**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D. C. 20549**


_________________________________________





**Form
      10-KSB**





**x**  **ANNUAL
      REPORT PURSUANT TO SECTION 13 or 15 (d) of the SECURITIES** **EXCHANGE
      ACT OF 1934**





**For
      the fiscal year ended December 31, 2007**


**or**





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





**Commission
      file number 0-26323**


___________________________________________________





**Advanced
      Biotherapy, Inc.**


*(Exact
      name of Registrant as specified in its charter)*


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


**227
      West Monroe Suite 3900 Chicago, IL 60606**


**(Address
      of principal executive offices, including zip code.)**





**(Registrant’s
      telephone number, including area code)**


**(312)
      701-0793**





**Securities
      registered pursuant to Section 12 (b) of the Act**


**None**





**Securities
      registered pursuant to Section 12 (g) of the Act**


**Common
      Stock**





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




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




State
      Issuer’s revenues for its most recent fiscal year.


December
        31, 2007:   $0.00


The
      aggregate market value of Registrant’s common stock held by non-affiliates
      computed by reference to the closing price of such stock on March 12, 2008
      was
      $1,880,164, which market value excludes 996,697,955 shares of common stock
      held
      by directors, executive officers and stockholders whose beneficial ownership
      exceeds ten percent (10%) of the shares outstanding on March 12,
      2008.




As
      of
      March 12, 2008, the Registrant had outstanding 1,167,621,940 shares of common
      stock.




Documents
      Incorporated by Reference: None.







ITEM
      1.  BUSINESS




GENERAL
      INTRODUCTION




Advanced
      Biotherapy, Inc. is a corporation organized and existing under the laws of
      the
      State of Delaware, headquartered in Chicago, Illinois.




Prior
      to
      its debt restructure and equity placement in 2006, the Company focused on the
      development of biologic therapeutic antibodies for treating a range of
      autoimmune diseases based on an anti-cytokine platform technology. Our
      activities consisted primarily of research, development and non-United States
      investigational human clinical trials. Such development stage activities have
      resulted in an accumulated deficit of $22,123,452 at December 31, 2007. Based
      upon our historical activities, we are a development stage biotechnology company
      holding patents based on the anti cytokine platform. Management currently does
      not plan to continue the Company’s research and development projects or to
      pursue new patent applications (See the section captioned “BUSINESS OBJECTIVES”
below.) Based upon management’s current business plans and since the Company has
      not achieved its historical plans to license its patents, management has
      determined to recognize a loss on impairment of its patents of $745,640 for
      the
      year ended December 31, 2007.




As
      part
      of management’s business objectives to invest in a non-control position in a
      revenue generating company, on December 18, 2007, the Company and Organic Farm
      Marketing, LLC (“OFM”), a Wisconsin limited liability company, entered into an
      agreement (“OFM Agreement”). Pursuant to the OFM Agreement, the Company arranged
      for The Northern Trust Company of Chicago, Illinois (“Bank”) to issue a $1.0
      million irrevocable letter of credit (“Letter of Credit”) for the benefit of the
      Wisconsin Department of Agriculture, Trade and Consumer Protection (“Wisconsin
      Department”), the designee of OFM. The Letter of Credit is required by the
      Wisconsin Department so that OFM may distribute certain dairy products in the
      State of Wisconsin. As collateral for repayment of funds advanced under the
      Letter of Credit, the Company entered into a pledge agreement pursuant to which
      it granted the Bank a security interest in a certificate of deposit account
      maintained by the Company at the Bank. OFM’s obligations to reimburse the
      Company for payments, if any, made by the Company to the Bank pursuant to the
      pledge agreement are evidenced by a promissory note (“OFM Note”) and a
      reimbursement agreement (“Reimbursement Agreement”) secured by OFM’s assets. OFM
      agreed to pay a cash fee of $50,000 and issue to the Company 5,000 units of
      OFM
      as payment for obtaining the Letter of Credit.




In
      accordance with the OFM Agreement, the Company also loaned to OFM the sum of
      $800,000 (“Working Capital Loan”) to be used for working capital and to
      repurchase a member’s interest in OFM. OFM issued to the Company a convertible
      note (“Convertible Note”) in the principal amount of $800,000, which bears
      interest at 10% per annum, payable quarterly. The Convertible Note has a stated
      maturity date of May 17, 2009, subject to acceleration upon default by OFM.
      Commencing June 18, 2008, the Convertible Note is convertible into OFM units
      at
      the conversion rate of $10.00 per unit. The Working Capital Loan is secured
      by
      all of OFM’s assets.




Since
      the
      end of our recent fiscal year, the Company made a loan to generate additional
      interest income. On March 12, 2008, the Company and Richard P. Kiphart, Chairman
      of the Board of the Company, agreed to provide Lime Energy, Inc. (“LEC”)
      (NASDAQ:LIME), a developer, manufacturer and integrator of energy saving
      technologies, with a $3 million revolving line of credit, for which the Company
      and Mr. Kiphart each will be responsible to fund up to $1.5 million. The Company
      and Mr. Kiphart will fund the line of credit and receive principal and interest
      payments on a pro-rata basis.




The
      LEC
      note matures on March 31, 2009, and bears interest at 17% per annum payable
      quarterly, with 12% payable in cash and the remaining 5% to be capitalized
      and
      added to the principal balance of the note. The note also provides for payment
      quarterly of an unused funds fee of 4% per annum, as well as a fee payable
      upon
      termination of the facility prior to its scheduled maturity. LEC may borrow
      any
      amount during the term of the note, so long as it is not in default at the
      time
      of the advance.




2




The
      description of the OFM Agreement and related agreements, as well as the LEC
      revolving line of credit note and related agreements, are not intended to be
      complete and are qualified in their entirety by the complete text of such
      agreements which have been previously filed by us as exhibits (Exhibits 10.19
      through 10.28 inclusive) and are incorporated by reference herein.




With
      respect to our past research and development activities, our autoimmune disease
      technology focused on an anti-cytokine platform. The Company’s primary cytokine
      target had been interferon-gamma. Cytokines are soluble components of the immune
      system that are largely responsible for regulating the immune response. When
      overproduced, as in certain autoimmune diseases, interferons and cytokines
      can
      lead to immune system disturbance and inflammation resulting in localized tissue
      damage and pathology seen in autoimmune diseases (ADs). The Company has not
      achieved its plans to enter into out-licensing agreements with pharmaceutical
      companies that would use the Company’s patents to develop biologic drugs
      designed to reduce the levels of certain cytokines that may effectively treat
      a
      range of autoimmune diseases.




Our
      patented technology is based upon the work of Dr. Simon Skurkovich and Dr.
      Boris
      Skurkovich who first suggested that autoimmune disease may be the result of
      augmented cytokine production. We conducted several investigational clinical
      trials at major institutes of the Medical Academy of Sciences in Russia, in
      which we evaluated the efficacy of a series of investigational antibodies,
      raised against certain cytokines, in autoimmune diseases such as rheumatoid
      arthritis (RA), multiple sclerosis (MS), certain autoimmune skin diseases,
      and a
      disease of the eye.




On
      December 25, 2001, the Company was issued United States Patent No. 6,333,032
      for
      the use of interferon-gamma antibodies as a monotherapy to treat five diseases
      of autoimmune etiology: Multiple Sclerosis, Rheumatoid Arthritis, Juvenile
      Rheumatoid Arthritis, Psoriatic Arthritis and Ankylosing Spondylitis. The
      Company’s patented treatment also uses various methods to neutralize or block
      specific combinations of cytokines and their receptors. In addition, the Company
      was issued United States Patent No. 6,534,059, issued March 18, 2003, covering
      the use of interferon gamma antibodies for treatment of corneal transplant
      rejection. On March 8, 2005, the Company was issued United States Patent No.
      6,863,890 for use of antibodies to Tumor Necrosis Factor-alpha (TNF-a),
      Interferon-Gamma (IFN-g) and Interferon-alpha (IFN-a) for the treatment of
      AIDS.
      On March 1, 2005, the Company was issued United States Patent No. 6,861,056
      for
      use of antibodies to IFN-g and standard therapy for treatment of uveitis. The
      Company also has been issued United States Patent Nos. 5,626,843, 5,888,511,
      6,846,486, 7,115,263 and 7,232,568, and Australia Patent Nos. 730498 and
      2002318175. The Company has also been issued Europe Patent No. 1401496, which
      is
      validated in Great Britain and Italy, and HK1063601. European Application No.
      97953584.6 has been allowed and will be validated in Great Britain, Germany
      and
      France. In addition, the Company has three United States utility patents pending
      filed between August 11, 2005, and October 2, 2006. The Company also has two
      applications pending in Canada, as well as a pending application in each of
      Europe and Japan. The Company intends to maintain its patents with plans to
      sell
      or license them and such maintenance costs for the year ending December 31,
      2008
      are expected to be nominal.




The
      ultimate degree of patent protection that will be afforded to biotechnology
      products and processes, including ours, in the United States and other markets
      remains uncertain and is dependent upon the scope of protection decided upon
      by
      the patent offices, courts and lawmakers in these countries. There is no
      certainty that our existing patents will afford us commercial
      benefit.




3




The
      Company’s development stage products would require regulatory approval from the
      United States Food and Drug Administration (“FDA”) prior to marketing of such
      products. The Company is not sufficiently funded to allow it to complete the
      product development process, obtain FDA approval, or market its products, nor
      does management plan to pursue such product development. The Company plans
      to
      consider opportunities to sell its patents and/or license its patents to a
      company that would provide the funding necessary for obtaining FDA approval.
      However, there can be no assurance that the Company will enter into any such
      sale arrangements, or if a license were to be granted, that the licensee would
      obtain the appropriate regulatory approvals, or develop, market, or distribute
      commercially viable products.




Currently,
      the Company’s only source of income is from interest earned on its cash and
      investments. (See the section captioned “BUSINESS OBJECTIVES”
below.)




BUSINESS
      OBJECTIVES




The
      Company had approximately $7,620,000 in cash and investments at December 31,
      2007. This amount of cash is adequate to meet the Company’s projected cash
      requirements for full operations for the next 12 months. Based upon the
      Company’s current business plan, management believes that for the period ending
      December 31, 2008, the earned interest on the Company’s cash and investments
      will be sufficient to fund approximately 45% to 55% of its ordinary operating
      expenses. The Company does not have a source of revenue to continue its
      operations beyond the current available investments and cash.




The
      Company’s business development plan for 2008 principally focuses on the
      following three specific elements:




1.
            
            Evaluation
                of possible acquisition candidates;




2.
            Acquisition
                of a control or non-control position in one or more revenue generating
                companies or development stage companies, through investment in equity
                or
                convertible debt, or an asset acquisition or other financing;
                and




3.
            Sale
                of our patents and/or licensing agreements with companies seeking
                opportunities related to our
                patents.




As
      of the
      date hereof, the Company has not entered into any agreement to acquire a revenue
      generating company, nor has it entered into any agreement for the sale or
      license of its patents.




TECHNICAL
      BACKGROUND, CLINICAL STUDIES AND GOVERNMENT REGULATION




The
      Company’s main biotechnology platform involved the use of antibodies directed
      against certain selected cytokines. An antibody is a protein secreted by cells
      in the blood and is part of the body’s natural defense system against foreign
      invaders such as viruses, bacteria, or other foreign substances. Antibodies
      selectively bind to their targets, producing such effects as the neutralization
      of toxins and the marshaling of the immune system against infectious
      microorganisms and certain other cells. The Company’s development-stage antibody
      treatment removed or neutralized specific interferons (IFNs) and other
      cytokines. These are soluble components of the immune system that are largely
      responsible for regulating the immune response and inflammation. During certain
      autoimmune diseases (ADs), such as rheumatoid arthritis, multiple sclerosis,
      type I diabetes and psoriasis, certain IFNs and other cytokines are overproduced
      by the body, disturbing immune system regulation. It is now generally agreed
      that this loss of homeostasis contributes significantly to the localized damage
      to organs and tissues characteristic of AD.




4




The
      biological mechanism for autoimmunity, in which the immune system directs an
      attack against the body’s own tissues, is still unclear, though many ADs are
      associated with identifiable antigens of the Human Leukocyte Antigen (HLA)
      complex, specifically, the Class II proteins.




The
      cells
      which constitute the immune system are not confined to one location or organ,
      so
      there is a need for them to communicate with each other in order for the various
      components (e.g., macrophages, T-cells, B-cells and others) to function in
      a
      coordinated manner. Cytokines are the agents that effect this communication.
      The
      cytokines include IFNs (alpha, beta and gamma), interleukins (IL), tumor
      necrosis factors (TNF-alpha and TNF-beta) and others. Cytokine interactions
      with
      cells can result in cell proliferation, suppression, or differentiation and
      may
      also result in the synthesis of other cytokines by the target cell. There is
      substantial data in the literature supporting the idea that upon immune system
      activation, the cytokines spring into action in a coordinated manner that can
      best be described as a cascade.




The
      cytokine cascade is extremely complex and it appears that the overproduction
      of
      certain pro-inflammatory cytokines, particularly IFN-gamma and TNF-alpha,
      underlies the pathology of AD. The Company’s research and development had been
      conceptually based on the postulate that in certain autoimmune conditions,
      a
      global effect may be achieved by removing or reducing one of more of the agents
      in the cascade.




Both
      TNF-alpha and IFN-gamma work in synthesis to induce HLA class II antigens in
      a
      variety of cell types. Induction of these antigens is thought to be associated
      with autoimmune pathology. The induction of activated T-cells requires that
      these specific HLA class II antigens be expressed, and this induction is a
      component of the resulting tissue destruction and inflammation in autoimmune
      disorders. The Company’s investigational clinical trials indicated that
      IFN-gamma is responsible for the activation of killer T-cells that produce
      many
      inflammatory cytokines. These clinical trials, sponsored in Russia, indicated
      that reduction of IFN-gamma or TNF-alpha would, therefore, be expected to
      inhibit activation of killer T-cells and, therefore, reduce or inhibit the
      autoimmune reaction.




The
      Company conducted clinical studies in Russia on the use of the anti-cytokine
      therapy using primarily antibodies to IFN-gamma on 62 patients with rheumatoid
      arthritis and 5 with psoriatic arthritis, and 83 patients with multiple
      sclerosis, 13 patients experiencing corneal transplant rejection and other
      patients with various autoimmune skin diseases as well as a group of children
      diagnosed with juvenile rheumatoid arthritis-associated uveitis. During 2004,
      the Company sponsored a Phase I FDA approved clinical trial at the Georgetown
      University Medical Center. The study, which terminated, was designed to
      investigate the clinical effect of treating AIDS patients who have become
      resistant to highly active anti-retroviral therapy, with an inhibitor to TNF
      alpha.




The
      Company’s therapeutic approach based on an anti-cytokine platform technology is
      subject to extensive federal, state, and local laws and regulations. In order
      to
      comply with the federal FDA regulations regarding the manufacture and marketing
      of such products, the Company would incur substantial costs relating to
      laboratory and clinical testing of new products required by the FDA. The Company
      does not plan to use its capital or raise additional capital for such costs.
      The
      Company does not plan to pursue the FDA approval necessary to commercially
      market its developmental products.




The
      Company’s clinical trials were at a very early stage and the Company did not
      receive approval from the FDA or any other governmental agency for the
      manufacturing or marketing of any products under development. With respect
      to
      patented products or technologies, delays imposed or projected by the
      governmental approval process may materially reduce the period during which
      any
      purchaser or licensee of the Company ’s patents, if any, would have the
      exclusive right to exploit them, adversely impacting the potential income that
      the Company would realize, if any.




5




TERMINATION
      OF RESEARCH AND DEVELOPMENT ACTIVITIES




The
      Company has ceased its research and development projects, and the Company has
      no
      current plans to recommence those operations. The amount spent on research
      and
      development (including consulting (non-cash) expenses) by the Company for the
      fiscal years ended December 31, 2007, 2006 and 2005 was $0.00, $166,220 and
      $827,317, respectively.




DEPENDENCE
      UPON KEY PERSONNEL




The
      Company relies on the services and expertise of its officers and directors.
      The
      business plan and future success of the Company would likely be adversely
      affected in the event that Richard P. Kiphart or any of our executive officers
      were incapacitated or the Company otherwise loses their services.




FORWARD-LOOKING
      STATEMENTS




This
      Annual Report and other documents we file with the Securities and Exchange
      Commission (“SEC”) contain forward-looking statements that are based on current
      expectations, estimates, forecasts and projections about us, our future
      performance, our business, our beliefs and our management’s assumptions. All
      statements other than statements of historical facts are forward-looking
      statements, including any statements of the plans and objectives of management
      for future operations, projections of revenue earnings or other financial items,
      any statements regarding future economic conditions or performance, and any
      statement of assumptions underlying any of the foregoing. Some of these
      forward-looking statements may be identified by the use of words in the
      statements such as “anticipate,” “estimate,” “could,” “would,” “expect,”
“project,” “intend,” “plan,” “believe,” “seek,” “should,” “may,” “assume,”
“continue,” variations of such words and similar expressions. These statements
      are not guarantees of future performance and involve certain risks,
      uncertainties, and assumptions that are difficult to predict. We caution you
      that our performance and results could differ materially from what is expressed,
      implied, or forecast by our forward-looking statements due to general financial,
      economic, regulatory and political conditions affecting the economy and markets,
      as well as more specific risks and uncertainties affecting the Company. 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. 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 subsection entitled,
      “FACTORS THAT MAY AFFECT THE COMPANY,” and the section entitled “MARKET FOR
      REGISTRANT’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS,” all contained in
      this Annual Report on Form 10-KSB. 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.




