**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, 2006**


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




**141
      West Jackson Blvd., Suite 2182**


**Chicago,
      IL 60604**





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





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


**(312)
      427-1912**





**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-KSB. o




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




December
      31, 2006:   $-0-




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 23, 2007
      was
      $6,147,782, which market value excludes 792,867,330 shares of common stock
      held
      by directors, executive officers and stockholders whose beneficial ownership
      exceeds ten percent (10%) of the shares outstanding on March 23,
      2007.




As
      of
      March 23, 2007, the Registrant had outstanding 946,561,870 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, our 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 have consisted primarily of research, development and non-United
      States investigational human clinical trials. Such development stage activities
      have resulted in an accumulated deficit of $20,769,079 at December 31, 2006.
      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.)




Our
      autoimmune disease technology focuses on an anti-cytokine platform. The
      Company’s primary cytokine target has 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). To date, the Company has not achieved its plans
      to
      enter into out-licensing agreements with pharmaceutical companies that seek
      to
      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 and 7,115,263 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. In addition, the Company has eleven United States
      utility patents pending filed between November 26, 2002, and October 2, 2006.
      The Company also has two applications pending in each of Europe, Hong Kong
      and
      Canada, as well as a pending application in Japan. The Company has one PCT
      application pending.




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. The
      Company plans to consider opportunities for joint ventures or licensing or
      similar arrangements with large pharmaceutical companies to provide the funding
      necessary for obtaining FDA approval. However, there can be no assurance that
      the Company will enter into any such arrangements, obtain the appropriate
      regulatory approvals, or develop, market, or distribute commercially viable
      products.




1


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 $6,082,344 in cash and investments at December 31,
      2006. 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, 2007, the earned interest on the Company’s cash and investments
      will be sufficient to fund approximately 55% to 65% of its ordinary operating
      expenses, including legal fees incurred in maintaining its patents, but
      excluding fees and costs associated with our stockholder rights offering, which
      has neither commenced nor been declared effective by the Securities and Exchange
      Commission. The Company does not have a source of revenue to continue its
      operations beyond the current available funds.




The
      Company’s business development plan for 2007 principally focuses on the
      following three specific elements:




1.
            Evaluation
                of possible acquisition candidates;




2.
            Acquisition
                of a control or non-control position in a revenue generating company
                through investment in equity, of convertible debt, or an asset
                acquisition; and




3.
            Licensing
                agreements with selected pharmaceutical companies seeking opportunities
                related to our patents.




As
      described above, one of the Company’s objectives, although not its primary
      objectives, is to establish a collaborative relationship with one or more
      pharmaceutical or biotechnological companies that could result in the generation
      of licensing, milestone and royalty payments to the Company.




As
      of the
      date hereof, the Company has not entered into any agreement to invest in or
      acquire a revenue generating company, nor has it entered into any agreement
      with
      a pharmaceutical or biotechnological company, or any licensing
      arrangements.




The
      amount spent on research and development (including consulting (non-cash)
      expenses) by the Company for the fiscal years ended December 31, 2006, 2005
      and
      2004 was $166,220, $827,317 and $730,007, respectively.




TECHNICAL
      BACKGROUND




The
      Company’s main biotechnology platform involves 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 removes or neutralizes 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 (RA), multiple sclerosis
      (MS), 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.




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.




2




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 has 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 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’s drug development strategy therefore has centered on the blocking of
      IFN-gamma, TNF-alpha, and sometimes both together in patients with Th1-mediated
      ADs.




CLINICAL
      STUDIES / RHEUMATOID ARTHRITIS (RA) AND PSORIATIC ARTHRITIS (PA)




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




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




CLINICAL
      STUDIES / MULTIPLE SCLEROSIS (MS)




The
      Company sponsored two trials in Russia of 83 MS patients on the use of
      anti-cytokine therapy. The first was an open-label trial with patients with
      secondary progressive MS. Following results in this trial, a double-blind,
      placebo-controlled trial was conducted in a study design similar to that used
      in
      RA. The preliminary study compared anti-IFN-gamma and anti-TNF-alpha with
      placebo. Only patients with MS who received antibodies to IFN-gamma showed
      statistically significant improvement compared to the placebo group—a
      significant increase in the number of patients without confirmed disability
      progression. Positive clinical changes in this group at six months were
      supported by MRI data showing a decrease in the number of active enhancing
      lesions. After 12 months of follow-up, the anti-IFN-gamma patients still showed
      significant improvement relative to the placebo group on a number of endpoints,
      including disease progression and the number of active MRI lesions.




CLINICAL
      STUDIES / CORNEAL TRANSPLANT REJECTION




In
      a
      clinical trial sponsored in Russia, 13 patients experiencing corneal transplant
      rejection were administered anti-IFN-gamma antibodies in eye drop form. Patients
      were chosen from those for whom standard treatment with steroids, antibiotics,
      anti-inflammatory drugs and vitamins produced no improvement after rejection.
      In
      all patients prior to treatment, vision was limited to distinguishing hand
      movement in front of the eyes. Standard treatment was stopped, and the Company’s
      antibodies were given at 2-3 drops three times a day for 7-10 days. Patients
      were observed for 3-6 months. Two to three days after the start of treatment,
      transplant transparency improved, edema dropped, and visual acuity increased.
      At
      the end of the first week, the transplants became almost fully transparent
      and
      inflammation of the patients’ eyes (13 eyes) disappeared. Improvement was
      sustained for about 6 months in all 13 patients including 2 patients given
      re-treatment. All patients experienced improvement in vision. The results of
      this study have been reported in the peer-reviewed journal American Journal
      of
      Ophthalmology (133, 829-830, 2002). After completion of the trials for Corneal
      Transplant rejection, the Company was issued United States Patent No.
      6,534,059.




3




CLINICAL
      STUDIES / AUTOIMMUNE SKIN DISEASES




Company-sponsored
      pilot studies in Russia of patients with various autoimmune skin diseases were
      conducted using anti-IFN-gamma. Seven patients with psoriasis vulgaris treated
      with antibodies showed complete clearing of psoriatic plaques by weeks 2 to
      3.
      The results in many cases were dramatic. Remission was maintained for the 4-
      to
      6- month period of observation. Of 17 patients with alopecia areata treated
      with
      antibodies to IFN-gamma, 11 patients with progressive-stage disease experienced
      partial, but ongoing or fully restored hair growth in the treated lesions by
      4-6
      months. Patients with total baldness had some brow and eyelash hair growth
      but
      only vellus hair in the scalp by week 12 after the completion of therapy. In
      a
      small group of patients with vitiligo receiving intradermal or intramuscular
      injections of anti-IFN-gamma around their lesions, abnormal redness of the
      skin
      disappeared after therapy and areas of normal-colored skin were observed in
      the
      treated area. The distinct border between the depigmented and normal skin also
      diminished on day 10 after a short-course of the antibodies.




CLINICAL
      STUDIES / JUVENILE RHEUMATOID ARTHRITIS-ASSOCIATED UVEITIS




A
      group
      of children in Russia, diagnosed with juvenile rheumatoid arthritis-associated
      uveitis were treated with anti-IFN-gamma. When the antibodies were combined
      with
      standard therapy, exacerbation of the disease symptoms were halted more quickly
      and remission lasted longer than in patients not receiving
      anti-IFN-gamma.




CLINICAL
      STUDIES / HERPES SIMPLEX VIRUS TYPE 1




The
      Company completed a pilot investigational study using antibodies to IFN-gamma
      in
      the treatment of patients suffering from Genital Herpes at the Department of
      Skin and Venereal Diseases, Russian State Medical University, Moscow, Russia.
      Patients with recurrent herpes simplex virus type 2 (HSV-2) genital lesions
      were
      treated topically for several days with our investigational antibodies to
      interferon-gamma. Our principal investigators reported that itching and pain
      were relieved within hours of the application of the antibody, and the eroded
      area of the skin epithelialized within 3-4 days. Research indicates that the
      HSV-2 causing recurrent genital lesions may belong to a special category of
      viruses, such as HIV and certain other viruses, in which interferons promote
      rather than stop viral replication. The Company also completed a pilot
      investigational study in Herpes type 1 with similar results.




CLINICAL
      STUDIES / FDA APPROVED PHASE 1 TRIALS




During
      2004, the Company sponsored a Phase I FDA approved clinical trial at the
      Georgetown University Medical Center. The study was designed to investigate
      the
      clinical effect of treating AIDS patents who have become resistant to highly
      active anti-retroviral therapy, with an inhibitor to TNF alpha. This study
      was
      intended to test the safety and possibly show a clinical effect of this
      inhibitor aimed at helping restore normal immune system function in AIDS
      patients with advanced disease.




GOVERNMENT
      REGULATION




The
      Company’s therapeutic approach based on an anti-cytokine platform technology is
      subject to extensive federal, state, and local laws and regulations controlling
      the development, testing, manufacture and distribution of medical treatments.
      The type of antibody-based products described in the sections entitled “CLINICAL
      STUDIES” above will be subject to regulation as therapeutics or devices by the
      FDA, as well as varying degrees of regulation by a number of foreign
      governmental agencies. In order to comply with the 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, and for
      the
      preparation and filing of documents in the formats required by the FDA. The
      Company also does not plan to use its capital or raise additional capital for
      such costs. The Company does not plan to unilaterally pursue the FDA approval
      necessary to commercially market its products.




4




The
      Company’s clinical trials were at a very early stage and the Company has not
      received approval from the FDA or any other governmental agency for the
      manufacturing or marketing of any products under development. The commencement,
      if ever, of manufacturing and marketing of any products relating to the
      Company’s patents is speculative and in all likelihood, many years away. The FDA
      also may place conditions on any approvals that could restrict the commercial
      applications of such products. Product approvals may be withdrawn if compliance
      with regulatory standards is not maintained or if problems occur following
      initial marketing. With respect to patented products or technologies, delays
      imposed by the governmental approval process may materially reduce the period
      during which the Company’s licensee, if any, will have the exclusive right to
      exploit them.




COMPETITION




The
      Company has encountered and will encounter significant competition from firms
      currently engaged in the biotechnology industries. The majority of these
      companies are and will be will be substantially larger than the Company, and
      have substantially greater resources and operating histories. The Company is
      aware of other competitors seeking treatments for ADs such as MS and
      RA.




PRODUCT
      LIABILITY EXPOSURE




The
      Company does not maintain any product liability insurance, because it has no
      products in pre-clinical or in FDA clinical trials as of March 23,
      2007.




GLOSSARY
      OF CERTAIN TERMS




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




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




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




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




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




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




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




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




5




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




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




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




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




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




PATENT
      STATUS AND PROTECTION OF PROPRIETARY TECHNOLOGY




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 has been issued
      United States Patent No. 6,333,032 for the use of interferon-gamma (IFN-gamma)
      antibodies as a monotherapy to treat five diseases of autoimmune etiology:
      Multiple Sclerosis, Rheumatoid Arthritis, Juvenile Rheumatoid Arthritis,
      Psoriatic Arthritis and Ankylosing Spondylitis. The Company believes that these
      patents give the Company patent protection for a new anti-cytokine approach
      to
      treating different autoimmune diseases. 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 on March 18, 2003, covering the use of interferon gamma antibodies
      for treatment of corneal transplant rejection. The Company also has been issued
      United States Patent Nos. 5,626,843, 5,888,511, 6,846,486, 7,115,263 and
      Australian Patent Nos. 730498 and 2002318175. The Company has also been issued
      Europe Patent No. 1401496, which is validated in Great Britain and Italy. The
      Company also has eleven United States utility patents pending filed between
      November 26, 2002, and October 2, 2006. The Company also has two applications
      pending in each of Europe, Hong Kong and Canada, as well as a pending
      application in Japan. The Company has one PCT application pending. 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, or others, if obtained, will afford us substantial
      protection or commercial benefit.




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 the executive officers
      were incapacitated or the Company otherwise loses their services.




TERMINATION
      OF RESEARCH AND DEVELOPMENT ACTIVITIES




The
      Company has ceased its research and development projects. The Company has no
      current plans to recommence these operations. The Company intends to [maintain
      its patent portfolio] and seek ways to generate licenses with other
      bio-technology companies in our field. As of March 23, 2007, there are no firm
      plans regarding such licensing arrangements.




6




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, any statements concerning proposed new product candidates
      and prospects for regulatory approval, any 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” “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 biotechnology and pharmaceutical
      industries as well as more specific risks and uncertainties. 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 for the fiscal year ended December 31, 2006. 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 a rapidly changing environment that involves a number of
      risk factors, many of which are beyond the Company’s control. The following
      discussion highlights some of these risks, uncertainties and assumptions that
      could affect the outcome of the forward-looking statements in this 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.




*We
      have a history of operating losses and have a need for additional financing.* For
      the
      fiscal year ended December 31, 2006, we realized a net loss of $7,418,882.
      At
      December 31, 2006, we had an accumulated deficit of $20,769,079. 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, 2007, the earned interest will be
      sufficient to fund approximately 55% to 65% of projected operating expenses
      including legal fees incurred in maintaining its patents, but excluding fees
      and
      costs attributed to the stockholder rights offering which is discussed in other
      risk factors below.




*We
      do
      not have any of our own products in FDA clinical trials, and if we cannot
      successfully complete any clinical trials, we will be unable to obtain
      regulatory approvals required to market our products.*  Our
      products are in the development stage, have not been subjected to clinical
      studies in the United States (except for preliminary initiation of Phase I
      clinical trials at Georgetown Medical University since terminated), have limited
      clinical data based upon studies conducted in Russia, have not been cleared
      for
      marketing by the FDA or foreign regulatory authorities, and cannot be
      commercially distributed in the United States and/or in foreign markets unless
      and until such clearance is obtained. We have discontinued our research and
      development projects, and we have no current plans to recommence these
      operations.




7




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




*Our
      research and development and marketing efforts will be dependent on
      collaborations and if our collaborations are not successful, we may not be
      able
      to successfully develop and market products.* At
      present, we have no collaboration agreements with other companies. If we pursue
      and enter into any such agreement, these agreements may be expected to call
      for
      our partners to control the supply of bulk or formulated drugs for commercial
      use or for use in clinical trials; design and execution of clinical studies;
      process of obtaining regulatory approval to market the product; and/or marketing
      and selling of any approved product.




In
      each
      of these areas, our partners may not support fully our research and commercial
      interests since our program may compete for time, attention and resources with
      the internal programs of our corporate collaborators. As such, we cannot be
      sure
      that our corporate collaborators, if any, will share our perspectives on the
      relative importance of our program, that they will commit sufficient resources
      to our program to move it forward effectively, or that the program will advance
      as rapidly as it might if we had retained complete control of all research,
      development, regulatory and commercialization decisions.




*Research
      and development activities, including future clinical trials, are inherently
      uncertain and we 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 may not be predictive of results obtained in subsequent
      clinical trials, and we cannot be sure that these clinical trials will
      demonstrate the safety and efficacy necessary to obtain regulatory approval
      for
      any product candidates. A number of companies in the biotechnology industries
      have suffered significant setbacks in advanced clinical trials, even after
      obtaining promising results in earlier trials.




We
      cannot
      be sure that we or our licensees, if any, would be permitted by regulatory
      authorities to undertake clinical trials for any of our anti-cytokine platform
      technology, or that if such trials are conducted, any product candidates will
      prove to be safe and efficacious or will receive regulatory
      approvals.




*Manufacturing
      difficulties materially impair our competitive position and our possibility
      of
      conducting clinical trials.* We
      lack
      the facilities to manufacture our products and do not have an adequate supply
      of
      product to begin clinical studies in the United States.




*If
      we
      are unable to protect our patents, we may not be able to develop products or
      compete successfully.* We
      have
      eight issued United States patents, two patents issued in Australia and one
      patent issued in Europe. Our success and ability to compete effectively will
      depend, in part, on the strength of our patents and the ability to obtain
      protection for our products, if any, in U.S. and foreign markets. No assurance
      can be given that any patents issued to us will not be challenged, invalidated,
      or circumvented. Litigation, which could result in substantial cost to us,
      may
      also be necessary to enforce any patents issued to us and/or determine the
      scope
      and validity of other parties’ proprietary rights.




