax preparation services, and employee benefits.

The company also entered into a verbal agreement for research and development laboratory space from New Horizons Diagnostics, Inc., owned by a director, at a monthly cost of $6,110. The Company also reimburses New Horizons Diagnostics, Inc. for research and development services at a monthly cost of approximately $12,000.

Subsequent to the date of these financial statements, a total of $15,000 of original debt and $4,119 of accrued interest and previously converted interest was converted into 76,476 shares of common stock at $0.25 per share. In addition, 150,000 shares of common stock were issued upon the exercise of stock options at $0.01 per share for a total of $1,500 in cash.

On February 7, 2003, the board of directors unanimously approved the repurchase of approximately 1,603,787 shares of common stock from an officer and two directors to the Company in satisfaction of outstanding notes receivable and accrued interest. Such notes were due and payable on December 31, 2002 and could not be extended under provisions of federal legislation known as the Sarbanes-Oxley Act. These shares had been previously issued to them under the Stock Bonus Plan on January 11, 2000,

Subsequent to the date of these financial statements, the Company authorized the issuance of a total of 180,000 stock options to its board of directors for services rendered during the year ended December 31, 2002. An accrued expense was recorded in the amount of $34,200 as the value of the services and is reflected in the financial statements.

On August 24, 2000, the shareholders approved the Company’s 2000 Omnibus Equity Incentive Plan. The purpose of the plan is to promote the long-term success of the Company and the creation of stockholder value by encouraging employees, outside directors and consultants to focus on critical long-range objectives, encouraging the attraction and retention of such with exceptional qualifications and linking them 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 non-statutory stock options) and stock appreciation rights (SAR’s). The aggregate number of options, SARs, stock units and restricted shares awarded under the plan were initially 4,000,000 common shares plus an annual increase of the lesser of two and one-half percent of the total number of common shares then outstanding or 250,000 common shares. Subsequent to the date of the financial statements, the disinterested members of the board of directors approved the issuance of 4,100,000 stock options to certain key employees, directors and consultants. These seven-year options vest over a period of three years, with the first one-third of such options vesting in 2004, the next one-third in 2005 and the remaining one-third vesting in 2006 at an exercise price of $0.16 per share.


þ		ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the fiscal year ending December 31, 2002

or

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


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


Addison’s disease		Hasimoto’s disease
Alopecia Areata		Systemic lupus erythematosus
Amyotrophic lateral sclerosis		Male infertility
(Lou Gehrig’s disease)		Multiple sclerosis
Autoimmune diseases of the ear		Myasthenia Gravis
Autoimmune diseases of the eye		Psoriasis
Autoimmune hepatitis		Rheumatic fever
Corneal transplant rejection		Rheumatoid arthritis
Crohn’s disease		Sarcoidosis
Diabetes (Type I)		Scleroderma
Epidermolysis Bullosa		Sjogren’s syndrome
Epididymitis		Thyroiditis
Glomerulonephritis		Vasculitis
Graves’ disease		Viteligo
Guillan-Barre syndrome


Alzheimer’s Disease		Depression
Autism		Parkinson’s disease
		Schizophrenia


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		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.

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.

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

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


Name of Director	For		Withheld Authority

John M. Bendheim		22,587,772		1,666,700
Edmond Buccellato		22,589,572		1,666,900
Alexander L. Cappello		22,378,938		1,877,534
Richard P. Kiphart		22,494,472		1,762,000
Lawrence Loomis		22,494,772		1,761,700
Leonard Millstein, Ph.D		22,589,472		1,667,000
Thomas J. Pernice		22,581,672		1,666,700
Boris Skurkovich, M.D.		22,589,072		1,667,900
Simon Skurkovich, M.D.		22,588,772		1,667,700


		High Bid		Low Bid

2001 Fiscal Quarter Ended:
	March 31	$	0.53	$	0.24
	June 30	$	0.34	$	0.20
	September 30	$	0.58	$	0.16
	December 31	$	0.55	$	0.21
2002 Fiscal Quarter Ended:
	March 31	$	0.38	$	0.18
	June 30	$	0.65	$	0.25
	September 30	$	0.37	$	0.21
	December 31	$	0.27	$	0.14