FACTORS
      THAT MAY AFFECT THE COMPANY




The
      Company operates in an environment that involves a number of risk factors,
      many
      of which are beyond the Company’s control. The following discussion highlights
      some of these risks, uncertainties and assumptions that could affect the outcome
      of the forward-looking statements in this Annual Report, and other risks are
      discussed elsewhere in this Annual Report. Other unanticipated occurrences
      besides those listed in this Annual Report could also adversely affect
      us.




6




*We
      have a history of operating losses and have a need for additional revenue
      sources.* For
      the
      fiscal year ended December 31, 2007, we realized a net loss of $1,354,371.
      At December 31, 2007, we had an accumulated deficit of $22,123,452. Currently,
      the Company’s only source of income is from interest earned on its cash and
      investments. Based upon the Company’s current business plan, management believes
      that for the period ending December 31, 2008, the earned interest will be
      sufficient to fund approximately 45% to 55% of projected operating expenses
      including legal and accounting fees required to operate as a public
      company.




*Our
      loans to Organic Farm Marketing, LLC and Lime Energy, Inc. may not generate
      the
      rate of return agreed upon, and there is risk associated with such loans.* The
      return on our loans to Organic Farm Marketing, LLC and loan to Lime Energy,
      Inc.
      is subject to the efforts of third parties and we cannot guarantee that interest
      on our convertible note and revolving line of credit will be timely paid or
      paid
      in full, if and when paid. We also can make no assurances that we will be repaid
      the principal amount that we loaned to those companies.




*Research
      and development activities, including future clinical trials, are inherently
      uncertain and any acquirer or licensee of our patents may be unable to obtain
      or
      maintain regulatory approval for any products.* Preclinical testing and clinical trials must demonstrate that a product
      candidate is safe and efficacious. The results from preclinical testing and
      early clinical trials such as those conducted by the Company may not be
      predictive of results obtained in subsequent clinical trials. A number of
      companies in the biotechnology industries have suffered significant setbacks
      in
      advanced clinical trials, even after obtaining promising results in earlier
      trials. We cannot be sure that any purchaser or licensee of our patents would
      be
      permitted by regulatory authorities to undertake clinical trials for any of
      our
      anti-cytokine platform technology, or that if such trials were to be conducted,
      any product candidates would prove to be safe and efficacious or would receive
      regulatory approvals.




*If
      we
      are unable or unwilling to protect our patents, we may not be able to sell
      or
      license our patents successfully.* We
      have nine issued United States patents, two patents issued in Australia and
      one patent issued in Europe. No assurance can be given that any patents issued
      to us will not be challenged, invalidated, or circumvented. Litigation, which
      could result in substantial cost to us if we were to pursue it, may also be
      necessary to enforce any patents issued to us and/or determine the scope and
      validity of other parties’ proprietary rights.




*There
      is a limited public market for our common stock; our stock price is subject
      to
      volatility and our common stock is quoted on the OTC Bulletin Board, which
      limits the liquidity and could negatively affect the value of our common
      stock* .
      There
      is a limited public market for our stock and an active trading market for our
      common stock may not be sustained in the future. Our stock price is highly
      volatile, so that investment in our stock involves substantial risk. In
      addition, the stock market has from time to time experienced extreme price
      and
      volume fluctuations that often have been unrelated to the operating performance
      of particular companies. Economic and other external factors may have a
      significant effect on the market price of our common stock. Fluctuations or
      decrease in the trading price of our common stock may adversely affect the
      liquidity of the trading market for our common stock. This lack of liquidity
      may
      adversely affect our ability to raise capital through future equity
      financing.




7




Our
      stock
      price may be affected by numerous factors, many of which are beyond our control
      such as:




·
            our
                business development plan


·
            acquisition
                of a revenue generating business


·
            operational
                results and cash flow of a revenue generating
                business


·
            cash
                flow and operational results of the companies in which we make a
                non-control investment or to which we make a
                loan


·
            material
                public announcements


·
            developments
                or disputes as to our patent or other proprietary
                rights.


·
            market
                reaction to announcements by other biotechnology or pharmaceutical
                companies


·
            initiation,
                termination or modification of agreements with a potential purchaser
                or
                licensee of our patents


·
            general
                market conditions




If
      any of
      these factors causes us to fail to meet the expectations of securities analysts
      or investors, or if adverse conditions prevail or are perceived to prevail
      with
      respect to our business, the price of our common stock would likely drop
      significantly.




*We
      do
      not expect to pay dividends on our common stock in the foreseeable
      future* .
      We did
      not pay dividends on our common stock during the past and do not expect to
      pay
      cash dividends on our common stock in the foreseeable future. Our payment of
      any
      dividends in the future will be at the discretion of our board of directors
      and
      will depend upon various factors, including future earnings, operations, capital
      requirements, our general financial condition and the general financial
      condition of our subsidiaries. In addition, under Delaware law, unless a
      corporation has available surplus it cannot declare or pay dividends on its
      capital stock.




*Future
      sales of our common stock or the perception that sales could occur may depress
      our stock price* .
      The
      market price of our common stock could decline as a result of sales of a large
      number of shares of our common stock in the market after our stockholder rights
      offering, if that occurs, or the perception that these sales could occur. These
      sales, or the possibility that these sales may occur, also might make it more
      difficult for us to sell equity securities in the future at a time and a price
      that we deem appropriate. (See Factors regarding the stockholder rights offering
      above.)




Richard
      P. Kiphart and certain other stockholders hold a significant number of shares
      of
      our common stock. Sales by one or more of these stockholders could cause
      significant fluctuation in our stock price. In the future, we may determine
      to
      raise capital through offerings of our common stock, securities convertible
      into
      our common stock or rights to acquire these securities or our common stock.
      In
      any case, the result could ultimately be dilutive to our common stock by
      increasing the number of shares outstanding. We cannot predict the effect this
      dilution may have on the price of our common stock. Certain other stockholders
      may sell shares of our common stock under Rule 144 under the Securities Act,
      depending on their holding period and subject to significant restrictions in
      the
      case of shares held by persons deemed to be our affiliates.




*Richard
      P. Kiphart is able to significantly influence our business and
      affairs* .
      Richard
      P. Kiphart beneficially owns approximately 82% of our outstanding common stock.
      Mr. Kiphart can control our business and affairs. Accordingly, Mr. Kiphart
      can
      affect significantly matters requiring approval by our stockholders, including
      the election of directors and the approval of mergers or other business
      combination transactions.




*Our
      stockholders likely will incur dilution as a result of actions recently approved
      by our Board of Directors regarding our common stock* .
      Our
      Board of Directors approved in 2007 an amendment to our Certificate of
      Incorporation (“Amendment”) that would increase our authorized shares of common
      stock from two billion (2,000,000,000) shares to two billion five hundred
      million (2,500,000,000) shares, and approved the adoption of our 2007 Omnibus
      Equity Incentive Plan (“2007 Equity Plan”) for directors, employees and
      consultants under which 100,000,000 shares of common stock has been reserved.
      Options to purchase 76,000,000 shares of common stock have been granted under
      the 2007 Equity Plan. No shares of stock have been awarded under the 2007 Equity
      Plan. Both the Amendment and the 2007 Equity Plan are subject to stockholder
      approval, which the Company intends to seek during the quarter ending
      June 30, 2008. As the beneficial owner of approximately 82% of our
      outstanding common stock, Richard P. Kiphart can cause to be approved all
      matters requiring approval by our stockholders, including the approval of the
      Amendment and the 2007 Option Plan.




8




*Our
      common stock is considered a penny stock, which may make it difficult to obtain
      timely and accurate quotes for the stock or execute trades in
      it* .
      The
      rules of the Securities and Exchange Commission define a penny stock to be
      any
      equity security that has a market price or exercise price of less than $5.00
      per
      share, subject to some exceptions. The penny stock rules require broker-dealers
      to deliver a standardized risk disclosure document prescribed by the Securities
      and Exchange Commission, to provide the customer with additional information,
      including the current bid and offer quotations for the penny stock, the
      compensation of the broker-dealer and its salesperson in the transaction,
      monthly account statements showing the market value of each penny stock held
      in
      the customer’s account, and to make a special written determination that the
      penny stock is a suitable investment for the purchaser and receive the
      purchaser’s written agreement to the transaction. These requirements may reduce
      the level of trading activity in any secondary market for our common stock
      and
      may adversely affect the ability of broker-dealers to sell our
      securities.




EXECUTIVE
      OFFICES




Our
      executive offices are located at 227 West Monroe, Suite 3900, Chicago, Illinois
      60606, and our telephone number is (312) 701-0793.




ITEM
      2.  DESCRIPTION
      OF PROPERTY




During
      2007, the Company paid no rent for the use of approximately 3,500 square feet
      of
      commercial building space of a firm, New Horizons Diagnostics that is partially
      owned by former director Lawrence Loomis. In addition, during 2007, the Company
      paid no rent for the use of a portion of office space in Chicago, Illinois
      leased in the name of Augustine Capital Management. No formal agreement
      memorializes this month-to-month arrangement.




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




ITEM
      3.  LEGAL
      PROCEEDINGS




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




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




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




The
      Company did not hold its annual meeting of stockholders for 2007 for financial
      reasons.




9




PART
      II




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




The
      Company’s Common Stock is quoted on the Over-The-Counter Bulletin Board operated
      by the National Association of Securities Dealers, Inc. under the symbol “ADVB.”
The table below shows the high and low bid quotations of the Company’s Common
      Stock during each of the four quarters of the 2007 and 2006 calendar years,
      and
      reflects inter-dealer prices, without retail mark-up, mark-down or commission
      and may not represent actual transactions .
      The
      quotation information has been obtained from Commodity Systems, Inc., available
      through Yahoo! Finance.




**2007
                Fiscal Quarter Ended:**
            **High
                Bid**
            **Low
                Bid**March
                31
              June
                30
              September
                30
              December
                31
            $0.06
              $0.08
              $0.03
              $0.02
            $0.03
              $0.02
              $0.02
              $0.01**2006
                Fiscal Quarter Ended:**
            **High
                Bid**
            **Low
                Bid**March
                31
            $0.16
            $0.07June
                30
            $0.09
            $0.03September
                30
            $0.10
            $0.02December
                31
            $0.14
            $0.04





As
      of
      March 12, 2008, the Company had approximately 1385 holders of record of its
      Common Stock. This number does not include those beneficial owners whose
      securities are held by brokers or in street name. The total number of record
      and
      beneficial stockholders is estimated to be more than 3300.




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




ITEM
                6.
            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. See “ITEM 1. BUSINESS – FORWARD-LOOKING
      STATEMENTS” for a more detailed discussion and disclaimer about our
      forward-looking statements. Investors are cautioned that forward-looking
      statements made by the Company, including those made in this Annual Report,
      are
      subject to risks and uncertainties that may cause actual results to differ
      materially from those projected. Reference is made in particular to
      forward-looking statements regarding product development, capital sources,
      plan
      of operations and expenses. The Company operates in a rapidly changing
      environment that involves a number of risks, some of which are beyond the
      Company’s control. Future operating results and the Company’s stock price may be
      affected by a number of factors. See “ITEM 1. BUSINESS – FACTORS THAT MAY AFFECT
      THE COMPANY.”




10


OVERVIEW




The
      Company had approximately $ 7,620,000 in
      cash
      at December 31, 2007. This amount of cash is projected to be adequate to meet
      the Company’s projected minimum cash requirements for operations for the next
      12-month period ending December 31, 2008, of approximately $450,000. Currently, the Company’s only source of income is from interest earned on its
      cash and investments. Based upon the Company’s current business plan, management
      believes that for the period ending December 31, 2008, the earned interest
      will
      be sufficient to fund approximately 45% to 55% of our projected operating
      expenses excluding non-recurring expenses. Besides
      interest payments on the Company’s investment in Organic Farm Marketing, LLC and
      loan to Lime Energy, Inc., the Company does not have a source of revenue to
      continue its operations beyond the currently available funds.




During
      2007, the Company did not undertake any research and development projects or
      new
      patent applications.




The
      Company’s business development plan for 2008 principally focuses on the
      following three specific elements, among other steps:





1.
            Evaluation of possible acquisition
              candidates; 2.
            Acquisition
                of a control or non-control position in one or more revenue generating
                companies or development stage companies, through investment in equity
                or
                convertible debt, or an asset acquisition or other financing;
                and


3.
            Sale
                or disposal of our patents and/or licensing agreements with companies
                seeking opportunities related to our
                patents.




As
      of the
      date hereof, the Company has not entered into any agreement for the acquisition
      of a revenue generating company or for the sale or license of its
      patents.




We
      have a
      history of operating losses and have not generated any revenue. At December
      31,
      2007, we had an accumulated deficit of $22,123,452. The amount of time required
      to reach sustained profitability is highly uncertain.




Subject
      to the acquisition of a revenue-generating business which is one of the
      objectives of the Company’s business plan for 2008, the Company does not expect
      to purchase any significant equipment and there are no expected significant
      changes in the number of the Company’s employees.




RESULTS
      OF OPERATIONS - Years ended December 31, 2007 and 2006.




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




LIQUIDITY
      AND CAPITAL RESOURCES.




The
      Company had approximately $7,620,000 in cash and investments at December 31,
      2007, and 1,167,621,940 shares
      of Common Stock issued and outstanding.




This
      amount of cash is adequate to meet the Company’s projected cash requirements for
      full operations for the next 12 months. Based upon the Company’s current
      business plan, management believes that for the period ending December 31,
      2008,
      the earned interest on the Company’s cash and investments will be sufficient to
      fund approximately 45% to 55% of its ordinary operating expenses. The Company
      does not have a source of revenue to continue its operations beyond the current
      available funds.




11




FISCAL
      2007 COMPARED TO FISCAL 2006




For
      the
      year ended December 31, 2007, the Company realized a net loss of $1,354,371
      compared to a net loss of $7,418,882 for the year ended December 31, 2006. The
      net
      loss decrease over fiscal year 2006 resulted primarily from a decrease in
      interest expense of $6,364,609. The Company also had increases in expenses
      over
      the year ended December 31, 2006, consisting primarily of the following:
      increased option and warrant expense of $197,569, transfer agent fees of
      $63,208, loss on impairment or abandonment of assets of $257,531 and loss on
      impairment or abandonment of patents of $745,640, offset by increased interest
      income of $249,078 and $100,000 in income for an extension of a line of credit.
      The Company had decreases in expenses over the year ended December 31,
      2006, consisting primarily of the following: decrease in professional fees
      of
      $70,087, decrease in directors’ fees of $144,200, decrease in salaries and
      benefits of $43,510, decreased research and development expenses of $9,600,
      business development expenses of $39,500, consulting, research and development
      (non-cash) $156,620, and other expenses of $50,527.




CRITICAL
      ACCOUNTING POLICIES




In
      preparing our financial statements, we must select and apply various accounting
      policies. In order to apply our accounting policies, we often need to make
      estimates based on judgments about future events. In making such estimates,
      we
      rely on historical experience, market and other conditions, and on assumptions
      that we believe to be reasonable. However, the estimation process is by its
      nature uncertain given that estimates depend on events over which we may not
      have control. If market and other conditions change from those that we
      anticipate, our results of operations, financial condition and changes in
      financial condition may be materially affected. In addition, if our assumptions
      change, we may need to revise our estimates, or to take other corrective
      actions, either of which may also have a material effect on our results of
      operations, financial condition or changes in financial condition. Members
      of
      our senior management have discussed the development and selection of our
      critical accounting estimates, and our disclosure regarding them, with the
      Audit
      Committee of our board of directors, and do so on a periodic basis.





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 has adopted this statement and has made certain adjustments to the
      carrying value of its assets, specifically patents, equipment, and furniture,
      at
      December 31, 2007.





Statement
      of Financial Accounting Standards No. 123(R), “Share Based Payment”, 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.





Income
      taxes are provided based upon the liability method of accounting pursuant to
      Statement of Financial Accounting Standards 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.





12




ITEM
      7.  FINANCIAL
      STATEMENTS




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




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




There
      have been no disagreements with the Company’s accountants, Williams &
Webster P.C., on accounting and financial disclosures during the Company’s two
      most recent fiscal years, i.e., January 1, 2006, through December 31, 2007,
      and through the date hereof.




ITEM
          8A(T).  CONTROLS
          AND PROCEDURES
  *Evaluation
          of Disclosure Controls and Procedures*
  Our
          management, with the participation of our chief executive officer and chief
          financial officer, has evaluated the effectiveness of the Company’s disclosure
          controls and procedures (as such term is defined in
          Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the
          end of the period covered by this report. Based on such evaluation, our
          chief
          executive officer and chief financial officer have concluded that, as of
          the end
          of such period, the Company’s disclosure controls and procedures were
          effective.
  *Management’s
          Report on Internal Control over Financial Reporting*
  Our
          management is responsible for establishing and maintaining adequate internal
          control over financial reporting as defined in Rules 13a-15(f) and
          15d-15(f) under the Exchange Act. Under the supervision and with the
          participation of our management, including our chief executive officer
          and chief
          financial officer, we conducted an evaluation of the effectiveness of our
          internal control over financial reporting based on criteria established
          in the
          framework in Internal Control — Integrated Framework issued by the Committee of
          Sponsoring Organizations of the Treadway Commission. Based on this evaluation,
          our management has concluded that our internal control over financial reporting
          was effective as of December 31, 2007.
  Because
          of its inherent limitations, internal control over financial reporting
          may not
          prevent or detect misstatements. Also, projections of any evaluation of
          effectiveness to future periods are subject to the risks that controls
          may
          become inadequate because of changes in conditions, or that the degree
          of
          compliance with the policies or procedures may deteriorate.
  This
          annual report does not include an attestation report of the Company’s registered
          public accounting firm regarding internal control over financial reporting.
          Management’s report was not subject to attestation by the Company’s registered
          public accounting firm pursuant to temporary rules of the Securities and
          Exchange Commission that permit the Company to provide only management’s report
          in this annual report.
  *Changes
          in Internal Control over Financial Reporting*
  There
          have not been any changes in the Company’s internal control over financial
          reporting (as such term is defined in Rules 13a-15(f) and
          15d-15(f) under the Exchange Act) during the most recent fiscal quarter
          that have materially affected, or are reasonably likely to materially affect,
          the Company’s internal control over financial reporting.
 13




PART
      III




ITEM
      9.  DIRECTORS,
      EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS




The
      following table sets forth the names and nature of all positions and offices
      held by all directors and executive officers of the Company as of March 12,
      2008, and the period or periods during which each such director or executive
      officer served in his or her respective positions.