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




8




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




*We
      face substantial competition and others may discover, develop, acquire or
      commercialize products before or more successfully than our licensees, if any,
      may do.* We are
      not actively engaged in the development or commercialization of any products,
      other than to seek potential licensing agreements, if any. A number of companies
      are pursuing the development of novel products which target the same diseases
      as
      we have targeted. These competitors have substantially greater capital
      resources, research and development staffs and facilities than we do. They
      may
      develop and introduce products and processes competitive with those of our
      licensees, if any. They represent significant short-term and long-term
      competition for us. For certain of our products, an important factor in
      competition may be the timing of market introduction of these competitive
      products. This timing will be based on the effectiveness with which we or the
      competition can complete clinical trials and approval processes and supply
      quantities of these products to market. Competition among products approved
      for
      sale will be based on, among other things, efficacy, safety, reliability, price,
      marketing capability and patent position.




*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.




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





·
            material
                public announcements





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





·
            unsatisfactory
                clinical trial results





·
            delays
                clinical trial plans or
                manufacturing





·
            market
                reaction to announcements by other biotechnology or pharmaceutical
                companies





·
            initiation,
                termination or modification of agreements with collaborative
                partners





·
            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.




9




*We
      plan a stockholder rights offering for shares of our common stock at $0.015
      per
      share* .
      We have
      filed a registration statement to register up to a total of 874,812,720 shares
      to be sold to our stockholders. The rights offering contemplates the
      distribution of ten non-transferable rights for each share of our common stock
      held on the record date (to be determined). Each right will entitle its holder
      to purchase one share of our common stock at an exercise price of $0.015 per
      share. The registration statement for our rights offering has not been declared
      effective by the Securities and Exchange Commission (“SEC”), nor has the
      offering commenced as of the date of this Annual Report on Form
      10-KSB.




Richard
      P. Kiphart, Christopher W. Capps, John R. Capps, David Valentine, Matthew Gooch
      and three other stockholders have consented to not participate in the rights
      offering. As of March 23, 2007, those stockholders held an aggregate of
      859,080,598 shares of the 946,561,870 outstanding shares of our common
      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.)




Approximately
      1,821,374,590 shares of our common stock would be issued and outstanding upon
      the full exercise of rights in our stockholder rights offering. (See Factors
      regarding the stockholder rights offering above.) Certain shares may be sold
      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.




In
      addition, 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.




Upon
      completion of the rights offering, we intend to file one or more registration
      statements on Form S-8 under the Securities Act to register all of the shares
      of
      common stock reserved of issuance upon exercise of certain stock options to
      purchase up to 7,560,000 shares of common stock and other shares of common
      stock
      to be issued or reserved for issuance under an equity incentive plan that the
      Company may in the future adopt. Accordingly, shares of common stock registered
      under any such registration statement and issued upon exercise of such stock
      options will be available for sale with the option market, unless such shares
      of
      common stock are subject to vesting restrictions.




*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 recently approved 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 an equity incentive
      plan (“2007 Stock Plan”) for directors, employees and consultants under
      which 60,000,000 shares of common stock would be reserved. No shares have been
      awarded or options granted under the 2007 Stock Plan. Both the Amendment
      and the 2007 Stock Plan are subject to stockholder approval, which the
      Company intends to seek after completion of its stockholder rights
      offering.




*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.




10




EXECUTIVE
      OFFICES




Our
      executive offices are located at 141 West Jackson Boulevard, Suite 2182,
      Chicago, Illinois 60604, and our telephone number is (312)
      427-1912.




ITEM
              2.
            DESCRIPTION
                OF PROPERTY




During
      2006, 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. During 2006, the Company paid an
      aggregate $6,800 in rent for the use of office space from a firm owned by former
      Chief Executive Officer Edmond F. Buccellato. In addition, during 2006, 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.




11


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




The
      Company did not hold its annual meeting of stockholders for 2006 for financial
      reasons.




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 2006 and 2005 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.


**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**2005
                  Fiscal Quarter Ended:**
              
              
              **High
                  Bid**
              
              
              **Low
                  Bid**March
                  31
              
              $
              0.19
              
              $
              0.17June
                  30
              
              $
              0.21
              
              $
              0.20September
                  30
              
              $
              0.20
              
              $
              0.18December
                  31
              
              $
              0.16
              
              $
              0.13




As
      of
      March 23, 2007, the Company had approximately 1393 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. 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. FACTORS THAT MAY AFFECT THE COMPANY.”




OVERVIEW




The
      Company had approximately $6,082,344 in cash at December 31, 2006. 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,
      2007, of approximately $450,000 excluding fees and costs for our stockholders
      rights offering. 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, 2007, the earned interest
      will
      be sufficient to fund approximately 55% to 65% of our projected operating
      expenses including legal fees incurred in maintaining its patents on its
      intellectual property, but excluding fees and costs for our stockholders’ rights
      offering, and other non-recurring expenses. The
      Company, however, does not have a source of revenue to continue its operations
      beyond the currently available funds.




12




All
      of
      the Company’s long-term debt had been converted or paid in full as of October
      11, 2006, except for one investor who holds approximately $6,600 principal
      amount of convertible debt that matured September 2004.




Commencing
      in 2005, due to a lack of funds, the Company initiated reductions in certain
      research and development projects and planned to postpone certain patent
      applications and other patent matters. Management has decided to cease all
      research and development projects and new patent applications. It is expected
      that the Company’s current position regarding use of its funds for research and
      development and patent matters will continue during the next 12 months, unless
      otherwise determined by the Board of Directors.




The
      Company’s business development plan for 2007 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 a revenue generating company
                through investment in equity or convertible debt, or an asset acquisition;
                and


3.
            Licensing
                agreements with selected pharmaceutical companies seeking opportunities
                related to our patented scientific
                approaches.




As
      of the
      date hereof, the Company has not entered into any agreement with a
      pharmaceutical or biotechnological company, or any licensing
      arrangements.




We
      have a
      history of operating losses and have not generated any revenue. At of December
      31, 2006, we had an accumulated deficit of $20,769,079. 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 2007, 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, 2006 and 2005 (As
      Restated).




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.




At
      December 31, 2006, the Company had $6,082,244 in cash and 946,561,870 shares
      of
      Common Stock issued and outstanding.




FISCAL
      2006 COMPARED TO FISCAL 2005 (As Restated)




For
      the
      year ended December 31, 2006, the Company realized a net loss of $7,418,882
      compared to a net loss of $2,158,352 for the year ended December 31, 2005. The
      net
      loss increase over fiscal year 2005 resulted primarily from an increase in
      interest expense of $5,773,890 related to the Company’s reduction of the
      conversion price of its outstanding convertible debt including accrued interest
      and the recognition of the difference in the fair market value on the date
      of
      conversion of such debt into shares of Common Stock and the new $0.015
      conversion rate. The Company also had increases in expenses over the year ended
      December 31, 2005, consisting primarily of the following: increased professional
      fees of $199,488, directors’ fees of $47,027, and general and administrative
      expenses of $65,442, business development expenses of $37,600, and loss on
      impairment or abandonment of patents of $63,677, offset by increased interest
      income of $66,022. The Company had decreases in expenses over the year ended
      December 31, 2005, consisting primarily of the following: decreased research
      and
      development expenses of $268,017, business development expenses of $42,000,
      consulting, research and development (non-cash), and other expenses of $517,884,
      administrative salaries and benefits of $144,793, insurance of $54,770, and
      travel and entertainment of $23,190, and a decrease of $145,400 in forgiveness
      of debt.




13




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 ANDFINANCIAL
                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, 2005, through December 31, 2006,
      and
      through the date hereof.




ITEM
              8A.
            CONTROLS
                AND PROCEDURES




In
      accordance with Item 307 of Regulation S-B promulgated under the Securities
      Act
      of 1933, as amended, as of December 31, 2006, the Chief Executive Officer and
      Chief Financial Officer of the Company (the “Certifying Officers”) conducted
      evaluations of the Company’s disclosure controls and procedures. As defined
      under Sections 13a-14(c) and 15d-14(c) of the Securities Exchange Act of 1934,
      as amended (the “Exchange Act”), the term “disclosure controls and procedures”
means controls and other procedures of an issuer that are designed to ensure
      that information required to be disclosed by the issuer in the reports that
      it
      files or submits under the Exchange Act is recorded, processed, summarized
      and
      reported, within the time periods specified in the Commission’s rules and forms.
      Disclosure controls and procedures include, without limitation, controls and
      procedures designed to ensure that information required to be disclosed by
      an
      issuer in the reports that it files or submits under the Exchange Act is
      accumulated and communicated to the issuer’s management, including its principal
      executive officer or officers and principal financial officer or officers,
      or
      persons performing similar functions, as appropriate to allow timely decisions
      regarding required disclosure. The Certifying Officers have reviewed the
      Company’s disclosure controls and procedures and concluded that those disclosure
      controls and procedures are effective in causing information to be recorded,
      processed, summarized and reported within the time periods specified in the
      Commission’s rules and forms and communicated to management of the Company to
      allow timely decisions regarding the Company’s public disclosures.




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 23,
      2007, 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
            
            65
            
            Chairman
                of the Board, Director (3)(4)
            
            June
                2002Christopher
                W. Capps
            
            24
            
            President
                and Chief Executive Officer, Director (3)
            
            November
                2006Thomas
                J. Pernice
            
            45
            
            Treasurer
                and Secretary, Director (1)(2)(3)(4)(5)
            
            April
                2001Michael
                G. Bansley
            
            71
            
            Chief
                Financial Officer (non-director)
            
            October
                2006Boris
                Skurkovich, M.D.
            
            51
            
            Director
                (4)
            
            December
                1986Joseph
                A. Bellanti, M.D.
            
            72
            
            Director
                (2)(5)
            
            October
                2003Keith
                Gregg
            
            43
            
            Director
                (1)(5)
            
            November
                2005John
                R. Capps
            
            56
            
            Director
                (2)(3)(4)
            
            November
                2006Matthew
                Gooch
            
            32
            
            Director
                (1)(3)(4)
            
            November
                2006David
                Valentine
            
            37
            
            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 theExecutive
                Committeeof
                the Board of Directors.


(4)
            Member
                of theNominating
                Committeeof
                the Board of Directors.


(5)
            Member
                of theSpecial
                Committeeof
                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.




14




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.




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 (24) 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
      25
      years. Plaza Motor Company is part of the Ashbury Automotive Group, which is
      a
      publicly owned Group 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 Saflink (SFLK Nasdaq)
      and a member of the Board of Directors of First Data Corp. (FDC-NYSE). Mr.
      Kiphart is the Head of Corporate Finance for the Investment Firm of William
      Blair & Company, L.L.C. Mr. Kiphart has been with William Blair for over 36
      years. Mr. Kiphart received his B.A. from Dartmouth College and his M.B.A.
      from
      Harvard Business School.




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 Chief
      Executive Officer and Founder of Modena Holding Corporation since 1999, a
      consulting company specializing in business development strategies. He has
      served for more than nine years as a Presidential appointee in three U.S.
      Presidential Administrations; first as a White House Staff member in the Reagan
      Administration, a Senior White House Staff member in the Bush 41 Administration
      and most recently as a Senior Advisor in the Bush 43 Administration to 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.




Michael
      G. Bansley - Mr. Bansley is a principal in the Chicago, Illinois accounting
      firm
      of Bansley, Brescia Co., P.C., which he founded on 1980. He graduated from
      Marquette University in 1957. He is a member of the American Institute of
      Certified Public Accountants and the Illinois CPA Society.




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 Keith Gregg and Thomas J. Pernice 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 the committee members may currently qualify as a “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 a “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.




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.




16




COMPLIANCE
      WITH SECTION 16(a) OF THE EXCHANGE ACT




Directors
      Christopher W. Capps, John R. Capps, Matthew Gooch, Richard P. Kiphart and
      David
      Valentine filed Form 4s regarding the acquisition of Company common stock,
      which
      transactions otherwise were not timely reported. Directors Joseph A. Bellanti,
      Keith Gregg, Thomas J. Pernice, Boris Skurkovich filed Form 4s regarding the
      receipt of stock options, which transactions were not timely reported. Directors
      Joseph A. Bellanti, Richard P. Kiphart, Thomas J. Pernice and Boris Skurkovich
      did not file timely their respective Form 5s for first quarter 2006. Chief
      Financial Officer Michael G. Bansley did not file timely his Form 3. Former
      Directors Edmond Buccellato, Paul Hopper, Lawrence Loomis, Simon Skurkovich
      filed Form 4s or Form 5s in 2006, however they were not timely
      filed.




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., 141 West Jackson Boulevard, Suite 2182, Chicago, Illinois
      60604, Attention: Secretary (include your return address), or by email to
      www.advancedbiotherapy.com.




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.
      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.




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,
      2005,
      through December 31,
      2006,
      for the Chief Executive Officer of the Company and
      the Company ’s
      other
      executive officers who were compensated during the year ended December 31, 2006 (the
      “ Named
      Executive Officers ”):




Summary
        Compensation Table


Name
                  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
              
              2006
              
              $
              0
              
              $
              0
              
              $
              0
              
              $
              0
              
              
              N/A
              
              $
              0
              
              $
              0
              
              $
              0Michael
                  Bansley
                Chief
                  Financial Officer(3)
              
              2006
              
              $
              0
              
              $
              0
              
              $
              0
              
              $
              0
              
              
              N/A
              
              $
              0
              
              $
              10,112
              
              $
              0Edmond
                  F. Buccellato
                Chief
                  Executive Officer (1)(4)(5)(6)
              
              2006
                2005
              
              $
                $
              32,500
                144,000
              
              $
                $
              0
                0
              
              $
                $
              0
                0
              
              $
              18,600
              
              
              
              
              $
                $
              0
                0
              
              $
                $
              142,337
                0
              
              $
                $
              193.437
                144,000Simon
                  Skurkovich
                Chairman
                  Emeritus, Director of Research & Development
                  (2)(4)(5)(6)
              
              2006
                2005
              
              $
                $
              55,000
                49,500
              
              $
                $
              0
                0
              
              $
                $
              0
                0
              
              $
              24,600
              
              
              
              
              $
                $
              0
                0
              
              $
                $
              149,500
                0
              
              $
                $
              229,100
                49,500




(1)  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.




17




(2)  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.




(3)
      During 2006, Michael 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.




(4)  During
      2005, the salaries for Mr.
      Buccellato and Dr.
      Skurkovich were
      set
      by the Compensation Committee at $180,000, respectively. They received actual
      compensation of $134,000 and $49,500, respectively.




(5)  During January 2005,
      the Company granted
      stock options to purchase 25,000 shares of the Company ’s
      Common
      Stock at $0.20 per share to each director for services rendered during the
      year
      ended December 31,
      2004.
      For the 2004 fiscal year, the estimated fair value of such options was accrued
      at $4,500 per director using the Black Scholes option price method.




(6)  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, which stock options are also
      reflected in the “Director Compensation” table.




During fiscal
      year 2006 ,
      William
      M. Finkelstein ,
      the Company ’s
      former
      Chief Financial Officer, did not receive any compensation directly from the Company.
      Mr. Finkelstein and Mr.
      Buccellato are
      shareholders of Buccellato
      & Finkelstein, Inc. In August 2006, the Company issued 2,822,467 shares of
      common stock in payment of $42,337 owed to Buccellato & Finkelstein for
      accounting services and tax preparation, which shares were registered to Edmond
      Buccellato and are reflected in the Summary Compensation Table above.




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 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.
      (See “Item 1. Business - Factors That May Affect the Company,” regarding
      approval by the Board of Directors of a new equity incentive plan, which plan
      is
      subject to stockholder approval.) 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




None of
      the Named
      Executive Officers received
      or exercised any stock options or SARs during the 2006 fiscal year.




18




OUTSTANDING
      EQUITY AWARDS AT DECEMBER 31, 2006


Option
                  Awards
              
              Stock
                  AwardsName
              
              Number
                  of Securities Underlying Unexercised Options (#) Exercisable
                  (1)
              
              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 ($)Simon
                  Skurkovich, M.D.
              
