
<PAGE>


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-QSB

                                   (Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities  Exchange
Act of 1934 for the period ended March 31, 2003
                                       OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from ____________ to ______________

                         Commission file number 0-26323

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

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

                          6355 Topanga Canyon Boulevard
                                    Suite 510
                        Woodland Hills, California 91367
          (Address of principal executive offices, including zip code)

                                 (818) 883-6716
              (Registrant's telephone number, including area code)

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

As of May 9, 2003, the Registrant had 42,224,004 shares of common stock,  $0.001
par value, outstanding.

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


<PAGE>
<TABLE>
<CAPTION>



                                TABLE OF CONTENTS

ITEM                                                                                         PAGE

                                     PART I.

<S>      <C>                                                                                  <C>

1.       Financial Statements

          a.   Independent Accountant's Review Report.................................         1

          b.   Balance Sheets -- March 31, 2003 (unaudited) and December 31,
               2002...................................................................         2

          c    Statements of Operations -- Three Months Ended March 31, 2003,
               March 31, 2002, and from Inception through March 31, 2003..............         3

          d.   Statements of Stockholders' Equity (Deficit)...........................         4

          e    Statements of Cash Flows -- Three Months Ended March 31, 2003,
               March 31, 2002 and from Inception through March 31, 2003...............         5

          f    Notes to Financial Statements..........................................         6

          g    Management's Discussion and Analysis of Financial Condition and
               Results of  Operations.................................................        25

3.       Controls and Procedures......................................................        27

                                    PART II.


2.       Changes in Securities........................................................        27


6.       Exhibits and Reports on Form 8-K.............................................        29

</TABLE>



<PAGE>


                            ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          REVIEWED FINANCIAL STATEMENTS
                                 MARCH 31, 2003











                              WILLIAMS & WEBSTER PS
                          CERTIFIED PUBLIC ACCOUNTANTS
                        BANK OF AMERICA FINANCIAL CENTER
                           W 601 RIVERSIDE, SUITE 1940
                                SPOKANE, WA 99201
                                 (509) 838-5111




<PAGE>

PART I

ITEM 1.  FINANCIAL STATEMENTS

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

                     INDEPENDENT ACCOUNTANT'S REVIEW REPORT

We have reviewed the accompanying balance sheet of Advanced Biotherapy,  Inc. (a
development stage company and a Delaware  corporation) as of March 31, 2003, and
the related statements of operations,  stockholders' equity (deficit),  and cash
flows for the three months ended March 31, 2003 and 2002 and for the period from
December 2, 1985  (inception)  to March 31, 2003.  All  information  included in
these financial  statements is the  representation of the management of Advanced
Biotherapy, Inc.

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

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

The financial statements for the year ended December 31, 2002 were audited by us
and we expressed an unqualified opinion on them in our report dated February 25,
2003. We have not performed any auditing procedures since that date.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 2 to the
financial  statements,  the Company  has  generated  little  revenue in the past
years,  and has  suffered  recurring  losses  from  operations  resulting  in an
accumulated  deficit of $7,051,330  at March 31, 2003.  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
May 9, 2003


                                        1
<PAGE>

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

<TABLE>
<CAPTION>

                                 ASSETS

                                                                                      March 31,
                                                                                        2003          December 31,
                                                                                     (Unaudited)         2002
                                                                                     -----------      -----------
<S>                                                                                  <C>              <C>
     CURRENT ASSETS
        Cash                                                                         $    71,601      $    31,081
        Marketable securities                                                          2,600,000        3,000,000
        Notes receivable - related party                                                  46,619          246,619
        Interest receivable - related party                                                9,757           47,609
        Deposits and prepaid expenses                                                     36,385           54,882
                                                                                     -----------      -----------
              Total Current Assets                                                     2,764,362        3,380,191
                                                                                     -----------      -----------

     PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation                      185,335           16,414
                                                                                     -----------      -----------

     OTHER ASSETS
        Deferred loan origination fees, net of accumulated amortization                  114,438          128,910
        Patents and patents pending, net of accumulated amortization                     396,913          365,713
                                                                                     -----------      -----------
              Total Other Assets                                                         511,351          494,623
                                                                                     -----------      -----------

     TOTAL ASSETS                                                                    $ 3,461,048      $ 3,891,228
                                                                                     ===========      ===========


                  LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

     CURRENT LIABILITIES
        Accounts payable                                                             $   251,381      $   113,457
        Accounts payable - related party                                                  18,451           14,174
        Accrued expenses - related party                                                   1,667           63,367
        Accrued interest on convertible debt                                             151,426               --
                                                                                     -----------      -----------
              Total Current Liabilities                                                  422,925          190,998
                                                                                     -----------      -----------

     LONG-TERM DEBT
        Convertible notes payable                                                      5,584,995        5,604,010
        Notes payable to related parties                                                 127,631          127,631
                                                                                     -----------      -----------
              Total Long-Term Debt                                                     5,712,626        5,731,641
                                                                                     -----------      -----------

              Total Liabilities                                                        6,135,551        5,922,639
                                                                                     -----------      -----------

     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,
           42,224,004 and 43,601,317 shares issued and outstanding, respectively          42,223           43,600
        Additional paid-in capital                                                     3,720,377        3,937,923
        Stock options and warrants                                                       614,227          580,027
        Deficit accumulated during development stage                                  (7,051,330)      (6,592,961)
                                                                                     -----------      -----------
              Total Stockholders' Equity (Deficit)                                    (2,674,503)      (2,031,411)
                                                                                     -----------      -----------

     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                            $ 3,461,048      $ 3,891,228
                                                                                     ===========      ===========
</TABLE>

             See accompanying notes and accountant's review report.