**Name**
              **Age**
              **Position
                  Held**
              **Director
                  Since**Richard
                  P. Kiphart
              66
              Chairman
                  of the Board, Director (3)(4)
              June
                  2002Christopher
                  W. Capps
              25
              President
                  and Chief Executive Officer, Director (3)
              November
                  2006Thomas
                  J. Pernice
              46
              Treasurer
                  and Secretary, Director (1)(2)(3)(4)
              April
                  2001John
                  L. Drew
              26
              Chief
                  Financial Officer (non-director)
              August
                  2007Boris
                  Skurkovich, M.D.
              53
              Director
                  (4)
              December
                  1986Joseph
                  A. Bellanti, M.D.
              73
              Director
                  (2)
              October
                  2003Keith
                  Gregg
              44
              Director
                  (1)
              November
                  2005John
                  R. Capps
              57
              Director
                  (2)(3)(4)
              November
                  2006Matthew
                  Gooch
              33
              Director
                  (1)(3)(4)
              November
                  2006David
                  Valentine
              38
              Director
                  (1)(2)(3)
              November
                  2006


_ ____________________


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


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


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


(4)  Member
      of
      the Nominating
      Committee of
      the
      Board of Directors.





TERM
      OF
      OFFICE




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




BIOGRAPHICAL
      DESCRIPTIONS OF DIRECTORS AND OFFICERS




Joseph
      A.
      Bellanti, M.D. - Since October 2003, Dr. Bellanti has served as a member of
      the
      Board of Directors. Dr. Bellanti joined the faculty of Georgetown University
      School of Medicine in 1963, and continued to serve on that faculty where he
      is
      currently Professor of Pediatrics and Microbiology-Immunology and Director
      of
      the International Center for interdisciplinary Studies of Immunology at
      Georgetown University Medical Center. In addition to teaching medical students
      and residents, as well as his continuing direct patient care of children and
      adults exhibiting the full spectrum of allergic and immunologic disorders,
      Dr.
      Bellanti has been actively engaged in research dealing with antimicrobial
      immunity and immunologically-mediated diseases and has published more than
      400
      scientific articles and abstracts. He is editor of the well-known textbook
      “Immunology,” published by W.B. Saunders Co. He is currently editor-in-chief of
      the Allergy and Asthma Proceedings. For his achievements in allergy and
      immunology, Dr. Bellanti has received numerous awards, including the Golden
      Cane
      Award in 2002. He is the recipient of many national and international honors.
      He
      received his M.D. degree from the University of Buffalo, trained in immunology
      at the University of Florida School of Medicine and continued his studies as
      a
      research virologist at Walter Reed Army Institute of Research, Washington,
      D.C.




14


Christopher
      W. Capps - Mr. Capps has served as President and Chief Executive Officer of
      Advanced Biotherapy, Inc. (the “Company”) since August 2006. Since September
      2005, Mr. Capps (25) has also served as President and CEO of KVG Partners,
      a
      private equity firm. Mr. Capps received his B.A. in history from Southern
      Methodist University.




John
      R.
      Capps - Mr. Capps has been the President and CEO of Plaza Motor Company for
      26
      years. Plaza Motor Company is part of the Ashbury Automotive Group, which is
      a
      publicly owned company on the New York Stock Exchange. Mr. Capps has worked
      in
      the automotive industry since his graduation from Stanford University in 1972.
      He is the father of Christopher W. Capps, President and Chief Executive Officer
      of the Company.




Matthew
      Gooch - Mr. Gooch joined William Blair & Company in 1997 and currently
      coordinates the firm’s special situations and restructuring activities. Mr.
      Gooch is a CFA charter holder and a graduate of Emory University (B.A.) and
      University of Chicago (M.B.A.), having earned high honors from both
      institutions.




Keith
      Gregg is the
      Managing Partner of BioPharm Development Group, LLC, a retained, global life
      sciences corporate strategy, business development and licensing firm. He has
      over 21 years of diverse experience in start-up and high growth
      biopharmaceutical companies, helping companies achieve their strategic goals
      for
      in-licensing, out-licensing, and business collaborations. Mr. Gregg is also
      a
      founding member of HALO Holdings, LLC which assists non-life science companies
      in their corporate strategy, operations, and identification of growth avenues.
      Prior to BioPharm, Mr. Gregg’s industry experience included key positions at
      Praxis Biologics, Molecular Oncology, Univax Biologics, NABI, and Mazier
      Partners. His management responsibilities have encompassed corporate
      development, business development and licensing, marketing operations,
      diagnostic operations, product launches, financing, and mergers. Mr. Gregg
      is an
      active member on several public and private company/foundation/educational
      boards and is a guest speaker at multiple U.S. business schools and business
      development conferences in the areas of entrepreneurship and partnering.
      Additionally, Mr. Gregg is an advisor to an extensive range of venture capital
      and private investor groups. Mr. Gregg received his MBA from the University
      of
      Maryland and a BS in Biomedical Engineering and Mathematics from Vanderbilt
      University. Mr. Gregg also completed post-graduate business strategy work at
      The
      Wharton School .




Richard
      P. Kiphart - Since August 28, 2006, Mr. Kiphart has served as Chairman of the
      Board. Since June 2002, Mr. Kiphart has served as a member of the Board of
      Directors. He currently serves as Chairman of the Board of Directors of SAFLINK
      Corporation (NASDAQ:SFLK), Chairman of the Board of Directors of Lime Energy,
      Inc. (NASDAQ:LIME), and a member of the Board of Directors of Nature Vision,
      Inc. (NASDAQ:NRVN). Mr. Kiphart is the Head of Corporate Finance for the
      investment firm of William Blair & Company, L.L.C. Mr. Kiphart has been with
      William Blair for over 42 years. Mr. Kiphart received his B.A. from Dartmouth
      College and his M.B.A. from Harvard Business School.




Thomas
      J.
      Pernice - Since
      April 2001, Mr. Pernice has served as the Treasurer and Secretary of the Company
      and as a member of the Board of Directors. He is co-founder and Chairman of
      Gibraltar Associates, LLC, a communications and public affairs consultancy
      with
      offices in Washington, DC and Los Angeles and Chief Executive Officer and
      Founder of Modena Holding Corporation, a consultancy specializing in business
      development strategies. He has served for more than nine years as a Presidential
      appointee in three U.S. Presidential Administrations; as a White House Staff
      member in the Reagan Administration, a Senior White House Staff member in the
      Bush 41 Administration and most recently in the Bush 43 Administration as a
      Senior Policy Advisor in the U.S. Department of Energy. After his career in
      government, Mr. Pernice served for eight years as a Vice President for the
      conglomerate of publicly and privately held business interests of David H.
      Murdock. Mr. Pernice earned a Bachelor of Arts degree in Broadcast Journalism
      from the University of Southern California in 1984.




15




Boris
      Skurkovich, M.D. - Since 1986, Dr. Skurkovich has served as a member of the
      Board of Directors, and from that same date until December 2000, he was a Vice
      President of the Company. He completed a clinical and research fellowship at
      the
      Maxwell Finland Laboratory for Infectious Diseases, Boston City Hospital,
      Boston, Massachusetts, and presently is, and has been a professor at Brown
      Medical School since 1989. He has collaborated with his father, Simon
      Skurkovich, on the development of the Company’s treatment of autoimmune
      diseases. Dr. Skurkovich received his M.D. from the Moscow State Medical
      Institute.




David
      Valentine has been President and Managing Partner of Broadreach Financial Group
      LLC, a financial advisory firm, and Managing Partner of the Broadreach Steward
      Fund LLC, a private equity fund, since 2006. Previously, Mr. Valentine was
      a
      portfolio manager at Magnetar Capital LLC, a multi-billion dollar hedge fund
      based in Evanston, Illinois. Mr. Valentine serves on the Boards of Directors
      of
      Ambiron Trustwave LLC and Lime Energy, Inc., where he also serves on the Audit
      Committees. He also serves on the Board of Directors of Inovomed, Inc. and
      Friends of the Global Fight against AIDS, Malaria and Tuberculosis. He is a
      1993
      graduate of Washington & Lee University. Mr. Valentine is the son-in-law of
      Richard P. Kiphart, Chairman of the Board of Directors of the
      Company.




John
      L.
      Drew - Mr. Drew is the Chief Financial Officer of the Company and was appointed
      to that position on August 24, 2007. Since August 1, 2007, Mr. Drew has been
      employed by the Company. Prior to joining the Company, Mr. Drew was employed
      by
      Deloitte Tax LLP as Senior Tax Analyst from October 2004. At Deloitte, Mr.
      Drew
      consulted on taxation and compliance issues for investment management companies,
      operating partnerships and holding companies. He is a 2004 graduate of DePaul
      University, where he double majored in Accounting and Finance.




AUDIT
      COMMITTEE




Matthew
      Gooch, Keith Gregg, Thomas J. Pernice and David Valentine serve on the Company’s
      Audit Committee. Although the Company’s securities are not quoted on Nasdaq, the
      Company has elected to apply the Nasdaq Marketplace Rules regarding the
      definition of “independence” for the members of the Audit Committee. Under the
      Nasdaq Marketplace Rules, directors Matthew Gooch, Keith Gregg, Thomas J.
      Pernice and David Valentine qualify as “independent.” Based upon current Nasdaq
      Marketplace Rules, Matthew Gooch, Keith Gregg, Thomas J. Pernice and David
      Valentine have financial sophistication, although none of such committee members
      may currently qualify as an “audit committee financial expert” for purposes of
      SEC rules, adopted pursuant to the Sarbanes-Oxley Act of 2002. Since the Company
      is a development stage company, the Board of Directors believes that the current
      members of the Audit Committee have sufficient knowledge of financial statement
      preparation, analysis and evaluation even if none of them qualify as an “audit
      committee financial expert.”




FAMILY
      RELATIONSHIPS




The
      only
      known family relationships between any directors are John R. Capps, father
      to
      Christopher W. Capps, and David Valentine, son-in-law of Richard P.
      Kiphart.




16




INVOLVEMENT
      IN CERTAIN LEGAL PROCEEDINGS




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




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




(b)  any
      criminal convictions;




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




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




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




COMPLIANCE
      WITH SECTION 16(a) OF THE EXCHANGE ACT




Section
      16(a) of the Exchange Act requires that the Company’s directors, executive
      officers, and 10% stockholders file with the SEC reports concerning their
      ownership, and changes in their ownership, of the Company’s equity securities.
      Based on a review of copies of the reports provided to the Company, Director
      Boris Skurkovich filed a Form 5 in February, 2008 to report a transaction which
      should have been reported on a Form 4 in July, 2007.




CODE
      OF
      ETHICS




The
      Company has adopted a Code of Ethics that applies to its chief executive
      officer, chief financial officer and all other executive officers. You may
      request a copy of the Company’s Code of Ethics by sending a request to Advanced
      Biotherapy, Inc., 227 West Monroe, Suite 3900, Chicago, Illinois 60606,
      Attention: Secretary (include your return address) **.**




ADVISORY
      BOARD - BIOGRAPHICAL DESCRIPTIONS OF MEMBERS




Edmond
      F.
      Buccellato - Mr. Buccellato served as Chairman of the Board from October 2002
      to
      August 28, 2006, and as President and Chief Executive Officer from April 2001
      to
      August 28, 2006. Mr. Buccellato served as President and Chief Operating Officer
      of the Company from September 1, 2000 to December 12, 2000, and he served as
      Chief Executive Officer from 1995 to August 31, 2000. He served as a member
      of
      the Board of Directors from 1995 to November 6, 2006. He presently serves on
      the
      Advisory Board. He is a shareholder of Buccellato & Finkelstein, a public
      accountancy firm. Mr. Buccellato received his undergraduate degree from
      California State University at San Diego, and his graduate degree from the
      University of Southern California.




Lawrence
      Loomis - From 1986 until November 6, 2006, Mr. Loomis served as a member of
      the
      Board of Directors of the Company. He presently serves on the Advisory Board.
      During the past five years, Mr. Loomis has been the major shareholder and
      President of New Horizons Diagnostics. Founded in 1980, NHD, under the direction
      of Mr. Loomis, has developed rapid test methods for small and large molecules.
      The test methods include: luminescence, fluorescence, fiber optics, and
      colloidal gold immunoassays. He also directed development of tests for the
      rapid
      screening of water and food for microbial contamination. Mr. Loomis received
      his
      undergraduate degree in math, chemistry and biology from New York University
      and
      his graduate degree in chemistry from City University.




17




Simon
      Skurkovich, M.D. - Dr. Skurkovich is the founder of Advanced Biotherapy, Inc.,
      and presently serves on its Advisory Board. From 1985 until September 2000,
      Dr.
      Skurkovich served as Chairman of the Board of the Company. He has been granted
      28 patents in the United States and Europe. He is the creator of immune
      preparations from human blood against antibiotic resistant bacteria that saved
      thousands of lives in the Soviet Union and Eastern Europe. In Russia, he was
      professor and Chief of the Immunology Laboratory of the Institute of Hematology
      and Blood Transfusion and was awarded gold and silver medals for his scientific
      discoveries. His laboratory was also awarded the nation’s highest honor, the
      Lenin Prize, for his patented work. Dr. Skurkovich received an M.D., Ph.D.
      and a
      Doctorate in Medical Sciences (D.Sc.) from Pirogov State Medical Institute
      in
      Moscow. He is the pioneer of anticytokine therapy, which opened the way to
      a new
      understanding of the pathogenesis and treatment of autoimmune diseases and
      thus
      helped bring treatments that have improved the health of many people. He has
      written more than 240 articles for scientific publications. In 1974, he
      published in the journal Nature a new explanation for the pathogenesis and
      treatment of autoimmune diseases, which has been the basis for successful
      clinical trials and is now well accepted around the world.




ITEM
      10.  EXECUTIVE
      COMPENSATION




The following
      table sets forth the compensation paid by the Company since January 1,
      2006,
      through December 31,
      2007,
      for the Chief Executive Officer of the Company and
      the Company ’s
      other
      executive officers who were compensated during the year ended December 31, 2007 (the
      “ Named
      Executive Officers ”):




Summary
                Compensation TableName
                and Principal Position
            Year
            Salary
              ($)
            Bonus
              ($)
            Stock
                Awards
              ($)
            Option
                Awards
              ($)
            Non-Equity
                Incentive Plan Compensation
              (#)
            Non-Qualified
                Deferred Compensation Earnings
              ($)
            All
                Other Compensation
              ($)
            Total
              ($)Christopher
                Capps
              Chief
                Executive Officer(1)
            2007
              2006
            $
                0
              $
                0
            $
                0
              $
                0
            $
                0
              $
                0
            $
                0
              $
                0
            N/A
            $
                0
              $
                0
            $
                0
              $
                0
            $
                0
              $
                0John
                L. Drew
              Chief
                Financial Officer
              As
                of August 24, 2007 (2)
            2007
            $35,000
            $
                0
            $
                0
            $
                0
            N/A
            $
                0
            $
                0
            $
                35,000Michael
                Bansley
              Chief
                Financial Officer
              Through
                July 31, 2007 (3)(4)
            2007
              2006
            $
                0
              $
                0
            $
                0
              $
                0
            $
                0
              $
                0
            $
                0
              $
                0
            N/A
            $
                0
              $
                0
            $
                10,112
              $
                45,869
            $
                0Edmond
                F. Buccellato (5)(7)
              Chief
                Executive Officer
            2006
            $
                32,500
            $
                0
            $
                0
            $
                18,600
            
            $
                0
            $
                142,337
            $193.437Simon
                Skurkovich (6)(7)
              Chairman
                Emeritus, Director of Research & Development
            2006
            $
                55,000
            $
                0
            $
                0
            $
                24,600
            
            $
                0
            $
                149,500
            $
                229,100




(1)
      During 2007, Mr. Capps was paid a salary by KVG Partners LLC, a family
      investment company in which Mr. Richard P. Kiphart is a principal and the
      largest investor. Mr. Capps is also eligible to receive equity awards from
      KVG
      Partners based on its investments. During 2007, the Company did not recognize
      as
      compensation to Mr. Capps the stock option grant to purchase 50,000,000 shares
      of Company common stock because those options do not commence to vest until
      November 21, 2008.




(2)
      During 2007, the Company did not recognize as compensation to Mr. Drew the
      stock
      option grant to purchase 10,000,000 shares of Company common stock because
      those
      options do not commence to vest until August 7, 2008.




(3)
      During 2007, Mr. Bansley, the Company’s Chief Financial Officer through July 31,
      2007, did not receive any compensation directly from the Company, although
      the
      Company paid Bansley, Brescia & Co., P.C., the amount of $45,869.75 for
      accounting services. Mr. Bansley is a shareholder of that accounting
      firm.




(4)   During
      2006, Mr. Bansley, the Company’s Chief Financial Officer, did not receive any
      compensation directly from the Company, although the Company paid Bansley,
      Brescia & Co., P.C., the amount of $10,112.75 for accounting services. Mr.
      Bansley is a shareholder of that accounting firm.




18




(5)  During
      2006, Mr. Buccellato was issued shares of common stock in lieu of payment of
      $55,000 in accrued but unpaid salary and in lieu of $42,337 in debt owed to
      Buccellato & Finkelstein, of which Mr. Buccellato is a principal. In
      addition, he was paid $45,000 in consulting fees.