              
              300,000
              
              
              
              
              
              
              
              $
              0.10
              
              
              12/01/2010623,000
              
              
              
              
              
              
              
              $
              0.10
              
              
              12/31/201010,000
              
              
              
              
              
              
              
              $
              0.25
              
              
              12/31/201120,000
              
              
              
              
              
              
              
              $
              0.21
              
              
              12/31/201230,000
              
              
              
              
              
              
              
              $
              0.42
              
              
              01/03/2014450,000
              
              
              
              
              
              
              
              $
              0.16
              
              
              02/07/201025,000
              
              
              
              
              
              
              
              $
              0.20
              
              
              01/03/20141,230,000
              
              
              
              
              
              
              
              $
              0.03
              
              
              08/27/2016Edmond
                  Buccellato
              
              
              50,000
              
              
              
              
              
              
              
              $
              0.20
              
              
              12/01/201050,000
              
              
              
              
              
              
              
              $
              0.10
              
              
              12/01/2010105,453
              
              
              
              
              
              
              
              $
              0.10
              
              
              12/31/201010,000
              
              
              
              
              
              
              
              $
              0.25
              
              
              12/31/201120,000
              
              
              
              
              
              
              
              $
              0.21
              
              
              12/31/201230,000
              
              
              
              
              
              
              
              $
              0.42
              
              
              02/07/20101,500,000
              
              
              
              
              
              
              
              $
              0.16
              
              
              01/03/201425,000
              
              
              
              
              
              
              
              $
              0.20
              
              
              12/31/2014930,000
              
              
              
              
              
              
              
              $
              0.03
              
              
              08/27/2016Christopher
                  Capps
              
              
              0Michael
                  Bansley
              
              
              0


(1)
            All
                options were exercisable as ofMarch 23, 2007.




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, 2006.




The
      following table sets forth the compensation paid by the Company to the directors
      during the year ended December 31, 2006:




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
              
              $
              16,600
              
              
              0
              
              
              0
              
              
              0
              
              $
              18,600Christopher
                  W. Capps
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0John
                  R. Capps
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0Matthew
                  Gooch
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0Keith
                  Gregg (2)
              
              
              0
              
              
              0
              
              
              16,600
              
              
              0
              
              
              0
              
              
              0
              
              
              16,600Richard
                  P. Kiphart (3)
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0Thomas
                  J. Pernice (4)
              
              
              0
              
              
              0
              
              
              30,600
              
              
              0
              
              
              0
              
              
              0
              
              
              30,600Boris
                  Skurkovich, M.D. (5)
              
              
              0
              
              
              0
              
              
              18,600
              
              
              0
              
              
              0
              
              
              0
              
              
              18,600David
                  W. Valentine
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0Edmond
                  F. Buccellato**
              
              
              0
              
              
              0
              
              
              18,600
              
              
              0
              
              
              0
              
              
              0
              
              
              18,600Lawrence
                  Loomis**
              
              
              0
              
              
              0
              
              
              18,600
              
              
              0
              
              
              0
              
              
              0
              
              
              18,600Simon
                  Skurkovich, M.D.**
              
              
              0
              
              
              0
              
              
              24,600
              
              
              0
              
              
              0
              
              
              0
              
              
              24,600




**Resigned
      from the Board of Directors effective November 6, 2006.




19




(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, and options to purchase up to 830,000
      shares of Common Stock at an exercise price of $0.03 per share (at December
      31,
      2006, aggregate 855,000 stock options).




(2)  Keith
      Gregg held options to purchase 830,000 shares of Common Stock at an exercise
      price of $0.03 per share, and warrants to purchase 20,000 shares of Common
      Stock
      at an exercise price of $0.10 per share, excluding warrants to purchase up
      to
      40,000 shares of Common Stock at an exercise price of $0.10 which vest in two
      remaining equal installments beginning December 31, 2007 (at December 31, 2006,
      aggregate 890,000 stock options and warrants).




(3)  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 and options to purchase
      up
      to 25,000 shares of Common Stock at an exercise price of $0.20 per share (at
      December 31, 2006, aggregate 75,000 stock options).




(4)  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, and options to purchase
      up
      to 1,530,000 shares of Common Stock at an exercise price of $0.03 per share
      (at
      December 31, 2006, aggregate 2,657,443 stock options and warrants).




(5)  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, and options to purchase
      up
      to 930,000 shares of Common Stock at an exercise price of $0.03 per share (at
      December 31, 2006, aggregate 1,465,000 stock options).




In
      May 2005,
      upon the recommendation of the Company ’s
      Compensation Committee, the directors approved the grant of stock options
      (“ 2005
      Options ”)
      to the
      directors and officers and to other employees and consultants. The grant of
      the 2005
      Options was
      made
      subject to approval by the stockholders of an increase in the number of shares
      of common stock reserved for the Company’s
      2000 Omnibus Equity Incentive Plan (“ Plan
      Share Increase ”)
      in an
      amount sufficient to cover the 2005
      Options .
      The Company expensed
      the 2005
      Options during
      2005. As of August 28,
      2006,
      stockholder approval of the Plan
      Share Increase had
      not
      been requested or obtained, and the 2005
      Options were
      deemed cancelled as of August 28, 2006. Accordingly, for the 2005 fiscal year,
      the 2005
      Options were
      not
      reported as beneficially owned by such directors and officers.




20


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, 2006


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)
              
              
              -
                  0 -
              
              
              
              
              
              -
                  0 -




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




(2)
      Stock
      Bonus Plan





The
      Company adopted a Stock Bonus Plan (“Stock Bonus Plan”) in January 2000 and
      reserved 10,000,000 shares of Common Stock to be issued thereunder, of which
      7,596,211 shares have been granted and issued as of December 31, 2006. 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, 2006, no shares had been granted under the OEI Plan. As of December
      31, 2006, 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.




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. Subject to the terms of such warrants, the warrants vest in three
      equal annual installments that commenced December 31, 2006. During the third
      quarter of 2005, the Company granted BioEquity Partners warrants to purchase
      up
      to 150,000 shares of Common Stock at an exercise price of $0.20 per share for
      consulting services, partly in connection with the Company’s Phase I clinical
      trials at Georgetown University Medical Center to study an investigational
      treatment for AIDS. Subject to the terms of such warrants, the warrants became
      exercisable on March 20, 2006, and expire on March 20, 2015. The Company granted
      Dr. Yehuda Shoenfeld, Director of the Center for Autoimmune Diseases at the
      Israel Sheba Medical Center, warrants to purchase up to 10,000 shares of Common
      Stock at an exercise price of $0.20 per share for services as a member of the
      Company’s scientific advisory board. Subject to the terms of such warrants, the
      warrants are presently exercisable, and expire on February 24,
      2015.




In
      March
      2007, the Board of Directors approved a new equity incentive plan for employees,
      directors and consultants, subject to stockholder approval. See “Item 1.
      Business-Factors That May Affect the Company.”




21




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 23, 2007. 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 23, 2007, the Company had
      approximately 946,561,870 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
            
            
            771,103,400
            (1)
            
            81.46
            %Boris
                Skurkovich, M.D.
              18
                Blaisdell Ave.
              Pawtucket,
                RI 01860
            
            
            10,627,264
            (2)
            
            1.12
            %John
                R. Capps
              11830
                Olive Blvd.
              St.
                Louis, MO 63141
            
            
            3,333,333
            
            
            *MatthewGooch
              c/o
                Wm. Blair & Company
              222
                West Adams St.
              Chicago,
                IL 60606
            
            
            3,333,333
            
            
            *DavidValentine
              311
                S. Wacker Drive, No. 5500
              Chicago,
                IL 60606
            
            
            3,333,333
            
            
            *Christopher
                W. Capps
              141
                West Jackson Blvd., Suite 2182
              Chicago,
                IL 60604
            
            
            2,666,667
            
            
            *Thomas
                J. Pernice
              141
                W. Jackson Blvd., Suite 2182
              Chicago,
                IL 60604
            
            
            2,657,443
            (3)
            
            *Joseph
                A. Bellanti, M.D.
              6007
                Corewood Lane
              Bethesda
                MD 20816
            
            
            855,000
            (4)
            
            *Keith
                Gregg
              205
                Powell Place
              Brentwood,
                TN 37027
            
            
            850,000
            (5)
            
            *All
                officers and directors as a group (10)
            
            
            798,759,823
            (6)
            
            86.67
            %







(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 and options
                to
                purchase up to 25,000 shares of Common Stock at an exercise price
                of $0.20
                per share.





(2)
            Shares
                held in the name of Boris Skurkovich include shares held in his name
                (2,595,384), and shares held in the name of Carol Marjorie Dorros
                (2,765,555) and Samuel Aaron Skurkovich (3,811,325) 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, and options to purchase
                up to 930,000 shares of Common Stock at an exercise price of $0.03
                per
                share.





(3)
            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.





(4)
            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, and
                options
                to purchase up to 830,000 shares of Common Stock at an exercise price
                of
                $0.03 per share.





(5)
            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, and
                a
                warrant to purchase up to 20,000 shares of Common Stock at an exercise
                price of $0.10 which vested December 31, 2006, but do not include
                a
                warrant to purchase up to 40,000 shares of Common Stock at an exercise
                price of $0.10, which vests in two remaining equal installments beginning
                December 31, 2007.





(6)
            Includes
                1,062,443 shares of Common Stock underlying warrants, and 4,840,000
                shares
                of Common Stock underlying options.





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




22




ITEM
              12.
            CERTAIN
                RELATIONSHIPS AND RELATED
                TRANSACTIONS




In
      October 2006, the Company reported that Richard P. Kiphart had converted into
      shares of Company Common Stock all his Company convertible notes and other
      indebtedness at $0.015 per share, and that he and other investors had purchased
      an additional $5,400,000 of Company Common Stock at $0.015 per share pursuant
      to
      the Share Purchase and Debt Restructure Agreement dated as of August 28, 2006,
      between the Company and Mr. Kiphart.




In
      August
      2006, the Company paid Edmond F. Buccellato, the Company’s former Chief
      Executive Officer and Chairman of the Board, an aggregate of 6,522,466 in shares
      of Company common stock in payment of his accrued but unpaid salary in the
      sum
      of $55,500 and payment of the Company’s accounts payable of $42,337 owed to the
      accounting firm of Buccellato and Finkelstein, of which Mr. Buccellato is a
      principal. Simon Skurkovich, M.D., former Chairman Emeritus and Director of
      Research and Development, and current member of the advisory committee of the
      Company, was paid 14,675,400 in shares of common stock of the Company in payment
      of accrued but unpaid salary of $147,500, and a note payable in the sum of
      $127,631. During 2006, the Company paid $13,110 to Amy Buccellato for
      administrative services rendered. Ms. Buccellato is the daughter of Edmond
      F.
      Buccellato.




During
      2006, the Company paid an aggregate $6,800 in rent, payable $1,700 monthly,
      for
      the use of office space from Buccellato & Finkelstein, Inc., of which former
      Chief Executive Officer and Director Edmond F. Buccellato is a shareholder.
      During 2006, the Company paid to Buccellato & Finkelstein, Inc., $7,828 in
      reimbursements for medical and dental insurance for Edmond F. Buccellato and
      Amy
      Buccellato.




During
      the second quarter of 2006, the Company agreed to transfer U.S. Application
      No.
      10/096,127 to Director Keith Gregg in satisfaction of the Company’s obligation
      to pay certain consulting fees to him.




ITEM
              13.
            EXHIBITS
                AND REPORTS ON FORM 8-K




**Exhibit**
                **Number**
              
              **Description**2.1
              
              Agreement
                  of Mergerdated
                  as ofJuly14,
                  2000, between the Registrant, aDelawarecorporation,
                  andAdvanced
                  Biotherapy Concepts, Inc.,
                  aNevadacorporation.
                  Filed asAppendix
                  A to Registrant’s Proxy StatementdatedJuly14,
                  2000, and incorporated herein by reference.2.2
              
              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.12.3
              
              Bylaws
                  of Registrant. Filed as an exhibit to Registrant’s 10-QSB for the quarter
                  ended September 30, 2000, and incorporated herein by
                  reference.22.4
              
              Certificate
                  of Amendment of Certificate of Incorporation of Registrant filed
                  December
                  26, 2002, in the office of the Delaware Secretary of State.32.5
              
              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 StockCertificate.
                  Filed as an exhibit to Registrant’s Form 10-QSB filed onJune10, 1999,
                  and incorporated herein by reference.4.2
              
              Form
                  of 2002 Subordinated Convertible Pay-In-Kind Note dueJune1,
                  2006, datedNovember14,
                  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
                  ofStock
                  Bonus Plan.
                  Filed as an exhibit to Registrant’s Form 10-KSB for the fiscal year endedDecember, 1999.
                  Filed as an exhibit to Registrant’s Form 10-KSB for the fiscal year endedDecember,
                  1999.10.2
              
              Form
                  of Common Stock Purchase Warrant in favor ofCappello
                  Capital Corporation.
                  Filed as an exhibit to Registrant’s Form 10-QSB for the quarter endedMarch31,
                  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.
  23
  10.3
              
              Form
                  of 2000 Omnibus Equity Incentive Plan. Filed as an exhibit to Registrant’s
                  Form 10-KSB for the fiscal year endedDecember31,
                  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 endedDecember31,
                  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 endedJune30,
                  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 endedDecember31,
                  2000, and incorporated herein by reference.10.7
              
              Form
                  of Investor Rights Agreement. Filed as an exhibit to Registrant’s Form
                  10-KSB for the fiscal year endedDecember31,
                  2000, and incorporated herein by reference.10.8
              
              Form
                  of 2002 Subordinated Convertible Pay-In-Kind Note dueSeptember30,
                  2004. Filed as an exhibit to Registrant’s Form 10-QSB for the quarter
                  endedMarch31,
                  2002, and incorporated herein by reference.10.9
              
              Form
                  of Investor Rights Agreement dated as ofApril15,
                  2002. Filed as an exhibit to Registrant’s Form 10-QSB for the quarter
                  endedMarch31,
                  2002, and incorporated herein by reference.10.10
              
              Form
                  of 2002 Subordinated Convertible Pay-In-Kind Note dueJune1,
                  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 endedSeptember30,
                  2002, and incorporated herein by reference.10.11
              
              Form
                  of Investor Rights Agreement dated as ofJune1,
                  2002. Filed as an exhibit to Registrant’s Form 10-QSB/A for the quarter
                  endedJune30,
                  2002, and incorporated by reference herein.10.12
              
              Form
                  of Integrated Project Service Agreement for Pilot Formulation and
                  Filling
                  Area datedMarch31,
                  2003. Filed onJanuary30,
                  2004, as Exhibit10.12to
                  theCompany’s
                  Form 10-QSB/A for the period endedMarch31,
                  2003, and incorporated by reference herein.10.13
              
              Form
                  ofAgreementbetween
                  theState
                  Institute of Transplantation and Artificial Organsof
                  theMinistry
                  of Healthof
                  theRussian
                  FederationandAdvanced
                  Biotherapy, Inc.Filed
                  as an exhibit to Registrant’s Form 8-K/A onJuly14,
                  2004.10.14
              
              Form
                  of 2003 Subordinated Convertible Pay-In-Kind Note Due 2007. Filed
                  as an
                  exhibit to Registrant’s Form 8-K onOctober28,
                  2004 and incorporated by reference herein.410.15
              
              Form
                  of the Investor Rights Agreement. Filed as an exhibit to Registrant’s Form
                  8-K onOctober28,
                  2004 and incorporated by reference herein.5
 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.
 24


10.16
              
              Form
                  of 2005 Subordinated Convertible Pay-In-Kind Note dueSeptember30,
                  2009. Filed as an exhibit to Registrant’s Form 10-QSB for the period endedJune30,
                  2005.610.17
              
              Form
                  of Amended Investor Rights Agreement.710.18
              
              Form
                  of Share Purchase and Debt Restructure Agreement. Filed as an exhibit
                  to
                  Registrant’s Form 8-K onAugust30,
                  2006.831.1
              
              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
                  2002.99.1
              
              Form
                  of Instructions for Use of Subscription Right. Previously filed
                  as an
                  Exhibit to our registration statement on Form SB-2 (Registration
                  No.
                  333-140444) filed on February 5, 2007.99.2
              
              Notice
                  of Guaranteed Delivery Sub. Rights. Previously filed as an Exhibit
                  to our
                  registration statement on Form SB-2 (Registration No. 333-140444)
                  filed on
                  February 5, 2007.99.3
              
              Broker-Dealer
                  Letter to Nominees. Previously filed as an Exhibit to our registration
                  statement on Form SB-2 (Registration No. 333-140444) filed on February
                  5,
                  2007.99.4
              
              Letter
                  to Stockholders - Record Holders. Previously filed as an Exhibit
                  to our
                  registration statement on Form SB-2 (Registration No. 333-140444)
                  filed on
                  February 5, 2007.99.5
              
              Letter
                  to Clients of Broker-Dealers. Previously filed as an Exhibit to
                  our
                  registration statement on Form SB-2 (Registration No. 333-140444)
                  filed on
                  February 5, 2007.99.6
              
              Form
                  of Nominee Holder Certification. Previously filed as an Exhibit
                  to our
                  registration statement on Form SB-2 (Registration No. 333-140444)
                  filed on
                  February 5, 2007.99.7
              
              Beneficial
                  Owner Election Form. Previously filed as an Exhibit to our registration
                  statement on Form SB-2 (Registration No. 333-140444) filed on February
                  5,
                  2007.