                                       2

<PAGE>


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

<TABLE>
<CAPTION>

                                                                                           From Inception
                                                          Three Months Ended March 31,   (December 2, 1985)
                                                        ------------------------------       through
                                                           2003              2002          March 31, 2003
                                                        (Unaudited)       (Unaudited)       (Unaudited)
                                                        ------------      ------------      ------------
<S>                                                     <C>               <C>               <C>
     REVENUES                                           $         --      $         --      $     89,947
                                                        ------------      ------------      ------------

     OPERATING EXPENSES
            Research and development                         109,931            30,062         2,701,900
            Promotional fees                                     240               240            26,408
            Professional fees                                 56,375            71,384         2,439,785
            Directors' fees                                       --                --            66,880
            Depreciation and amortization                     23,713            12,819           582,901
            Administrative salaries and benefits              53,833                --         1,162,311
            Insurance                                         18,131            13,219           134,892
            Shareholder relations and transfer fees            5,508             4,000           209,001
            Rent                                              26,371                --           182,487
            Travel and entertainment                           7,164             6,516           180,297
            Telephone and communications                       1,104               622            32,624
            Office                                             3,433             1,110            58,652
            General and administrative                        12,292             6,241           637,000
                                                        ------------      ------------      ------------
                 Total Operating Expenses                    318,095           146,213         8,415,138
                                                        ------------      ------------      ------------

     Loss From Operations                                   (318,095)         (146,213)       (8,325,191)

     Other Income (Expense)
            Miscellaneous income                                  --                --            22,000
            Interest and dividend income                      12,648             4,059           124,809
            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)
            Interest expense                                (152,922)          (34,049)       (1,121,077)
                                                        ------------      ------------      ------------
                 Total Other Income (Expense)               (140,274)          (29,990)        1,273,861
                                                        ------------      ------------      ------------

     Loss Before Income Taxes                               (458,369)         (176,203)       (7,051,330)

     Income Taxes                                                 --                --                --
                                                        ------------      ------------      ------------

     NET LOSS                                           $   (458,369)     $   (176,203)     $ (7,051,330)
                                                        ============      ============      ============

     BASIC AND DILUTED NET LOSS
       PER COMMON SHARE                                 $      (0.01)     $        nil
                                                        ============      ============

     WEIGHTED AVERAGE NUMBER OF
     BASIC AND DILUTED COMMON STOCK
     SHARES OUTSTANDING                                   43,143,910        42,364,324
                                                        ============      ============
</TABLE>

             See accompanying notes and accountant's review report.

                                       3

<PAGE>

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

<TABLE>
<CAPTION>
                                                                                                        Deficit
                                                                                                      Accumulated      Total
                                                      Common Stock         Additional       Stock       During     Stockholders'
                                               -------------------------     Paid-in     Options and  Development     Equity
                                                  Shares        Amount       Capital       Warrants      Stage       (Deficit)
                                               -----------   -----------   -----------   -----------  -----------   -----------
<S>                                             <C>          <C>           <C>           <C>          <C>           <C>
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 in exchange
for services                                            --            --            --        54,344           --        54,344

Stock options issued 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)

Contribution of capital by shareholders in
form of foregone interest                               --            --         1,026            --           --         1,026

Common stock issued in exchange
for convertible debt at $0.25 per share             76,476            77        19,042            --           --        19,119

Stock issued for cash at an average price of
$0.01 per share from the exercise of options       150,000           150         1,350            --           --         1,500

Stock returned in settlement of notes
and accrued interest receivable                 (1,603,789)       (1,604)     (238,964)           --           --      (240,568)

Stock options issued in exchange
for services                                            --            --            --        34,200           --        34,200

Net loss for the quarter ended
  March 31, 2003                                        --            --            --            --     (458,369)     (458,369)
                                               -----------   -----------   -----------   -----------  -----------   -----------

Balance, March 31, 2003 (Unaudited)             42,224,004   $    42,223   $ 3,720,377   $   614,227  $(7,051,330)  $(2,674,503)
                                               ===========   ===========   ===========   ===========  ===========   ===========
</TABLE>

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

             See accompanying notes and accountant's review report.

                                       4

<PAGE>

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

<TABLE>
<CAPTION>
                                                                                       From Inception
                                                     Three Months Ended March 31,    (December 2, 1985)
                                                     -------------------------            through
                                                        2003          2002             March 31, 2003
                                                     (Unaudited)   (Unaudited)          (Unaudited)
                                                     -----------   -----------           -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                  <C>           <C>                   <C>
Net (loss)                                           $  (458,369)  $  (176,203)          $(7,051,330)
Adjustments to reconcile net loss to cash
  used in operating activities:
    Depreciation and amortization                         23,713        12,819               582,901
    Loss on disposal of equipment                             --            --                 2,224
    Investment income                                         --            --              (157,520)
    Expenses paid through issuance
      of common stock                                         --            --               231,340
    Expenses paid through issuance
      of common stock warrants and options                34,200        13,600               403,489
    Accrued interest paid by convertible debt                104           511               578,151
    Expenses paid through contribution
      of additional paid-in capital                        1,026         1,523                52,607
    Organization costs                                        --            --                (9,220)
    Decrease (increase) in:
       Marketable securities                             400,000            --            (2,600,000)
       Deposits and prepaid expenses                      18,497        13,745               (36,385)
       Interest receivable                                (2,716)       (4,007)              (50,325)
       Deferred loan origination cost                         --            --              (215,183)
    Increase (decrease) in:
       Accounts payable                                   80,501        77,262               271,499
       Accounts and notes payable, related parties            --            --               127,631
       Payroll and payroll taxes payable                      --            --                 8,878
       Accrued interest                                  151,426        32,016               151,426
                                                     -----------   -----------           -----------

Net cash provided by (used in) operating activities      248,382       (28,734)           (7,709,817)
                                                     -----------   -----------           -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of fixed assets                            (170,411)           --              (233,684)
    Internal gain on sale of securities                       --            --               157,520
    Acquisition of patents                               (38,951)      (32,805)             (527,053)
                                                     -----------   -----------           -----------

