


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

                                   (Mark One)

[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities  Exchange
Act of 1934 for the period ended September 30, 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 November 7, 2003, the  Registrant  had 42,861,317  shares of common stock,
$0.001 par value, outstanding.

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


<PAGE>








                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
ITEM                                                                                                                        PAGE

                                                         PART I.

<S>                                                                                                                           <C>
1.      Financial Statements
        a.       Independent Accountant's Review Report........................................................................1
        b.       Balance Sheets --September 30, 2003 (unaudited) and December 31, 2002.........................................2
        c.       Statements of Operations -- Nine Months Ended September 30, 2003
                 unaudited, September 30, 2002 (unaudited), and from Inception through
                 September 30, 2003 (unaudited) ...............................................................................3

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

        e.       Statement's of Cash  Flows -- Nine  Months  Ended  September  30,  2003
                  (unaudited),   September  30,  2002   (unaudited),   and  from
                  Inception through
                  September 30, 2003 (unaudited) ..............................................................................5

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

2.      Management's Discussion and Analysis of Financial Condition and Results of
        Operations............................................................................................................27

3.      Controls and Procedures...............................................................................................29


                                                         PART II.


2.        Changes in Securities...............................................................................................30


6.        Exhibits and Reports on Form 8-K....................................................................................30
</TABLE>





<PAGE>



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 September 30, 2003,
and the related statements of operations,  stockholders'  equity (deficit),  and
cash flows for the three and nine months ended  September  30, 2003 and 2002 and
for the period from  December 2, 1985  (inception)  to September  30, 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 $8,055,422 at September 30, 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
BANK OF AMERICA FINANCIAL CENTER
W. 601 RIVERSIDE, SUITE 1940
SPOKANE, WA 99201
(509) 838-5111





                                       1
<PAGE>



PART I

ITEM 1.  FINANCIAL STATEMENTS

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


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

<TABLE>
<CAPTION>
                                     ASSETS

                                                                               SEPTEMBER 30,            DECEMBER 31,
                                                                                    2003                    2002
                                                                                (UNAUDITED)
                                                                             -------------------      -----------------
<S>                                                                        <C>                      <C>
CURRENT ASSETS
Cash                                                                       $             41,118     $           31,081
Marketable securities                                                                 1,800,000              3,000,000
Notes receivable - related party                                                         46,619                246,619
Interest receivable - related party                                                      11,272                 47,609
Deposits and prepaid expenses                                                             8,110                 54,882
                                                                             -------------------      -----------------
         Total Current Assets                                                         1,907,119              3,380,191
                                                                             -------------------      -----------------

PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation                          205,758                 16,414
                                                                             -------------------      -----------------

OTHER ASSETS
   Deferred loan origination fees, net of accumulated amortization                       85,494                128,910
   Patents and patents pending, net of accumulated amortization                         542,028                365,713
                                                                             -------------------      -----------------
         Total Other Assets                                                             627,522                494,623
                                                                             -------------------      -----------------

TOTAL ASSETS                                                               $          2,740,399     $        3,891,228
                                                                             ===================      =================


              LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES
Accounts payable                                                           $            220,000     $          113,457
Loan payable - related party                                                              6,247                      -
Accounts payable - related party                                                         12,536                 14,174
Accrued expenses - related party                                                              -                 63,367
Accrued interest on convertible debt                                                    162,389                      -
Current portion of convertible notes payable                                          2,459,798                      -
                                                                             -------------------      -----------------
         Total Current Liabilities                                                    2,860,970                190,998
                                                                             -------------------      -----------------

LONG-TERM DEBT
Convertible notes payable, net of current portion                                     3,408,201              5,604,010
Note payable to related parties                                                         127,631                127,631
                                                                             -------------------      -----------------
         Total Long-Term Debt                                                         3,535,832              5,731,641
                                                                             -------------------      -----------------

         Total Liabilities                                                            6,396,802              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,
      42,304,447 and 43,601,317 shares issued and outstanding, respectively              42,303                 43,600
   Additional paid-in capital                                                         3,742,489              3,937,923
   Stock options and warrants                                                           614,227                580,027
   Deficit accumulated during development stage                                      (8,055,422)            (6,592,961)
                                                                             -------------------      -----------------
         Total Stockholders' Equity (Deficit)                                        (3,656,403)            (2,031,411)
                                                                             -------------------      -----------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                       $          2,740,399     $        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>

                                             THREE MONTHS ENDED                NINE MONTHS ENDED           FROM INCEPTION
                                                SEPTEMBER 30,                    SEPTEMBER 30,           (DECEMBER 2, 1985)
                                        -----------------------------    -----------------------------         THROUGH
                                           2003             2002            2003             2002         SEPTEMBER 30, 2003
                                        (UNAUDITED)      (UNAUDITED)     (UNAUDITED)      (UNAUDITED)        (UNAUDITED)
                                        ------------     ------------    ------------     ------------     ---------------