(6)  During
      2006, Dr. Skurkovich was issued shares of common stock in lieu of payment of
      $147,500 in accrued but unpaid salary. In addition, he was paid $2,000 in
      consulting fees to the Company.




(7)  During August 2006,
      the
      Company granted options to purchase up to 930,000 shares of Common Stock and
      1,230,000 shares of Common Stock, at an exercise price of $0.03 per share,
      to
      Mr. Buccellato and Dr. Skurkovich, respectively.




Mr.
      Drew,
      the Company’s Chief Financial Officer, has a written employment agreement that
      provides for an annual salary of $84,000, subject to annual increase in the
      discretion of the Board of Directors.




There are
      no
      retirement, pension, or profit sharing plans for the benefit of the Company ’s
      officers and directors. The Company has
      previously granted non-qualified stock options and warrants for the benefit
      of
      officers and directors.




The
      Board
      of Directors approved
      the adoption of our 2007 Omnibus Equity Incentive Plan (“2007 Equity Plan”)
      in October 2007, which plan is subject to approval by the Company’s stockholders
      which has not occurred yet. (See
      “ITEM 1. BUSINESS - FACTORS THAT MAY AFFECT THE COMPANY” regarding approval by
      the Board of Directors of the 2007 Equity Plan and the recent grant of stock
      options.) The purpose of the 2007 Equity Plan
      is to
      promote the long-term success of the Company and
      the
      creation of stockholder value by (a) encouraging
      employees, outside directors and consultants to focus on critical long-term
      objectives, (b) encouraging
      the attraction and retention of employees, outside directors and consultants
      with exceptional qualifications and (c) linking
      employees, outside directors and consultants directly to stockholder interests
      through increased stock ownership. The 2007 Equity Plan provides
      for awards in the form of restricted shares, stock units, incentive and
      nonstatutory stock options, stock appreciation rights, and performance awards.
      An aggregate of 100,000,000 shares of Common Stock (subject to annual
      adjustments on January 1 st of each
      year of 3% of the total number of shares of Common Stock then outstanding and
      subject to adjustments in the event of stock splits or other changes in the
      Common Stock) may be awarded under the 2007 Equity Plan. Non-statutory stock
      options for 76,000,000 shares of Common Stock have been granted pursuant to
      the
      2007 Equity Plan. No shares have been awarded pursuant to the 2007 Equity Plan.
      The 2007 Equity Plan
      will
      be ad ministered
      by the Board of Directors, unless the Board delegates administration to a
      committee.




The stockholders
      approved our 2000 Omnibus Equity Incentive Plan (“ OEI
      Plan”) at
      the Company ’s
      Annual
      Stockholders Meeting on December 13,
      2001.
      In March 2007, the Board of Directors approved the termination of the OEI Plan.
      The purpose of the OEI
      Plan was
      to
      promote the long-term success of the Company and
      the
      creation of stockholder value by (a) encouraging
      employees, outside directors and consultants to focus on critical long-term
      objectives, (b) encouraging
      the attraction and retention of employees, outside directors and consultants
      with exceptional qualifications and (c) linking
      employees, outside directors and consultants directly to stockholder interests
      through increased stock ownership. The OEI
      Plan provided
      for awards in the form of restricted shares, stock units, incentive and
      nonstatutory stock options and stock appreciation rights. However, only
      non-statutory stock options were granted pursuant to the OEI Plan. The OEI
      Plan
      has been, and will
      continue to be, administered by the Board of Directors, unless the Board
      delegates administration to a committee, with respect to stock options granted
      pursuant to the OEI Plan prior to its termination in March, 2007.




OPTION/SAR
      GRANTS TO EXECUTIVE OFFICERS




The
      following  Named
      Executive Officers received
      stock options or SARs during the 2007 fiscal year, none of which were
      exercisable.




19




OUTSTANDING
      EQUITY AWARDS AT DECEMBER 31, 2007




Option
                Awards
            Stock
                AwardsName
            Number
              of
              Securities
              Underlying
              Unexercised
              Options
              (#)
              Exercisable
            Number
              of
              Securities
              Underlying
              Unexercised
              Options
              (#)
              Unexercisable
            Equity
              Incentive
              Plan
              Awards
              Number
              of
              Securities
              Underlying
              Unexercised
              Unearned
              Options
              (#)
            Option
              Exercise
              Price
              ($)
            Option
              Expiration
              Date
            Number
              of
                Shares
              or
                Units
              of
                Stock
              That
                Have
              Not
              Vested
              (#)
            Market
              Value
                of Shares or
              Units
                of Stock
              That
                Have
              Not
                Vested
              ($)
            Equity
              Incentive
              Plan
                Awards:
              Number
              of
              Unearned
              Shares,
              Units
                or
              Other
                Rights
              That
                Have Not
              Vested
              (#)
            Equity
              Incentive
              Plan
                Awards:
              Market
                or Payout Value of
              Unearned
              Shares,
              Units
                or
              Other
                Rights
              That
                Have Not
              Vested
              ($)Christopher
                Capps
              
              John
                L. Drew
            0
              
              0
            50,000,000
              
              10,000,000
            0
              
              0
            $0.013
              
              $0.013
            11/21/2013
              
              08/01/2013
            50,000,000
              
              10,000,000
              
              0
            550,000
              
              110,000
            0
              
              0
              
              0
            0
              
              0
              
              0





COMPENSATION
      OF DIRECTORS




Directors
      did not receive any cash compensation for serving as members of the Board of
      Directors for the year ended December 31, 2007.




The
      following table sets forth the compensation paid by the Company to the directors
      during the year ended December 31, 2007:




DIRECTOR
      COMPENSATION




Name
            Fees
                earned or paid in cash
              ($)
            Stock
                Awards
              ($)
            Option
                Awards
              ($)
            Non-equity
                Incentive Plan Compensation
              ($)
            Non-qualified
                Deferred Compensation Earnings
              ($)
            All
                Other Compensation
              ($)
            Total
              ($)Joseph
                A. Bellanti (1)
            0
            0
            24,081
            0
            0
            0
            24,081Christopher
                W. Capps(2)
            0
            0
            0
            0
            0
            0
            0John
                R. Capps(3)
            0
            0
            24,081
            0
            0
            0
            24,081Matthew
                Gooch(4)
            0
            0
            24,081
            0
            0
            0
            24,081Keith
                Gregg (5)
            0
            0
            24,081
            0
            0
            0
            24,081Richard
                P. Kiphart (6)
            0
            0
            24,081
            0
            0
            0
            24,081Thomas
                J. Pernice (7)
            0
            0
            24,081
            0
            0
            0
            24,081Boris
                Skurkovich, M.D. (8)
            0
            0
            24,081
            0
            0
            0
            24,081David
                W. Valentine(9)
            0
            0
            24,081
            0
            0
            0
            24,081




(1)  Joseph
      A.
      Bellanti, M.D. held options to purchase up to 25,000 shares of Common Stock
      at
      an exercise price of $0.20 per share, options to purchase up to 830,000 shares
      of Common Stock at an exercise price of $0.03 per share, and options to purchase
      up to 2,000,000 shares of Common Stock at an exercise price of $0.013 per share
      (at December 31, 2007, aggregate 2,855,000 stock options).




(2)  Christopher
      W. Capps held options to purchase up to 50,000,000 shares of Common Stock at
      an
      exercise price of $0.013 per share, which vest in three equal installments
      beginning on November 21, 2008 (at December 31, 2007, aggregate 50,000,000
      stock
      options).




(3)  John
      R.
      Capps held options to purchase up to 2,000,000 shares of Common Stock at an
      exercise price of $0.013 per share (at December 31, 2007, aggregate 2,000,000
      stock options).




(4)  Matthew
      Gooch held options to purchase up to 2,000,000 shares of Common Stock at an
      exercise price of $0.013 per share (at December 31, 2007, aggregate 2,000,000
      stock options).




(5)  Keith
      Gregg held options to purchase 830,000 shares of Common Stock at an exercise
      price of $0.03 per share, options to purchase 2,000,000 shares of Common Stock
      at an exercise price of $0.013 per share, and warrants to purchase 40,000 shares
      of Common Stock at an exercise price of $0.10 per share, excluding warrants
      to
      purchase up to 20,000 shares of Common Stock at an exercise price of $0.10
      which
      vests in one remaining equal installments on December 31, 2008 (at December
      31,
      2007, aggregate 2,870,000 stock options and warrants).





(6)  Richard
      P. Kiphart held options to purchase up to 20,000 shares of Common Stock at
      an
      exercise price of $0.21 per share, options to purchase up to 30,000 shares
      of
      Common Stock at an exercise price of $0.42 per share, options to purchase up
      to
      25,000 shares of Common Stock at an exercise price of $0.20 per share, and
      options to purchase up to 2,000,000 shares of Common Stock at an exercise price
      of $0.013 per share (at December 31, 2007, aggregate 2,075,000 stock
      options).




(7)  Thomas
      J.
      Pernice held warrants assigned by Cappello Capital Corp. to purchase 1,042,443
      shares of Common Stock at an exercise price of $0.15 per share, options to
      purchase up to 10,000 shares of Common Stock at an exercise price of $0.25
      per
      share, options to purchase up to 20,000 shares of Common Stock at an exercise
      price of $0.21 share, options to purchase up to 30,000 shares of Common Stock
      at
      an exercise price of $0.42 per share, options to purchase up to 25,000 shares
      of
      Common Stock at an exercise price of $0.20 per share, options to purchase up
      to
      1,530,000 shares of Common Stock at an exercise price of $0.03 per share, and
      options to purchase up to 2,000,000 shares of Common Stock at an exercise price
      of $0.013 per share (at December 31, 2007, aggregate 4,657,443 stock options
      and
      warrants).


20


(8)  Boris
      Skurkovich, M.D. held options to purchase up to 10,000 shares of Common Stock
      at
      an exercise price of $0.25 per share, options to purchase up to 20,000 shares
      of
      Common Stock at an exercise price of $0.21 per share, options to purchase up
      to
      30,000 shares at an exercise price of $0.42 per share, options to purchase
      up to
      450,000 shares of Common Stock at an exercise price of $0.16 per share, options
      to purchase up to 25,000 shares at $0.20 per share, options to purchase up
      to
      930,000 shares of Common Stock at an exercise price of $0.03 per share, and
      options to purchase up to 2,000,000 shares of Common Stock at an exercise price
      of $0.013 per share (at December 31, 2007, aggregate 3,465,000 stock
      options).




(9)  David
      Valentine held options to purchase up to 2,000,000 shares of Common Stock at
      an
      exercise price of $0.013 per share (at December 31, 2007, aggregate 2,000,000
      stock options).




ITEM
      11.  SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED  STOCKHOLDER
      MATTERS




EQUITY
      COMPENSATION AND LONG-TERM INCENTIVE PLAN AWARDS




EQUITY
      COMPENSATION PLAN INFORMATION AS OF DECEMBER 31, 2007




Number
                of securities to be issued upon exercise of outstanding options,
                warrants
                and rights
            Weighted-average
                exercise price of outstanding options, warrants and rights
            Number
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in column
                (a)(a)
            (b)
            (c)Equity
                compensation plans approved by security holders(1)
            4,990,000
            $0.18
            -
                0
                -Equity
                compensation plans not approved by security holders(2)(3)
            76,000,000
            $0.013
            24,000,000




(1)
      2000
      Omnibus Equity Incentive Plan, terminated March, 2007


(2)
      2007
      Omnibus Equity Incentive Plan adopted October 2007 by the Board of Directors,
      subject to approval by stockholders.


(3)
      As of
      January 1, 2008, the number of reserved shares available for future issuance
      under the 2007 Omnibus Incentive Plan increased to 59,028,628 shares of Company
      common stock.





The
      directors approved
      the adoption of our 2007 Omnibus Equity Incentive Plan (“2007 Equity Plan”)
      in October 2007, which plan is subject to approval by the Company’s stockholders
      which has not occurred yet. (See
      “ITEM 1. BUSINESS – FACTORS THAT MAY AFFECT THE COMPANY” regarding approval by
      the Board of Directors of the 2007 Equity Plan and grant of stock options.)
      The
      purpose of the 2007 Equity Plan
      is to
      promote the long-term success of the Company and
      the
      creation of stockholder value by (a) encouraging
      employees, outside directors and consultants to focus on critical long-term
      objectives, (b) encouraging
      the attraction and retention of employees, outside directors and consultants
      with exceptional qualifications and (c) linking
      employees, outside directors and consultants directly to stockholder interests
      through increased stock ownership. The 2007 Equity Plan provides
      for awards in the form of restricted shares, stock units, incentive and
      nonstatutory stock options, stock appreciation rights, and performance awards.
      An aggregate of 100,000,000 shares of Common Stock (subject to annual
      adjustments on January 1 st of each
      year of 3% of the total number of shares of Common Stock then outstanding and
      subject to adjustments in the event of stock splits or other changes in the
      Common Stock) may be awarded under the 2007 Equity Plan. Non-statutory stock
      options for 76,000,000 shares of Common Stock have been granted pursuant to
      the
      2007 Equity Plan. No shares have been awarded pursuant to the 2007 Equity Plan.
      The 2007 Equity Plan
      will
      be ad ministered
      by the Board of Directors, unless the Board delegates administration to a
      committee.




21




The
      Company adopted a Stock Bonus Plan (“Stock Bonus Plan”) in January 2000 and
      reserved 10,000,000 shares of Common Stock to be issued thereunder, of which
      7,596,211 shares have been granted and issued as of December 31, 2007. In
      December 2000, the Board of Directors approved the Company’s OEI Plan and
      reserved 4,000,000 shares of Common Stock to be issued thereunder to employees,
      consultants and directors, subject to annual increases equal to the lesser
      of
      2.5% of the then outstanding shares of Common Stock or 250,000 shares. As of
      December 31, 2007, no shares had been granted under the OEI Plan. As of December
      31, 2007, options to purchase approximately 4,990,000 shares had been granted
      under the OEI Plan. In March 2007, the Board of Directors approved the
      termination of the OEI Plan, and it has been terminated.




Prior
      to
      January 2001, the Company granted other stock options and warrants to purchase
      Company Common Stock which were not granted pursuant to any equity compensation
      plan. In addition, as of February 7, 2003, the Company granted warrants to
      purchase 50,000 shares of Common Stock at an exercise price of $0.16 per share
      to each of the following consultants: Dr. Seji Haba and Joseph Tartel. Subject
      to the terms applicable to such grants, the foregoing warrants became
      exercisable in three equal installments commencing on February 7, 2004, and
      expire seven years from the grant date. The warrants cease to vest upon complete
      termination of the recipient’s services as a consultant, employee, officer or
      director of the Company.




As
      previously reported, during December 2005, the Company granted BioPharm
      Development Group LLC, of which director Keith Gregg is a managing director,
      warrants to purchase up to 60,000 shares of Common Stock at an exercise price
      of
      $0.10 per share for consulting services. As of December 31, 2007, options to
      purchase 40,000 shares of Company common stock had vested with the balance
      to
      vest on December 31, 2008.




SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT




The following
      table sets forth the common stock ownership, including options to purchase
      stock, of each person known by the Company to
      be the
      beneficial owner of five percent (5%) or more of the Company ’s
      Common
      Stock, each director individually and all officers and directors of the Company as
      a
      group as of March 12, 2008. Each person has sole voting and investment power
      with respect to the shares of Common Stock shown, unless otherwise noted, and
      all ownership is of record and beneficial. As of March 12, 2008, the Company had
      approximately 1,167,621,940 shares
      of Common Stock outstanding.




Name
                and Address of Owner
            Number
                of Shares
              Beneficially
                Owned
            Percentage
                of TotalRichard
                P. Kiphart
              c/o
                Wm. Blair & Company
              222
                W. Adams St.
              Chicago,
                IL 60606
            954,921,582(1)
            81.64%






22








Michael
                P. Krasny, Trustee of the
              Michael
                P. Krasny Revocable Trust
              c/o
                Sawdust Investment Management Corp.
              1622
                Willow Road, Suite 200
              Northfield,
                IL 60093
            62,052,200
            5.31%Boris
                Skurkovich, M.D.
              18
                Blaisdell Ave.
              Pawtucket,
                RI 01860
            12,727,264(2)
            1.09%John
                R. Capps
              11830
                Olive Blvd.
              St.
                Louis, MO 63141
            5,333,333(3)
            *Matthew
                Gooch
              c/o
                Wm. Blair & Company
              222
                West Adams St.
              Chicago,
                IL 60606
            5,333,333(4)
            *David
                Valentine
              311
                S. Wacker Drive, No. 5500
              Chicago,
                IL 60606
            5,333,333(5)
            *Thomas
                J. Pernice
              141
                W. Jackson Blvd., Suite 2182
              Chicago,
                IL 60604
            4,657,443(6)
            *Keith
                Gregg
              205
                Powell Place
              Brentwood,
                TN 37027
            2,870,000(7)
            *Joseph
                A. Bellanti, M.D.
              6007
                Corewood Lane
              Bethesda
                MD 20816
            2,855,000(8)
            *Christopher
                W. Capps
              227
                West Monroe, Suite 3900
              Chicago,
                IL 60606
            2,666,667(9)
            *All
                officers and directors as a group (10)
            996,697,955
            83.79%





(1)
            Shares
                held in the name ofRichard
                P. Kiphartinclude
                options to purchase up to 20,000 shares of Common Stock at an exercise
                price of $0.21 per share, options to purchase up to 30,000 shares
                of
                Common Stock at an exercise price of $0.42 per share, options to
                purchase
                up to 25,000 shares of Common Stock at an exercise price of $0.20
                per
                share, and options to purchase up to 2,000,000 shares of Common Stock
                at
                an exercise price of $0.013 per
                share.