Net cash used in investing activities                   (209,362)      (32,805)             (603,217)
                                                     -----------   -----------           -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from issuance of common stock                 1,500         6,000             2,457,254
    Proceeds from convertible notes                           --        35,000             5,714,000
    Proceeds from notes payable                               --            --               388,508
    Payments on notes payable                                 --            --              (175,127)
                                                     -----------   -----------           -----------

Net cash provided by financing activities                  1,500        41,000             8,384,635
                                                     -----------   -----------           -----------

Net increase (decrease) in cash                           40,520       (20,539)               71,601

Cash, beginning                                           31,081        36,615                    --
                                                     -----------   -----------           -----------

Cash, ending                                         $    71,601   $    16,076           $    71,601
                                                     ===========   ===========           ===========

SUPPLEMENTAL CASH FLOW DISCLOSURES:

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

NON-CASH FINANCING AND INVESTING ACTIVITIES:

    Common stock issued in exchange for
       professional fees and expenses                $        --   $        --           $   340,869
    Contributed expenses                             $     1,026   $     1,523           $    52,607
    Common stock issued for a loan payable           $        --   $        --           $   213,381
    Common stock issued for notes receivable         $        --   $        --           $   246,619
    Common stock returned in payment of
       notes and interest receivable                 $   240,568   $        --           $   240,568
    Options issued for services                      $    34,200   $    13,600           $   157,200
    Warrants issued for services                     $        --   $        --           $   246,289
    Accrued interest paid by convertible debt        $       104   $       511           $   578,151
    Common stock issued for convertible debt         $    19,119   $    29,142           $   707,156
</TABLE>


             See accompanying notes and accountant's review report.

                                       5

<PAGE>

                           ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2003


NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

Advanced Biotherapy, Inc. was originally incorporated December 2, 1985 under the
laws of the State of Nevada as Advanced  Biotherapy  Concepts,  Inc. 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.

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.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of Advanced Biotherapy,  Inc. is
presented to assist in understanding  the Company's  financial  statements.  The
financial statements and notes are representations of the Company's  management,
which is  responsible  for their  integrity and  objectivity.  These  accounting
policies  conform to  accounting  principles  generally  accepted  in the United
States of America,  and have been consistently applied in the preparation of the
financial statements.

Development Stage Activities

The Company has been in the  development  stage since its  formation in 1985 and
has not realized any  significant  revenues from its planned  operations.  It is
primarily engaged in the research and development of the treatment of autoimmune
diseases in humans, most notably, multiple sclerosis and rheumatoid arthritis.

Going Concern

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will continue as a going  concern.  For the period ended March 31, 2003,
the  Company  incurred a net loss of  $458,369  and had an  accumulated  deficit
during the development  stage of $7,051,330 for the period then ended.  Although
the  Company  has  sufficient  funds  for  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 March 31, 2003, 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.

Accounting Method

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

                                       6

<PAGE>

                           ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2003


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Pronouncements

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.


                                       7
<PAGE>


                           ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2003


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Accounting for Long-Lived Assets

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 March 31, 2003.

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.

Cash and Cash Equivalents

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

Use of Estimates

The process of preparing  financial  statements  in conformity  with  accounting
principles  generally  accepted in the United States of America requires the use
of estimates and  assumptions  regarding  certain types of assets,  liabilities,
revenues,   and  expenses.   Such  estimates   primarily   relate  to  unsettled
transactions and events as of the date of the financial statements. Accordingly,
upon settlement, actual results may differ from estimated amounts.

Provision for Taxes

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 March 31,  2003,  the Company had net  deferred  tax assets of  approximately
$1,270,000, 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 March 31, 2003,  the  Company's net operating  loss  carryforwards  amount to
approximately  $5,090,000,  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.


                                       8
<PAGE>

                           ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2003


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Reclassifications

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

Promotional  fees are charged to  operations in the year  incurred.  Promotional
fees amounted to $240 for each of the periods ended March 31, 2003 and 2002.

Research and Development Costs

Costs of research and development are expensed as incurred.

Compensated Absences

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

Revenue Recognition

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

Fair Value of Financial Instruments

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

Deferred Loan Origination Fees

During the year ended  December 31, 2000, the Company  entered into  convertible
subordinated debt, which required the payment of loan origination fees. See Note
12. These loan  origination  fees,  which totaled  $40,152,  net of  accumulated
amortization at March 31, 2003, are amortized over the life of the related debt.
During the period  ended  March 31,  2003,  the  Company  recorded  amortization
expense in the amount of $6,928 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  $74,287,  net of  accumulated
amortization at March 31, 2003, are amortized over the life of the related debt.
During the period  ended  March 31,  2003,  the  Company  recorded  amortization
expense in the amount of $7,544 related to these fees.

Internal Gain On Sale of Securities

During the year ending December 31, 2000,  officers of the Company sold stock at
a gain shortly after  purchasing stock through a stock bonus plan. In compliance
with the Securities and Exchange Rule 16b, the 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.


                                       9
<PAGE>

                           ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2003


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Derivative Instruments

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  statements   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 March 31, 2003, 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  exercisable  stock options  (1,987,953
shares) and  warrants  (5,324,535  shares),  and  convertible  debt  (22,946,100
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.

Interim Financial Statements

The interim financial statements as of and for the quarter ended March 31, 2003,
included herein,  have been prepared without audit. These statements reflect all
adjustments,  which are,  in the  opinion of  management,  necessary  to present
fairly the results of operations for these  periods.  All such  adjustments  are
normal  recurring  adjustments.  The  results  of  operations  for  the  periods
presented are not  necessarily  indicative of the results to be expected for the
full fiscal year.