<S>                                   <C>              <C>             <C>              <C>              <C>
REVENUES                              $           -    $           -   $           -    $           -    $         89,947
                                        ------------     ------------    ------------     ------------     ---------------

OPERATING EXPENSES
     Research and development               132,686          110,855         370,426          192,833           2,962,395
     Promotional fees                         3,926              240           7,375            9,319              33,543
     Professional fees                       52,174          152,755         139,301          416,382           2,522,711
     Directors' fees                              -                -               -                -              66,880
     Depreciation and amortization           26,694           18,164          75,154           48,015             634,342
     Administrative salaries and benefits    59,855           57,072         197,371           57,072           1,305,849
     Insurance                               18,723           13,218          54,986           39,656             171,747
     Shareholder relations and transfer fees  9,409            8,555          20,292           15,555             223,785
     Rent                                    21,748                -          62,439                -             218,555
     Travel and entertainment                35,751           21,093          56,866           51,364             229,999
     Telephone and communications             1,820              448           3,931            2,107              35,451
     Office                                   3,596            2,362           8,482            5,650              63,701
     General and administrative               3,397            6,091          24,514           22,782             649,222
                                        ------------     ------------    ------------     ------------     ---------------
         Total Operating Expenses           369,779          390,853       1,021,137          860,735           9,118,180
                                        ------------     ------------    ------------     ------------     ---------------

Loss From Operations                       (369,779)        (390,853)     (1,021,137)        (860,735)         (9,028,233)

Other Income (Expense)
     Miscellaneous income                         -                -               -                -              22,000
     Interest and dividend income             6,349           17,050          28,329           27,334             140,490
     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                      (164,143)        (132,762)       (469,653)        (239,309)         (1,437,808)
                                        ------------     ------------    ------------     ------------     ---------------
         Total Other Income (Expense)      (157,794)        (115,712)       (441,324)        (211,975)            972,811
                                        ------------     ------------    ------------     ------------     ---------------

Loss Before Income Taxes                   (527,573)        (506,565)     (1,462,461)      (1,072,710)         (8,055,422)

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

NET LOSS                              $    (527,573)   $    (506,565)  $  (1,462,461)   $  (1,072,710)   $     (8,055,422)
                                        ============     ============    ============     ============     ===============

BASIC AND DILUTED NET LOSS
  PER COMMON SHARE                    $       (0.01)   $       (0.01)  $       (0.03)   $       (0.02)
                                        ============     ============    ============     ============

WEIGHTED AVERAGE NUMBER OF
BASIC AND DILUTED COMMON STOCK
SHARES OUTSTANDING                       42,262,477       43,592,998      42,540,234       43,032,548
                                        ============     ============    ============     ============
</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
                                                COMMON STOCK                                        ACCUMULATED          TOTAL
                                          -----------------------   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                          -           -         3,107               -                 -             3,107

Common stock issued in exchange
for convertible debt at $0.25 per share      156,919         157        39,073               -                 -            39,230

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 period ended
  September 30, 2003                               -           -             -               -        (1,462,461)       (1,462,461)
                                          ----------     --------    ----------     -----------     -------------      ------------

Balance, September 30, 2003 (Unaudited)   42,304,447   $  42,303    $3,742,489     $   614,227    $   (8,055,422)    $  (3,656,403)
                                          ==========     ========    ==========     ===========     =============      ============
</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>
                                                          NINE MONTHS ENDED               FROM INCEPTION
                                                             SEPTEMBER 30,               (DECEMBER 2, 1985)
                                                    --------------------------------          THROUGH
                                                        2003               2002          SEPTEMBER 30, 2003
                                                     (UNAUDITED)       (UNAUDITED)         (UNAUDITED)
                                                    --------------     -------------     -----------------

<S>                                               <C>               <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss)                                        $    (1,462,461)  $    (1,072,710)    $      (8,055,422)
Adjustments to reconcile net loss to cash
  used in operating activities:
    Depreciation and amortization                          31,738            48,015               590,926
    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            98,744               403,489
    Accrued interest paid by convertible debt             303,219           103,501               881,266
    Expenses paid through contribution
      of additional paid-in capital                         3,107             4,586                54,688
    Organization costs                                          -                 -                (9,220)
    Decrease (increase) in:
       Marketable securities                            1,200,000        (2,750,000)           (1,800,000)
       Deposits and prepaid expenses                       46,772            40,226                (8,110)
       Interest receivable                                 (4,231)          (12,022)              (51,840)
       Deferred loan origination cost                      43,416           (41,895)             (171,767)
    Increase (decrease) in:
       Accounts payable                                   106,543           (73,276)              297,541
       Accounts and notes payable, related parties        (58,758)                -                68,873
       Payroll and payroll taxes payable                        -                 -                 8,878
       Accrued interest                                   162,389           131,222               162,389
                                                    --------------     -------------     -----------------