Name	Age		Position Held	Director Since

Simon Skurkovich, M.D.		80	Chairman Emeritus, Director, and Director of Research and Development	November, 1985
Edmond F. Buccellato		57	Chairman of the Board, President and Chief Executive Officer, Director(3)	November, 1995
Thomas J. Pernice		41	Treasurer and Secretary, Director(2)(3)	April, 2001
William M. Finkelstein		43	Chief Financial Officer (non-director)	April, 2001
Lawrence Loomis		58	Director(2)(3)	December, 1986
Leonard Millstein, Ph.D.		60	Director(2)	December, 1986
Boris Skurkovich, M.D.		48	Director(2)	December, 1986
Alexander L. Cappello		47	Director(1)(3)	April, 2000
John M. Bendheim		49	Director(1)(3)	June, 2000
Richard P. Kiphart		61	Director(1)(2)	June, 2002


										Restricted		Securities
								Other Annual		Stock		Underlying		LTIP		All Other
				Salary		Bonus		Compensation		Award(s)		Options/SARs		Payouts		Compensation
Name and Principal Position		Year		($)		($)		($)		($)		(#)		($)		($)

Edmond F. Buccellato			2002	$	154,500	$	0	$	0	$	0	$	3,800	$	0	$	0
	Chief Executive Officer		2001	$	84,000	$	0	$	0			$	2,150	$	0	$	0
	(1)(4)(6)		2000	$	72,500	$	0	$	0			$	0	$	0	$	0
Paul J. Marangos			2001	$	35,000	$	0	$	10,000	$	0	$	7,800	$	0	$	0
	Chief Executive Officer		2000	$	40,000	$	25,000	$	0			$	0	$	0	$	0
	(2)(5)
Simon Skurkovich			2002	$	131,500	$	0	$	0	$	0	$	3,800	$	0	$	0
	Chairman Emeritus,		2001	$	60,000	$	0	$	0			$	2,150	$	0	$	0
	Director of Research &		2000	$	30,000	$	0	$	0			$	0	$	0	$	0
	Development(3)(4)(6)


					Number of Unexercised		Value of Unexercised
					Securities Underlying		In-The-Money
					Options/SARs		Options/SARs
	Shares Acquired				at FY-End(#)		At FY-End($)
Name	on Exercise(#)		Value Realized($)		Exercisable/Unexercisable(1)		Exercisable/Unexercisable(2)

Simon Skurkovich		0	$	0		300,000	$	84,000.00
						623,000	$	174,400.00
						10,000	$	1,300.00
Edmond Buccellato		0	$	0		105,543	$	29,552.00
						50,000	$	14,000.00
						50,000	$	9,000.00
						10,000	$	1,300.00


Item 11.	*Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters*


		Number of Shares
Name and Address of Owner		Beneficially Owned			Percentage of Total

Richard P. Kiphart			12,829,832	(1)		22.64	%
	222 W. Adams St.
	Chicago, IL 60606
Boris Skurkovich, M.D.			6,240,599	(2)		14.23	%
	18 Blaisdell Ave
	Pawtucket, RI 01860
Leonard Millstein and Ellen Millstein			4,096,709	(3)		9.34	%
	1677 Calle Alta
	La Jolla, CA 92037
Simon Skurkovich, M.D.			2,421,770	(4)		5.41	%
	802 Rollins Avenue
	Rockville, MD 20852
Alexander L. Cappello			2,062,244	(5)		4.49	%
	100 Wilshire Boulevard
	Suite 1200
	Santa Monica, CA 90401
Edmond F. Buccellato			1,636,638	(6)		3.70	%
	6355 Topanga Canyon
	Boulevard, Suite 510
	Woodland Hills, CA 91367
Thomas J. Pernice			1,338,599	(7)		2.96	%
	837 Chautauqua Blvd
	Pacific Palisades, CA 90272
Lawrence Loomis			1,154,053	(8)		2.63	%
	9110 Red Branch Road
	Columbia, MD 21045
John M. Bendheim			255,936	(9)		*
	361 N. Canon Drive
	Beverly Hills, CA 90210
All officers and directors as a group(10)			32,048,680			51.93	%


	*	Represents less than 1% of the outstanding Shares of Common Stock.