                                       10
<PAGE>

                           ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2003


NOTE 3 - PROPERTY AND EQUIPMENT

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

The following is a summary of property,  equipment and accumulated  depreciation
at March 31, 2003 and December 31, 2002:

<TABLE>
<CAPTION>
                                             March 31, 2003          December 31, 2002
                                        -----------------------   -----------------------
                                                   Accumulated                Accumulated
                                         Cost      Depreciation    Cost      Depreciation
                                        --------     --------     --------     --------
<S>                                     <C>          <C>          <C>          <C>
     Lab equipment                      $ 27,582     $ 27,582     $ 27,582     $ 27,582
     Office equipment                     18,062       12,057       18,062       11,073
     Furniture and fixtures               11,384        2,465       11,384        1,959
     Filing room under construction      170,411         --           --           --
                                        --------     --------     --------     --------
                                        $227,439     $ 42,104     $ 57,028     $ 40,614
                                        ========     ========     ========     ========
</TABLE>


Depreciation  expense for the  periods  ended March 31, 2003 and 2002 was $1,490
and $669, respectively.

NOTE 4 - INVESTMENTS

Marketable Securities

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 March 31,
2003,  there was no change in the fair market value of the securities.  See Note
7.

NOTE 5 - INTANGIBLE ASSETS

Patents and Patents Pending

Costs relating to the development  and approval of patents,  other than research
and  development  costs which are expensed,  are capitalized and amortized using
the  straight-line  method over seventeen years. The Company's patents relate to
the treatment of autoimmune diseases.

The following is a summary of the costs of patents and patents  pending at March
31, 2003:

<TABLE>
<CAPTION>
                                                 Accumulated        Net
                                       Cost     Amortization       Amount
                                    ---------     ---------      ---------
<S>                                 <C>           <C>            <C>
     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
     2003 Activity                     38,951        (7,751)        31,200
                                    ---------     ---------      ---------
     Balance, March 31, 2003        $ 527,053     $(130,140)     $ 396,913
                                    =========     =========      =========
</TABLE>


                                       11

<PAGE>


                           ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2003


NOTE 6 - RELATED PARTY TRANSACTIONS

Current Transactions

On February 7, 2003, the board of directors  unanimously approved the repurchase
of  1,603,789  shares of common  stock from an officer and two  directors to the
Company in satisfaction  of outstanding  notes  receivable and accrued  interest
totaling $240,568. The 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 the officer and
directors under the Stock Bonus Plan on January 11, 2000.

The  Company  has notes  receivable  in the  aggregate  amount of  $46,619  from
non-officer/director  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. These notes receivable have not
been collected and as a result are in default. The Company intends to extend the
notes for an additional three years to the non-officer/director shareholders.

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 $1,026 was  recorded  during the period  ending  March 31,  2003 as  interest
expense and contributed capital in the accompanying financial statements.

See Note 13 for related party office lease agreements.

Transactions in 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.

Transactions in 1999

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.


                                       12

<PAGE>


                           ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2003


NOTE 6 - RELATED PARTY TRANSACTIONS (CONTINUED)

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.

NOTE 7 - CONCENTRATIONS

Bank Accounts

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
$71,601 is at risk on March 31, 2003.

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
$2,600,000 is at risk as of March 31, 2003. See Note 4.

NOTE 8 - COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL

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

<TABLE>
<CAPTION>

                                                     Common Stock
                                    ------------------------------------------------
                                       Average                                             Additional
                                      price per                                             Paid-in
                                        share            Shares            Amount           Capital
                                    ------------      --------------     -----------    ----------------
Common stock issued for cash:
<S>                                 <C>               <C>                <C>             <C>
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

</TABLE>


                                       13

<PAGE>

                           ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2003


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

<TABLE>
<CAPTION>
                                                                    Common Stock
                                                   ------------------------------------------------
                                                      Average
                                                     price per                                           Additional
                                                       share            Shares            Amount       Paid-in Capital
                                                   ------------      --------------     -----------    ----------------

Common stock issued for cash (continued):
<S>                                                <C>               <C>                <C>            <C>
1997                                                   $  .09            1,800,500      $    1,801     $       153,749
1998                                                      .10              305,000             305              30,195
1999                                                      .05            3,158,000           3,158             151,993
                                                                     --------------     -----------    ----------------
                                                                        10,800,500          10,801           2,399,703
                                                                     --------------     -----------    ----------------

Common stock issued for patents assigned:

1984                                                      .01              550,000           5,500                   -
1985, adjustment to reflect change in number   and
   par value of shares outstanding                         --            2,750,000          (2,200)              2,200
                                                                     --------------     -----------    ----------------
                                                                         3,300,000           3,300               2,200
                                                                     --------------     -----------    ----------------

Common stock issued for acquisitions:

1985                                                      .01           13,333,500          13,334             (41,112)
                                                                     --------------     -----------    ----------------

Common stock issued for note receivable:

1986                                                     1.00               10,000              10               9,990
2000                                                      .05            4,932,380           4,932             241,687
                                                                     --------------     -----------    ----------------
                                                                         4,942,380           4,942             251,677
                                                                     --------------     -----------    ----------------

Common stock returned in payment of notes receivable:

2003                                                      .16          (1,603,789)         (1,604)           (238,964)
                                                                     --------------     -----------    ----------------

Contribution of additional paid-in capital:

1991                                                       --                   --              --              35,825
1999                                                       --                   --              --              28,098
2000                                                       --                   --              --               9,735
2001                                                       --                   --              --               8,113
2002                                                       --                   --              --               5,635
2003                                                       --                   --              --               1,026
                                                                     --------------     -----------    ----------------
                                                                                --              --              88,432
                                                                     --------------     -----------    ----------------

Stock subscriptions:

1999                                                      .05              650,000             650              31,850
                                                                     --------------     -----------    ----------------

Cancellation of escrowed shares in 1999                    .001           (850,000)           (850)                850
Reissued escrowed shares cancelled in error:
2001- See Note 14                                          .001             850,000            850                (850)
                                                                     --------------     -----------    ----------------
                                                                                --              --                  --
                                                                     --------------     -----------    ----------------
</TABLE>