Net cash provided by (used in) operating activities       405,934        (3,523,609)           (7,552,265)
                                                    --------------     -------------     -----------------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of fixed assets                             (194,643)          (13,169)             (257,916)
    Internal gain on sale of securities                         -                 -               157,520
    Acquisition of patents                               (202,754)          (90,127)             (690,856)
                                                    --------------     -------------     -----------------

Net cash used in investing activities                    (397,397)         (103,296)             (791,252)
                                                    --------------     -------------     -----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from issuance of common stock                  1,500             6,000             2,457,254
    Proceeds from convertible notes                             -         3,703,500             5,714,000
    Proceeds from notes payable                                 -                 -               388,508
    Payments on notes payable                                   -                 -              (175,127)
                                                    --------------     -------------     -----------------

Net cash provided by financing activities                   1,500         3,709,500             8,384,635
                                                    --------------     -------------     -----------------

Net increase (decrease) in cash                            10,037            82,595                41,118

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

Cash, ending                                      $        41,118   $       119,210     $          41,118
                                                    ==============     =============     =================

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                          $         3,107   $         4,586     $          54,688
    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   $        98,744     $         157,200
    Warrants issued for services                  $             -   $             -     $         246,289
    Accrued interest paid by convertible debt     $       302,958   $       103,501     $         881,005
    Common stock issued for convertible debt      $        39,230   $       286,928     $         707,156
</TABLE>




             See accompanying notes and accountant's review report.



                                       5
<PAGE>

                            ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 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  September  30, 2003,  the Company  incurred a net loss of
$1,462,461  and had an  accumulated  deficit  during  the  development  stage of
$8,055,422 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 September 30, 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
                               SEPTEMBER 30, 2003

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Pronouncements
--------------------------------
In May 2003,  the  Financial  Accounting  Standards  Board  issued  Statement of
Financial  Accounting  Standards  No. 150,  "Accounting  for  Certain  Financial
Instruments with  Characteristics  of Both Liabilities and Equity"  (hereinafter
"SFAS  No.  150").  SFAS No.  150  establishes  standards  for  classifying  and
measuring certain financial instruments with characteristics of both liabilities
and equity and requires that those  instruments  be classified as liabilities in
statements of financial  position.  Previously,  many of those  instruments were
classified  as  equity.  SFAS No. 150 is  effective  for  financial  instruments
entered  into or modified  after May 31, 2003 and  otherwise is effective at the
beginning  of the first  interim  period  beginning  after  June 15,  2003.  The
Company's  adoption of this  statement  did not have an impact on the  financial
statements of the Company.

In April 2003,  the Financial  Accounting  Standards  Board issued  Statement of
Financial   Accounting  Standards  No.  149,  "Amendment  of  Statement  133  on
Derivative  Instruments and Hedging  Activities"  (hereinafter  "SFAS No. 149").
SFAS No. 149 amends and clarifies the  accounting  for  derivative  instruments,
including certain derivative  instruments  embedded in other contracts,  and for
hedging  activities under SFAS No. 133,  "Accounting for Derivative  Instruments
and Hedging Activities".  This statement is effective for contracts entered into
or modified after June 30, 2003 and for hedging  relationships  designated after
June 30,  2003.  The  adoption  of SFAS No.  149 did not have an  impact  on the
financial statements of the Company.

In December 2002, the Financial  Accounting Standards Board issued Statement No.
148   (hereinafter    "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  (hereinafter   "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"  (hereinafter  "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.




                                       7
<PAGE>
                            ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2003



NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Pronouncements (Continued)
--------------------------------------------
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"
(hereinafter "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.

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 September 30, 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.




                                       8
<PAGE>

                            ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2003


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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  in 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.

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 $7,375 and $9,319 for the nine months ended  September 30, 2003
and 2002, respectively.

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  $26,295,  net of  accumulated
amortization  at September 30, 2003,  are amortized over the life of the related
debt.  During  the  period  ended  September  30,  2003,  the  Company  recorded
amortization expense in the amount of $20,784 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  $59,199,  net of  accumulated
amortization  at September 30, 2003,  are amortized over the life of the related
debt.  During  the  period  ended  September  30,  2003,  the  Company  recorded
amortization expense in the amount of $22,632 related to these fees.


                                       9
<PAGE>

                            ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2003

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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.

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", SFAS No. 138,  "Accounting for Certain Derivative  Instruments and Certain
Hedging Activities", and SFAS No. 149, "Amendment of Statement 133 on Derivative
Instruments  and 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 September  30,  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  (503,977
shares) and  warrants  (1,011,434  shares),  and  convertible  debt  (23,551,810
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.




                                       10
<PAGE>

                            ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2003


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Interim Financial Statements
----------------------------
The interim  financial  statements as of and for the quarter ended September 30,
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.