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




The
      following financial statements are included herein:


Independent
                  Auditor’s Report
              
              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


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.




25




REPORTS
      ON FORM 8-K




The
      Registrant filed the following reports on Form 8-K during the quarter ended
      December 31, 2006:




1.  October
      16, 2006. The Registrant reported the unregistered sale of equity securities
      to
      accredited investors, the grant of stock options to certain members of the
      Board
      of Directors and members of its Advisory Board and a change in control with
      respect to the stock ownership of the Company.




2.  November
      6, 2006. The Registrant reported the appointment of Michael G. Bansley as the
      Company’s new Chief Financial Officer.




3.  November
      9, 2006. The Registrant reported that, as of November 6, 2006, three directors
      resigned from the Board of Directors and were appointed to the Company’s
      Advisory Board, and that four new directors were appointed to the Board of
      Directors.




4.  December
      14, 2006. The Registrant reported that in response to comments by the Securities
      and Exchange Commission, it would restate its 2005 audited financial statements
      and its financial statements for each of the three calendar quarters in 2006
      and
      file an amended Form 10-KSB for the year ended December 31, 2005, and amended
      Forms 10-QSB for the quarters ended March 30, 2006, June 30, 2006, and September
      30, 2006, respectively.




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 $41,000 for 2006 and $41,000
                for
                2005.




(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
                2006 and $-0- for 2005.




(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 relatingto
                the 2006 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
                -%




26




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
      12 th day of
      April, 2007.




Advanced
                Biotherapy, Inc.
              (Registrant)By:
            /s/
              Christopher W. CappsChristopher
                W. CappsPresident
                and Chief Executive Officer


By:
            /s/
              Michael
              G. BansleyMichael
                G. BansleyChief
                Financial Officer




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
              
              TitleApril
                  12, 2007
              
              /s/*Christopher
                  W. Capps*
                Christopher
                  W. Capps
              
              President
                  and Chief Executive Officer,
                DirectorApril
                  12, 2007
              
              /s/*Michael
                  G. Bansley*
                  Michael
                  G. Bansley
              
              Chief
                  Financial Officer
                (Principal
                  Financial and Accounting Officer)April
                  12, 2007
              
              /s/*Joseph
                  A. Bellanti, M.D.*
                Joseph
                  A. Bellanti, M.D.
              
              DirectorApril
                  12, 2007
              
              /s/*John
                  R. Capps*
                  John
                  R. Capps
              
              DirectorApril
                  12, 2007
              
              /s/*Keith
                  A. Gregg*
                  Keith
                  A. Gregg
              
              DirectorApril
                  12, 2007
              
              /s/*Richard
                  P. Kiphart*
                  Richard
                  P. Kiphart
              
              DirectorApril
                  12, 2007
              
              /s/*Thomas
                  J. Pernice*
                  Thomas
                  J. Pernice
              
              DirectorApril
                  12, 2007
              
              /s/
                  Boris Skurkovich, M.D.
                Boris
                  Skurkovich, M.D.
              
              DirectorApril
                  12, 2007
              
              /s/*David
                  W. Valentine*
                David
                  W. Valentine
              
              Director





27


**ADVANCED
        BIOTHERAPY, INC.**
 **(A
        Development Stage Enterprise)**
 **December
        31, 2006**
  **CONTENTS**Report
                    of Independent Registered Public Accounting
                    Firm
                
                
                F-1Balance Sheets
                
                
                F-2Statements
                  of Operations
                
                
                F-3Statement
                  of Stockholders’ 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, 2006 and 2005, and the related
        statements of operations, stockholders’ deficit and cash flows for the years
        then ended and for the period from December 2, 1985 (inception) to December
        31,
        2006. 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. 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, 2006 and 2005 and the results of its operations, stockholders’
deficit and its cash flows for the years then ended, and for the period from
        December 2, 1985 (inception) to December 31, 2006, in conformity with accounting
        principles generally accepted in the United States of America.
  Williams
        & Webster, P.S.
 *Certified
        Public Accountants*
 Spokane,
        Washington
 March
        31,
        2007


F-1
 **ADVANCED
                      BIOTHERAPY, INC.****(A
                      DEVELOPMENT STAGE ENTERPRISE)****BALANCE
                      SHEETS**
  **December
                      31,**
                  
                  **December
                      31,****2006**
                  
                  **2005****ASSETS****CURRENT
                      ASSETS**Cash
                  
                  $
                  6,082,344
                  
                  $
                  22,068Notes
                      receivable - related party
                  
                  
                  46,619
                  
                  
                  46,619Interest
                      receivable - related party
                  
                  
                  21,121
                  
                  
                  18,090Total
                      Current Assets
                  
                  
                  6,150,084
                  
                  
                  86,777**PROPERTY,
                      PLANT AND EQUIPMENT, net**
                  
                  
                  275,003
                  
                  
                  294,428**OTHER
                      ASSETS**Deferred
                      loan origination fees, net of accumulated amortization
                  
                  
                  -
                  
                  
                  7,283Patents
                      and patents pending, net of accumulated amortization
                  
                  
                  779,287
                  
                  
                  883,002Total
                      Other Assets
                  
                  
                  779,287
                  
                  
                  890,285**TOTAL
                      ASSETS**
                  
                  $
                  7,204,374
                  
                  $
                  1,271,490**LIABILITIES
                      AND STOCKHOLDERS' EQUITY (DEFICIT)****CURRENT
                      LIABILITIES**Accounts
                      payable and accrued expenses
                  
                  $
                  103,761
                  
                  $
                  246,776Accounts
                      payable and accrued expenses - related party
                  
                  
                  -
                  
                  
                  182,200Current
                      portion of term and convertible notes payable
                  
                  
                  8,099
                  
                  
                  4,490,485Total
                      Current Liabilities
                  
                  
                  111,860
                  
                  
                  4,919,461**LONG-TERM
                      DEBT**Convertible
                      notes payable, net of current portion
                  
                  
                  -
                  
                  
                  1,286,134Note
                      payable to related parties
                  
                  
                  -
                  
                  
                  127,631Total
                      Long-Term Debt
                  
                  
                  -
                  
                  
                  1,413,765**TOTAL
                      LIABILITIES**
                  
                  
                  111,860
                  
                  
                  6,333,226**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,946,561,870
                      and 54,384,346,shares issued and outstanding, respectively
                  
                  
                  946,561
                  
                  
                  54,347Additional
                      paid-in capital
                  
                  
                  25,417,862
                  
                  
                  6,998,563Stock
                      options and warrants
                  
                  
                  1,497,171
                  
                  
                  1,235,551Deficit
                      accumulated during development stage
                  
                  
                  (20,769,079
                  )
                  
                  (13,350,197
                  )Total
                      Stockholders' Equity (Deficit)
                  
                  
                  7,092,514
                  
                  
                  (5,061,736
                  )**TOTAL
                      LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)**
                  
                  $
                  7,204,374
                  
                  $
                  1,271,490
  The
              accompanying notes are an integral part of these financial
              statements.
 F-2
  **ADVANCED
                        BIOTHERAPY, INC.****(A
                        DEVELOPMENT STAGE ENTERPRISE)****STATEMENTS
                        OF OPERATIONS**
  **From
                        Inception****(December
                        2, 1985)****Years
                        Ended December 31,**
                    
                    **through****2006**
                    
                    **2005**
                    
                    **December
                        31, 2006****REVENUES**
                    
                    $
                    -
                    
                    $
                    -
                    
                    
                    89,947**OPERATING
                        EXPENSES**Research
                        and development
                    
                    
                    9,600
                    
                    
                    277,617
                    
                    
                    3,925,134Promotional
                        fees
                    
                    
                    -
                    
                    
                    256
                    
                    
                    62,570Professional
                        fees
                    
                    
                    380,855
                    
                    
                    181,367
                    
                    
                    3,341,929Business
                        development
                    
                    
                    39,500
                    
                    
                    81,500
                    
                    
                    121,000Consulting,
                        research & development (non-cash)
                    
                    
                    156,620
                    
                    
                    549,700
                    
                    
                    1,388,229Warrants
                        - scientific advisory board
                    
                    
                    -
                    
                    
                    1,900
                    
                    
                    1,900Directors'
                        fees
                    
                    
                    144,200
                    
                    
                    97,173
                    
                    
                    443,253Depreciation
                        and amortization
                    
                    
                    85,365
                    
                    
                    100,296
                    
                    
                    965,771Administrative
                        salaries and benefits
                    
                    
                    104,436
                    
                    
                    249,229
                    
                    
                    1,482,434Insurance
                    
                    
                    -
                    
                    
                    54,770
                    
                    
                    324,452Shareholder
                        relations and transfer fees
                    
                    
                    9,969
                    
                    
                    20,092
                    
                    
                    321,367Rent
                    
                    
                    10,200
                    
                    
                    20,400
                    
                    
                    361,578Travel
                        and entertainment
                    
                    
                    1,383
                    
                    
                    24,573
                    
                    
                    332,182Telephone
                        and communications
                    
                    
                    2,640
                    
                    
                    5,799
                    
                    
                    65,057Office
                    
                    
                    1,816
                    
                    
                    6,451
                    
                    
                    83,684General
                        and administrative
                    
                    
                    85,779
                    
                    
                    20,337
                    
                    
                    837,535Total
                        Operating Expenses
                    
                    
                    1,032,363
                    
                    
                    1,691,460
                    
                    
                    14,058,075**LOSS
                        FROM OPERATIONS**
                    
                    
                    (1,032,363
                    )
                    
                    (1,691,460
                    )
                    
                    (13,968,128
                    )**OTHER
                        INCOME (EXPENSES)**Miscellaneous
                        income
                    
                    
                    -
                    
                    
                    2,682
                    
                    
                    27,682Interest
                        and dividend income
                    
                    
                    71,078
                    
                    
                    5,056
                    
                    
                    242,517Internal
                        gain on sale of securities
                    
                    
                    -
                    
                    
                    -
                    
                    
                    157,520Forgiveness
                        of debt
                    
                    
                    -
                    
                    
                    145,400
                    
                    
                    2,192,837Forgiveness
                        of payables
                    
                    
                    -
                    
                    
                    
                    
                    
                    45,396Loss
                        on disposal of office equipment
                    
                    
                    -
                    
                    
                    
                    
                    
                    (2,224
                    )Loss
                        on impairment or abandonment of patents
                    
                    
                    (92,500
                    )
                    
                    (28,823
                    )
                    
                    (136,174
                    )Interest
                        expense
                    
                    
                    (6,365,097
                    )
                    
                    (591,207
                    )
                    
                    (9,328,504
                    )Total
                        Other Income (Expenses)
                    
                    
                    (6,386,519
                    )
                    
                    (466,892
                    )
                    
                    (6,800,950
                    )**LOSS
                        BEFORE INCOME TAXES**
                    
                    
                    (7,418,882
                    )
                    
                    (2,158,352
                    )
                    
                    (20,769,078
                    )**INCOME
                        TAXES**
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -**NET
                        LOSS**
                    
                    $
                    (7,418,882
                    )
                    $
                    (2,158,352
                    )
                    
                    (20,769,079
                    )BASIC
                        AND DILUTED NET LOSSPER
                        COMMON SHARE
                    
                    $
                    (0.11
                    )
                    $
                    (0.04
                    )WEIGHTED
                        AVERAGE NUMBER OFBASIC
                        AND DILUTED COMMON STOCKSHARES
                        OUTSTANDING
                    
                    
                    69,064,621
                    
                    
                    54,137,820
 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)**
  **Deficit****Accumulated****Common
                        Stock**
                    
                    **Additional**
                    
                    **Stock**
                    
                    **During****Paid-in**
                    
                    **Options
                        and**
                    
                    **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 inform
                        of foregone interest
                    
                    
                    -
                    
                    
                    -
                    
                    
                    4,230
                    
                    
                    -
                    
                    
                    -
                    
                    
                    4,230Common
                        stock issued in exchangefor
                        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 notesand
                        accrued interest receivable
                    
                    
                    (1,603,789
                    )
                    
                    (1,604
                    )
                    
                    (238,964
                    )
                    
                    -
                    
                    
                    -
                    
                    
                    (240,568
                    )Stock
                        options issued in exchangefor
                        services
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    34,200
                    
                    
                    -
                    
                    
                    34,200Stock
                        issued for cashless exercise of warrantsat
                        $0.05 per share
                    
                    
                    151,846
                    
                    
                    152
                    
                    
                    7,059
                    
                    
                    (7,211
                    )
                    
                    -
                    
                    
                    -Net
                        loss for the year endedDecember
                        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 inform
                        of foregone interest
                    
                    
                    -
                    
                    
                    -
                    
                    
                    4,480
                    
                    
                    -
                    
                    
                    -
                    
                    
                    4,480Common
                        stock issued in exchangefor
                        convertible debt at $0.24 per share
                    
                    
                    10,896,275
                    
                    
                    10,897
                    
                    
                    2,654,496
                    
                    
                    -
                    
                    
                    -
                    
                    
                    2,665,393Stock
                        options issued in exchangefor
                        services
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    94,500
                    
                    
                    -
                    
                    
                    94,500Stock
                        options and warrants issued in exchangefor
                        services, one third vested
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    172,200
                    
                    
                    -
                    
                    
                    172,200Stock
                        issued for cashless exercise of warrantsat
                        $0.16 per share
                    
                    
                    47,917
                    
                    
                    48
                    
                    
                    7,752
                    
                    
                    (7,800
                    )
                    
                    -
                    
                    
                    -Net
                        loss for the year endedDecember
                        31, 2004
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (2,490,444
                    )
                    
                    (2,490,444
                    )Balance,
                        Decemner 31, 2004
                    
                    
                    54,032,557
                    
                    
                    54,032
                    
                    
                    6,574,786
                    
                    
                    865,916
                    
                    
                    (11,191,845
                    )
                    
                    (3,697,111
                    )Contribution
                        of capital by shareholders inform
                        of foregone interest
                    
                    
                    -
                    
                    
                    -
                    
                    
                    4,455
                    
                    
                    -
                    
                    
                    -
                    
                    
                    4,455Common
                        stock issued to Paul Hopperin
                        exchange for services at $.19 pershare
                    
                    
                    315,789
                    
                    
                    315
                    
                    
                    59,684
                    
                    
                    -
                    
                    
                    -
                    
                    
                    59,999Stock
                        options issued to directors inin
                        exchange for services
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    97,173
                    