                                       14

<PAGE>

                           ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2003


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

<TABLE>
<CAPTION>
                                                                    Common Stock
                                                   ------------------------------------------------
                                                      Average
                                                     price per                                           Additional
                                                       share            Shares            Amount       Paid-in Capital
                                                   ------------      --------------     -----------    ----------------
Common stock issued for services (1):
<S>                                                <C>               <C>                <C>            <C>

1988                                                   $  .50               25,000      $       25     $        12,475
1989                                                      .38               25,000              25               9,475
1990                                                      .66               37,375              37              24,635
1991                                                      .51              159,500             160              81,010
1992                                                      .75               62,500              62              46,563
1993                                                      .25              120,000             120              29,880
1996                                                      .05              308,500             308              13,832
1997                                                      .05              155,500             155               7,619
1999                                                      .05               99,190              99               4,860
                                                                     --------------     -----------    ----------------
                                                                           992,565             991             230,349
                                                                     --------------     -----------    ----------------

Common stock issued to replace
  unrecorded certificates:

1988                                                       .001              1,200               1                  (1)
1992                                                       .001                500               1                  (1)
2000                                                       .001            100,000             100                (100)
                                                                     --------------     -----------    ----------------
                                                                           101,700             102                (102)
                                                                     --------------     -----------    ----------------

Common stock issued for forgiveness of
  accounts payable (1):

1990                                                      .50               25,000              25              12,475
1996                                                      .05              150,000             150               7,350
                                                                     --------------     -----------    ----------------
                                                                           175,000             175              19,825
                                                                     --------------     -----------    ----------------

Common stock issued in payment of
  notes payable (1):

1993                                                      .25              200,000             200              49,800
2000                                                      .05            1,714,995           1,715              84,035
                                                                     --------------     -----------    ----------------
                                                                         1,914,995           1,915             133,835
                                                                     --------------     -----------    ----------------

Common stock issued in payment of
  loans payable (1):

2000                                                      .05            2,552,625           2,553             125,078
                                                                     --------------     -----------    ----------------

Common stock issued for commissions (1):

1993                                                       .001          1,260,000           1,260                  --
                                                                     --------------     -----------    ----------------
</TABLE>

                                       15

<PAGE>

                           ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2003


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

<TABLE>
<CAPTION>
                                                                    Common Stock
                                                   ------------------------------------------------
                                                      Average
                                                     price per                                           Additional
                                                       share            Shares            Amount       Paid-in Capital
                                                   ------------      --------------     -----------    ----------------
Common stock issued for convertible debt:
<S>                                                <C>               <C>                <C>            <C>

2001                                                   $  .25            1,605,346      $    1,605     $       399,504
2002                                                      .25            1,147,706           1,147             285,781
2003                                                      .25               76,476              77              19,042
                                                                     --------------     -----------    ----------------
                                                                         2,829,528           2,829             704,327
                                                                     --------------     -----------    ----------------

Stock options exercised:

1997                                                      .01              325,000             325               2,929
2000                                                      .01              350,000             350               3,150
2002                                                      .04              150,000             150               5,850
2003                                                      .01              150,000             150               1,350
                                                                     --------------     -----------    ----------------
                                                                           975,000             975              13,279
                                                                     --------------     -----------    ----------------
Total                                                                   42,224,004  $       42,223   $       3,720,377
                                                                     ==============     ===========    ================
</TABLE>


(1)  Per share amounts  determined by information  deemed most reliable based on
     circumstances  of each case:  trading price at time of issuance or value of
     services received.

Effective  with the merger 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 authorized common stock to 200,000,000 shares.

Stock Bonus Plan

On January 11,  2000,  the Company  issued  9,200,000  shares of common stock to
certain key officers and directors under a stock bonus plan,  subject to various
restrictions.  The plan's purpose is to keep personnel of experience and ability
in the employ of the Company and to compensate them for their  contributions  to
the  growth of the  Company,  thereby  inducing  them to  continue  to make such
contributions  in the future.  Such stock  bonuses  were issued at the  weighted
average  price at which  the  Company  had been  selling  shares of stock out of
authorized but yet unissued  common stock to third parties during the six months
immediately  preceding the issuance of the bonus shares,  or $0.05 per share. On
February 7, 2003, the board of directors unanimously approved the repurchase and
cancellation  of  1,603,789  of these  shares of common stock at the fair market
value of $0.16 per share in  satisfaction  of outstanding  notes  receivable and
accrued  interest.  At March 31, 2003, a total of 800,000  shares are  available
under this plan.


                                       16

<PAGE>

                           ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2003


NOTE 9 - PREFERRED STOCK

With the  merger  into its  Delaware  subsidiary,  the  Company  has  authorized
20,000,000 shares of $0.001 par value preferred stock. As of March 31, 2003, the
Company has not issued any preferred stock.

NOTE 10 - STOCK OPTIONS AND ISSUANCE COMMITMENTS

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 the remaining  option to purchase  150,000 shares of common
stock was exercised during January 2003. During 1995,  options for 50,000 shares
were granted at $0.20 per share,  which expire in 2005. 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.

Omnibus Equity Incentive Plan

In 2000,  the  Company  approved an Omnibus  Equity  Incentive  Plan,  which was
approved by the  stockholders  in December  2001.  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.  At March 31, 2003,  there are 30,000 shares  available
under this plan.


                                       17
<PAGE>



                           ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2003


NOTE 10 - STOCK OPTIONS AND ISSUANCE COMMITMENTS (CONTINUED)

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.

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.

During January 2003, the Company issued stock options to purchase 180,000 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, 2002.  The options are  exercisable
immediately  and expire on December 31, 2012.  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
98% with no  dividends  expected  to be paid.  The  Company  recorded a total of
$34,200  ($0.19 per option) of expense for the value of these options based upon
these Black Scholes assumptions.