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 September 30, 2003 and December 31, 2002:

<TABLE>
<CAPTION>
                                                 September 30, 2003                     December 31, 2002
                                          ----------------------------------      -------------------------------
                                                              Accumulated                          Accumulated
                                              Cost           Depreciation            Cost         Depreciation
                                          --------------    ----------------      -----------    ----------------
<S>                                     <C>                <C>                  <C>            <C>
   Lab equipment                        $       35,349     $    28,414          $    27,582    $     27,582
   Office equipment                             18,062          14,028               18,062          11,073
   Furniture and fixtures                       11,384           3,471               11,384           1,959
   Filing room under construction              186,876               -                    -               -
                                          --------------    ----------------      -----------    ----------------
                                        $      251,671     $    45,913          $    57,028    $     40,614
                                          ==============    ================      ===========    ================
</TABLE>

Depreciation  expense  for the  periods  ended  September  30, 2003 and 2002 was
$5,299 and $1,339 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 period ended September
30,  2003,  there  was no  change in the fair  market  value of the  securities,
however,  the Company sold a portion of the  securities  during the period.  The
Company's  marketable  securities  investment consists of auction rate preferred
stock money market alternatives that rolls every seven days at the then existing
market interest rate. This investment is not insured, and therefore,  a total of
$1,800,000 was at risk on September 30, 2003.  During the period ended September
30, 2003 a total of $1,200,000 was redeemed and transferred to cash with no gain
or loss being recognized.



                                       11
<PAGE>

                            ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2003


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
September 30, 2003:

<TABLE>
<CAPTION>
                                                        Cost              Accumulated          Net Amount
                                                                         Amortization
                                                    -------------      -----------------      --------------
<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                                      202,754           (26,439)                176,315
                                                    -------------      -----------------      --------------
      Balance, September 30, 2003                $       690,856     $    (148,828)         $      542,028
                                                    =============      =================      ==============
</TABLE>


NOTE 6 - RELATED PARTY TRANSACTIONS

Current Transactions
--------------------
On February 7, 2003, the board of directors  unanimously approved the repurchase
and  cancellation  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 mature on December 31, 2003.

The note  payable to  related  parties  consist of a note  payable to one of the
Company's   directors.   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 $3,107
was recorded during the period ending September 30, 2003 as interest expense and
contributed capital in the accompanying financial statements.

The Company purchased  laboratory equipment for $7,767 from a firm, which has as
a  shareholder,  one of the directors of Advanced  Biotherapy,  Inc. The Company
agreed to make monthly  payments of $486 for a total of 18 months on the invoice
for this equipment.

The board of directors adopted a policy that restricts the sale of shares of the
Company's  common stock by  directors  for a period of one year  terminating  on
August 31, 2004, unless prior to that date the Company's common stock achieves a
market price of $1.50 for fourteen consecutive trading days.

See Note 13 for related party occupancy agreements.



                                       12
<PAGE>

                            ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2003


NOTE 6 - RELATED PARTY TRANSACTIONS (CONTINUED)

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.

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.




                                       13
<PAGE>

                            ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2003


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
$41,118 is at risk on September 30, 2003.

The  Company's  marketable   securities  investment  consists  of  auction  rate
preferred  money  market  alternatives  that rolls  every seven days at the then
existing market interest rate. This investment is not insured, and therefore,  a
total of $1,800,000 is at risk as of September 30, 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           Shares            Amount         Additional
                                                     price per                                         Paid-in Capital
                                                       share
                                                   ------------      --------------     -----------    ----------------
<S>                                                   <C>                  <C>       <C>              <C>
Common stock issued for cash:
1985                                                  $   .50              100,000   $         100    $         49,900
1986                                                     1.00              639,500             640             678,861
1987                                                     1.00              850,500             850             759,650
1988                                                     1.00               25,000              25              24,975
1993                                                      .25            2,402,000           2,402             475,900
1995                                                      .05            1,000,000           1,000              49,000
1996                                                      .05              520,000             520              25,480
1997                                                      .09            1,800,500           1,801             153,749
1998                                                      .10              305,000             305              30,195
1999                                                      .05            3,158,000           3,158             151,993
                                                                     --------------     -----------    ----------------
                                                                        10,800,500          10,801           2,399,703
                                                                     --------------     -----------    ----------------

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
                                                                     --------------     -----------    ----------------
</TABLE>


                                       14
<PAGE>

                            ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2003

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

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

<S>                                                    <C>             <C>           <C>             <C>
Common stock 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                                                        -                    -               -               3,107
                                                                     --------------     -----------    ----------------
                                                                                 -               -              90,513
                                                                     --------------     -----------    ----------------