                    
                    -
                    
                    
                    97,173Stock
                        options and warrants issued in exchangefor
                        services, one third vested
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    172,200
                    
                    
                    -
                    
                    
                    172,200Stock
                        options & warrants issued in exchangefor
                        services
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    459,900
                    
                    
                    -
                    
                    
                    459,900Expiration
                        of stock options
                    
                    
                    -
                    
                    
                    -
                    
                    
                    359,638
                    
                    
                    (359,638
                    )
                    
                    -
                    
                    
                    --Net
                        loss for the year endedDecember
                        31, 2005
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (2,158,352
                    )
                    
                    (2,158,352
                    )Balance,
                        December 31, 2005
                    
                    
                    54,348,346
                    
                    
                    54,347
                    
                    
                    6,998,563
                    
                    
                    1,235,551
                    
                    
                    (13,350,197
                    )
                    
                    (5,061,736
                    )Contribution
                        of capital by shareholders inform
                        of foregone interest
                    
                    
                    -
                    
                    
                    -
                    
                    
                    3,332
                    
                    
                    
                    
                    
                    -
                    
                    
                    3,332Stock
                        options issued to directors inin
                        exchange for services
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    144,200
                    
                    
                    
                    
                    
                    144,200Stock
                        options and warrants issued in exchangefor
                        services, one third vested
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    156,620
                    
                    
                    -
                    
                    
                    156,620Common
                        stock issued for cash at $0.015per
                        share
                    
                    
                    359,999,998
                    
                    
                    360,000
                    
                    
                    5,040,000
                    
                    
                    -
                    
                    
                    -
                    
                    
                    5,400,000Common
                        stock issued for conversion of debtand
                        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
                    
                    
                    -
                    
                    
                    -
                    
                    
                    5,859,894-Expiration
                        of stock options
                    
                    
                    -
                    
                    
                    -
                    
                    
                    39,200
                    
                    
                    (39,200
                    )
                    
                    -
                    
                    
                    --Net
                        loss for the year endedDecember
                        31, 2006
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (7,418,882
                    )
                    
                    (7,418,882
                    )Balance,
                        December 31, 2006
                    
                    
                    946,561,870
                    
                    $
                    946,561
                    
                    $
                    25,417,862
                    
                    $
                    1,497,171
                    
                    $
                    (20,769,079
                    )
                    $
                    7,092,514
 The
              accompanying notes are an integral part of these financial
              statements.
 F-4
  **ADVANCED
                        BIOTHERAPY, INC.****(A
                        DEVELOPMENT STAGE ENTERPRISE)****STATEMENTS
                        OF CASH FLOWS**
 **From
                        Inception****(December
                        2, 1985)****Years
                        Ended December 31,**
                    
                    **through****2006**
                    
                    **2005**
                    
                    **December
                        31, 2006****CASH
                        FLOWS FROM OPERATING ACTIVITIES:**Net
                        (loss)
                    
                    $
                    (7,418,882
                    )
                    $
                    (2,158,352
                    )
                    $
                    (20,769,079
                    )Adjustments
                        to reconcile net loss to cashused
                        in operating activities:Depreciation
                        and amortization
                    
                    
                    85,365
                    
                    
                    100,296
                    
                    
                    907,883Loss
                        on disposal of equipment
                    
                    
                    -
                    
                    
                    -
                    
                    
                    2,224Loss
                        on impairment of patents
                    
                    
                    92,500
                    
                    
                    28,823
                    
                    
                    136,175Investment
                        income
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (157,520
                    )Expenses
                        paid through issuance of common stock
                    
                    
                    274,837
                    
                    
                    59,999
                    
                    
                    566,176Expenses
                        paid through issuanceof
                        common stock warrants and options
                    
                    
                    300,820
                    
                    
                    729,273
                    
                    
                    1,700,282Accrued
                        interest paid by convertible debt
                    
                    
                    3,030,858
                    
                    
                    591,206
                    
                    
                    5,604,156Beneficial
                        Conversion
                    
                    
                    5,859,894
                    
                    
                    
                    
                    
                    5,859,894Expenses
                        paid through contributionof
                        additional paid-in capital
                    
                    
                    3,332
                    
                    
                    4,455
                    
                    
                    68,078Conveyance
                        of patent in lieu of payable
                    
                    
                    39,500
                    
                    
                    -
                    
                    
                    39,500Organization
                        costs
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (9,220
                    )Decrease
                        (increase) in assets:Deposits
                        and prepaid expenses
                    
                    
                    -
                    
                    
                    32,001
                    
                    
                    -Interest
                        receivable
                    
                    
                    (3,031
                    )
                    
                    (3,030
                    )
                    
                    (61,689
                    )Deferred
                        loan origination cost
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (157,295
                    )Increase
                        (decrease) in liabilities:
                    
                    
                    
                    
                    
                    
                    
                    
                    -Accounts
                        payable and accrued expenses
                    
                    
                    (88,015
                    )
                    
                    26,769
                    
                    
                    236,302Accounts
                        payable and accrued expenses - related parties
                    
                    
                    -
                    
                    
                    133,200
                    
                    
                    241,168-Net
                        cash used in operating activities
                    
                    
                    2,177,178
                    
                    
                    (455,360
                    )
                    
                    (5,792,965
                    )**CASH
                        FLOWS FROM INVESTING ACTIVITIES:**Purchase
                        of fixed assets
                    
                    
                    -
                    
                    
                    (858
                    )
                    
                    (385,339
                    )Acquisition
                        of patents
                    
                    
                    (86,942
                    )
                    
                    (129,051
                    )
                    
                    (1,291,547
                    )Net
                        cash used in investing activities
                    
                    
                    (86,942
                    )
                    
                    (129,909
                    )
                    
                    (1,676,886
                    )**CASH
                        FLOWS FROM FINANCING ACTIVITIES:**Proceeds
                        from issuance of common stock
                    
                    
                    5,400,000
                    
                    
                    -
                    
                    
                    7,857,254(Purchase)
                        sale of auctions rate securities
                    
                    
                    -
                    
                    
                    300,000
                    
                    
                    157,520Proceeds
                        from convertible notes
                    
                    
                    -
                    
                    
                    240,000
                    
                    
                    6,754,000Proceeds
                        from notes payable
                    
                    
                    (1,414,500
                    )
                    
                    -
                    
                    
                    (1,025,992
                    )Payments
                        on notes payable
                    
                    
                    (15,460
                    )
                    
                    -
                    
                    
                    (190,587
                    )Net
                        cash provided by financing activities
                    
                    
                    3,970,040
                    
                    
                    540,000
                    
                    
                    13,552,195Net
                        increase (decrease) in cash
                    
                    
                    6,060,276
                    
                    
                    (45,269
                    )
                    
                    6,082,344**Cash
                        beginning**
                    
                    
                    22,068
                    
                    
                    67,337
                    
                    
                    -**Cash,
                        ending**
                    
                    $
                    6,082,344
                    
                    $
                    22,068
                    
                    $
                    6,082,344**SUPPLEMENTAL
                        CASH FLOW DISCLOSURES:**Interest
                        expense paid
                    
                    $
                    -
                    
                    $
                    -
                    
                    $
                    341,166Income
                        taxes paid
                    
                    $
                    -
                    
                    $
                    -
                    
                    $
                    -**NON-CASH
                        FINANCING AND INVESTING ACTIVITIES:**Common
                        stock issued for a loan payable
                    
                    $
                    1,414,500
                    
                    $
                    -
                    
                    $
                    1,627,881Common
                        stock issued for notes receivable
                    
                    $
                    -
                    
                    $
                    -
                    
                    $
                    246,619Common
                        stock returned in payment ofnotes
                        and interest receivable
                    
                    $
                    -
                    
                    $
                    -
                    
                    $
                    240,568Common
                        stock issued on cashless exercise of warrants
                    
                    $
                    156,620
                    
                    $
                    -
                    
                    $
                    171,631Accrued
                        interest paid by convertible debt
                    
                    $
                    505,203
                    
                    $
                    -
                    
                    $
                    2,865,316Common
                        stock issued for convertible debt
                    
                    $
                    5,857,830
                    
                    $
                    -
                    
                    $
                    4,687,156Forgiveness
                        of debt
                    
                    $
                    -
                    
                    $
                    145,400
                    
                    $
                    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, 2006**
 
  **NOTE
          1 - ORGANIZATION AND DESCRIPTION OF BUSINESS**
  Advanced
          Biotherapy, Inc. was originally incorporated December 2, **** 1985
          under the laws of the State of Nevada as Advanced Biotherapy Concepts,
          Inc. On
          July 14, 2000, the Company incorporated a wholly owned subsidiary, Advanced
          Biotherapy, Inc. in the State of Delaware. On September 1, 2000, the Company
          merged with its wholly owned subsidiary, effectively changing its name
          to
          Advanced Biotherapy, Inc. (hereinafter “the Company” or “ABI”) and its domicile
          to Delaware.
  The
          Company has been 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. 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.
  For
          the
          year ended December 31, 2006, the Company incurred a net loss of $7,418,882
          and
          had an accumulated deficit during the development stage of $20,769,079.
          For the
          twelve-month period subsequent to December 31, 2006, the Company anticipates
          that its minimum operating cash requirements will be approximately $450,000.
          Management’s goal are to acquire a revenue generating business and to forge a
          collaborative relationship with a profitable enterprise including, but
          not
          limited to a pharmaceutical or biotechnology company.
  **NOTE
          2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
  This
          summary of significant accounting policies of Advanced Biotherapy, Inc.
          is
          presented to assist in understanding the Company’s financial statements. The
          financial statements and notes are representations of the Company’s management,
          which is responsible for their integrity and objectivity. These accounting
          policies conform to accounting principles generally accepted in the United
          States of America, and have been consistently applied in the preparation
          of the
          financial statements.
  Accounting
          Method
 The
          Company’s financial statements are prepared using the accrual basis of
          accounting in accordance with accounting principles generally accepted
          in the
          United States of America.
  F-6
  **ADVANCED
          BIOTHERAPY, INC.**
 **(A
          DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
          TO FINANCIAL STATEMENTS** ****
 **December
          31, 2006**
 
  Recent
          Accounting Pronouncements
  In
          February, 2007, the Financial Accounting Standards Board issued Statement
          of
          Financial Accounting Standards No. 159, “The Fair Value Option for Financial
          Assets and Financial Liabilities - Including an amendment of FASB Statement
          No.
          115” (hereinafter “SFAS No. 159”). This statement permits entities to choose to
          measure many financial instruments and certain other items at fair value.
          The
          objective is to improve financial reporting by providing entities with
          the
          opportunity to mitigate volatility in reported earnings caused by measuring
          related assets and liabilities differently without having to apply complex
          hedge
          accounting provisions. This Statement is expected to expand the use of
          fair
          value measurement, which is consistent with the Board’s long-term measurement
          objectives for accounting for financial instruments. This statement is
          effective
          as of the beginning of an entity’s first fiscal year that begins after November
          15, 2007, although earlier adoption is permitted. Management has not determined
          the effect that adopting this statement would have on the Company’s financial
          condition or results of operation.
  In
          June
          2006, the Financial Accounting Standards Board issued FASB Interpretation
          No.
          48, “Accounting for Uncertainty in Income Taxes - an interpretation of FASB
          Statement No. 109” (hereinafter “FIN 48”), which prescribes a recognition
          threshold and measurement attribute for the 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 de-recognition, classification, interest and
          penalties, accounting in interim periods, disclosure and transition. FIN
          48 is
          effective for fiscal years beginning after December 15, 2006. The Company
          does
          not expect the adoption of FIN 48 to have a material impact on its financial
          reporting, and the Company is currently evaluating the impact, if any,
          the
          adoption of FIN 48 will have on its disclosure requirements.
  In
          September, 2006, the Financial Accounting Standards Board issued Statement
          of
          Financial Accounting Standards No. 158, “Employers’ Accounting for Defined
          Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements
          No. 87,88,106, and 132(R)” (hereinafter “SFAS No. 158”). This statement requires
          an employer to recognize the overfunded or underfunded statues of a defined
          benefit postretirement plan (other than a multiemployer plan) as an asset
          or
          liability in its statement of financial position and to recognize changes
          in
          that funded status in the year in which the changes occur through comprehensive
          income of a business entity or changes in unrestricted net assets of a
          not for
          profit organization. This statement also requires an employer to measure
          the
          funded status of a plan as of the date of its year end statement of financial
          position, with limited exceptions. The adoption of this statement had no
          immediate material effect on the Company’s financial condition or results of
          operations.
  In
          September, 2006, the Financial Accounting Standards Board issued Statement
          of
          Financial Accounting Standards No. 157, “Fair Value Measurements” (hereinafter
“SFAS No. 157”). This statement defines fair value, establishes a framework for
          measuring fair value in generally accepted accounting principles (GAAP),
          and
          expands disclosure about fair value measurements. This statement applies
          under
          other accounting pronouncements that require or permit fair value
 F-7
  **ADVANCED
            BIOTHERAPY, INC.**
 **(A
            DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
            TO FINANCIAL STATEMENTS** ****
 **December
            31, 2006**
 
  measurements.
          This statement does not require any new fair value measurements, but for
          some
          entities, the application of this statement may change current practice.
          The
          adoption of this statement had no immediate material effect on the Company’s
          financial condition or results of operations.
  In
          March
          2006, the Financial Accounting Standards Board issued Statement of Financial
          Accounting Standards No. 156, “Accounting for Servicing of Financial Assets—an
          amendment of FASB Statement No. 140.” This statement requires an entity to
          recognize a servicing asset or servicing liability each time it undertakes
          an
          obligation to service a financial asset by entering into a servicing contract
          in
          any of the following situations: a transfer of the servicer’s financial assets
          that meets the requirements for sale accounting; a transfer of the servicer’s
          financial assets to a qualifying special-purpose entity in a guaranteed
          mortgage
          securitization in which the transferor retains all of the resulting securities
          and classifies them as either available-for-sale securities or trading
          securities; or an acquisition or assumption of an obligation to service
          a
          financial asset that does not relate to financial assets of the servicer
          or its
          consolidated affiliates. The statement also requires all separately recognized
          servicing assets and servicing liabilities to be initially measured at
          fair
          value, if practicable and permits an entity to choose either the amortization
          or
          fair value method for subsequent measurement of each class of servicing
          assets
          and liabilities. The statement further permits, at its initial adoption,
          a
          one-time reclassification of available for sale securities to trading securities
          by entities with recognized servicing rights, without calling into question
          the
          treatment of other available for sale securities under Statement 115, provided
          that the available for sale securities are identified in some manner as
          offsetting the entity’s exposure to changes in fair value of servicing assets or
          servicing liabilities that a servicer elects to subsequently measure at
          fair
          value and requires separate presentation of servicing assets and servicing
          liabilities subsequently measured at fair value in the statement of financial
          position and additional disclosures for all separately recognized servicing
          assets and servicing liabilities. This statement is effective for fiscal
          years
          beginning after September 15, 2006, with early adoption permitted as of
          the
          beginning of an entity’s fiscal year. Management believes the adoption of this
          statement will have no impact on the Company’s financial condition or results of
          operations at December 31, 2006.
  In
          February 2006, the Financial Accounting Standards Board issued Statement
          of
          Financial Accounting Standards No. 155, “Accounting for Certain Hybrid Financial
          Instruments, an Amendment of FASB Standards No. 133 and 140” (hereinafter “SFAS
          No. 155”). This statement established the accounting for certain derivatives
          embedded in other instruments. It simplifies accounting for certain hybrid
          financial instruments by permitting fair value remeasurement for any hybrid
          instrument that contains an embedded derivative that otherwise would require
          bifurcation under SFAS No. 133 as well as eliminating a restriction on
          the
          passive derivative instruments that a qualifying special-purpose entity
          (“SPE”)
          may hold under SFAS No. 140. This statement allows a public entity to
          irrevocably elect to initially and subsequently measure a hybrid instrument
          that
          would be required to be separated into a host contract and derivative in
          its
          entirety at fair value (with changes in fair value recognized in earnings)
          so
          long as that instrument is not designated as a hedging instrument pursuant
          to
          the statement. SFAS No. 140 previously prohibited a qualifying special-purpose
          entity from holding a derivative financial
 F-8
  **ADVANCED
            BIOTHERAPY, INC.**
 **(A
            DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
            TO FINANCIAL STATEMENTS** ****
 **December
            31, 2006**
 
  instrument
          that pertains to a beneficial interest other than another derivative financial
          instrument. This statement is effective for fiscal years beginning after
          September 15, 2006, with early adoption permitted as of the beginning of
          an
          entity’s fiscal year. Management believes the adoption of this statement will
          have no impact on the Company’s financial condition or results of operations at
          December 31, 2006.
  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, at December 31, 2006.
          See
          Note 5.
  Accounting
          for Convertible Notes and Securities with Beneficial Conversion
          Features
  Following
          guidance by EITF 00-27, the Company allocates a portion of proceeds received
          from convertible notes to the beneficial conversion feature of the debt.
          The
          value of the beneficial conversion feature are recorded on the balance
          sheet as
          a debt discount and as an increase to stockholders’ equity. The discounts are
          amortized over the life of the loans. All of the Company’s convertible
          debentures were initially recorded without a beneficial conversion feature,
          however, the conversion of these debts at per share amounts lower than
          the debt
          agreements, triggered a beneficial conversion feature that was recorded
          as
          additional interest. See Note 12.
  Cash
          and Cash Equivalents
  For
          purposes of the statement of cash flows, the Company considers all bank
          accounts, certificates of deposit, money market accounts and short-term
          debt
          securities purchased with a maturity of three months or less to be cash
          equivalents.
  Concentration
          of Credit Risk
  The
          Company maintains its cash in several commercial accounts at a major financial
          institution. Although the financial institution is considered creditworthy
          and
          has not experienced any losses on its deposits, at December 31, 2006 the
          Company’s cash balances exceeded Federal Deposit Insurance Corporation (FDIC)
          limits by $5,979,634 and at December 31, 2005, the Company did not exceed
          the
          FDIC limits. See Note 7.
  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-9
  **ADVANCED
            BIOTHERAPY, INC.**
 **(A
            DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
            TO FINANCIAL STATEMENTS** ****
 **December
            31, 2006**
 