On  February  7,  2003,  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 have an exercise price of
$0.16 per share and 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. 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  $0.16,  risk  free  interest  rate of 5%,
expected life of 7 years, and

                                       18

<PAGE>

                           ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2003


NOTE 10 - STOCK OPTIONS AND ISSUANCE COMMITMENTS (CONTINUED)

expected  volatility of 82% with no dividends  expected to be paid.  The Company
will  record an expense  for the value of these  options  based upon these Black
Scholes  assumptions of $504,300 ($0.123 per option) during the next three years
as the options vest.

The following is a summary of the Company's equity compensation plans:


<TABLE>
<CAPTION>
                                                                                           Number of securities
                                     Number of securities to       Weighted-average       remaining available for
                                     be issued upon exercise      exercise price of        future issuance under
               Plan                   of outstanding options     outstanding options     equity compensation plans
----------------------------------- --------------------------- ----------------------- ----------------------------
<S>                                 <C>                         <C>                     <C>
Equity compensation plan approved                    4,720,000                   $0.17                       30,000
   by security holders (1)
Equity compensation plan not
   approved by security holders                              -                       -                      800,000
   (2)
                                    ---------------------------                         ----------------------------
Total                                                4,720,000                                              830,000
                                    ===========================                         ============================
</TABLE>


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

Following  is a summary of the  status of the  options  during the period  ended
March 31, 2003 and the year ended December 31, 2002:

<TABLE>
<CAPTION>
                                                                                                  Weighted Average
                                                                    Number of Shares               Exercise Price
                                                                  ----------------------        ---------------------
<S>                                                               <C>                           <C>
Outstanding at January 1, 2002                                             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
Granted                                                                    4,280,000                        0.17
Exercised                                                                   (150,000)                       0.01
Forfeited                                                                          -                            -
                                                                  ----------------------        ---------------------
Options outstanding at March 31, 2003                                      6,087,953                        0.16
                                                                  ======================        =====================
Options exercisable at March 31, 2003                                      1,987,953                 $      0.15
                                                                  ======================        =====================
Weighted average fair value of options granted in 2003                                               $      0.16
                                                                                                =====================

</TABLE>


                                       19

<PAGE>

                           ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2003


NOTE 10 - STOCK OPTIONS AND ISSUANCE COMMITMENTS (CONTINUED)

Summarized  information about stock options outstanding and exercisable at March
31, 2003 is as follows:

<TABLE>
<CAPTION>

                                                              Outstanding Options
                                     -----------------------------------------------------------------------
                                       Number of          Weighted Average             Weighted Average
           Exercise Price Range         Shares             Remaining Life               Exercise Price
           ---------------------     --------------    ------------------------     ------------------------
<S>                                  <C>               <C>                          <C>
              $0.01 - $0.25            6,087,953                6.13                        $ 0.16
</TABLE>

<TABLE>
<CAPTION>
                                                              Exercisable Options
                                     -----------------------------------------------------------------------
                                       Number of          Weighted Average             Weighted Average
           Exercise Price Range         Shares             Remaining Life               Exercise Price
           ---------------------     --------------    ------------------------     ------------------------
<S>                                  <C>               <C>                          <C>
              $0.01 - $0.25            1,987,953                4.62                        $ 0.15
</TABLE>



NOTE 11 - NON-CASH COMMITMENT AND WARRANTS

During the period ended March 31, 2003, the Company issued  warrants to purchase
a total of 100,000  shares of common  stock to two  outside  consultants.  These
warrants have an exercise price of $0.16 per share,  expire in seven-years,  and
vest over a period of three years,  with the first  one-third  of such  warrants
vesting in 2004, the next one-third in 2005 and the remaining  one-third vesting
in 2006. In accordance with Statement of Financial  Accounting Standard 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 stock
warrants: strike price at $0.16, risk free interest rate of 5%, expected life of
7 years, and expected  volatility of 82% with no dividends  expected to be paid.
The Company  will record an expense for the value of these  warrants  based upon
these Black Scholes  assumptions of $12,300  ($0.123 per option) during the next
three years as the warrants vest.

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.


                                       20

<PAGE>


                           ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2003


NOTE 11 - NON-CASH COMMITMENT AND WARRANTS (CONTINUED)

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.

Summarized information about stock warrants outstanding and exercisable at March
31, 2003 is as follows:

<TABLE>
<CAPTION>

                                     Number of             Weighted Average
                                     warrants               Remaining Life          Average exercise price
                                 ------------------    ------------------------     -----------------------
<S>                              <C>                      <C>                       <C>
       Outstanding                   5,424,535                   6.60                       $0.16
       Exercisable                   5,324,535                   6.59                       $0.16
</TABLE>


NOTE 12 - CONVERTIBLE DEBT

2000 Convertible Notes

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 period ended March 31, 2003 was $6,928.

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.  During the period  ended March 31, 2003, a
total of $15,000  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.

                                       21
<PAGE>


                           ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2003


NOTE 12 - CONVERTIBLE DEBT (CONTINUED)

2000 Convertible Notes (Continued)

At March 31,  2003,  the  remaining  2000  notes,  including  converted  accrued
interest, may be converted into a total of 4,608,604 shares of common stock.

2002 Convertible Notes due September 30, 2004

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 period ended March 31,
2003 was $3,794.

At March 31, 2003, the remaining  2002-2004 notes,  including  converted accrued
interest, may be converted into a total of 5,064,032 shares of common stock.

2002 Convertible Notes due June 1, 2006

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.

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 related  party a loan  origination  fee of  $60,000.
Amortization  of the loan  origination fee for the year ended March 31, 2003 was
$3,750.

At March 31, 2003, the remaining  2002-2006 notes,  including  converted accrued
interest, could be converted into a total of 13,273,464 shares of common stock.

2002 Convertible Notes

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.


                                       22

<PAGE>

                           ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2003


NOTE 13 - COMMITMENTS AND CONTINGENCIES

Consulting Contract

During  2001,  the  Company  signed a  contract  with a  consultant  to  provide
information on possible partnering companies to divest or license certain rights
to its  technologies  or  products.  The Company has 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.