(2)
            Shares
                held in the name of Boris Skurkovich include shares held in his name
                (2,585,384), and shares held in the name of Carol Marjorie Dorros
                (2,765,555) and Samuel Aaron Skurkovich (3,911,325) and options to
                purchase up to 10,000 shares of Common Stock at an exercise price
                of $0.25
                per share, options to purchase up to 20,000 shares of Common Stock
                at an
                exercise price of $0.21 per share, options to purchase up to 30,000
                shares
                at an exercise price of $0.42 per share, options to purchase up to
                450,000
                shares of Common Stock at an exercise price of $0.16 per share, options
                to
                purchase up to 25,000 shares at $0.20 per share, options to purchase
                up to
                930,000 shares of Common Stock at an exercise price of $0.03 per
                share,
                and options to purchase up to 2,000,000 shares of Common Stock at
                an
                exercise price of $0.013 per share.


(3)
            Shares
                held in the name of John R. Capps include shares held in his name
                (3,333,333) and options to purchase up to 2,000,000 shares of Common
                Stock
                at an exercise price of $0.013 per
                share.


(4)
            Shares
                held in the name of Matthew Gooch include shares held in his name
                (3,333,333) and options to purchase up to 2,000,000 shares of Common
                Stock
                at an exercise price of $0.013 per
                share.


(5)
            Shares
                held in the name of David Valentine include shares held in his name
                (3,333,333) and options to purchase up to 2,000,000 shares of Common
                Stock
                at an exercise price of $0.013 per
                share.


(6)
            Shares
                held in the name of Thomas J. Pernice include warrants assigned by
                Cappello Capital Corp. to purchase 1,042,443 shares of Common Stock
                at an
                exercise price of $0.15 per share, options to purchase up to 10,000
                shares
                of Common Stock at an exercise price of $0.25 per share, options
                to
                purchase up to 20,000 shares of Common Stock at an exercise price
                of $0.21
                per share, options to purchase up to 30,000 shares of Common Stock
                at an
                exercise price of $0.42 per share, options to purchase up to 25,000
                shares
                of Common Stock at an exercise price of $0.20 per share, and options
                to
                purchase up to 1,530,000 shares of Common Stock at an exercise price
                of
                $0.03 per share.




23


(7)
            Shares
                held in the name of Keith Gregg include options to purchase up to
                830,000
                shares of Common Stock at an exercise price of $0.03 per share, options
                to
                purchase up to 2,000,000 shares of Common Stock at an exercise price
                of
                $0.013 per share, and a warrant to purchase up to 40,000 shares of
                Common
                Stock at an exercise price of $0.10, but do not include a warrant
                to
                purchase up to 20,000 shares of Common Stock at an exercise price
                of
                $0.10, which vests on December 31,
                2008.


(8)
            Shares
                held in the name of Joseph A. Bellanti comprise options to purchase
                up to
                25,000 shares of Common Stock at an exercise price of $0.20, options
                to
                purchase up to 830,000 shares of Common Stock at an exercise price
                of
                $0.03 per share, and options to purchase up to 2,000,000 shares of
                Common
                Stock at an exercise price of $0.013 per
                share.


(9)
            Shares
                held in the name of Christopher W. Capps include shares held in his
                name
                (2,666,667), but do not include options to purchase up to 50,000,000
                shares of Common Stock at an exercise price of $0.013, which vest
                in three
                equal installments commencing November 21,
                2008.


(10)
            Includes
                1,082,443 shares of Common Stock underlying warrants, and 20,840,000
                shares of Common Stock underlying
                options.





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




ITEM
      12.  CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE




The
      Board
      is comprised of a majority of independent directors (as defined in NASDAQ
      Marketplace Rule 4200(a)(15)). The Audit Committee is currently comprised of
      four independent members, although none of the committee members may currently
      qualify as an “audit committee financial expert” (See Item 9. “Audit Committee”
above.) The Nominating Committee and Compensation Committee are currently
      comprised of independent members.




On
      December 18, 2007, Richard P. Kiphart, Chairman of the Board of Directors of
      the
      Company, purchased an aggregate of 181,818,182 shared of Company common stock,
      at $0.011 per share, for the aggregate sum of $2,000,000, which amount was
      received by the Company.




Prior
      to
      the Company entering into the OFM transaction (See the section captioned “ITEM
      1. BUSINESS – GENERAL INTRODUCTION” above), Richard P. Kiphart made loans to OFM
      in April and June, 2007, evidenced by convertible notes (collectively “Kiphart
      Convertible Notes”), which notes are secured by OFM’s assets. Concurrently with
      the Company’s transaction with OFM, Mr. Kiphart and the Company entered into an
      intercreditor agreement (“Intercreditor Agreement”). The Intercreditor Agreement
      provides that Mr. Kiphart will subordinate his claims under the Kiphart
      Convertible Notes to the Company’s claims against OFM relative to the OFM Note
      and the Reimbursement Agreement. The Company’s claims also will be senior to Mr.
      Kiphart as to payment and rights to collateral securing the OFM Note and the
      Reimbursement Agreement. With respect to the Convertible Note, Mr. Kiphart
      agreed that the Company’s Convertible Note will rank on the same priority as to
      payment and rights to collateral as the Kiphart Convertible Notes, although
      Mr.
      Kiphart’s loans to OFM pre-date the Company’s. Management has been informed that
      OFM owes Mr. Kiphart the principal sum of $1.625 million.




With
      respect to the Company’s loan to Lime Energy, Inc. (“LEC”) (See the section
      captioned “GENERAL INTRODUCTION” above), Richard P. Kiphart, the Company’s
      Chairman of the Board is also Chairman of the Board of LEC and its largest
      individual investor, and David Valentine, one of the Company’s directors, is
      also a director of LEC.




During
      2007, Mr. Capps was paid a salary by KVG Partners LLC, a family investment
      company in which Mr. Richard P. Kiphart is a principal and the largest investor.
      Mr. Capps is also eligible to receive equity awards from KVG Partners based
      on
      its investments.




24




ITEM
      13.  EXHIBITS
      AND REPORTS ON FORM 8-K




**Exhibit**


**Number**
              **Description**2.1
              Agreement
                  of Merger dated as of July 14, 2000, between the Registrant, a
                  Delaware
                  corporation, and Advanced Biotherapy Concepts, Inc., a Nevada corporation.
                  Filed as Appendix A to Registrant’s Proxy Statement dated July 14, 2000,
                  and incorporated herein by reference.3.1
              Certificate
                  of Incorporation of Registrant. Filed as an exhibit to Registrant’s 10-QSB
                  for the quarter ended September 30, 2000, and incorporated herein
                  by
                  reference. 13.2
              Bylaws
                  of Registrant. Filed as an exhibit to Registrant’s 10-QSB for the quarter
                  ended September 30, 2000, and incorporated herein by reference.
                  23.3
              Certificate
                  of Amendment of Certificate of Incorporation of Registrant filed
                  December
                  26, 2002, in the office of the Delaware Secretary of State.
                  33.4
              Form
                  of Amendment to Certificate of Incorporation. Filed as an exhibit
                  to
                  Registrant’s Form 8-K on October 16, 2006.4.1
              Form
                  of Registrant’s Common Stock Certificate. Filed as an exhibit to
                  Registrant’s Form 10-QSB filed on June 10, 1999, and incorporated herein
                  by reference.4.2
              Form
                  of 2002 Subordinated Convertible Pay-In-Kind Note due June 1, 2006,
                  dated
                  November 14, 2002. Filed as an exhibit to Registrant’s Form 10-QSB and
                  10-QSB/A for the quarter ended June 30, 2002, and incorporated
                  herein by
                  reference.10.1
              Form
                  of Stock Bonus Plan. Filed as an exhibit to Registrant’s Form 10-KSB for
                  the fiscal year ended December, 1999. Filed as an exhibit to Registrant’s
                  Form 10-KSB for the fiscal year ended December, 1999.10.2
              Form
                  of Common Stock Purchase Warrant in favor of Cappello Capital Corporation.
                  Filed as an exhibit to Registrant’s Form 10-QSB for the quarter ended
                  March 31, 2000, and incorporated herein by reference.10.3
              Form
                  of 2000 Omnibus Equity Incentive Plan. Filed as an exhibit to Registrant’s
                  Form 10-KSB for the fiscal year ended December 31, 2000, and incorporated
                  herein by reference.10.4
              Form
                  of Option Agreement. Filed as an exhibit to Registrant’s Form 10-KSB for
                  the fiscal year ended December 31, 2000, and incorporated herein
                  by
                  reference.10.5
              Form
                  of 10% Convertible Subordinated Debt Instrument. Filed as an exhibit
                  to
                  Registrant’s Form 10-QSB for the quarter ended June 30, 2000, and
                  incorporated herein by reference.10.6
              Form
                  of Convertible Subordinated Debt Purchase Agreement. Filed as an
                  exhibit
                  to Registrant’s Form 10-KSB for the fiscal year ended December 31, 2000,
                  and incorporated herein by
                  reference.





1 Exhibit
        3.1 was erroneously identified as Exhibit 2.2 in the original filing and
        is
        correctly identified herein.
 2 Exhibit
        3.2 was erroneously identified as Exhibit 2.3 in the original filing and
        is
        correctly identified herein.
 3 Exhibit
        3.3 was erroneously identified as Exhibit 2.4 in the original filing and
        is
        correctly identified herein.




25


10.7
              Form
                  of Investor Rights Agreement. Filed as an exhibit to Registrant’s Form
                  10-KSB for the fiscal year ended December 31, 2000, and incorporated
                  herein by reference.10.8
              Form
                  of 2002 Subordinated Convertible Pay-In-Kind Note due September
                  30, 2004.
                  Filed as an exhibit to Registrant’s Form 10-QSB for the quarter ended
                  March 31, 2002, and incorporated herein by reference.10.9
              Form
                  of Investor Rights Agreement dated as of April 15, 2002. Filed
                  as an
                  exhibit to Registrant’s Form 10-QSB for the quarter ended March 31, 2002,
                  and incorporated herein by reference.10.10
              Form
                  of 2002 Subordinated Convertible Pay-In-Kind Note due June 1, 2006,
                  as
                  corrected for the payment maturity date on page 2 thereof. Filed
                  as an
                  exhibit to Registrant’s Form 10-QSB for the quarter ended September 30,
                  2002, and incorporated herein by reference.10.11
              Form
                  of Investor Rights Agreement dated as of June 1, 2002. Filed as
                  an exhibit
                  to Registrant’s Form 10-QSB/A for the quarter ended June 30, 2002, and
                  incorporated by reference herein.10.12
              Form
                  of Integrated Project Service Agreement for Pilot Formulation and
                  Filling
                  Area dated March 31, 2003. Filed on January 30, 2004, as Exhibit
                  10.12 to
                  the Company’s Form 10-QSB/A for the period ended March 31, 2003, and
                  incorporated by reference herein.10.13
              Form
                  of Agreement between the State Institute of Transplantation and
                  Artificial
                  Organs of the Ministry of Health of the Russian Federation and
                  Advanced
                  Biotherapy, Inc. Filed as an exhibit to Registrant’s Form 8-K/A on July
                  14, 2004.10.14
              Form
                  of 2003 Subordinated Convertible Pay-In-Kind Note Due 2007. Filed
                  as an
                  exhibit to Registrant’s Form 8-K on October 28, 2004 and incorporated by
                  reference herein. 410.15
              Form
                  of the Investor Rights Agreement. Filed as an exhibit to Registrant’s Form
                  8-K on October 28, 2004 and incorporated by reference herein.
                  510.16
              Form
                  of 2005 Subordinated Convertible Pay-In-Kind Note due September
                  30, 2009.
                  Filed as an exhibit to Registrant’s Form 10-QSB for the period ended June
                  30, 2005. 610.17
              Form
                  of Amended Investor Rights Agreement. Filed as an exhibit to Registrant’s
                  Form 10-QSB for the period ended June 30, 2005.710.18
              Form
                  of Share Purchase and Debt Restructure Agreement. Filed as an exhibit
                  to
                  Registrant’s Form 8-K on August 30, 2006. 810.19
              Investment
                  Agreement. Filed as an exhibit to Registrant’s Form 8-K on December 21,
                  2007.10.20
              OFM
                  Secured Promissory Note. Filed as an exhibit to Registrant’s Form 8-K on
                  December 21, 2007.10.21
              OFM
                  Convertible Note. Filed as an exhibit to Registrant’s Form 8-K on December
                  21, 2007.





4 Exhibit
          10.14 was erroneously identified as Exhibit 10.12 in the original filing,
          as
          Exhibit 10.13 in subsequent filings, and is correctly identified
          herein.
 5 Exhibit
          10.15 was erroneously identified as Exhibit 10.13 in the original filing,
          as
          Exhibit 10.14 in subsequent filings, and is correctly identified
          herein.
 6
          Exhibit 10.16 was erroneously identified as Exhibit 10.15 in the original
          filing
          and is correctly identified herein.
 7
          Exhibit 10.17 was erroneously identified as Exhibit 10.16 in the original
          filing
          and is correctly identified herein.
 8
          Exhibit 10.18 was erroneously identified as Exhibit 10.17 in the original
          filing
          and is correctly identified herein.




26


10.22
              OFM
                  General Business Security Agreement. Filed as an exhibit to Registrant’s
                  Form 8-K on December 21, 2007.10.23
              OFM
                  Reimbursement Agreement. Field as an exhibit to Registrant’s Form 8-K on
                  December 21, 2007.10.24
              Intercreditor
                  Agreement. Filed as an exhibit to Registrant’s Form 8-K on December 21,
                  2007.10.25
              The
                  Northern Trust Company Pledge Agreement (Deposit Account). Filed
                  as an
                  exhibit to Registrant’s Form 8-K on December 21, 2007.10.26
              Subscription
                  Agreement. Filed as an exhibit to Registrant’s Form 8-K on December 21,
                  2007.10.27
              Revolving
                  Line of Credit Note. Filed as an exhibit to Registrant’s Form 8-K on March
                  14, 2008.10.28
              Note
                  Issuance Agreement. Filed as an exhibit to Registrant’s Form 8-K on March
                  14, 2008.31.1
              Certification
                  of Chief Executive Officer Pursuant to Rule 13a-14(a).31.2
              Certification
                  of Chief Financial Officer Pursuant to Rule 13a-14(a).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.




27


The
        financial statements are incorporated herein by reference and begin with
        Page
        F-1.
  The
        following financial statements are included herein:
 Report
                      of Independent Registered Public Accounting Firm
                
                
                F-1Financial
                    Statements:Balance
                    Sheets:
                
                
                F-2Statements
                    of Operations
                
                
                F-3Statement
                    of Stockholders’ Equity (Deficit)
                
                
                F-4Statements
                    of Cash Flows
                
                
                F-5Notes
                    to Financial Statements:
                
                
                F-6




REPORTS
      ON FORM 8-K




The
      Registrant filed the following reports on Form 8-K during the quarter ended
      December 31, 2007:




1.  November
      26, 2007. The Registrant reported the approval of a 2007 Omnibus Equity
      Incentive Plan (“2007 Plan”) by the Board of Directors for directors, officers,
      employees and consultants of the Company and that, pursuant to the 2007 Plan,
      the Board of Directors approved the grant of certain stock options to all of
      the
      directors as well as to Christopher W. Capps, President and Chief Executive
      Officer and John L. Drew, Chief Financial Officer.




2.  December
      21, 2007. The Registrant reported the purchase by Richard P. Kiphart, Chairman
      of the Board of the Company, of 181,818,182 shares of Company common stock,
      $0.001 par value, at $0.011 per share, for the aggregate sum of $2,000,000.
      The
      Company further reported that the Company invested a portion of the new capital
      in a transaction with Organic Farm Marketing, LLC.




ITEM
      14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES




(1)
            Audit
                Fees. The aggregate fees billed for each of the last two fiscal years
                for
                audit and review were approximately $57,000 for 2007 and $41,000
                for
                2006.


(2)
            Audit-Related
                Fees. The aggregate fees billed for each of last two fiscal years
                for
                assurance and related services related to audit or review were $-0-
                for
                2007 and $-0- for 2006.


(3)
            Tax
                Fees. No fees were billed for either of the last two fiscal years
                for
                compliance, tax advice and tax
                planning.


(4)
            There
                were no other fees paid to the Company’s outside auditors for either of
                the last two fiscal years.


(5)
            (i)Before
                the Company engaged its current auditors to render services to the
                Company
                for or relating to the 2007 fiscal year, the engagement was approved
                by
                the Company’s Audit Committee.


(ii)
            Disclose
                percentage of services described in each of Items 9(e)(2) through
                9(e)(4)
                of Schedule 14A that were approved by the Audit
              Committee
                pursuant to paragraph (c)(7)(ii)(c) of Rule 2-01 of Regulation S-X:
                - 0
                -%







SIGNATURES




Pursuant
      to the requirements of Section 13 or 15(d) of the Securities and Exchange Act
      of
      1934, the Registrant, Advanced Biotherapy, Inc., has duly caused this Report
      to
      be signed on its behalf by the undersigned, thereunto duly authorized, on
      this 27th day of March, 2008.


Advanced
        Biotherapy, Inc.
 (Registrant)
  By:
                /s/
                    Christopher W. CappsChristopher
                    W. CappsPresident
                    and Chief Executive OfficerBy:
                /s/
                    John L. DrewJohn
                    L. DrewChief
                    Financial Officer
 
 28





Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the Registrant and in the
      capacities indicated and on the dates indicated.