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 15                                          .001             850,000            850                (850)
                                                                     --------------     -----------    ----------------
                                                                                 -               -                   -
                                                                     --------------     -----------    ----------------
Common stock issued for services (1):
1988                                                      .50               25,000              25              12,475
1989                                                      .38               25,000              25               9,475
1990                                                      .66               37,375              37              24,635
1991                                                      .51              159,500             160              81,010
1992                                                      .75               62,500              62              46,563
1993                                                      .25              120,000             120              29,880
1996                                                      .05              308,500             308              13,832
1997                                                      .05              155,500             155               7,619
1999                                                      .05               99,190              99               4,860
                                                                     --------------     -----------    ----------------
                                                                           992,565             991             230,349
                                                                     --------------     -----------    ----------------

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)
                                                                     --------------     -----------    ----------------
</TABLE>





                                       15
<PAGE>

                            ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2003



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

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

<S>                                                    <C>                  <C>     <C>             <C>
Common stock issued for 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                   -
                                                                     --------------     -----------    ----------------

Common stock issued for convertible debt:
2001                                                      .25            1,605,346           1,605             399,504
2002                                                      .25            1,147,706           1,147             285,781
2003                                                      .25              156,919             157              39,073
                                                                     --------------     -----------    ----------------
                                                                         2,909,971           2,909             724,358
                                                                     --------------     -----------    ----------------

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                                                                   42,304,447  $       42,303   $       3,742,489
                                                                     ==============     ===========    ================
</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.




                                       16
<PAGE>

                            ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2003


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

Effective  December 26, 2002, the Company amended its articles of  incorporation
to increase the maximum  amount of 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 September 30, 2003, a total of 800,000 shares are available
under this plan.


NOTE 9 - PREFERRED STOCK

The  Company  has  authorized  20,000,000  shares of $0.001 par value  preferred
stock. As of September 30, 2003, the Company has not issued any preferred stock.


NOTE 10 - STOCK OPTIONS AND ISSUANCE COMMITMENTS

Omnibus Equity Incentive Plan
-----------------------------
In 2000, the board of directors approved an Omnibus Equity Incentive Plan, which
was then 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 September 30, 2003,  there are 30,000
shares available under this plan.

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  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.


                                       17
<PAGE>

                            ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2003

NOTE 10 - STOCK OPTIONS AND ISSUANCE COMMITMENTS (CONTINUED)

During January 2003, the Company issued stock options to purchase 180,000 shares
of the Company's stock at $0.21 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 $0.21,  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.

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 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.

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.

Options Issued Outside an Incentive Plan
----------------------------------------
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



                                       18
<PAGE>

                            ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2003


NOTE 10 - STOCK OPTIONS AND ISSUANCE COMMITMENTS (CONTINUED)

Options Issued Outside an Incentive Plan (Continued)
----------------------------------------------------
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.

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 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.

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.




                                       19
<PAGE>

                            ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2003


NOTE 10 - STOCK OPTIONS AND ISSUANCE COMMITMENTS (CONTINUED)

Following  is a summary of the  status of the  options  during the period  ended
September 30, 2003 and the year ended December 31, 2002:

<TABLE>
<CAPTION>
                                                                    Number of Shares              Weighted Average
                                                                                                   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                        0.16
Exercised                                                                   (150,000)                       0.01
Forfeited                                                                          -                            -
                                                                  ----------------------        ---------------------
Options outstanding at September 30, 2003                                  6,087,953                        0.16
                                                                  ======================        =====================
Options exercisable at September 30, 2003                                  1,987,953                 $      0.15
                                                                  ======================        =====================
Weighted average fair value of options granted in 2003                                               $      0.13
                                                                                                =====================
</TABLE>

Summarized  information  about stock  options  outstanding  and  exercisable  at
September 30, 2003 is as follows:

<TABLE>
<CAPTION>
                                                              Outstanding Options
                                     -----------------------------------------------------------------------
           Exercise Price Range        Number of          Weighted Average             Weighted Average
                                        Shares             Remaining Life               Exercise Price
           ---------------------     --------------    ------------------------     ------------------------
<S>                                    <C>                      <C>                         <C>
              $0.01 - $0.25            6,087,953                5.63                        $ 0.16

<CAPTION>

                                                              Exercisable Options
                                     -----------------------------------------------------------------------
           Exercise Price Range        Number of          Weighted Average             Weighted Average
                                        Shares             Remaining Life               Exercise Price
           ---------------------     --------------    ------------------------     ------------------------
<S>                                    <C>                      <C>                         <C>
              $0.01 - $0.25            1,987,953                4.12                        $ 0.15
</TABLE>


NOTE 11 - NON-CASH COMMITMENT AND WARRANTS

During February 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.


                                       20
<PAGE>

                            ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2003

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

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.

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.

Subsequent  to the date of these  financial  statements,  a warrant to  purchase
200,308  shares  of common  stock was  exercised  using  the  cashless  feature,
resulting in the issuance of 151,847 shares of common stock.