Item 12.	*Certain Relationships and Related Transactions*


Edmond F. Buccellato	$	89,478
Boris Skurkovich, M.D.	$	89,478
Lawrence Loomis	$	59,652


For:			21,683,729
Against:			2,518,120
Abstain:			62,723


Item 10.	*Executive Compensation*


Item 13.	*Exhibits and Reports on Form 8-K*


Exhibit
Number		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. Filed as Appendix A to Registrant’s Proxy Statement dated July 14, 2000, and incorporated herein by reference.
	3.1	Certificate of Incorporation of Registrant. Filed as an exhibit to Registrant’s 10-QSB for the quarter ended September 30, 2000, and incorporated herein by reference.
	3.2	Bylaws of Registrant. Filed as an exhibit to Registrant’s 10-QSB for the quarter ended September 30, 2000, and incorporated herein by reference.
	3.3	Certificate of Amendment of Certificate of Incorporation of Registrant filed December 26, 2002, in the office of the Delaware Secretary of State.
	4.1	Form of Registrant’s Common Stock Certificate. Filed as an exhibit to Registrant’s Form 10-QSB filed on June 10, 1999, and incorporated herein by reference.
	4.2	Form of 2002 Subordinated Convertible Pay-In-Kind Note due June 1, 2006, dated November 14, 2002.
	10.1	Form of Stock Bonus Plan. Filed as an exhibit to Registrant’s Form 10-KSB for the fiscal year ended December, 1999. Filed as an exhibit to Registrant’s Form 10-KSB for the fiscal year ended December, 1999.
	10.2	Form of Common Stock Purchase Warrant in favor of Cappello Capital Corporation. Filed as an exhibit to 2000, and Registrant’s Form 10-QSB for the quarter ended March 31, incorporated herein by reference.
	10.3	Form of 2000 Omnibus Equity Incentive Plan. Filed as an exhibit to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000, and incorporated herein by reference.
	10.4	Form of Option Agreement. Filed as an exhibit to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000, and incorporated herein by reference.
	10.5	Form of 10% Convertible Subordinated Debt Instrument. Filed as an exhibit to Registrant’s Form 10-QSB for the quarter ended June 30, 2000, and incorporated herein by reference.
	10.6	Form of Convertible Subordinated Debt Purchase Agreement. Filed as an exhibit to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000, and incorporated herein by reference.
	10.7	Form of Investor Rights Agreement. Filed as an exhibit to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000, and incorporated herein by reference.
	10.8	Form of 2002 Subordinated Convertible Pay-In-Kind Note due September 30, 2004. Filed as an exhibit to Registrant’s Form 10-QSB for the quarter ended March 31, 2002, and incorporated herein by reference.
	10.9	Form of Investor Rights Agreement dated as of April 15, 2002. Filed as an exhibit to Registrant’s Form 10-QSB for the quarter ended March 31, 2002, and incorporated herein by reference.
	10.10	Form of 2002 Subordinated Convertible Pay-In-Kind Note due June 1, 2006. Filed as an exhibit to Registrant’s Form 10-QSB for the quarter ended September 30, 2002, and incorporated herein by reference.
	10.11	Form of Investor Rights Agreement dated as of June 1, 2002. Filed as an exhibit to Registrant’s Form 10-QSB/ A for the quarter ended June 30, 2002, and incorporated by reference herein.
	99.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.
	99.2	Certification of Chief Financial Officer Pursuant to 18 U.S. C. Section 1350.