Date
              Signature
              TitleMarch
                  27, 2008
              /s/*Christopher
                  W. Capps*
                Christopher
                  W. Capps
              President
                  and Chief Executive Officer, DirectorMarch
                    27, 2008
              /s/*John
                  L. Drew*
                John
                  L. Drew
              Chief
                  Financial Officer
                (Principal
                  Financial and Accounting Officer)March
                    27, 2008
              /s/*Joseph
                  A. Bellanti, M.D.*
                Joseph
                  A. Bellanti, M.D.
              DirectorMarch
                    27, 2008
              /s/*John
                  R. Capps*
                John
                  R. Capps
              DirectorMarch
                    27, 2008
              */s/
                  Matthew Gooch*
                Matthew
                  Gooch
              DirectorMarch
                    27, 2008
              /s/*Keith
                  A. Gregg*
                Keith
                  A. Gregg
              DirectorMarch
                    27, 2008
              */s/Richard
                  P. Kiphart*
                Richard
                  P. Kiphart
              DirectorMarch
                    27, 2008
              */s/Thomas
                  J. Pernice*
                Thomas
                  J. Pernice
              DirectorMarch
                    27, 2008
              */s/Boris
                  Skurkovich, M.D.*
                Boris
                  Skurkovich, M.D.
              DirectorMarch
                    27, 2008
              /s/*David
                  W. Valentine*
                David
                  W. Valentine
              Director


29




**ADVANCED
      BIOTHERAPY, INC.**


**(A
      Development Stage Enterprise)**


**December
      31, 2007**




**CONTENTS**




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










Board
      of
      Directors


Advanced
      Biotherapy, Inc.


Chicago,
      Illinois





**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





We
      have
      audited the accompanying balance sheet of Advanced Biotherapy, Inc. (a
      development stage enterprise) as of December 31, 2007 and 2006, and the related
      statements of operations, stockholders’ equity and cash flows for the years then
      ended and for the period from December 2, 1985 (inception) to December 31,
      2007.
      These financial statements are the responsibility of the Company’s management.
      Our responsibility is to express an opinion on these financial statements based
      on our audit.





We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement .
      The
      Company is not required to have, nor were we engaged to perform, an audit of
      its
      internal control over financial reporting. Our audit included consideration
      of
      internal control over financial reporting as a basis for designing audit
      procedures that are appropriate in the circumstances, but not for the purpose
      of
      expressing an opinion on the effectiveness of the Company’s internal control
      over financial reporting. Accordingly, we express no such opinion. An audit
      includes examining, on a test basis, evidence supporting the amounts and
      disclosures in the financial statements. An audit
      also includes assessing the accounting principles used and significant estimates
      made by management, as well as evaluating the overall financial statement
      presentation. We believe that our audit provides a reasonable basis for our
      opinion.





In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of Advanced Biotherapy, Inc. as of
      December 31, 2007 and 2006 and the results of its operations, stockholders
      equity and its cash flows for the years then ended and for the period from
      December 2, 1985 (inception) to December 31, 2007 in conformity with
      accounting principles generally accepted in the United States of
      America.








Williams
      & Webster, P.S.


*Certified
      Public Accountants*


Spokane,
      Washington


March
      26,
      2008





F-1




**ADVANCED
                  BIOTHERAPY, INC.****(A
                  DEVELOPMENT STAGE ENTERPRISE)****BALANCE
                  SHEETS**
  **December
                  31,**
              
              **December
                  31,****2007**
              
              **2006****ASSETS****CURRENT
                ASSETS**Cash
              
              $
              6,620,659
              
              $
              6,082,344Interest
                  receivable - CD
              
              
              20,328
              
              
              -Total
                  Current Assets
              
              
              6,640,987
              
              
              6,082,344**PROPERTY,
                  PLANT AND EQUIPMENT, net**
              
              
              -
              
              
              275,003**OTHER
                  ASSETS**Equity
                  investment - Organic Farm Marketing
              
              
              50,000
              
              
              -Note
                  receivable - Organic Farm Marketing
              
              
              800,000
              
              
              -Notes
                  receivable - related party
              
              
              -
              
              
              46,619Interest
                  receivable - related party
              
              
              -
              
              
              21,121Restricted
                  cash
              
              
              1,000,000
              
              
              -Patents
                  and patents pending, net of accumulated amortization
              
              
              -
              
              
              779,287Total
                  Other Assets
              
              
              1,850,000
              
              
              847,027**TOTAL
                  ASSETS**
              
              $
              8,490,987
              
              $
              7,204,374**LIABILITIES
                  AND STOCKHOLDERS' EQUITY****CURRENT
                  LIABILITIES**Accounts
                  payable and accrued expenses
              
              $
              34,997
              
              $
              103,761Accounts
                  payable - related party
              
              
              2,422
              
              
              -Current
                  portion of convertible notes payable
              
              
              -
              
              
              8,099Total
                  Current Liabilities
              
              
              37,419
              
              
              111,860Total
                  Liabilities
              
              
              37,419
              
              
              111,860**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; 2,000,000,000 shares authorized, 1,167,621,940
                  and 946,561,870 shares issued and outstanding,
                  respectively
              
              
              1,167,621
              
              
              946,561Additional
                  paid-in capital
              
              
              27,763,610
              
              
              25,417,862Stock
                  options and warrants
              
              
              1,716,559
              
              
              1,497,171Deficit
                  accumulated during development stage
              
              
              (22,194,222
              )
              
              (20,769,080
              )Total
                  Stockholders' Equity
              
              
              8,453,568
              
              
              7,092,514**TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY**
              
              $
              8,490,987
              
              $
              7,204,374




The
        accompanying notes are an integral part of these financial
        statements
  F-2




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




**Year
                  Ended December 31,**
              
              **From
                  Inception (December 2, 1985) through December 31,****2007**
              
              **2006**
              
              **2007****REVENUES**
              
              $
              -
              
              $
              -
              
              $
              89,947**OPERATING
                  EXPENSES**Research
                  and development
              
              
              -
              
              
              9,600
              
              
              3,925,134Promotional
                  fees
              
              
              -
              
              
              -
              
              
              62,570Professional
                  fees
              
              
              310,768
              
              
              380,855
              
              
              3,652,698Business
                  development
              
              
              -
              
              
              39,500
              
              
              121,000Consulting
                  - research and development (non-cash)
              
              
              -
              
              
              156,620
              
              
              1,388,229Warrants
                  - scientific advisory board
              
              
              4,920
              
              
              -
              
              
              6,820Options
                  expense - directors
              
              
              192,649
              
              
              -
              
              
              192,649Directors'
                  fees
              
              
              -
              
              
              144,200
              
              
              443,253Depreciation
                  and amortization
              
              
              77,138
              
              
              85,365
              
              
              1,042,910Administrative
                  salaries and benefits
              
              
              60,926
              
              
              104,436
              
              
              1,543,360Insurance
              
              
              -
              
              
              -
              
              
              324,452Shareholder
                  relations and transfer fees
              
              
              73,177
              
              
              9,969
              
              
              394,544Rent
              
              
              -
              
              
              10,200
              
              
              361,578Travel
                  and entertainment
              
              
              581
              
              
              1,383
              
              
              332,763Telephone
                  and communications
              
              
              852
              
              
              2,640
              
              
              65,909Office
              
              
              1,069
              
              
              1,816
              
              
              84,753General
                  and administrative
              
              
              48,788
              
              
              85,779
              
              
              886,323Total
                  Operating Expenses
              
              
              770,869
              
              
              1,032,363
              
              
              14,828,946**LOSS
                  FROM OPERATIONS**
              
              
              (770,869
              )
              
              (1,032,363
              )
              
              (14,738,999
              )**OTHER
                  INCOME (EXPENSES)**Miscellaneous
                  income
              
              
              -
              
              
              -
              
              
              27,682Interest
                  and dividend income
              
              
              320,156
              
              
              71,078
              
              
              562,673Income
                  from extension of line of credit
              
              
              100,000
              
              
              -
              
              
              100,000Internal
                  gain on sale of securities
              
              
              -
              
              
              -
              
              
              157,520Forgiveness
                  of debt
              
              
              -
              
              
              -
              
              
              2,192,837Forgiveness
                  of payables
              
              
              -
              
              
              -
              
              
              45,396Loss
                  on uncollectable notes receivable
              
              
              (70,770
              )
              
              -
              
              
              (25,374
              )Loss
                  on disposal of office equipment
              
              
              (257,531
              )
              
              -
              
              
              (259,755
              )Loss
                  on abandonment of patents
              
              
              (745,640
              )
              
              (92,500
              )
              
              (881,814
              )Interest
                  expense
              
              
              (488
              )
              
              (6,365,097
              )
              
              (9,328,992
              )Total
                  Other Income (Expenses)
              
              
              (654,272
              )
              
              (6,386,519
              )
              
              (7,409,826
              )**LOSS
                  BEFORE INCOME TAXES**
              
              
              (1,425,141
              )
              
              (5,354,156
              )
              
              (22,148,825
              )**INCOME
                  TAXES**
              
              
              -
              
              
              -
              
              
              -**NET
                  LOSS**
              
              $
              (1,425,141
              )
              $
              (5,354,156
              )
              $
              (22,148,825
              )BASIC
                  AND DILUTED NET LOSSPER
                  COMMON SHARE
              
              $
              nil
              
              $
              (0.11
              )WEIGHTED
                  AVERAGE NUMBER OFBASIC
                  AND DILUTED COMMON STOCKSHARES
                  OUTSTANDING
              
              
              966,182,814
              
              
              69,064,621




The
        accompanying notes are an integral part of these financial
        statements
  F-3




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


**Common
                  Stock**
              
              **Additional**
                **Paid-in**
              
              **Stock**
                **Options
                  and**
              
              **Deficit
                  Accumulated During Development****Shares**
              
              **Amount**
              
              **Capital**
              
              **Warrants**
              
              **Stage**
              
              **Total**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
              
              
              -
              
              
              -
              
              
              4,230
              
              
              -
              
              
              -
              
              
              4,230Common
                  stock issued in exchange for convertible debt at $0.25 per
                  share
              
              
              788,991
              
              
              789
              
              
              196,460
              
              
              -
              
              
              -
              
              
              197,249Stock
                  issued for cash at an average price of $0.01 per share from the
                  exercise
                  of options
              
              
              150,000
              
              
              150
              
              
              1,350
              
              
              -
              
              
              -
              
              
              1,500Stock
                  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
              
              
              -
              
              
              34,200Stock
                  issued for cashless exercise of warrants at $0.05 per
                  share
              
              
              151,846
              
              
              152
              
              
              7,059
              
              
              (7,211
              )
              
              -
              
              
              -Net
                  loss for the year ended December 31, 2003
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (2,108,440
              )
              
              (2,108,440
              )Balance,
                  December 31, 2003
              
              
              43,088,365
              
              
              43,087
              
              
              3,908,058
              
              
              607,016
              
              
              (8,701,401
              )
              
              (4,143,240
              )Contribution
                  of capital by shareholders in form of foregone interest
              
              
              -
              
              
              -
              
              
              4,480
              
              
              -
              
              
              -
              
              
              4,480Common
                  stock issued in exchange for convertible debt at $0.24 per
                  share
              
              
              10,896,275
              
              
              10,897
              
              
              2,654,496
              
              
              -
              
              
              -
              
              
              2,665,393Stock
                  options issued in exchange for services
              
              
              -
              
              
              -
              
              
              -
              
              
              94,500
              
              
              -
              
              
              94,500Stock
                  options and warrants issued in exchange for services, one third
                  vested
              
              
              -
              
              
              -
              
              
              -
              
              
              172,200
              
              
              -
              
              
              172,200Stock
                  issued for cashless exercise of warrants at $0.16 per
                  share
              
              
              47,917
              
              
              48
              
              
              7,752
              
              
              (7,800
              )
              
              -
              
              
              0Net
                  loss for the year ended December 31, 2004
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (2,490,444
              )
              
              (2,490,444
              )Balance,
                  December 31, 2004
              
              
              54,032,557
              
              
              54,032
              
              
              6,574,786
              
              
              865,916
              
              
              (11,191,846
              )
              
              (3,697,111
              )Contribution
                  of capital by shareholders in form of foregone interest
              
              
              -
              
              
              -
              
              
              4,455
              
              
              -
              
              
              -
              
              
              4,455Common
                  stock issued to Paul Hopper in exchange for services at $.19 per
                  share
              
              
              315,789
              
              
              315
              
              
              59,684
              
              
              -
              
              
              -
              
              
              59,999Stock
                  options issued to directors in in exchange for services
              
              
              -
              
              
              -
              
              
              -
              
              
              97,173
              
              
              -
              
              
              97,173Stock
                  options and warrants issued in exchange for services, one third
                  vested
              
              
              -
              
              
              -
              
              
              -
              
              
              172,200
              
              
              -
              
              
              172,200Stock
                  options & warrants issued in exchange for services
              
              
              -
              
              
              -
              
              
              -
              
              
              459,900
              
              
              -
              
              
              459,900Expiration
                  of stock options
              
              
              -
              
              
              -
              
              
              359,638
              
              
              (359,638
              )
              
              -
              
              
              --Net
                  loss for the year ended December 31, 2005
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (2,158,352
              )
              
              (2,158,352
              )Balance,
                  December 31, 2005
              
              
              54,348,346
              
              
              54,347
              
              
              6,998,563
              
              
              1,235,551
              
              
              (13,350,198
              )
              
              (5,061,736
              )form
                  of foregone interest
              
              
              -
              
              
              -
              
              
              3,332
              
              
              
              
              
              -
              
              
              3,332Stock
                  options issued to directors in exchange for services
              
              
              -
              
              
              -
              
              
              -
              
              
              144,200
              
              
              
              
              
              144,200Stock
                  options and warrants issued in exchange for services, one third
                  vested
              
              
              -
              
              
              -
              
              
              -
              
              
              156,620
              
              
              -
              
              
              156,620Common
                  stock issued for cash at $0.015 per share
              
              
              359,999,998
              
              
              360,000
              
              
              5,040,000
              
              
              -
              
              
              -
              
              
              5,400,000Common
                  stock issued for conversion of debt and accrued payables at $.015
                  per
                  share
              
              
              532,213,526
              
              
              532,214
              
              
              7,476,873
              
              
              -
              
              
              -
              
              
              8,009,087Beneficial
                  conversion cost of converted debt
              
              
              -
              
              
              -
              
              
              5,859,894
              
              
              -
              
              
              -
              
              
              5,859,894Expiration
                  of stock options
              
              
              -
              
              
              -
              
              
              39,200
              
              
              (39,200
              )
              
              -
              
              
              -Net
                  loss for the year ended December 31, 2006
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (7,418,882
              )
              
              (7,418,882
              )Balance,
                  December 31, 2006
              
              
              946,561,870
              
              
              946,561
              
              
              25,417,862
              
              
              1,497,171
              
              
              (20,769,080
              )
              
              7,092,514Stock
                  options issued to directors in exchange for services
              
              
              -
              
              
              -
              
              
              -
              
              
              192,649
              
              
              
              
              
              192,649Stock
                  options and warrants issued in exchange for services, one third
                  vested
              
              
              -
              
              
              -
              
              
              -
              
              
              4,920
              
              
              -
              
              
              4,920Common
                  stock issued for cash at $0.015 per share
              
              
              221,060,070
              
              
              221,060
              
              
              2,367,568
              
              
              -
              
              
              -
              
              
              2,588,628Correction
                  of stock option and warrant amount
              
              
              -
              
              
              -
              
              
              (23,720
              )
              
              23,720
              
              
              
              
              
              -Expiration
                  of stock options
              
              
              -
              
              
              -
              
              
              1,900
              
              
              (1,900
              )
              
              -
              
              
              -Net
                  loss for the year ended December 31, 2007
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,425,141
              )
              
              (1,425,141
              )Balance,
                  December 31, 2007
              
              
              1,167,621,940
              
              $
              1,167,621
              
              $
              27,763,610
              
              $
              1,716,559
              
              $
              (22,194,222
              )
              $
              8,453,568


The
        accompanying notes are an integral part of these financial
        statements
  F-4




**ADVANCED
                        BIOTHERAPY, INC.****(A
                        DEVELOPMENT STAGE ENTERPRISE)****STATEMENTS
                        OF CASH FLOWS**
 **Twelve
                        Months Ended December 31,**
                    
                    **From
                        Inception (December 2, 1985)through**
                      **December
                        31,****2007**
                    
                    **2006**
                    
                    **2007****CASH
                        FLOWS FROM OPERATING ACTIVITIES:**Net
                        (loss)
                    
                    $
                    (1,425,141
                    )
                    $
                    (7,418,882
                    )
                    $
                    (22,194,220
                    )Adjustments
                        to reconcile net loss to cash used in operating
                        activities:Depreciation
                        and amortization
                    
                    
                    77,138
                    
                    
                    85,365
                    
                    
                    985,021Loss
                        on disposal of equipment
                    
                    
                    257,531
                    
                    
                    -
                    
                    
                    259,755Loss
                        on impairment of patents
                    
                    
                    745,640
                    
                    
                    92,500
                    
                    
                    881,815Loss
                        on uncollectable notes receivable
                    
                    
                    46,618
                    
                    
                    -
                    
                    
                    46,618Investment
                        income
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (157,520
                    )Expenses
                        paid through issuance of common stock
                    
                    
                    -
                    
                    
                    274,837
                    
                    
                    566,176Expenses
                        paid through issuance warrants and options
                    
                    
                    192,649
                    
                    
                    300,820
                    
                    
                    1,892,931Accrued
                        interest paid by convertible debt
                    
                    
                    4,920
                    
                    
                    3,030,858
                    
                    
                    5,609,076Beneficial
                        conversion
                    
                    
                    
                    
                    
                    5,859,894
                    
                    
                    5,859,894Expenses
                        paid through contribution of additional paid-in capital
                    