Occupancy Agreements

During the period ended March 31, 2003, the company  entered a verbal  agreement
to pay  approximately  $4,000 a month to a firm  owned  by the  Company's  chief
executive  officer and chief  financial  officer for tax  preparation  services,
monthly accounting, and reimbursement for rent and employee benefits.

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

Contracts

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  March  2003,  the  Company  entered  into an  agreement  for the design,
construction   and  validation  in  accordance  with  FDA  standards  and  other
regulatory  requirements  of a new  pilot  formulation  and  filling  room to be
located in Columbia,  Maryland,  within the facilities  currently  leased to New
Horizons  Diagnostics,  Inc., a company  principally owned by Lawrence Loomis, a
director  of the  Company.  The  contract  calls for a payment of  approximately
$164,000.


                                       23
<PAGE>

                           ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 2003


NOTE 14 - RESTATEMENT OF SHARES

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.

                                       24

<PAGE>



ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

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.  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:  availability of capital for research and development;  availability
of capital for clinical trials;  opportunities  for joint ventures and corporate
partnering;  opportunities  for mergers and acquisitions to expand the Company's
biotechnology  base or  acquire  revenue  generating  products;  the  results of
preclinical  and  clinical  trials,  if any;  regulatory  approvals  of  product
candidates new indications and manufacturing facilities;  health care guidelines
and policies  relating to prospective  Company products;  intellectual  property
matters  (patents);  and competition.  Factors that could cause or contribute to
such differences include, but are not limited to; those discussed in the section
entitled "Item 1. Business," and all  subsections  therein,  including,  without
limitation,   the  subsections  entitled,   Technical   Background,   Government
Regulation, Federal Drug Administration Regulation, Competition and Factors That
May Affect the Company, and the section entitled "Market for Registrant's Common
Equity and Related  Stockholder  Matters," all contained in the Company's Annual
Report,  as amended,  on Form  10-KSB/A  for the fiscal year ended  December 31,
2002. 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.

Results of Operations

Liquidity and Capital Resources

         As of March 31, 2003, the Company had issued and outstanding 42,224,004
shares of its Common Stock. The Company previously reported that it had arranged
to repurchase,  subject to completion of documentation,  an aggregate  1,603,789
shares of common stock from Edmond Buccellato,  the Company's President and CEO,
and two other directors, Lawrence Loomis and Boris Skurkovich, M.D., in order to
enable   the   Company   to  comply   with  the   Sarbanes-Oxley   Act  of  2002
("Sarbanes-Oxley Act"), which, as of July 30, 2002, prohibits loans to directors
and officers.  The foregoing  repurchase was completed  during the quarter ended
March 31, 2003, and,  accordingly,  reduces the number of issued and outstanding
shares of the Company's common stock by an aggregate 1,603,789 shares.


                                       25
<PAGE>

The  Company  is a development stage company and its principal assets consist of
cash, marketable securities and patents and patent applications. The Company had
$2,671,601  in  cash  and  marketable  securities  as of March 31, 2003. For the
twelve-month  period  subsequent to March 31, 2003, 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  and  co-development  arrangements  related  to  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  biotechnology  company,  or  any  such  out-licensing  or
co-development  arrangements.

Three Months Ended March 31, 2003 and 2002

For  the three months ended March 31, 2003, the Company realized a net loss from
operations  of  $458,369  compared to a net loss from operations of $176,203 for
the  three  months  ended  March 31, 2002. The Company had increases in expenses
over  the  three  months  ended  March  31,  2002,  consisting  primarily of the
following: increased research and development expenses in the amount of $79,869,
increased  interest  expense  in the amount of $118,873 related to the Company's
convertible  subordinated  debt  and subordinated convertible pay-in-kind notes,
increased rent in the amount of $26,371, increased depreciation and amortization
in  the  amount  of  $10,894, increased travel and entertainment expenses in the
amount  of  $648  related  to  business  development  and other Company matters,
increased  administrative  salaries  and  benefits  in  the  amount  of $53,833,
increased  general  and  administrative expenses in the amount of $6,051; net of
decreased  professional fees in the amount of $15,009 and increased interest and
dividend  income  in  the  amount  of  $8,589.

RESTATEMENT OF COMPANY FINANCIAL STATEMENTS

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.
Subsequent  to  December 31, 2001, 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 third-party consultant and certain other
parties,  the  Company  issued  850,000 shares in the name of the consultant and
placed  those  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 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



                                       26
<PAGE>

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.

ITEM 3.      CONTROLS AND PROCEDURES

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 Quarterly Report
on  Form  10-QSB, 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  Rules  13a-14(c) and
15d-14(c) promulgated under 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-Oxley Act of 2002, (18 U.S.C. 1350), each of
the  Certifying  Officers  executed  an Officer's Certification included in this
Quarterly  Report  on  Form  10-QSB.

As of the date of this Quarterly Report on Form 10-QSB,  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.

PART II

ITEM 2. (c)     CHANGES IN SECURITIES

During  the  quarter  ended  March  31, 2003, the Company granted options to the
directors,  officers  and  consultants  listed  below  to  purchase an aggregate
4,100,000  shares  of Common Stock at an exercise price of $0.16 per share under
the  Company's  2000  Omnibus Equity Incentive Plan (the "OEI Plan"). Subject to
the  terms  applicable to such grants and the OEI Plan, the stock options become
exercisable  in  equal installments on the first, second and third anniversaries
of  the  grant  date  (February  7, 2003), and expire seven years from the grant
date.  The  stock  options  cease  to  vest  upon  complete  termination  of the
optionee's  services  as  a  director,  officer,  employee  or consultant of the
Company.