Independent Auditor’s Report		F-1
Financial Statements:
Balance Sheets		F-2
Statements of Operations		F-3
Statement of Stockholders’ Equity (Deficit)		F-4
Statements of Cash Flows		F-5
Notes to Financial Statements		F-6


		Advanced Biotherapy, Inc. (Registrant)

		By:		/s/ Edmond F. Buccellato

				President and Chief Executive Officer


Date	Signature	Title

March 31, 2003	/s/Edmond F. Buccellato	President and Chief Executive Officer

	Edmond F. Buccellato

March 31, 2003	/s/William M. Finkelstein William M. Finkelstein	Chief Financial Officer (Principal Financial and Accounting Officer)

March 31, 2003	/s/John Bendheim	Director

	John Bendheim

March 31, 2003	/s/Alexander L. Cappello	Director

	Alexander L. Cappello

March 31, 2003	/s/Lawrence Loomis Lawrence Loomis	Director

March 31, 2003	/s/Thomas J. Pernice	Director

	Thomas J. Pernice

March 31, 2003	/s/Boris Skurkovich	Director

	Boris Skurkovich, M.D.

March 31, 2003	/s/Simon Skurkovich, M.D.	Director

	Simon Skurkovich, M.D.


		/s/ Edmond F. Buccellato

		Edmond F. Buccellato President and Chief Executive Officer


		/s/ William M. Finkelstein

		William M. Finkelstein Chief Financial Officer


			December 31,		December 31,
			2002		2001

CURRENT ASSETS
	Cash		$	31,081	$	36,615
	Marketable securities			3,000,000		—
	Notes receivable - related parties			246,619		246,619
	Interest receivable - related parties			47,609		31,579
	Deposits and prepaid expenses			54,882		40,710

		Total Current Assets		3,380,191		355,523

PROPERTY AND EQUIPMENT, net of accumulated depreciation				16,414		4,888

OTHER ASSETS
	Deferred loan origination fees, net of accumulated amortization			128,910		74,791
	Patents and patents pending, net of accumulated amortization			365,713		264,493

		Total Other Assets		494,623		339,284

TOTAL ASSETS			$	3,891,228	$	699,695


CURRENT LIABILITIES
	Accounts payable		$	113,457		$	142,206
	Accounts payable - related parties			14,174			9,740
	Accrued expenses - related parties			63,367			13,600

		Total Current Liabilities		190,998			165,546

LONG-TERM DEBT
	Convertible notes payable			5,604,010			1,314,301
	Notes payable to related parties			127,631			127,631

		Total Long-Term Debt		5,731,641			1,441,932

		Total Liabilities		5,922,639			1,607,478

COMMITMENTS AND CONTINGENCIES				—			—

STOCKHOLDERS’ EQUITY (DEFICIT)
	Preferred stock, par value $0.001; 20,000,000 shares authorized, no shares issued and outstanding			—			—
	Common stock, par value $0.001; 200,000,000 shares authorized, 43,601,317 and 42,303,611 shares issued and outstanding, respectively			43,600			42,303
	Additional paid-in capital			3,937,923			3,640,657
	Stock options and warrants			580,027			477,683
	Deficit accumulated during development stage			(6,592,961	)		(5,068,426	)

		Total Stockholders’ Equity (Deficit)		(2,031,411	)		(907,783	)

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)			$	3,891,228		$	699,695


										From Inception
				Year Ended December 31,						(December 2, 1985)
										through
				2002			2001			December 31, 2002

REVENUES				$	—		$	—		$	89,947

OPERATING EXPENSES
		Research and development			313,597			133,747			2,591,969
		Promotional fees			9,624			8,986			26,168
		Professional fees			435,977			395,074			2,383,410
		Directors’ fees			37,800			29,080			66,880
		Depreciation and amortization			77,305			49,879			559,188
		Salaries and benefits			98,618			83,746			1,108,478
		Insurance			57,787			48,076			116,761
		Shareholder relations and transfer fees			26,946			28,788			203,493
		Rent			—			33,962			156,116
		Travel and entertainment			73,977			37,796			173,133
		Telephone and communications			4,140			12,764			31,520
		Office			12,099			15,208			55,219
		General and administrative			43,062			13,648			624,708

			Total Operating Expenses		1,190,932			890,754			8,097,043

Loss From Operations					(1,190,932	)		(890,754	)		(8,007,096	)
OTHER INCOME (EXPENSE)
		Miscellaneous income			—			—			22,000
		Interest and dividend income			45,168			35,902			112,161
		Internal gain on sale of securities			—			—			157,520
		Forgiveness of debt			—			—			2,047,437
		Forgiveness of payables			—			—			45,396
		Loss on disposal of office equipment			—			(2,224	)		(2,224	)
		Interest expense			(378,771	)		(163,225	)		(968,155	)