                    
                    -
                    
                    
                    3,332
                    
                    
                    68,078Conveyance
                        of patent in lieu of payable
                    
                    
                    -
                    
                    
                    39,500
                    
                    
                    39,500Organization
                        costs
                    
                    
                    -
                    
                    
                    
                    
                    
                    (9,220
                    )Decrease
                        (increase) in assets:Deposits
                        and prepaid expenses
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (61,689
                    )Interest
                        receivable
                    
                    
                    793
                    
                    
                    (3,031
                    )
                    
                    (156,502
                    )Increase
                        (decrease) in liabilities:Accounts
                        payable and accrued expenses
                    
                    
                    (68,764
                    )
                    
                    (88,015
                    )
                    
                    167,538Accounts
                        and notes payable, related parties
                    
                    
                    2,422
                    
                    
                    -
                    
                    
                    243,590Net
                        cash provided by (used) in operating activities
                    
                    
                    (166,195
                    )
                    
                    2,177,178
                    
                    
                    (5,959,160
                    )**CASH
                        FLOWS FROM INVESTING ACTIVITIES:**Purchase
                        of fixed assets
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (385,339
                    )Investments
                        in companies
                    
                    
                    (850,000
                    )
                    
                    -
                    
                    
                    (850,000
                    )Increase
                        in restricted cash
                    
                    
                    (1,000,000
                    )
                    
                    -
                    
                    
                    (1,000,000
                    )Acquisition
                        of patents
                    
                    
                    (26,018
                    )
                    
                    (86,942
                    )
                    
                    (1,317,565
                    )Net
                        cash used in investing activities
                    
                    
                    (1,876,018
                    )
                    
                    (86,942
                    )
                    
                    (3,552,904
                    )**CASH
                        FLOWS FROM FINANCING ACTIVITIES:**Proceeds
                        from issuance of common stock
                    
                    
                    221,060
                    
                    
                    5,400,000
                    
                    
                    8,078,314Internal
                        gain on sale of securities
                    
                    
                    2,367,568
                    
                    
                    -
                    
                    
                    2,525,088Proceeds
                        from convertible notes
                    
                    
                    -
                    
                    
                    -
                    
                    
                    6,754,000Proceeds
                        from notes payable
                    
                    
                    -
                    
                    
                    (1,414,500
                    )
                    
                    (1,025,992
                    )Payments
                        on notes payable
                    
                    
                    (8,099
                    )
                    
                    (15,460
                    )
                    
                    (198,686
                    )Net
                        cash provided by (used) in financing activities
                    
                    
                    2,580,528
                    
                    
                    3,970,040
                    
                    
                    16,132,723Net
                        increase in cash
                    
                    
                    538,315
                    
                    
                    6,060,276
                    
                    
                    6,620,659**Cash,
                        beginning**
                    
                    
                    6,082,344
                    
                    
                    22,068
                    
                    
                    -**Cash,
                        ending**
                    
                    $
                    6,620,659
                    
                    $
                    6,082,344
                    
                    $
                    6,620,659**SUPPLEMENTAL
                        CASH FLOW DISCLOSURES:**Interest
                        expense paid
                    
                    $
                    488
                    
                    $
                    -
                    
                    $
                    341,166Income
                        taxes paid
                    
                    $
                    -
                    
                    $
                    -
                    
                    $
                    -**NON-CASH
                        FINANCING AND INVESTING ACTIVITIES:**Common
                        stock issued for a loan payable
                    
                    $
                    -
                    
                    $
                    1,414,500
                    
                    $
                    3,042,381Common
                        stock issued for notes receivable
                    
                    $
                    -
                    
                    $
                    -
                    
                    $
                    246,619Common
                        stock returned in payment of notes and interest receivable
                    
                    $
                    -
                    
                    $
                    -
                    
                    $
                    240,568Common
                        stock issued on cashless exercise of warrants
                    
                    $
                    -
                    
                    $
                    156,620
                    
                    $
                    328,251Accrued
                        interest paid by convertible debt
                    
                    $
                    -
                    
                    $
                    505,203
                    
                    $
                    3,370,519Common
                        stock issued for convertible debt
                    
                    $
                    -
                    
                    $
                    5,857,830
                    
                    $
                    10,544,986Forgiveness
                        of debt
                    
                    $
                    -
                    
                    $
                    -
                    
                    $
                    145,400
  The
            accompanying notes are an integral part of these financial
            statements
  F-5


**ADVANCED
        BIOTHERAPY, INC.**
 **(A
        DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2007**


**NOTE
      1 - BUSINESS ORGANIZATION AND BASIS OF PRESENTATION**





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” or “ABI”) and its domicile to Delaware.





The
      Company was primarily engaged in the research and development for the treatment
      of autoimmune diseases in humans, most notably, multiple sclerosis, rheumatoid
      arthritis, and certain autoimmune skin diseases and AIDS, until the company
      decided to discontinue such research and development. The Company’s fiscal
      year-end is December 31. The Company is a development stage
      enterprise.





The
      Company has been in the development stage since its formation in 1985 and has
      not realized any significant revenues from its planned operations. Management’s
      goal is to acquire control or non-control investments in one or more revenue
      generating companies.






**NOTE
      2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**





This
      summary of significant accounting policies of the Company 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.





Accounting
      Method




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





Recent
      Accounting Pronouncements




In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities”.  This Statement permits
      entities to choose to measure many financial assets and financial liabilities
      at
      fair value.  Unrealized gains and losses on items for which the fair value
      option has been elected are reported in earnings. SFAS No. 159 is effective
      for
      fiscal years beginning on or after November 15, 2007.  The Company is
      currently evaluating that pronouncements impact on its financial statements.




F-6


**ADVANCED
        BIOTHERAPY, INC.**
 **(A
        DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2007**


In
      December 2007, the FASB issued SFAS No. 160, "Non-controlling Interests in
      Consolidated Financial Statements - an Amendment of ARB No. 51." This statement
      requires that non-controlling or minority interests in subsidiaries be presented
      in the consolidated statement of financial position within equity, but separate
      from the parents' equity, and that the amount of the consolidated net income
      attributable to the parent and to the non-controlling interest be clearly
      identified and presented on the face of the consolidated statement of income.
      SFAS No. 160 is effective for the fiscal years beginning on or after December
      15, 2008. Currently the Company does not anticipate that this statement will
      have an impact on its financial statements.





In
      December 2007, the FASB issued SFAS No. 141 (Revised) “Business Combinations”.
      SFAS 141 (Revised) establishes principles and requirements for how the acquirer
      of a business recognizes and measures in its financial statements the
      identifiable assets acquired, the liabilities assumed, and any non-controlling
      interest in the acquiree. The statement also provides guidance for recognizing
      and measuring the goodwill acquired in the business combination and determines
      what information to disclose to enable users of the financial statements to
      evaluate the nature and financial effects of the business combination. The
      guidance will become effective for the fiscal year beginning after December
      15,
      2008. Management is in the process of evaluating the impact that SFAS 141
      (Revised) may have on the Company’s financial statements upon
      adoption.





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 has adopted this statement and has made certain adjustments to the
      carrying value of its assets, specifically patents, equipment, and furniture,
      at
      December 31, 2007. See Notes 3 and 4.





Cash
      and Cash Equivalents




All
      highly liquid investments are considered 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.





F-7


**ADVANCED
        BIOTHERAPY, INC.**
 **(A
        DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2007**


Accounting
      for Stock Options and Warrants Granted to Employees and
      Nonemployees




Statement
      of Financial Accounting Standards No. 123(R), “Share Based Payment” *,* 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. See Notes 8 and 9.





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 was
      primarily engaged in the research and development of the treatment of autoimmune
      diseases in humans, most notably, multiple sclerosis and rheumatoid
      arthritis.





Research
      and Development




Costs
      of
      research and development are expensed as incurred.





Provision
      for Taxes




Income
      taxes are provided based upon the liability method of accounting pursuant to
      Statement of Financial Accounting Standards No. 109, “Accounting for Income
      Taxes, (“SFAS No. 109”). 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. See
      Note
      10.





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.
      No
      liability has been recorded in the accompanying financial statements, because
      of
      the relative immateriality of this obligation.





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”. 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.




F-8


**ADVANCED
        BIOTHERAPY, INC.**
 **(A
        DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2007**


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




Loans
        Receivable
 
 Loans
        are
        stated at their unpaid principal balance adjusted for unamortized premiums
        and
        unearned discounts and deferred loan fees and costs. Interest income is computed
        using the simple interest method and is recorded in the period
        earned.
 
 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.


Earnings
      (loss) per share




Basic
      earnings (loss) per share are 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 exercise of the vested stock options (32,108,453 shares)
      and warrants (5,130,894 shares). Diluted net loss per share is the same as
      basic
      net loss per share as inclusion of the common stock equivalents would be
      anti-dilutive.





**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
      thirty-nine years.





The
      following is a summary of property, equipment and accumulated depreciation
      at
      December 31, 2007 and December 31, 2006:





December
                31,2007
            
            December
                31, 2006Cost
            
            CostLab
                equipment
            
            $
            0
            
            $
            31,891Office
                equipment
            
            
            12,922
            
            
            13,777Furniture
                and fixtures
            
            
            10,082
            
            
            22,539Clean
                room
            
            
            0
            
            
            271,786Total
                assets
            
            
            23,004
            
            
            339,993Less
                accumulated depreciation
            
            
            (23,004
            )
            
            (64,990
            )Net
                fixed assets
            
            $
            0
            
            $
            275,003





F-9


**ADVANCED
        BIOTHERAPY, INC.**
 **(A
        DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2007**


Depreciation
      expense for the twelve months ended December 31, 2007 and 2006 was $17,472
      and $19,425, respectively .





In
      accordance with Statement of Financial Accounting Standards No. 144 ,
“Accounting for the Impairment or Disposal of Long-Lived Assets,” the Company
      reviews identified intangible and other long-lived assets for impairment
      whenever events or changes in circumstances indicate that the carrying value
      of
      the asset may not be recoverable. If such events or changes in circumstances
      are
      present, an impairment loss would be recognized if the sum of the expected
      future net cash flows is less than the carrying amount of the asset. Management
      performed an assessment of the market value of the assets on the balance sheet
      as of December 31, 2007. This assessment resulted in management concluding
      that
      these assets no longer retain the value previously stated on the books of the
      Company. This conclusion resulted in the company writing off $271,787 in a
      clean
      room facility, $31,891 of lab equipment, $854 of office equipment and $12,456
      of
      office furniture. The accumulated depreciation associated with these assets
      totaled $23,300, $24,037, $828 and $9,194 respectively. The total loss on asset
      impairment for these assets amounted to $257,531 for the year ended December
      31,
      2007.





**NOTE
                4 - INTANGIBLE ASSETS**
            ****
            ****




Patents
      and Patents Pending




Costs
      relating to the development and approval of patents, other than research and
      development costs which are expensed, are capitalized and amortized using the
      straight-line method over seventeen years. Patents prior to 1998 were abandoned
      in prior years; therefore, an abandonment loss on patents of $14,851 was
      recognized. Patents in the amount of $110,162 and $92,500, net of amortization,
      were abandoned in the years ended December 31, 2007 and 2006, respectively.




In
      accordance with Statement of Financial Accounting Standards No. 144 ,
“Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”),
      the Company reviews identified intangible and other long-lived assets for
      impairment whenever events or changes in circumstances indicate that the
      carrying value of the asset may not be recoverable. If such events or changes
      in
      circumstances are present, an impairment loss would be recognized if the sum
      of
      the expected future net cash flows is less than the carrying amount of the
      asset. It has been determined that the remaining patent portfolio is fully
      impaired under the current business plan of the company. The impairment loss
      for
      the patents for the year ended December 31, 2007 amounted to
      $857,816.





Management
      is attempting to sell the Company’s patent portfolio; however, at this time, the
      Company has not entered into any agreement for the sale of its
      patents.




F-10


**ADVANCED
        BIOTHERAPY, INC.**
 **(A
        DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2007**


The
      following is a summary of the costs of patents and patents pending:





Accumulated
            
            NetCost
            
            Amortization
            
            AmountBalance,
                December 31, 2005
            
            
            1,063,192
            
            
            (170,644
            )
            
            892,5482006
                Activity
            
            
            86,942
            
            
            (75,486
            )
            
            11,456Abandonment
                of Patents
            
            
            (120,000
            )
            
            34,783
            
            
            (85,217
            )Pending
                Patent expenses conveyed in payment of  liability
            
            
            (39,500
            )
            
            -
            
            
            (39,500
            )Balance
                at December 31, 2006
            
            
            990,634
            
            
            (211,347
            )
            
            779,2872007
                Activity
            
            
            26,019
            
            
            (59,666
            )
            
            (33,647
            )Abandonment
                of Patents
            
            
            (158,837
            )
            
            48,675
            
            
            (110,162
            )Impairment
                of Patents
            
            
            (857,816
            )
            
            222,339
            
            
            (745,640
            )Balance
                at December 31, 2007
            
            $
            -
            
            $
            -
            
            $
            -





The
      following is a summary of the costs of patents separated into pending and
      granted:





2007
            
            2006Pending
                Patents
            
            $
            575,810
            
            $
            712,941Granted
                Patents
            
            
            282,006
            
            
            277,693$
            857,816
            
            $
            990,634





**NOTE
      5 - CONCENTRATIONS**





Bank
      Accounts and Investments




The
      Company maintains cash on deposit in Illinois.





The
      funds
      reflect a balance of the following accounts at December 31, 2007:


Regular
                  Checking
              
              $
              11,971Money
                  Market
              
              
              6,608,689Restricted
                  Cash
              
              
              1,000,000Total
              
              $
              7,620,660


At
      December 31, 2007, $7,520,660 of these amounts were in excess of FDIC insured
      limits.





F-11




**ADVANCED
        BIOTHERAPY, INC.**
 **(A
        DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2007**


**NOTE
      6 - RELATED PARTY TRANSACTIONS**




On
      December 18, 2007, Richard P Kiphart, Chairman of the Board of Directors of
      the
      Company, purchased an aggregate of 181,818,182 shares (“New Shares”) of Company
      common stock, $0.001 par value, at $0.011 per share, for the aggregate sum
      of
      $2,000,000 (“New Capital”). The Company has received the New Capital. The
      Company used the New Capital to make the investment described in Note 7 and
      intends to use the balance for additional working capital.





**NOTE
      7 - INVESTMENTS**





On
      December 18, 2007, the Company and Organic Farm Marketing, LLC (“OFM”), a
      Wisconsin limited liability company, entered into an agreement whereby the
      Company will arranged for The Northern Trust Company of Chicago, Illinois
      (“Bank”) to issue a $1.0 million irrevocable letter of credit (“Letter of
      Credit”) for the benefit of the Wisconsin Department of Agriculture, Trade and
      Consumer Protection (“Wisconsin Department”), the designee of OFM. As collateral
      for repayment of funds advanced under the Letter of Credit, the Company pledged
      to the bank a certificate of deposit in the amount of $1.0 million. OFM’s
      obligations to reimburse the Company for payments made by the Company to the
      Bank are evidenced by a promissory note (“OFM Note”) and a reimbursement
      agreement (“Reimbursement Agreement”) secured by OFM’s assets. OFM further
      agreed to pay a cash fee of $50,000 and issue to the Company 5,000 units of
      OFM
      as payment for obtaining the Letter of Credit.




The
      Company also loaned to OFM the sum of $800,000 to be used for working capital
      and to repurchase a member’s interest in OFM. OFM issued to the Company a
      convertible note (“Convertible Note”) in the principal amount of $800,000, which
      bears interest at 10% per annum, payable quarterly. The Convertible Note has
      a
      stated maturity date of May 17, 2009, subject to acceleration upon default
      by
      OFM. Commencing June 18, 2008, the Convertible Note is convertible into OFM
      units at the conversion rate of $10.00 per unit. The loan also is secured by
      all
      of OFM’s assets.




Prior
      to
      the Company entering into the OFM Transaction, Richard P. Kiphart, the Company’s
      Chairman of the Board, made loans to OFM in April and June, 2007, evidenced
      by
      convertible notes (collectively “Kiphart Convertible Notes”), which notes are
      secured by OFM’s assets. Mr. Kiphart and the Company agreed that Mr. Kiphart
      will subordinate his claims under the Kiphart Convertible Notes to the Company’s
      claims against OFM relative to the OFM Note and the Reimbursement Agreement.
      The
      Company’s claims also will be senior to Mr. Kiphart as to payment and rights to
      collateral securing the OFM Note and the Reimbursement Agreement. Mr. Kiphart
      agreed that the Company’s Convertible Note will rank on the same priority as to
      payment and rights to collateral as the Kiphart Convertible Notes.