  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.” 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 14.
  Reclassifications
  Certain
          amounts from prior periods have been reclassified to conform with the current
          period presentation. These reclassifications have resulted in no changes
          to the
          Company’s accumulated deficit or net losses presented.
  Promotional
          Fees
  Promotional
          fees are charged to operations in the year incurred. Promotional fees amounted
          to $0 and $256 for the years ended December 31, 2006 and 2005,
          respectively.
  Research
          and Development Costs
  Costs
          of
          research and development are expensed as incurred.
  Compensated
          Absences
  Employees
          of the Company are entitled to paid vacation, paid sick days and personal
          days
          off, depending on job classification, length of service, and other factors.
          No
          liability has been recorded in the accompanying financial statements, because
          of
          the relative immateriality of this obligation. At December 31, 2006 the
          Company
          had no employees.
  Revenue
          Recognition
  Upon
          entering into license agreements with other companies, revenue will be
          recognized when fees are earned. Prior to 1994, revenues were recognized
          when
          fees for services related to research activities were received.
  Fair
          Value of Financial Instruments
  The
          carrying amounts for cash, investments, deposits and prepaid expenses,
          receivables, accounts payable, accrued liabilities, notes payable and
          convertible debt approximate their fair value.
  Deferred
          Loan Origination Fees
  During
          the year ended December 31, 2002, the Company entered into convertible
          subordinated debt, which required the payment of loan origination fees.
          See Note
          12. These loan origination fees, which totaled $7,283, net of accumulated
          amortization at December 31, 2005, are amortized over the life of the related
          debt. During the years ended December 31, 2006 and 2005, the
 F-10
  **ADVANCED
            BIOTHERAPY, INC.**
 **(A
            DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
            TO FINANCIAL STATEMENTS** ****
 **December
            31, 2006**
 
  Company
          recorded amortization expense related to these fees of $7,283 and $19,036
          and
          respectively.
  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.
  Historically,
          the Company has not entered into derivatives contracts to hedge existing
          risks
          or for speculative purposes.
  At
          December 31, 2006 and 2005, the Company has not engaged in any transactions
          that
          would be considered derivative instruments or hedging activities.
  Earnings
          (loss) per share
  Basic
          earnings (loss) per share is computed by dividing the net income (loss)
          by the
          weighted average number of shares outstanding during the period. The weighted
          average number of shares is calculated by taking the number of shares
          outstanding and weighting them by the amount of time that they were
          outstanding.
  Diluted
          earnings (loss) per share is computed by dividing the net income (loss),
          adjusted for interest expense on convertible debt, by the weighted average
          number of basic shares outstanding increased by the number of shares that
          would
          be outstanding assuming conversion of the exercisable stock options (15,845,120
          shares), warrants (5,424,228 shares), and convertible debt (539,933 shares).
          Diluted net loss per share is the same as basic net loss per share as inclusion
          of the common stock equivalents would be antidilutive.
 F-11
  **ADVANCED
            BIOTHERAPY, INC.**
 **(A
            DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
            TO FINANCIAL STATEMENTS** ****
 **December
            31, 2006**
 
  **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, 2006 and 2005:
  December
                    31, 2006
                
                December
                    31, 2005Accumulated
                
                
                
                AccumulatedCost
                
                Depreciation
                
                Cost
                
                DepreciationLab
                    equipment
                
                $
                31,891
                
                
                19,828
                
                $
                31,891
                
                $
                13,450Office
                    equipment
                
                
                13,777
                
                
                12,559
                
                
                13,777
                
                
                11,905Furniture
                    and fixtures
                
                
                22,539
                
                
                16,342
                
                
                22,539
                
                
                10,918Clean
                    room
                
                
                271,786
                
                
                16,261
                
                
                271,786
                
                
                9,292$
                339,993
                
                
                64,990
                
                $
                339,993
                
                $
                45,565
 
 Depreciation
          expense for the years ended December 31, 2006 and 2005 was $19,425 and
          $21,532,
          respectively.
  **NOTE
          4 - INVESTMENTS**
  Marketable
          Securities
  In
          2004,
          the Company’s investments in equity securities that are intended to be held for
          a short period are classified as trading securities. These securities are
          recorded at fair value as current assets on the balance sheet under the
          caption
          of marketable securities. The change in fair value of those securities
          is
          included in earnings during the period presented. During the year ended
          December
          31, 2005, a total of $300,000 was redeemed and transferred to cash with
          no gain
          or loss being recognized.
  **NOTE
                    5 - INTANGIBLE ASSETS**
 Patents
            and Patents Pending
 Costs
            relating to the development and approval of patents, other than research
            and
            development costs which are expensed, are capitalized and amortized using
            the
            straight-line method over seventeen years. 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 $92,500 and $28,823, net of amortization,
            were abandon d ed
            in the
            years ending December 13, 2006 and 2005, respectively, and the abandonment
            loss
            has been recognized in the accompanying financial statements. The Company’s
            patents relate to the treatment of autoimmune diseases.
  The
            following is a summary of the costs of patents and patents
            pending:
  F-12
  **ADVANCED
            BIOTHERAPY, INC.**
 **(A
            DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
            TO FINANCIAL STATEMENTS** ****
 **December
            31, 2006**
 Accumulated
                
                NetCost
                
                Amortization
                
                AmountBalance,
                    December 31, 2004
                
                $
                966,389
                
                $
                (123,888
                )
                $
                842,5032005
                    Activity
                
                
                131,803
                
                
                (64,537
                )
                
                67,266Abandonment
                    of Patents
                
                
                (35,000
                )
                
                8,235
                
                
                (26,765
                )Balance,
                    December 31, 2005
                
                
                1,063,192
                
                
                (108,190
                )
                
                883,0022006
                    Activity
                
                
                86,942
                
                
                (75,486
                )
                
                36,924Abandonment
                    of Patents
                
                
                (120,000
                )
                
                34,783
                
                
                (85,217
                )Pending
                    Patent expensesconveyed
                    in payment ofliability
                
                
                (39,500
                )
                
                -
                
                
                (39,500
                )Balance
                    at December 31, 2006
                
                $
                990,634
                
                $
                (211,347
                )
                $
                779,287
 
 The
          following is a summary of the costs of patents separated into pending and
          granted:
  2006
                
                2005Pending
                    Patents
                
                $
                712,941
                
                $
                796,948Granted
                    Patents
                
                
                277,693
                
                
                266,244$
                990,634
                
                $
                1,063,192
  **NOTE
          6 - RELATED PARTY TRANSACTIONS**
  At
          December 31, 2006 and 2005, the Company has notes receivable in the aggregate
          amount of $46,619 from non-officer/director shareholders of the Company
          in
          connection with a payment plan for the purchase of Company stock. The notes
          accrue interest at a rate of 6.5% per annum and mature on December 31,
          2007.
  The
          note
          payable to related parties consists of a loan payable to one of the Company’s
          directors. The note has no specific due date, is currently uncollateralized,
          and
          is non-interest bearing, however, interest is calculated at the applicable
          federal rate each quarter. The calculated interest of $3,030 and $4,455
          was
          recorded during the year ending December 31, 2006 and 2005, respectively,
          as
          interest expense and contributed capital in the accompanying financial
          statements because the note holder elected to forgive this interest. At
          December
          31, 2006, the balance of the note $127,631 was converted into 8,508,733
          shares
          of common stock at $0.015 per share.
  See
          Note
          13 for related party occupancy agreements.
 F-13
  **ADVANCED
            BIOTHERAPY, INC.**
 **(A
            DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
            TO FINANCIAL STATEMENTS** ****
 **December
            31, 2006**
 **NOTE
                    7 - CONCENTRATIONS**
  Bank
          Accounts and investments ****
  The
          Company maintains cash on deposit in various financial institutions in
          California and Illinois. The funds in California reflect a balance of $1,263
          and
          are not insured by the FDIC and are considered at risk.
  The
          funds in Illinois reflect a balance of the
          following accounts:
 Regular
                    Checking
                
                $
                1,446Money
                    Market
                
                
                999,862Certificates
                    of Deposit
                
                
                5,079,773Total
                
                $
                6,081,081
 
 At
          December 31, 2006, $5,979,634 of these amounts were in excess of FDIC insured
          limits.
  **NOTE
          8 - COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL**
  Information
          regarding the number of shares issued and consideration received is as
          follows:
  Common
                    StockAverageprice
                      per
                
                
                
                
                
                Additional
                    Paid-inshare
                
                Shares
                
                Amount
                
                CapitalCommon
                    stock issuedfor
                    cash:1985
                
                $
                .50
                
                
                100,000
                
                $
                100
                
                $
                49,9001986
                
                
                1.00
                
                
                639,500
                
                
                640
                
                
                678,8611987
                
                
                1.00
                
                
                850,500
                
                
                850
                
                
                759,6501988
                
                
                1.00
                
                
                25,000
                
                
                25
                
                
                24,9751993
                
                
                .25
                
                
                2,402,000
                
                
                2,402
                
                
                475,9001995
                
                
                .05
                
                
                1,000,000
                
                
                1,000
                
                
                49,0001996
                
                
                .05
                
                
                520,000
                
                
                520
                
                
                25,4801997
                
                
                .09
                
                
                1,800,500
                
                
                1,801
                
                
                153,7491998
                
                
                .10
                
                
                305,000
                
                
                305
                
                
                30,1951999
                
                
                .05
                
                
                3,158,000
                
                
                3,158
                
                
                151,9932006
                
                
                .015
                
                
                359,999,998
                
                
                360,000
                
                
                5,040,000370,800,498
                
                
                370,801
                
                
                7,439,703Common
                    stock issuedfor
                    patents assigned:1984
                
                
                .01
                
                
                550,000
                
                
                5,500
                
                
                -1985,
                    adjustment toreflect
                    change innumber
                    and parvalue
                    of sharesoutstanding
                
                
                -
                
                
                2,750,000
                
                
                (2,200
                )
                
                2,2003,300,000
                
                
                3,300
                
                
                2,200
  F-14
  **ADVANCED
            BIOTHERAPY, INC.**
 **(A
            DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
            TO FINANCIAL STATEMENTS** ****
 **December
            31, 2006**
 Common
                    stock issuedfor
                    acquisitions:1985
                
                
                .01
                
                
                13,333,500
                
                
                13,334
                
                
                (41,112
                )Common
                    stock issuedfor
                    note receivable:1986
                
                
                1.00
                
                
                10,000
                
                
                10
                
                
                9,9902000
                
                
                .05
                
                
                4,932,380
                
                
                4,932
                
                
                241,6874,942,380
                
                
                4,942
                
                
                251,677Common
                    stockreturned
                    in paymentof
                    notes receivable:2003
                
                
                .16
                
                
                (1,603,789
                )
                
                (1,604
                )
                
                (238,964
                )
  
  Common
                    StockAverage
                
                
                
                
                
                
                
                
                Additionalprice
                    per
                
                
                
                
                
                
                
                
                Paid-inshare
                
                
                Shares
                
                
                Amount
                
                
                CapitalContribution
                    ofadditional
                    paid-incapital:1991
                
                
                -
                
                
                -
                
                
                -
                
                
                35,8251999
                
                
                -
                
                
                -
                
                
                -
                
                
                28,0982000
                
                
                -
                
                
                -
                
                
                -
                
                
                9,7352001
                
                
                -
                
                
                -
                
                
                -
                
                
                8,1132002
                
                
                -
                
                
                -
                
                
                -
                
                
                5,6352003
                
                
                -
                
                
                -
                
                
                -
                
                
                4,2302004
                
                
                
                
                
                
                
                
                
                
                
                4,4802005
                
                
                
                
                
                -
                
                
                -
                
                
                4,4552006
                
                
                
                
                
                -
                
                
                -
                
                
                3,332-
                
                
                -
                
                
                103,903Stock
                    subscriptions:1999
                
                
                .05
                
                
                650,000
                
                
                650
                
                
                31,850Cancellation
                    ofescrowed
                    shares in
                
                
                .001
                
                
                (850,000
                )
                
                (850
                )
                
                8501999Reissued
                    escrowedshares
                    cancelled inerror:2001
                
                
                .001
                
                
                850,000
                
                
                850
                
                
                (850
                )-
                
                
                -
                
                
                -
  Common
                    stock issued
  F-15
  **ADVANCED
            BIOTHERAPY, INC.**
 **(A
            DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
            TO FINANCIAL STATEMENTS** ****
 **December
            31, 2006**
 for
                    services (1):1988
                
                
                .50
                
                
                25,000
                
                
                25
                
                
                12,4751989
                
                
                .38
                
                
                25,000
                
                
                25
                
                
                9,4751990
                
                
                .66
                
                
                37,375
                
                
                37
                
                
                24,6351991
                
                
                .51
                
                
                159,500
                
                
                160
                
                
                81,0101992
                
                
                .75
                
                
                62,500
                
                
                62
                
                
                46,5631993
                
                
                .25
                
                
                120,000
                
                
                120
                
                
                29,8801996
                
                
                .05
                
                
                308,500
                
                
                308
                
                
                13,8321997
                
                
                .05
                
                
                155,500
                
                
                155
                
                
                7,6191999
                
                
                .05
                
                
                99,190
                
                
                99
                
                
                4,8602005
                
                
                .19
                
                
                315,784
                
                
                315
                
                
                59,6841,308,354
                
                
                1,306
                
                
                290,033
  Common
                    StockAverageprice
                    per
                
                
                
                
                
                Additional
                    Paid-inshare
                
                Shares
                
                Amount
                
                CapitalCommon
                    stockissued
                    to replaceunrecordedcertificates:1988
                
                
                .001
                
                
                1,200
                
                
                1
                
                
                (1
                )1992
                
                
                .001
                
                
                500
                
                
                1
                
                
                (1
                )2000
                
                
                .001
                
                
                100,000
                
                
                100
                
                
                (100
                )101,700
                
                
                102
                
                
                (102
                )Common
                    stock issuedfor
                    forgiveness ofaccounts
                    payable(1):1990
                