			Total Other Income (Expense)		(333,603	)		(129,547	)		1,414,135

Loss Before Income Taxes					(1,524,535	)		(1,020,301	)		(6,592,961	)
Income Taxes					—			—			—

NET LOSS				$	(1,524,535	)	$	(1,020,301	)	$	(6,592,961	)

BASIC AND DILUTED NET LOSS
	PER COMMON SHARE			$	(0.04	)	$	(0.02	)

WEIGHTED AVERAGE NUMBER OF BASIC AND DILUTED COMMON STOCK SHARES OUTSTANDING					43,175,909			40,885,351


									Deficit
	Common Stock								Accumulated			Total
					Additional		Stock		During			Stockholders’
					Paid-in		Options and		Development			Equity
	Shares		Amount		Capital		Warrants		Stage			(Deficit)

Balance, December 31, 2000		40,698,265	$	40,698	$	3,233,040	$	379,403	$	(4,048,125	)	$	(394,984	)
Common stock issued in exchange for convertible debt at $0.25 per share		1,605,346		1,605		399,504		—		—			401,109
Contribution of capital by shareholders in form of foregone interest and rent		—		—		8,113		—		—			8,113
Stock warrants issued at $0.06 per warrant in exchange for services		—		—		—		23,280		—			23,280
Stock options issued at $0.30 per option in exchange for services		—		—		—		75,000		—			75,000
Net loss for the year ended December 31, 2001		—		—		—		—		(1,020,301	)		(1,020,301	)

Balance, December 31, 2001		42,303,611		42,303		3,640,657		477,683		(5,068,426	)		(907,783	)
Contribution of capital by shareholders in form of foregone interest		—		—		5,635		—		—			5,635
Common stock issued in exchange for convertible debt at $0.25 per share		1,147,706		1,147		285,781		—		—			286,928
Stock issued for cash at an average price of $0.04 per share from the exercise of options		150,000		150		5,850		—		—			6,000
Stock warrants issued at $0.23 per warrant in exchange for services		—		—		—		54,344		—			54,344
Stock options issued at $0.25 per option in exchange for services		—		—		—		48,000		—			48,000
Net loss for the year ended December 31, 2002		—		—		—		—		(1,524,535	)		(1,524,535	)

Balance, December 31, 2002		43,601,317	$	43,600	$	3,937,923	$	580,027	$	(6,592,961	)	$	(2,031,411	)


			Accumulated			Net
	Cost		Amortization			Amount

Balance, December 31, 2000	$	251,120	$	(77,611	)	$	173,509
2001 Activity		109,977		(18,993	)		90,984

Balance, December 31, 2001		361,097		(96,604	)		264,493
2002 Activity		127,005		(25,785	)		101,220

Balance, December 31, 2002	$	488,102	$	(122,389	)	$	365,713


	Common Stock

	Average						Additional
	price per						Paid-in
	share		Shares		Amount		Capital

Common stock issued for cash:
1985	$	.50		100,000	$	100	$	49,900
1986		1.00		639,500		640		678,861
1987		1.00		850,500		850		759,650
1988		1.00		25,000		25		24,975
1993		.25		2,402,000		2,402		475,900
1995		.05		1,000,000		1,000		49,000
1996		.05		520,000		520		25,480

(1)		Omnibus Equity Incentive Plan
(2)		Stock Bonus Plan. See Note 8 and 15.


				Weighted
				Average Exercise
	Number of Shares			Price

Outstanding at January 1, 2001		2,527,953		$	0.11
Granted		250,000			0.25
Exercised		—			—
Forfeited		—			—

Outstanding at December 31, 2001		2,777,953			0.14
Granted		190,000			0.25
Exercised		(150,000	)		0.04
Forfeited		(860,000	)		0.20

Outstanding at December 31, 2002		1,957,953			0.13

Options exercisable at December 31, 2002		1,957,953		$	0.13

Weighted average fair value of options granted in 2002				$	0.25