                                       27
<PAGE>


           OPTIONEE NAME                          NUMBER OF OPTION SHARES
           -------------                          -----------------------
         John M. Bendheim                                  350,000
       Edmond F. Buccellato                              1,500,000
           Jeanne Kelly                                    150,000
          Lawrence Loomis                                1,200,000
      Boris Skurkovich, M.D.                               450,000
      Simon Skurkovich, M.D.                               450,000

In addition,  the Company  granted  warrants to purchase 50,000 shares of Common
Stock  at an  exercise  price  of  $0.16  per  share  to each  of the  following
consultants: Dr. Seji Haba and Joseph Tartel. Subject to the terms applicable to
such grants, the warrants become exercisable in equal installments on the first,
second and third  anniversaries of the grant date (February 7, 2003), and expire
seven  years  from the grant  date.  The  warrants  cease to vest upon  complete
termination of the recipient's  services as a consultant,  employee,  officer or
director of the Company.

The  above  described  stock  options  and  warrants  were  granted to officers,
directors  and  consultants  based  upon, among other factors, the potential for
individual  contribution  to  the  Company.  In  the case of Mr. Buccellato, Mr.
Loomis  and  Dr. Boris Skurkovich, consideration also was given to the amount of
stock  bonus plan shares which the Company repurchased from each such individual
in  order  to  enable  the  Company  to  comply with the Sarbanes-Oxley Act. The
disinterested  members  of  the  Board of Directors determined the amount of the
stock  options  and warrants and the exercise price of the options and warrants,
which  was  set  at  fair  market  value  on  the  grant  date.

ITEM 5.

On or around  March 31,  2003,  the  Company  entered  into an  agreement  ("IPS
Agreement") with Integrated Project Services, a national integrated  engineering
firm providing technical services focused on clean, compliant industries.

The  IPS Agreement provides for the design, construction and validation of a new
pilot  formulation  and  filling  room  ("Facility")  to be located in Columbia,
Maryland,  within  the  facilities currently leased to New Horizons Diagnostics,
Inc., a company principally owned by Lawrence Loomis, a director of the Company.
The  responsibilities  of  Integrated Project Services include, among others, to
provide an FDA approved manufacturing space for the Facility, and to build a new
sterile  unit  that will be validated in accordance with FDA standards and other
regulatory  requirements.  The  project  cost  for  the Facility is estimated at
$164,500,  excluding  costs for additional services and equipment not covered by
the  IPS  Agreement.

                                       28
<PAGE>

The  purpose  of the Facility, among others, is to test and manufacture clinical
grade  antibodies  for  clinical  trial purposes. The Company estimates that the
annual  labor  and  maintenance  cost  for  the  Facility  will be approximately
$150,000,  excluding  capital  expenditures and equipment leases. The Company is
seeking  a term loan to finance the project, but no assurances can be given that
financing  will  be  available  or,  if  available, on terms satisfactory to the
Company.

Reference is made to Exhibit 10.12 attached to this Form 10-QSB,  which contains
the IPS Agreement,  and the foregoing  summary of the IPS Agreement is qualified
in its entirety by this reference.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

   (a)      Exhibit
            Number               Description

             10.12               Integrated  Project  Service  Agreement
                                 for Pilot  Formulation  and Filling
                                 Area dated March 31, 2003.

               99.1              Certification    of   Chief   Executive
                                 Officer  Pursuant to 18 U.S.C.  Section
                                 1350,  as Adopted  Pursuant  to Section
                                 906 of the Sarbanes-Oxley Act of 2002.

               99.2              Certification    of   Chief   Financial
                                 Officer  Pursuant to 18 U.S.C.  Section
                                 1350,  as Adopted  Pursuant  to Section
                                 906 of the Sarbanes-Oxley Act of 2002.



   (b)  REPORTS ON FORM 8-K
        -------------------

        Current Report on Form 8-K dated March 10, 2003   Item 5.  Other Events



                                       29
<PAGE>



                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant has duly caused this Report on Form 10-QSB to be signed on its behalf
by the undersigned thereunto duly authorized as of May 14, 2003.

                                            Advanced Biotherapy, Inc.
                                            (Registrant)


By:      S/EDMOND F. BUCCELLATO             By:      S/WILLIAM M. FINKELSTEIN
         ---------------------------                 ---------------------------
         Edmond F. Buccellato                        William M. Finkelstein
         President and CEO                           Chief Financial Officer







                                       30
<PAGE>

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

I, Edmond F. Buccellato, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Advanced  Biotherapy,
Inc.;

2. Based on my  knowledge,  this  quarterly  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 quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  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 quarterly 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 quarterly 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
quarterly report (the "Evaluation Date"); and

     c) presented in this quarterly 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


                                       31
<PAGE>

     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
quarterly  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.

Date:    May 14, 2003

                                      S/EDMOND F. BUCCELLATO
                                      -------------------------------------
                                      Edmond F. Buccellato
                                      President and Chief Executive Officer


                                       32
<PAGE>

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

I, William M. Finkelstein, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Advanced  Biotherapy,
Inc.;

2. Based on my  knowledge,  this  quarterly  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 quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  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 quarterly 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 quarterly 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
quarterly report (the "Evaluation Date"); and

     c) presented in this quarterly 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


                                       33
<PAGE>

     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
quarterly  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.


Date:    May 14, 2003

                                                S/WILLIAM M. FINKELSTEIN
                                                --------------------------
                                                William M. Finkelstein
                                                Chief Financial Officer






                                       34
<PAGE>

                                  EXHIBIT INDEX

            EXHIBIT                          DESCRIPTION
            -------                         -------------



             10.12               Integrated  Project  Service  Agreement
                                 for Pilot  Formulation  and Filling
                                 Area dated March 31, 2003.

               99.1              Certification    of   Chief   Executive
                                 Officer  Pursuant to 18 U.S.C.  Section
                                 1350,  as Adopted  Pursuant  to Section
                                 906 of the Sarbanes-Oxley Act of 2002.

               99.2              Certification    of   Chief   Financial
                                 Officer  Pursuant to 18 U.S.C.  Section
                                 1350,  as Adopted  Pursuant  to Section
                                 906 of the Sarbanes-Oxley Act of 2002.



                                       35
<PAGE>