                
                .50
                
                
                25,000
                
                
                25
                
                
                12,4751996
                
                
                .05
                
                
                150,000
                
                
                150
                
                
                7,3502006
                
                
                .015
                
                
                10,989,133
                
                
                10,989
                
                
                153,84511,164,133
                
                
                11,164
                
                
                173,670Common
                    stock issuedin
                    payment of notespayable
                    (1):1993
                
                
                .25
                
                
                200,000
                
                
                200
                
                
                49,8002000
                
                
                .05
                
                
                1,714,995
                
                
                1,715
                
                
                84,0352006
                
                
                .015
                
                
                1,568,004
                
                
                1,568
                
                
                1,566,4363,482,999
                
                
                3,483
                
                
                1,700,271
 F-16
  **ADVANCED
            BIOTHERAPY, INC.**
 **(A
            DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
            TO FINANCIAL STATEMENTS** ****
 **December
            31, 2006**
 Common
                  stock issued in paymentof
                    loans payable (1):2000
                
                
                .05
                
                
                2,552,625
                
                
                2,553
                
                
                125,078Common
                    stock issuedfor
                    commissions (1):1993
                
                
                .001
                
                
                1,260,000
                
                
                1,260
                
                
                -Common
                    stock issuedfor
                    convertible debt:2001
                
                
                .25
                
                
                1,605,346
                
                
                1,605
                
                
                399,5042002
                
                
                .25
                
                
                1,147,706
                
                
                1,147
                
                
                285,7812004
                
                
                .25
                
                
                788,991
                
                
                789
                
                
                196,4602005
                
                
                .25
                
                
                10,896,275
                
                
                10,897
                
                
                2,604,7472006
                
                
                .015
                
                
                418,416,459
                
                
                418,416
                
                
                5,857,830432,854,777
                
                
                432,801
                
                
                9,344,322
 
 Common
                    StockAverageprice
                    per
                
                
                
                
                
                Additional
                    Paid-inshare
                
                Shares
                
                Amount
                
                CapitalExpiration
                    of stockoptions2005
                
                
                -
                
                
                -
                
                
                -
                
                
                210,7382006
                
                
                -
                
                
                -
                
                
                -
                
                
                39,200-
                
                
                -
                
                
                -
                
                
                249,938Stock
                    warrantsexercised:2003
                    (cashless
                
                
                .05
                
                
                151,846
                
                
                152
                
                
                7,059exercise)2004
                    (cashless
                
                
                .16
                
                
                47,917
                
                
                48
                
                
                7,752exercise)199,763
                
                
                200
                
                
                14,811Stock
                    optionsexercised:1997
                
                
                .01
                
                
                325,000
                
                
                325
                
                
                2,9292000
                
                
                .01
                
                
                350,000
                
                
                350
                
                
                3,1502002
                
                
                .04
                
                
                150,000
                
                
                150
                
                
                5,8502003
                
                
                .01
                
                
                150,000
                
                
                150
                
                
                1,350975,000
                
                
                975
                
                
                13,279Total
                
                
                
                
                
                946,561,870
                
                $
                946,561
                
                $
                25,417,862
 
 (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,
 F-17
  **ADVANCED
            BIOTHERAPY, INC.**
 **(A
            DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
            TO FINANCIAL STATEMENTS** ****
 **December
            31, 2006**
 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.
  Stock
          Bonus Plan
  In
          January 2000, the Company approved a stock bonus plan the purpose of which
          is to
          retain personnel of experience and ability in the employ of the Company
          and to
          compensate them for their contributions to the growth of the Company, thereby
          inducing them to continue to make such contributions in the future. During
          January 2000, the Company issued 9,200,000 shares of common stock under
          this
          plan to certain key officers and directors subject to various restrictions.
          Such
          stock bonuses were issued at the weighted average price at which the Company
          had
          been selling shares of stock out of authorized but yet unissued common
          stock to
          third parties during the six months immediately preceding the issuance
          of the
          bonus shares, or $0.05 per share. On February 7, 2004, the board of directors
          unanimously approved the repurchase and cancellation of 1,603,789 of these
          shares of common stock at the fair market value of $0.16 per share in
          satisfaction of outstanding notes receivable and accrued interest. At December
          31, 2004, a total of 2,403,7829 shares were available under this plan.
          During
          2005, the Company terminated its Stock Bonus Plan. All shares available
          under
          the plan are to be available for grant under the Company’s Omnibus Equity
          Incentive Plan. See Note 10.
  2005
          Equity Issuances
  During
          the year ended December 31, 2005, the Company issued 315,789 shares of
          common
          stock in payment of services totaling $59,999 ($0.19 per share).
  2006
            Equity Issuances
  During
          the year ended December 31, 2006, the Company sold in private placement
          359,999,998 shares of common stock for $.015 per share, or a total of $5,040,000
          in cash.
  Also
          during the year, the Company converted a portion of its notes payable,
          accrued
          expenses, convertible debt and capitalized interest into shares of common
          stock.
          The company converted a total of $8,009,087 of liabilities into 532,213,526
          shares of common stock ($0.015 per share). Pursuance to this conversion,
          the
          Company recognized $5,859,894 in beneficial conversion costs. See Note
          12.
 F-18
  **ADVANCED
            BIOTHERAPY, INC.**
 **(A
            DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
            TO FINANCIAL STATEMENTS** ****
 **December
            31, 2006**
 **NOTE
          9 - PREFERRED STOCK**
  The
          Company has authorized 20,000,000 shares of $0.001 par value preferred
          stock. As
          of December 31, 2006, the Company has not issued any preferred
          stock.
  **NOTE
          10 - STOCK OPTIONS AND ISSUANCE COMMITMENTS**
  Omnibus
          Equity Incentive Plan
  In
          2000,
          the board of directors approved an Omnibus Equity Incentive Plan, which
          was
          later approved by the stockholders in December 2001. The purpose of the
          plan is
          to promote the long-term success of the Company and the creation of stockholder
          value by encouraging employees, outside directors and consultants to focus
          on
          the achievement of critical long-range objectives. The plan endeavors to
          attract
          and maintain such individuals with exceptional qualifications and to link
          them
          directly to stockholder interests through increased stock ownership. The
          plan
          seeks to achieve this purpose by providing for awards in the form of restricted
          shares, stock units, options (which may constitute incentive stock options
          or
          non-statutory stock options) and stock appreciation rights (“SAR’s”). The
          aggregate number of options, SARs, stock units and restricted shares awarded
          under the plan was initially 4,000,000 common shares plus an annual increase
          of
          the lesser of two and one-half percent of the total number of common shares
          then
          outstanding or 250,000 common shares. No options were issued under this
          plan
          during the twelve months ending December 31, 2006. However, 1,200,000 options
          vested during the first quarter of 2006, and the resulting expense of $147,600
          was recorded in the accompanying statement of operations.
  During
          the year ended December 31, 2006 the board of directors approved the issuance
          of
          7,210,000 options to members of the board of directors. The options were
          exercisable at the closing stock price on the date of issuance, or $0.03
          per
          share. The options vest immediately and have a term of ten years. In accordance
          with Statement of Financial Accounting Standard No. 123, the fair value
          of the
          options was estimated using the Black Scholes Option Price Calculation.
          The
          following assumptions were made to value the stock options: strike price
          at
          $0.03; risk free interest rate of 4%; expected life of ten years; and expected
          volatility of 103% with no dividends expected to be paid. The Company recorded
          expenses totaling $144,200.
  During
          January, 2004, the Company approved the issuance of stock options to its
          board
          of directors to purchase a total of 270,000 shares of the Company’s stock at
          $0.42 per share for services rendered during the year ended December 31,
          2004.
          The options vest immediately and have a term of ten years. In accordance
          with
          Statement of Financial Accounting Standard No. 123, the fair value of the
          options was estimated using the Black Scholes Option Price Calculation.
          The
          following assumptions were made to value the stock options: strike price
          at
          $0.10 -$0.20; risk free interest rate of 4% expected life of five to ten
          years;
          and expected volatility of 62% to 92% with no dividends expected to be
          paid. The
          Company recorded expenses totaling $515,173 ($0.10 per option for the value
          of
          these options based upon these Black Scholes assumptions).
 F-19
  **ADVANCED
            BIOTHERAPY, INC.**
 **(A
            DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
            TO FINANCIAL STATEMENTS** ****
 **December
            31, 2006**
 The
          following is a summary of the Company's equity compensation plans:
  Number
                    of securitiesNumber
                    of securities
                
                Weighted-average
                
                remaining
                    availableto
                    be issued upon
                
                exercise
                    price of
                
                for
                    future issuanceexercise
                    of
                
                outstanding
                
                under
                    equityPlan
                
                outstanding
                    options
                
                options
                
                compensation
                    plansEquity
                    compensationplan
                    approved by
                
                
                4,990,000
                
                $
                0.18
                
                
                260,000security
                    holders (1)
  (1)
                    Omnibus Equity Incentive Plan
 
 Following
          is a summary of the status of the options during the years December 31,
          2006 and
          2005:
  WeightedNumber
                    of
                
                AverageShares
                
                Exercise
                    PriceOutstanding
                    at January 1, 2005
                
                
                6,357,953
                
                $
                0.17Granted
                
                
                5,178,453
                
                
                0.15Exercised
                
                
                -
                
                
                -Forfeited
                
                
                (2,637,953
                )
                
                (0.14
                )Options
                    outstanding at December 31, 2005
                
                
                8,898,453
                
                $
                0.16Granted
                
                
                7,210,000
                
                
                0.03Exercised
                
                
                -
                
                
                -Forfeited/Expired
                
                
                (263,333
                )
                
                (0.15
                )Options
                    outstanding at December 31, 2006
                
                
                15,845,120
                
                $
                0.10Weighted
                    average fair value of optionsgranted
                    in 2006
                
                
                
                
                $
                0.02Options
                    exercisable at December 31, 2005
                
                
                15,845120
                
                $
                0.10
  Summarized
          information about stock options outstanding and exercisable at December
          31, 2006
          is as follows:
  Outstanding
                  and Exercisable OptionsExercise
                  Price
                
                Number
                  of
                
                Weighted
                  Average
                
                Weighted
                    AverageRange
                
                Shares
                
                Remaining
                  Life
                
                Exercise
                    Price$0.03
                    - $0.42
                
                
                15,845,120
                
                
                7.88
                
                $
                0.10
  At
          December 31, 2006, all options granted in prior years have vested.
 F-20
  **ADVANCED
            BIOTHERAPY, INC.**
 **(A
            DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
            TO FINANCIAL STATEMENTS** ****
 **December
            31, 2006**
 **NOTE
          11 - NON-CASH COMMITMENT AND WARRANTS**
  During
          February 2003, the Company issued warrants to purchase a total of 100,000
          shares
          of common stock to two outside consultants. These warrants have an exercise
          price of $0.16 per share, expire in seven years, and vest over a period
          of three
          years, with the first one-third of such warrants vesting in 2004, the next
          one-third in 2005 and the remaining one-third vesting in 2006. In accordance
          with Statement of Financial Accounting Standard No. 123, the fair value
          of the
          warrants was estimated using the Black Scholes Option Price Calculation.
          The
          following assumptions were made to value the stock warrants: strike price
          at
          $0.16, risk free interest rate of 5%, expected life of seven years, and
          expected
          volatility of 82% with no dividends expected to be paid. The Company records
          an
          expense for the value of these warrants based upon these Black Scholes
          assumptions of $12,300 ($0.123 per option) over the three years as the
          warrants
          vest.
  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.
  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, 260,000 warrants are presently exercisable,
          and
          expire February 24, 2015 through August 24, 2015. The remaining 120,000
          warrants
          vest 1/3 each year commencing December 31, 2006, with a value of $4,100
          being
          recorded as an expense each year.
  Summarized
          information about stock warrants outstanding and exercisable at December
          31,
          2006 is as follows:
  Number
                    of
                
                Weighted
                    Average
                
                Average
                    exercisewarrants
                
                Remaining
                    Life
                
                priceOutstanding
                
                
                5,504,227
                
                
                3.86
                
                $
                0.16Exercisable
                
                
                5,424,228
                
                
                3.95
                
                $
                0.16
  **NOTE
          12 - CONVENTIONAL CONVERTIBLE DEBT AND BENEFICIAL CONVERSION**
  2000
          Convertible Notes
  During
          the year ended December 31, 2000, the Company sold in a private placement
          to
          accredited investors $1,510,500 of convertible subordinated debt due and
          payable
          September 30, 2005. The debt bears interest at the rate of 10% per annum
          and is
          payable semi-annually in cash or through the issuance of additional convertible
          subordinated debt. This debt was convertible into shares of Company common
          stock
          at a conversion price equal to $0.25 per share, subject to certain anti-dilution
          provisions. As of December 31, 2004 a total of $497,912 of unpaid accrued
          interest was converted to additional convertible debt.
 F-21
  **ADVANCED
            BIOTHERAPY, INC.**
 **(A
            DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
            TO FINANCIAL STATEMENTS** ****
 **December
            31, 2006**
 The
          Company offered the convertible subordinated debt pursuant to Section 4(2)
          of
          the Securities Act of 1933, as amended, and Rule 506 of Regulation D,
          promulgated under the Securities Act. In connection with the placement
          of the
          debt, the Company paid a loan origination fee of $113,288 to its financial
          advisor, in addition to the granting of an option to the financial advisor
          to
          purchase an equivalent principal amount of convertible subordinated debt
          at the
          face amount thereof over a period of ten years. The aforementioned fee
          was fully
          amortized as of December 31, 2004. Amortization for the year ended December
          31,
          2003 was $19,368.
  During
          the year ended December 31, 2001, a total of $355,000 original debt and
          $46,109
          of accrued interest and previously converted interest was converted into
          1,605,346 shares of common stock at $0.25 per share. During the year ended
          December 31, 2002, a total of $245,000 original debt and $41,928 of accrued
          interest and previously converted interest was converted into 1,147,706
          shares
          of common stock at $0.25 per share. During the year ended December 31,
          2003, a
          total of $152,500 original debt and $35,393 of accrued interest and previously
          converted interest was converted into 751,574 shares of common stock at
          $0.25
          per share.
  In
          February, 2004 the Company offered the holders of the remaining $773,000
          of
          unconverted convertible debt an incentive of a reduced conversion price
          from
          $0.25 to $0.24 and payment of interest through the maturity date of September
          30, 2005, if the holders would convert prior to April 30, 2004. The Company
          issued 4,558,771 shares for the principal and accrued interest through
          March 31,
          2004, valued at $1,094,105 and 222,404 shares of common stock valued at
          $53,377
          for the additional interest from April to September. Additionally, since
          the
          Company changed the conversion price, following SFAS No. 84, the Company
          recognized a beneficial conversion feature and calculated additional interest
          equal to the difference in the fair market value on the date of the conversion
          and the new conversion rate, multiplied by the difference in the shares
          converted. The Company recorded interest expense totaling $21,882 for this
          difference.
  2002
          Convertible Notes due September 30, 2004
  During
          the year ended December 31, 2002, the Company sold in a private placement to
          accredited investors 2002 Subordinated Convertible Pay-in-kind Notes due
          September 30, 2004 ("2002-2005 convertible notes") in the principal amount
          of
          $1,148,500 in cash. A Company director personally guaranteed a total of
          $500,000
          worth of this debt offering. The 2002-2004 convertible notes bear interest
          at
          the rate of 11% per annum payable semi-annually in cash or through the
          issuance
          of additional 2002-2004 convertible notes.
  This
          debt
          is convertible into shares of Company common stock at a conversion price
          equal
          to $0.25 per share, subject to certain anti-dilution provisions. The Company
          offered the convertible subordinated debt pursuant to Section 4(2) of the
          Securities Act of 1933, as amended, and Rule 506 of Regulation D, promulgated
          under the Securities Act. In connection with the placement of the debt,
          the
          Company paid a loan origination fee of $41,895 to two advisors, together
          with
          a
 F-22
  **ADVANCED
            BIOTHERAPY, INC.**
 **(A
            DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
            TO FINANCIAL STATEMENTS** ****
 **December
            31, 2006**
 warrant
          to acquire 239,400 shares of common stock at $0.25 per share. The loan
          was
          totally amortized at December 31, 2005.
  During
          the year ended December 31, 2004, a total of $8,000 original debt and $1,354
          of
          accrued interest and previously converted interest was converted into 37,416
          shares of common stock at $0.25 per share.
  In
          February, 2004 the Company offered the holders of the remaining $773,000
          of
          unconverted convertible debt an incentive of a reduced conversion price
          from
          $0.25 to $0.24 and payment of interest through the maturity date of September
          30, 2005, if the holders would convert prior to April 30, 2004. The Company
          issued 4,558,771 shares for the principal and accrued interest through
          March 31,
          2004, valued at $1,094,105 and 222,404 shares of common stock valued at
          $53,377
          for the additional interest from April to September. Additionally, since
          the
          Company changed the conversion price, following SFAS No. 84, the Company
          recognized a beneficial conversion feature and calculated additional interest
          equal to the difference in the fair market value on the date of the conversion
          and the new conversion rate, multiplied by the difference in the shares
          converted. The Company recorded interest expense totaling $21,882 for this
          difference.
  2002
          Convertible Notes due June 1, 2006
  During
          the year ended December 31, 2002, the Company sold in a private placement
          to
          accredited investors 2002 Subordinated Convertible Pay-in-kind Notes due
          June 1,
          2006 ("2002-2006 convertible notes") in the principal amount of $3,055,000
          in
          cash. The interest rate of the 2002-2006 convertible notes is 11% per annum
          for
          $2,555,000 of the debt, and 12.5% per annum for $500,000 of the debt. Interest
          is payable semi-annually in cash or through the issuance of additional
          2002-2006
          convertible notes. As of December 31, 2005, unpaid accrued interest of
          $1,428,085 has been converted to additional convertible debt, which totaled
          $4,483,085 at year end.
  This
          debt
          is convertible into shares of Company common stock at a conversion price
          equal
          to $0.11 and $0.25 per share, subject to certain anti-dilution provisions.
          The
          Company offered the convertible subordinated debt pursuant to Section 4(2)
          of
          the Securities Act of 1933, as amended, and Rule 506 of Regulation D,
          promulgated under the Securities Act. In connection with the placement
          of the
          debt, the Company paid a related party a loan origination fee of $60,000.
          Amortization of the loan origination fee for the year ended December 31,
          2005
          was $53,750.
  During
          the year ended December 31, 2006 the Company offered the holders of the
          remaining $4,853,216 of unconverted convertible debt and interest an incentive
          of a reduced conversion price from $0.11 and $0.25 to $0.015 if the holders
          would convert in August 2006. The Company issued 323,547,734 shares for
          the
          principal and accrued interest through August 31, 2006. Additionally, since
          the
          Company changed the conversion price, following SFAS No. 84, the Company
          recognized a beneficial conversion feature and calculated additional interest
          equal to the difference in the fair market value on the date of the conversion
          and the new conversion
 F-23
  **ADVANCED
            BIOTHERAPY, INC.**
 **(A
            DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
            TO FINANCIAL STATEMENTS** ****
 **December
            31, 2006**
 