Summarized  information  about stock  warrants  outstanding  and  exercisable at
September 30, 2003 is as follows:

<TABLE>
<CAPTION>
                                     Number of             Weighted Average           Average exercise
                                     warrants              Remaining Life                  price
                                 ------------------    --------------------------   -----------------------
<S>                                  <C>                         <C>                        <C>
       Outstanding                   5,424,535                   6.10                       $0.16
       Exercisable                   5,324,535                   6.09                       $0.16
</TABLE>





                                       21
<PAGE>

                            ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2003


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 $376,683  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 September 30, 2003 was $20,784.

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 September 30, 2003,
a total of $30,000  original debt and $9,229 of accrued  interest and previously
converted  interest was converted  into 156,916  shares of common stock at $0.25
per share.

At September 30, 2003, the remaining  2000 notes,  including  converted  accrued
interest, may be converted into a total of 4,640,709 shares of common stock. The
balance due on these notes have been reclassified to current liabilities as they
are payable on September 30, 2004, unless converted to stock earlier.

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 $151,121  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 September
30, 2003 was $11,382.




                                       22
<PAGE>

                            ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2003


NOTE 12 - CONVERTIBLE DEBT (CONTINUED)

2002 Convertible Notes due September 30, 2004 (Continued)
---------------------------------------------------------
At September  30, 2003,  the  remaining  2002-2004  notes,  including  converted
accrued  interest,  may be converted into a total of 5,198,485  shares of common
stock.  The  balance  due on these  notes  have  been  reclassified  to  current
liabilities as they are payable on September 30, 2004, unless converted to stock
earlier.

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  $353,305  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 September 30, 2003
was $11,250.

At September  30, 2003,  the  remaining  2002-2006  notes,  including  converted
accrued interest, could be converted into a total of 13,633,218 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.

2003 Convertible Notes due September 30, 2007
---------------------------------------------
Subsequent  to the date of these  financial  statements,  the Company  sold in a
private  placement  to  accredited   investors  2003  Subordinated   Convertible
Pay-in-kind Notes due September 30, 2007 ("2003-2007  convertible notes") in the
principal  amount  of  $800,000  in cash.  The  interest  rate of the  2003-2007
convertible notes is 12% per annum, payable  semi-annually in cash or additional
2003-2007 convertible notes.

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.





                                       23
<PAGE>

                            ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 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.

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 from New
Horizons  Diagnostics,  Inc., a company  principally owned by Lawrence Loomis, a
director  of the  Company.  The  contract  calls for a payment of  approximately
$186,000.

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 with a firm,  which has as a shareholder,  one of the directors
of Advanced  Biotherapy,  Inc. This agreement calls for a monthly rent of $6,110
along with reimbursement for research and development services at a monthly cost
of $12,000.





                                       24
<PAGE>

                            ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2003


NOTE 14 - INCOME TAXES

The  following  is a  reconciliation  of  income  tax  computed  at the  Federal
statutory rate to the provision for taxes:

<TABLE>
<CAPTION>
                                                         September 30, 2003             December 31, 2002
                                                         Amount        Percent          Amount        Percent
                                                     ---------------- ---------- -- ---------------- ----------
<S>                                                       <C>            <C>            <C>              <C>
Federal tax (benefit)                                     $(491,000)     (34) %         $ (356,000)      (25)%
State tax (benefit)                                        (115,000)     ( 8) %           (114,000)     ( 8) %
Valuation allowance                                         606,000       42  %            470,000        33 %
                                                     ---------------- ----------    ---------------- ----------
                                                             $     -          -             $     -          -
                                                     ================ ==========    ================ ==========
</TABLE>

Deferred  income  taxes  reflect  the net tax effects of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes.

Significant  components  of the deferred  tax assets at  September  30, 2003 and
December 31, 2002 are as follows:

<TABLE>
<CAPTION>
                                                                         September 30, 2003        December 31,
                                                                                                       2002
                                                                         --------------------    -----------------
<S>                                                                             <C>                  <C>
Deferred tax asset:
    Net operating loss carryforwards                                            $ 2,440,000          $ 1,160,000
    General business credit carryforwards                                            21,000                    -
                                                                         --------------------    -----------------
Total deferred tax asset                                                          2,461,000            1,160,000
    Valuation allowance for deferred asset                                       (2,461,000)          (1,160,000)
                                                                         --------------------    -----------------
Net deferred tax asset                                                              $     -              $     -
                                                                         ====================    =================
</TABLE>

At September 30, 2003, the Company has federal net operating loss  carryforwards
of approximately $6,100,000,  which expire in the years 2003 through 2023, state
net operating loss  carryforwards of approximately  $4,100,000,  which expire in
the years 2010  through  2013,  and general  business  credit  carryforwards  of
approximately  $63,000, which expire in the years 2017 through 2022. At December
31, 2002,  approximately  $878,000 of the federal net operating  losses expired,
and  approximately  $195,000 of the federal net operating  losses will expire on
December 31, 2003.

The change in the allowance account from December 31, 2002 to September 30, 2003
was $1,301,000,  which is principally due to the change in management's estimate
of effective  tax rates as well as an increase in the  Company's  net  operating
loss carryforward.