F-12


**ADVANCED
          BIOTHERAPY, INC.**
 **(A
          DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
          TO FINANCIAL STATEMENTS**
 **DECEMBER
          31, 2007**


**NOTE
      8 - COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL**





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




Common
                StockAverage
                price per share
            
            Shares
            
            Amount
            
            Additional
                Paid-in CapitalCommon
                stock issued for cash:1985
            
            $
            0.50
            
            
            100,000
            
            $
            100
            
            $
            49,9001986
            
            
            1
            
            
            639,500
            
            
            640
            
            
            678,8611987
            
            
            1
            
            
            850,500
            
            
            851
            
            
            759,6501988
            
            
            1
            
            
            25,000
            
            
            25
            
            
            24,9751993
            
            
            0.25
            
            
            2,402,000
            
            
            2,402
            
            
            475,9001995
            
            
            0.05
            
            
            1,000,000
            
            
            1,000
            
            
            49,0001996
            
            
            0.05
            
            
            520,000
            
            
            520
            
            
            25,4801997
            
            
            0.09
            
            
            1,800,500
            
            
            1,801
            
            
            153,7491998
            
            
            0.1
            
            
            305,000
            
            
            305
            
            
            30,1951999
            
            
            0.05
            
            
            3,158,000
            
            
            3,158
            
            
            151,9932006
            
            
            0.015
            
            
            359,999,998
            
            
            360,000
            
            
            5,040,0002007
            
            
            0.01
            
            
            221,060,070
            
            
            221,060
            
            
            2,367,568591,860,568
            
            
            591,861
            
            
            9,807,271Common
                stock issued for patents assigned:1984
            
            
            0.01
            
            
            550,000
            
            
            5,500
            
            
            01985,
                adjustment to reflect change in number and par value of shares
                outstanding
            
            
            
            
            
            2,750,000
            
            
            -2,200
            
            
            2,2003,300,000
            
            
            3,300
            
            
            2,200Common
                stock issued for acquisitions:1985
            
            
            0.01
            
            
            13,333,500
            
            
            13,334
            
            
            -41,112




F-13


**ADVANCED
          BIOTHERAPY, INC.**
 **(A
          DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
          TO FINANCIAL STATEMENTS**
 **DECEMBER
          31, 2007**


Common
                StockAverage
                price per share
            
            Shares
            
            Amount
            
            Additional
                Paid-in CapitalCommon
                stock issued for note receivable:1986
            
            
            1
            
            
            10,000
            
            
            10
            
            
            9,9902000
            
            
            0.05
            
            
            4,932,380
            
            
            4,932
            
            
            241,6874,942,380
            
            
            4,942
            
            
            251,677Common
                stock returned in payment of notes receivable:2003
            
            
            0.16
            
            
            -1,603,789
            
            
            -1,604
            
            
            -238,964Contribution
                of additional paid-in capital:1991
            
            
            -
            
            
            -
            
            
            -
            
            
            35,8251999
            
            
            -
            
            
            -
            
            
            -
            
            
            28,0982000
            
            
            -
            
            
            -
            
            
            -
            
            
            9,7352001
            
            
            -
            
            
            -
            
            
            -
            
            
            8,1132002
            
            
            -
            
            
            -
            
            
            -
            
            
            5,6352003
            
            
            -
            
            
            -
            
            
            -
            
            
            4,2302004
            
            
            
            
            
            
            
            
            
            
            
            4,4802005
            
            
            
            
            
            -
            
            
            -
            
            
            4,4552006
            
            
            
            
            
            -
            
            
            -
            
            
            3,332-
            
            
            -
            
            
            103,903Stock
                subscriptions:1999
            
            
            0.05
            
            
            650,000
            
            
            650
            
            
            31,850Cancellation
                of escrowed shares in 1999
            
            
            0.001
            
            
            -850,000
            
            
            -850
            
            
            850Reissued
                escrowed shares cancelled in error:2001
            
            
            0.001
            
            
            850,000
            
            
            850
            
            
            -850-
            
            
            -
            
            
            -




F-14


**ADVANCED
        BIOTHERAPY, INC.**
 **(A
        DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2007**





Common
                StockAverage
                price per share
            
            Shares
            
            Amount
            
            Additional
                Paid-in CapitalCommon
                stock issued for services (1):1988
            
            
            0.5
            
            
            25,000
            
            
            25
            
            
            12,4751989
            
            
            0.38
            
            
            25,000
            
            
            25
            
            
            9,4751990
            
            
            0.66
            
            
            37,375
            
            
            37
            
            
            24,6351991
            
            
            0.51
            
            
            159,500
            
            
            160
            
            
            81,0101992
            
            
            0.75
            
            
            62,500
            
            
            62
            
            
            46,5631993
            
            
            0.25
            
            
            120,000
            
            
            120
            
            
            29,8801996
            
            
            0.05
            
            
            308,500
            
            
            308
            
            
            13,8321997
            
            
            0.05
            
            
            155,500
            
            
            155
            
            
            7,6191999
            
            
            0.05
            
            
            99,190
            
            
            99
            
            
            4,8602005
            
            
            0.19
            
            
            315,789
            
            
            315
            
            
            59,6841,308,354
            
            
            1,306
            
            
            290,033Common
                stock issued to replace unrecorded certificates:1988
            
            
            0.001
            
            
            1,200
            
            
            1
            
            
            -11992
            
            
            0.001
            
            
            500
            
            
            1
            
            
            -12000
            
            
            0.001
            
            
            100,000
            
            
            100
            
            
            -100101,700
            
            
            102
            
            
            -102Common
                stock issued for forgiveness of accounts payable (1):1990
            
            
            0.5
            
            
            25,000
            
            
            25
            
            
            12,4751996
            
            
            0.05
            
            
            150,000
            
            
            150
            
            
            7,3502006
            
            
            0.015
            
            
            10,989,133
            
            
            10,989
            
            
            5,859,89411,164,133
            
            
            11,164
            
            
            5,879,719Common
                stock issued in payment of notes payable (1):1993
            
            
            0.25
            
            
            200,000
            
            
            200
            
            
            49,8002000
            
            
            0.05
            
            
            1,714,995
            
            
            1,715
            
            
            84,0352006
            
            
            0.015
            
            
            1,568,004
            
            
            1,568
            
            
            21,9523,482,999
            
            
            3,483
            
            
            155,787




F-15




**ADVANCED
          BIOTHERAPY, INC.**
 **(A
          DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
          TO FINANCIAL STATEMENTS**
 **DECEMBER
          31, 2007**


Common
                StockAverage
                price per share
            
            Shares
            
            Amount
            
            Additional
                Paid-in CapitalCommon
                stock issued for commissions (1):1993
            
            
            0.001
            
            
            1,260,000
            
            
            1,260
            
            
            -Common
                stock issued for convertible debt:2001
            
            
            0.25
            
            
            1,605,346
            
            
            1,605
            
            
            399,5042002
            
            
            0.25
            
            
            1,147,706
            
            
            1,147
            
            
            285,7812004
            
            
            0.25
            
            
            788,991
            
            
            789
            
            
            196,4602005
            
            
            0.25
            
            
            10,896,275
            
            
            10,898
            
            
            2,654,4962006
            
            
            0.015
            
            
            519,656,389
            
            
            519,656
            
            
            7,454,921534,094,707
            
            
            534,095
            
            
            10,991,162Expiration
                of stock options2005
            
            
            -
            
            
            -
            
            
            -
            
            
            359,6382006
            
            
            -
            
            
            -
            
            
            -
            
            
            39,2002007
            
            
            -
            
            
            -
            
            
            -
            
            
            1,900-
            
            
            -
            
            
            361,538Correction
                of Stock Options
            
            
            
            
            
            
            
            
            
            
            
            -39,200Stock
                warrants exercised:2003
                (cashless exercise)
            
            
            0.05
            
            
            151,846
            
            
            152
            
            
            7,0592004
                (cashless exercise)
            
            
            0.16
            
            
            47,917
            
            
            48
            
            
            7,752199,763
            
            
            200
            
            
            14,811Stock
                warrants expired:2007
            
            
            
            
            
            -
            
            
            -
            
            
            15,480Stock
                options exercised:1997
            
            
            0.01
            
            
            325,000
            
            
            325
            
            
            2,9292000
            
            
            0.01
            
            
            350,000
            
            
            350
            
            
            3,1502002
            
            
            0.04
            
            
            150,000
            
            
            150
            
            
            5,8502003
            
            
            0.01
            
            
            150,000
            
            
            150
            
            
            1,350




F-16


**ADVANCED
            BIOTHERAPY, INC.**
 **(A
            DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
            TO FINANCIAL STATEMENTS**
 **DECEMBER
            31, 2007**




Common
                StockAverage
                price per share
            
            Shares
            
            Amount
            
            Additional
                Paid-in Capital975,000
            
            
            975
            
            
            13,279Total
            
            
            
            
            
            1,167,621,940
            
            $
            1,167,621
            
            $
            27,763,610




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





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





Effective
      in 2006, the Company amended its articles of incorporation to increase the
      maximum amount of its authorized common stock to 2,000,000,000 shares with
      a par
      value of $0.001.





Preferred
      Stock




The
      Company is authorized to issue 20,000,000 shares of non-assessable $0.001 par
      value preferred stock. As of December 31, 2007, the Company has not issued
      any
      preferred stock.





Common
      Stock




The
      Company is authorized to issue 2,000,000,000 shares of non-assessable $0.001
      par
      value common stock. Each share of stock is entitled to one vote at the annual
      shareholders’ meeting.




As
      a
      result of the rights offering in July 2007, 39,251,888 shares of common stock
      were purchased at $0.015 per share. On December 18, 2007, Richard P. Kiphart,
      the Company’s Chairman of the Board of Directors, purchased an aggregate of
      181,818,182 shares of Company common stock, $0.001 par value, at $0.011 per
      share, for the aggregate sum of $2,000,000.





Stock
      Options




An
      adjustment was made in the amount of $39,200 to the balance of Stock Options
      to
      reverse a transaction that was inadvertently counted twice in 2006. The
      offsetting entry was to Additional Paid in Capital, there was no effect to
      net
      income.





Stock
      Bonus Plan




The
      Board
      of Directors approved a 2007 Omnibus Equity Incentive Plan (“2007 Plan”) for
      directors, officers, employees and consultants of the Company. The 2007 Plan
      sets the number of shares of Company common stock reserved for grants, options
      and other awards at 100,000,000 shares subject to annual increases of 3% of
      the
      issued and outstanding shares of common stock as of January 1st of each year.
      The 2007 Plan is subject to stockholder approval which has not been received
      yet.




F-17


**ADVANCED
            BIOTHERAPY, INC.**
 **(A
            DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
            TO FINANCIAL STATEMENTS**
 **DECEMBER
            31, 2007**


Pursuant
      to the 2007 Plan, the Board of Directors approved the grant to each director
      (excluding Christopher W. Capps) of stock options to purchase up to 2,000,000
      shares of Company common stock at an exercise price of $0.013 per share. The
      options vest as of the date of grant on November 21, 2007.





Pursuant
      to the 2007 Plan, the Board of Directors granted to Christopher W. Capps,
      President and Chief Executive Officer of the Company, stock options to purchase
      up to 50,000,000 shares of Company common stock at an exercise price of $0.013
      per share. These stock options will vest 25% annually over four years,
      commencing November 21, 2008, and each November 21st thereafter, so long as
      Mr.
      Capps is employed or otherwise provides services to the Company. Management
      calculates the current value of these options is $540,800 on the date of grant.
      This amount was calculated using the Black-Scholes model.





As
      previously reported, the Company agreed to grant to John L. Drew, Chief
      Financial Officer, stock options to purchase up to 10,000,000 shares of Company
      common stock. The stock options are granted pursuant to the 2007 Plan and vest
      one-third annually over three years commencing August 1, 2008, and each August
      1st thereafter, so long as he is employed at the Company. The date of grant
      for
      those options was set at November 21, 2007, which is the same grant date for
      the
      stock options granted to Christopher W. Capps and the other directors of the
      Company, as reported herein. The exercise price for the stock options granted
      to
      Mr. Drew is $0.013 per share. Management calculates that these options have
      a
      current value of $153,495on the date of grant. This amount was calculated using
      the Black-Scholes model.





**NOTE
      9 - NON-CASH COMMITMENT AND WARRANTS**





During
      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 fully vest n 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 seven years, and expected
      volatility of 82% with no dividends expected to be paid. The Company recorded
      an
      expense for the value of these warrants based upon these Black Scholes
      assumptions of $36,900 ($0.123 per option).





During
      the year ended December 31, 2004, a warrant to purchase 100,000 shares of common
      stock was exercised using the cashless conversion feature, resulting in the
      issuance of 47,917 shares of common stock.




F-18


**ADVANCED
            BIOTHERAPY, INC.**
 **(A
            DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
            TO FINANCIAL STATEMENTS**
 **DECEMBER
            31, 2007**


During
      2005, the Company granted warrants to purchase up to 380,000 shares of common
      stock at an exercise price of $0.10 - $0.20 per share for services. Subject
      to
      the terms of such warrants, 340,000 warrants are presently exercisable, and
      expire February 24, 2015 through August 24, 2015. The remaining 40,000 warrants
      vest 1/3 each year commencing December 31, 2006, with a value of $4,920 being
      recorded as an expense each year.





In
      2007,
      $15,480 of warrants that should have been deemed expired in 2005 and 2006 were
      transferred to additional paid in capital.





Summarized
      information about stock warrants outstanding and exercisable at December 31,
      2007 is as follows:





Number
                of warrants
            
            Weighted
                Average Remaining Life
            
            Average
                exercise priceOutstanding
            
            
            5,170,894
            
            
            2.51
            
            $
            0.16Exercisable
            
            
            5,130,894
            
            
            2.47
            
            $
            0.16





**NOTE
      10 - INCOME TAXES**





FAS
      109




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





December
                31, 2007
            
            December
                31, 2006Amount
            
            Percent
            
            Amount
            
            PercentFederal
                tax (benefit)
            
            $
            (373,200
            )
            
            (34
            )%
            $
            (436,000
            )
            
            (34
            )%California
                State tax (benefit)
            
            
            (0
            )
            
            (8
            )%
            
            (73,000
            )
            
            (8
            )%Illinois
                State tax (benefit)
            
            
            (80,100
            )
            
            (7.3
            )%
            
            (23,000
            )
            
            (7.3
            )%Valuation
                allowance
            
            
            453,300
            
            
            42
            %
            
            532,000
            
            
            42
            %$
            -
            
            
            -
            
            $
            -
            
            
            -





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 December 31, 2007 and 2006 are as
      follows:




December
                31, 2007
            
            December
                31, 2006Deferred
                tax asset:Net
                operating loss carryforwards****
            
            $
            4,953,000
            
            $
            4,570,000General
                business credit carryforwards
            
            
            95,000
            
            
            95,000Excess
                book accumulated amortization
            
            
            21,000
            
            
            21,0005,069,000
            
            
            4,686,000Deferred
                tax liabilities:Excess
                tax accumulated depreciation
            
            
            3,000
            
            
            3,000Total
                deferred tax asset
            
            
            5,066,000
            
            
            4,683,000Valuation
                allowance for deferred tax asset
            
            
            (5,066,000
            )
            
            (4,683,000
            )Net
                deferred tax asset
            
            $
            -
            
            $
            -




F-19


**ADVANCED
            BIOTHERAPY, INC.**
 **(A
            DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
            TO FINANCIAL STATEMENTS**
 **DECEMBER
            31, 2007**


At
      December 31, 2007, the Company has federal net operating loss carryforwards
      of
      approximately $11,842,000, which expire in the years 2008 through 2027, state
      net operating loss carryforwards of approximately $11,797,000, which expire
      in
      the years 2010 through 2016, and general business credit carryforwards of
      approximately $95,000, which expire in the years 2012 through 2023. Not included
      in the calculation of deferred tax assets are temporary differences of $256,000.
      At December 31, 2007 and 2006, federal net operating losses expired in the
      amount of approximately $199,262 and $219,832, respectively.





FIN
      48




The
      Company adopted the provisions of Financial Accounting Standards Board (“FASB”)
      Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an
      interpretation of FASB Statement No. 109” (“FIN 48”), on January 1, 2007. FIN 48
      clarifies the accounting for uncertainty in income taxes recognized in an
      enterprise’s financial statements in accordance with FASB Statement 109,
“Accounting for Income Taxes”, and prescribes a recognition threshold and
      measurement process for financial statement recognition and measurement of
      a tax
      position taken or expected to be taken in a tax return. FIN 48 also provides
      guidance on derecognition, classification, interest and penalties, accounting
      in
      interim periods, disclosure and transition.





The
      Company classifies interest and penalties as a component of the provision for
      income taxes.





Income
      tax expense for the year ended December 31, 2007 includes no interest and
      penalties. As of December 31, 2007, we have no accrued interest and
      penalties related to uncertain tax positions.





Based
      on
      our evaluation, we have concluded that there are no significant uncertain tax
      positions requiring recognition in our financial statements.





The
      Company has determined it is not reasonably possible for the amounts of
      unrecognized tax benefits to significantly increase or decrease within twelve
      months of the adoption of FIN 48.





We
      file
      income tax returns in the U.S. federal, various and states jurisdictions. The
      statute of limitations remains open for 2003, 2004, and 2005. We have
      substantially concluded all U.S. federal and state income tax matters through
      December 31, 2006.





As
      a
      result of the adoption of FIN 48, we did not recognize any adjustment to
      the liability for uncertain tax position and therefore did not record any
      adjustment to the beginning balance of accumulated deficit on the consolidated
      balance sheet.





F-20


**ADVANCED
            BIOTHERAPY, INC.**
 **(A
            DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
            TO FINANCIAL STATEMENTS**
 **DECEMBER
            31, 2007**





**NOTE
      11 - SUBSEQUENT EVENTS**





On
      March
      12, 2008, the Company and Richard P. Kiphart, Chairman of the Board of the
      Company, agreed to provide Lime Energy, Inc. (“LEC”) (NASDAQ:LIME), a developer,
      manufacturer and integrator of energy saving technologies, with a $3 million
      revolving line of credit, for which the Company and Mr. Kiphart each will be
      responsible to fund up to $1.5 million. The Company and Mr. Kiphart will fund
      the line of credit and receive principal and interest payments on a pro-rata
      basis.




The
      LEC
      note matures on March 31, 2009, and bears interest at 17% per annum payable
      quarterly, with 12% payable in cash and the remaining 5% to be capitalized
      and
      added to the principal balance of the note. The note also provides for payment
      quarterly of an unused funds fee of 4% per annum, as well as a fee payable
      upon
      termination of the facility prior to its scheduled maturity. LEC may borrow
      any
      amount during the term of the note, so long as it is not in default at the
      time
      of the advance.




Mr.
      Kiphart is also the Chairman of the Board of LEC and its largest individual
      investor, and Mr. David Valentine, one of the Company’s directors, is also a
      director of LEC.




F-21