  rate,
          multiplied by the difference in the shares converted. The Company recorded
          interest expense totaling $4,556,658 for this difference.
  2004
          Convertible Notes due September 30, 2007
  During
          the year ended December 31, 2003, the Company sold in a private placement
          to
          accredited investors 2004 Subordinated Convertible Pay-in-kind Notes due
          September 30, 2007 ("2003-2007 convertible notes") in the principal amount
          of
          $800,000 in cash. The interest rate of the 2003-2007 convertible notes
          is 12%
          per annum, payable semi-annually in cash or through the issuance of additional
          2004-2007 convertible notes. The unpaid accrued interest as of December
          31, 2005
          of $58,976 has been converted to additional convertible debt.
  This
          debt
          is convertible into shares of Company common stock at a conversion price
          equal
          to $0.25 per share, subject to certain anti-dilution provisions. The Company
          offered the convertible subordinated debt pursuant to Section 4(2) of the
          Securities Act of 1933, as amended, and Rule 506 of Regulation D, promulgated
          under the Securities Act.
  During
          the year ended December 31, 2006 the Company offered the holders of the
          remaining $1,108,038 of unconverted convertible debt and interest an incentive
          of a reduced conversion price from $0.25 to $0.015 if the holders would
          convert
          in August 2006. The Company issued 127,775,467 shares for the principal
          and
          accrued interest through August 31, 2006. Additionally, since the Company
          changed the conversion price, following SFAS No. 84, the Company recognized
          a
          beneficial conversion feature and calculated additional interest equal
          to the
          difference in the fair market value on the date of the conversion and the
          new
          conversion rate, multiplied by the difference in the shares converted.
          The
          Company recorded interest expense totaling $2,652,375 for this difference.
  2005
          Convertible Notes due September 30, 2009
  During
          the year ended December 31, 2005, the Company sold in a private placement
          to
          Officer/Directors and an accredited investor 2005 Subordinated Convertible
          Pay-in-kind Notes due September 30, 2009 in the principal amount of $240,000
          in
          cash. The interest rate of the 2005 convertible notes is 12% per annum,
          payable
          semi-annually in cash or through the issuance of additional 2005 convertible
          notes. The unpaid accrued interest as of December 31, 2005 of $12,245 has
          been
          converted to additional convertible debt.
  This
          debt
          is convertible into shares of Company common stock at a conversion price
          equal
          to $0.09 and $.105 per share, subject to certain anti-dilution provisions.
          The
          Company offered the convertible subordinated debt pursuant to Section 4(2)
          of
          the Securities Act of 1933, as amended, and Rule 506 of Regulation D,
          promulgated under the Securities Act.
  During
          the year ended December 31, 2006 the Company offered the holders of the
          $275,206
          of unconverted convertible debt and interest an incentive of a reduced
          conversion price from $.09 and $0.105 to $0.015 if the holders would convert
          in
          August 2006. The Company issued 18,347,046 shares for the principal and
          accrued
          interest through August 31, 2006. Additionally, since the Company changed
          the
          conversion price, following SFAS No. 84, the Company
 F-24
  **ADVANCED
            BIOTHERAPY, INC.**
 **(A
            DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
            TO FINANCIAL STATEMENTS** ****
 **December
            31, 2006**
 
  recognized
          a beneficial conversion feature and calculated additional interest equal
          to the
          difference in the fair market value on the date of the conversion and the
          new
          conversion rate, multiplied by the difference in the shares converted.
          The
          Company recorded interest expense totaling $230,418 for this difference.
  2006
          Convertible Notes due June 30, 2006
  In
          April
          2006, the Company sold in a private placement to accredited investors 2006
          Subordinated Convertible Pay-in-kind Notes due June 30, 20066 in the principal
          amount of $38,000 in cash. The interest rate of the 2006 convertible notes
          is
          12% per annum, payable semi-annually in cash or through the issuance of
          additional 2005 convertible notes.
  This
          debt
          is convertible into shares of Company common stock at a conversion price
          equal
          to $0.07 per share, subject to certain anti-dilution provisions. The Company
          offered the convertible subordinated debt pursuant to Section 4(2) of the
          Securities Act of 1933, as amended, and Rule 506 of Regulation D, promulgated
          under the Securities Act.
  In
          August
          2006 the Company offered the holders of the $39,787 of unconverted convertible
          debt and interest an incentive of a reduced conversion price from $0.07
          to
          $0.015 if the holders would convert in August 2006. The Company issued
          2,652,479
          shares for the principal and accrued interest through August 31, 2006.
          Additionally, since the Company changed the conversion price, following
          SFAS No.
          84, the Company calculated additional interest equal to the difference
          in the
          fair market value on the date of the conversion and the new conversion
          rate,
          multiplied by the difference in the shares converted. The Company recorded
          interest expense totaling $31,261 for this difference.
  Other
          2006 Convertible Debt
  During
          2006, the Company sold in a private placement to an officer Subordinated
          Convertible Pay-in-kind Notes the principal amount of $1,414,500 in cash.
          The
          interest rate of the 2006 convertible notes was 12% per annum.
  This
          debt
          is convertible into shares of Company common stock at a conversion price
          equal
          to $0.015 per share, subject to certain anti-dilution provisions. The Company
          offered the convertible subordinated debt pursuant to Section 4(2) of the
          Securities Act of 1933, as amended, and Rule 506 of Regulation D, promulgated
          under the Securities Act.
  In
          August
          2006 the Company converted this debt and accrued interest into 90,117,267
          shares
          of common stock, at the same time as all the other debt conversions.
  **NOTE
          13 - COMMITMENTS AND CONTINGENCIES**
  Occupancy
          Agreements
  During
          the period ended March 31, 2003, the Company entered a verbal agreement
          to pay
          approximately $4,000 a month to a firm owned by the Company’s chief executive
          officer and
 F-25
  **ADVANCED
            BIOTHERAPY, INC.**
 **(A
            DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
            TO FINANCIAL STATEMENTS** ****
 **December
            31, 2006**
 chief
          financial officer for tax preparation services, monthly accounting, and
          reimbursement for rent and employee benefits. A total of $65,321 was paid
          during
          2004 under this month-to-month agreement. Under this verbal agreement,
          a total
          of $24,200 has been accrued in the financial statements as of December
          31, 2005
  The
          Company also entered into a verbal agreement for research and development
          laboratory space with a firm, which has as a shareholder, one of the directors
          of Advanced Biotherapy, Inc. This agreement calls for a monthly rent of
          $6,110
          along with reimbursement for research and development services at a monthly
          cost
          of $12,000. A total of $300,283 was paid during 2004 under this month-to-month
          agreement.
  Contracts
  During
          the first quarter of 2005, the Company entered into an agreement with a
          consultant whereby the consultant will utilize its established process
          and
          reasonable commercial efforts to secure a commercial relationship with
          potential
          candidates. This commercial relationship may include the license or transfer
          of
          intellectual property, product rights, manufacturing rights, patents, or
          development assistance. A fees will be paid to the consultant in the amount
          of
          $5,000 per month for services provided between January 1, 2005 and September
          30,
          2005 upon the Company receiving funding either in the form of a licensing
          agreement or equity or debt financing. Additionally, the consultant will
          be
          reimbursed for reasonable out-of-pocket costs. A success fee is included
          in the
          agreement of the Company enters into a commercial relationship within eighteen
          months from the termination of the agreement with candidates brought to
          the
          company by the consultant. This agreement was terminated on September 30,
          2005.
  **NOTE
                    14 - INCOME TAXES**
  The
          following is a reconciliation of income tax, computed at the federal statutory
          rate, to the provision for taxes:
  December
                    31, 2006
                
                December
                    31, 2005Amount
                
                Percent
                
                Amount
                
                PercentFederal
                    tax (benefit)
                
                $
                (436,000
                )
                
                (34
                )%
                $
                (490,000
                )
                
                (34
                )%California
                    State tax (benefit)
                
                
                (73,000
                )
                
                (8
                )%
                
                (111,000
                )
                
                (
                    8
                )%Illinois
                    State tax (benefit)
                
                
                (23,000
                )
                
                (7.3
                )%
                
                -
                
                
                -Valuation
                    allowance
                
                
                536,000
                
                
                42
                %
                
                601,000
                
                
                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, 2006 and 2005 are
          as
          follows:
 F-26
  **ADVANCED
            BIOTHERAPY, INC.**
 **(A
            DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
            TO FINANCIAL STATEMENTS** ****
 **December
            31, 2006**
 December
                    31,
                
                December
                    31,2006
                
                2005Deferred
                    tax asset:Net
                    operating loss carryforwards
                
                $
                4,570,000
                
                $
                4,040,000General
                    business credit carryforwards
                
                
                95,000
                
                
                95,000Excess
                    book accumulated amortization
                
                
                21,000
                
                
                24,0004,686,000
                
                
                4,159,000Deferred
                    tax liabilities:Excess
                    tax accumulated depreciation
                
                
                3,000
                
                
                3,000Total
                    deferred tax asset
                
                
                4,683,000
                
                
                4,156,000Valuation
                    allowance for deferred tax asset
                
                
                (4,683,000
                )
                
                (4,156,000
                )Net
                    deferred tax asset
                
                $
                -
                
                $
                -
  At
          December 31, 2006, the Company has federal net operating loss carryforwards
          of
          approximately $10,960,000, which expire in the years 2007 through 2025,
          state
          net operating loss carryforwards of approximately $9,780,000, which expire
          in
          the years 2011 through 2014, 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 permanent differences of
          $5,859,938 and temporary differences of $274,328. At December 31, 2006
          and 2005,
          federal net operating losses expired in the amount of approximately $219,832
          and
          $221,164, respectively. A total of approximately $199,262 federal net operating
          losses is set to expire on December 31, 2006.
  The
          change in the valuation allowance account from December 31, 2005 to December
          31,
          2006 was $527,000, which is principally due to the change in management’s
          estimates as well as an increase in the Company’s net operating loss
          carryforward including expiration of prior years’ net operating losses.
  **NOTE
          15 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**
  In
          October 2006, the Company reported that Richard P. Kiphart had converted
          into
          shares of Company Common Stock all his Company convertible notes and other
          indebtedness at $0.015 per share, and that he and other investors had purchased
          an additional $5,400,000 of Company Common Stock at $0.015 per share pursuant
          to
          the Share Purchase and Debt Restructure Agreement dated as of August 28,
          2006,
          between the Company and Mr. Kiphart.
  In
          August
          2006, the Company paid Edmond F. Buccellato, the Company’s former Chief
          Executive Officer, an aggregate of 6,522,466 in shares of Company common
          stock
          in payment of his accrued but unpaid salary in the sum of $55,500 and payment
          of
          the Company’s accounts payable of $42,337 owed to the accounting firm of
          Buccellato and Finkelstein, of which Mr. Buccellato is a principal. Simon
          Skurkovich, M.D., former Chairman Emeritus and Director of Research and
          Development, and current member of the advisory committee of the Company,
          was
          paid 14,675,400 in shares of common stock of the Company in payment of
          accrued
          but unpaid salary of $147,500, and a note payable in the sum of $127,631.
          During
          2006 the
 F-27
  **ADVANCED
            BIOTHERAPY, INC.**
 **(A
            DEVELOPMENT STAGE ENTERPRISE)**
 **NOTES
            TO FINANCIAL STATEMENTS** ****
 **December
            31, 2006**
 Company
          paid $13,110 to Amy Buccellato for administrative services rendered. Ms.
          Buccellato is the daughter of the Edmond F. Buccellato, the Company’s former
          Chief Executive Officer.
  During
          2006, the Company paid an aggregate $6,800 in rent, payable $1,700 monthly,
          for
          the use of office space from Buccellato & Finkelstein, Inc., of which former
          Chief Executive Officer and Director Edmond F. Buccellato is a shareholder.
          During 2006, the Company paid to Buccellato
  &
          Finkelstein, Inc., $7,828 in reimbursements for medical and dental insurance
          for
          Company employees, including Edmond F. Buccellato and Amy Buccellato.
  During
          the second quarter of 2006, the Company agreed to transfer U.S. Application
          No.
          10/096,127 to Director Keith Gregg in satisfaction of the Company’s obligation
          to pay certain consulting fees to him.
  **NOTE
                    16 - SUBSEQUENT EVENTS**
  The
          Board
          of Directors are currently considering a business development plan which
          focuses
          in three specific areas:
  A.)
              Evaluation of possible acquisition candidates
  B.)
            Acquisition of a control or non-control position in a revenue generation
            company  through
            investment in equity or convertible debt, or an asset acquisition
  C.)  Licensing
          agreement with selected pharmaceutical companies seeking opportunities
          related
          to our patented scientific approaches.
  As
          of the
          dated of this report, the Company has not entered
          into any agreement with a pharmaceutical or biotechnological company, or
          any
          such out-licensing arrangements.
  F-28