NOTE 15 - 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


                                       25
<PAGE>


                            ADVANCED BIOTHERAPY, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2003

NOTE 15 - RESTATEMENT OF SHARES (CONTINUED)

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.


NOTE 16 - SUBSEQUENT EVENTS

Subsequent  to the date of these  financial  statements,  a warrant to  purchase
200,308  shares  of common  stock was  exercised  using  the  cashless  feature,
resulting in the issuance of 151,847 shares of common stock.

Subsequent  to the date of these  financial  statements,  the Company  sold in a
private  placement  to  accredited   investors  2003  Subordinated   Convertible
Pay-in-kind Notes due September 30, 2007. See Note 12


                                       26
<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.  Some of  these
forward-looking  statements  may be  identified  by  the  use  of  words  in the
statements such as  "anticipate,"  "estimate,"  "expect,"  "project,"  "intend,"
"Plan,"  "believe"  or other  words and terms of similar  meaning.  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 November 7, 2003, the Company had issued and outstanding 42,861,317 shares
of its Common Stock.

The Company is a development  stage company and has no current assets other than
cash  and  marketable  securities.  The  Company  had  $1,841,118  in  cash  and
marketable  securities as of September  30, 2003.  For the  twelve-month  period
subsequent to September 30, 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.


                                       27
<PAGE>

On September  30, 2004,  the Company's  Convertible  Debt due September 30, 2004
("2000  Convertible Debt 2004") and Subordinated  Convertible  Pay-In-Kind Notes
due  September  30, 2004 ("2002  Convertible  Notes 2004") will  mature,  unless
earlier converted into shares of Company common stock. As of September 30, 2003,
the outstanding  principal  amount of 2000  Convertible Debt 2004 was $1,160,177
and  the  outstanding  principal  amount  of 2002  Convertible  Notes  2004  was
$1,299,621.  The Company is considering various alternatives for raising capital
to satisfy  its  payment  obligations  under such  indebtedness.  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/or 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  biotechnological  company,  or  any  such  out-licensing  or
co-development arrangements.




Three Months Ended September 30, 2003 and 2002

 For the three months ended September 30, 2003, the Company  realized a net loss
of  $527,573  compared  to a net loss of  $506,565  for the three  months  ended
September 30, 2002. The Company had increases in expenses over the quarter ended
September 30, 2002, principally related to the following: increased research and
development  expenses in the amount of $21,831,  increased  insurance of $5,505,
increased rent in the amount of $21,748, increased depreciation and amortization
in the amount of $8,530,  increased  travel and  entertainment  of $14,658,  and
increased  interest  expense in the amount of $31,381  related to the  Company's
convertible  subordinated debt and subordinated  convertible  pay-in-kind notes,
increased promotional fees of $3,686,  decreased interest income of $10,701, all
net of decreased professional fees of $100,581.

Nine Months Ended September 30, 2003 and 2002

During the nine  months  ended  September  30,  2003,  the  Company's  financial
condition changed in the following manner, principally related to the following:
cash increased by $10,037, marketable securities decreased by $1,200,000,  notes
receivable - related party decreased by $200,000,  interest receivable decreased
by $36,337, deposits and prepaid expenses decreased by $46,772,  property, plant
and equipment, net of accumulated amortization increased by $189,344 principally
related to  construction  in  progress  of a  laboratory  facility,  patents and
patents  pending,  net of  accumulated  amortization  increased  by $176,315 and
deferred loan  origination  fees, net of accumulated  amortization  decreased by
$43,416.  The  Company's  current  liabilities,  net of the  current  portion of
long-term  debt,  increased by  approximately  $210,174 in the normal  course of
business.

For the nine months ended September 30, 2003, the Company realized a net loss of
$1,462,461  compared  to a net  loss of  $1,072,710  for the nine  months  ended
September  30, 2002.  The Company had increases in expenses over the nine months
ended  September  30,  2002  principally  related  to the  following:  increased
research  and  development  expenses  in  the  amount  of  $177,593,   increased


                                       28
<PAGE>

administrative  salaries and benefits of $140,299,  increased rent in the amount
of $62,439, increased travel and entertainment of $5,502, increased depreciation
and amortization in the amount of $27,139,  increased insurance in the amount of
$15,330,  increased  travel  and  entertainment  in the  amount of  $5,502,  and
increased  interest  expense in the amount of $230,344  related to the Company's
convertible  subordinated debt and subordinated  convertible  pay-in-kind notes,
all net of decreased promotional fees of $1,944 and decreased  professional fees
of $277,081.

ITEM 3.  CONTROLS AND PROCEDURES

In accordance with Item 307 of Regulation S-B  promulgated  under the Securities
Act of 1933,  as amended,  within 90 days of the filing  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  Sections
13a-14(c) and 15d-14(c) of the Securities  Exchange Act of 1934, as amended (the
"Exchange Act"), the term  "disclosure  controls and procedures"  means controls
and other  procedures of an issuer that are designed to ensure that  information
required to be  disclosed  by the issuer in the reports that it files or submits
under the Exchange Act is recorded,  processed,  summarized and reported, within
the time  periods  specified  in the  Commission's  rules and forms.  Disclosure
controls and procedures  include,  without  limitation,  controls and procedures
designed to ensure that information required to be disclosed by an issuer in the
reports  that it files or submits  under the  Exchange  Act is  accumulated  and
communicated  to the issuer's  management,  including  its  principal  executive
officer or officers and  principal  financial  officer or  officers,  or persons
performing similar functions, as appropriate to allow timely decisions regarding
required  disclosure.  The  Certifying  Officers  have  reviewed  the  Company's
disclosure  controls and procedures  and have  concluded  that those  disclosure
controls and  procedures  are effective in causing  information  to be recorded,
processed,  summarized  and reported  within the time  periods  specified in the
Commission's  rules and forms and  communicated  to management of the Company to
allow timely decisions regarding the Company's public disclosures. In compliance
with Section 302 of the  Sarbanes-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 September 30, 2003, the Board of Directors approved the
issuance of additional convertible debt and convertible notes, respectively,  in
payment  of  accrued  and  unpaid  interest  (in  lieu of cash  payments)  as of
September  30,  2003,  for  the  Company's  Convertible  Subordinated  Debt  due
September 30, 2004, the Subordinated Convertible Pay-In-Kind Notes due September
30, 2004, and the Subordinated  Convertible  Pay-In-Kind  Notes due September 1,
2006.


                                       29
<PAGE>

Subsequent  to the quarter  ended  September  30,  2003,  the Company  sold in a
private  placement to two accredited  investors  (including  director Richard P.
Kiphart) 2003 Subordinated  Convertible Pay-In-Kind Notes due September 30, 2007
("2003  Convertible  Notes Due 2007"),  in the  principal  amount of $800,000 in
cash. The 2003  Convertible  Notes Due 2007 bear interest at the rate of 12% per
annum payable  semi-annually  in cash or additional 2003  Convertible  Notes Due
2007.  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 2003 Convertible Notes Due 2007 are to be paid ratably with the
Company's Convertible Subordinated Debt due September 30, 2004, the Subordinated
Convertible  Pay-In-Kind  Notes due  September  30, 2004,  and the  Subordinated
Convertible  Pay-In-Kind  Notes due  September 1, 2006.  The holders of the 2003
Convertible  Notes  Due 2007 are  entitled  to  certain  piggyback  registration
rights.  The Company  offered the 2003  Convertible  Notes Due 2007  pursuant to
Section 4(2) of the  Securities  Act of 1933, as amended.  The proceeds from the
placement  of 2003  Convertible  Notes Due 2007  will be used to fund  potential
Phase I clinical  trials,  although no  assurance  can be given that the Company
will qualify for any Phase I clinical trials,  or that the FDA will approve such
clinical trials, and for Company working capital purposes.

The form of the 2003  Convertible  Notes Due 2007 was filed as Exhibit  10.12 to
the  Company's  Form 8-K filed on  October  28,  2003.  The form of the  related
Investor Rights  Agreement also was filed as Exhibit 10.13 to the Company's Form
8-K filed on October 28, 2003.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

   (a)              Exhibit
                    Number            Description

                       31.1           Certification of Chief Executive Officer
                                      Pursuant to Rule 13a-14(a) of the
                                      Securities Exchange Act of 1934, as
                                      amended.

                       31.2           Certification of Chief Financial Officer
                                      Pursuant to Rule 13a-14(a) of the
                                      Securities Exchange Act of 1934, as
                                      amended.

                       32.1           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.

                       32.2           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.


                                       30
<PAGE>


   (b)  Reports on Form 8-K

<TABLE>

<S>                                                                      <C>
           Current Report on Form 8-K dated August 4, 2003               Item 5.  Other Events

           Current Report on Form 8-K dated August 6, 2003               Item 5.  Other Events

           Current Report on Form 8-K dated September 3, 2003            Item 5.  Other Events

           Current Report on Form 8-K dated September 22, 2003           Item 5.  Other Events
</TABLE>




                                       31
<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 November 12, 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



                                       32
<PAGE>





<TABLE>
<CAPTION>

EXHIBIT INDEX

        Exhibit                                                      Description

<S>                              <C>
         31.1                    Certification  of  Chief  Executive  Officer  Pursuant  to  Rule  13a-14(a)  of  the
                                 Securities Exchange Act of 1934, as amended.

         31.2                    Certification  of  Chief  Financial  Officer  Pursuant  to  Rule  13a-14(a)  of  the
                                 Securities Exchange Act of 1934, as amended.

         32.1                    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.

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




                                       33

