SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q AMENDMENT
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-19041
American Biogenetic Sciences, Inc.
( Exact name of registrant as specified in its charter)
Delaware 11-2655906
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
1375 Akron Street 516-789-2600
Copiague, New York 11726 (Telephone number)
(Address of principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES X NO
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at November 7, 1996
Class A Common Stock, par value $.001 16,210,673
Class B Common Stock, par value $.001 1,375,500
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AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARY
(a development stage company)
Form 10-Q for the Quarter Ended September 30, 1996
INDEX
Part I - FINANCIAL INFORMATION
Item 1: Financial Statements: Page No.
Consolidated Balance Sheets -
September 30, 1996 and December 31, 1995 3
Consolidated Statements of Operations -
Three and Nine Months Ended September 30, 1996 and
September 30, 1995 and For the Period from Inception
(September 1, 1983) Through September 30, 1996 4
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1996 and September 30, 1995
and For the Period from Inception (September 1, 1983)
Through September 30, 1996 5
Consolidated Statements of Stockholders' Equity -
For the Period from Inception (September 1, 1983)
Through September 30, 1996 6 - 7
Notes to Consolidated Financial Statements 8 - 11
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations 12- 14
Part II - OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K 15
Signature 15
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<TABLE>
AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 30, December 31,
Assets 1996 1995
------------ ------------
(UNAUDITED)
<S> <C> <C>
Current Assets:
Cash and cash equivalents 7,187,000 5,436,000
Marketable securities 5,721,000 4,397,000
Other current assets 3,000,000 163,000
------------ ------------
Total current assets 15,908,000 9,996,000
------------ ------------
Fixed assets, at cost, net of accumulated
depreciation and amortization of $1,116,000
and $902,000, respectively 565,000 714,000
Patent costs, net of accumulated
amortization of $196,000 and $154,000,
respectively 932,000 766,000
Debt issuance costs, net of accumulated
amortization of $287,000 and $168,000,
respectively 660,000 1,022,000
Other assets 20,000 23,000
------------ ------------
18,085,000 12,521,000
============ ============
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued expenses 619,000 508,000
Current portion of capital lease obligation 3,000 3,000
------------ ------------
Total current liabilities 622,000 511,000
------------ ------------
Long Term Liabilities:
7% convertible debentures 9,000,000 -
8% convertible debentures 1,900,000 7,850,000
Long-term portion of capital lease obligation 12,000 15,000
------------ ------------
Total liabilities 11,534,000 8,376,000
------------ ------------
Commitments and Contingencies (Notes 1, 3 and 4)
Stockholders' Equity:
Class A common stock, par value $.001 per
share; 50,000,000 shares authorized;
16,210,673 and 13,431,364 shares issued
and outstanding, respectively 16,000 13,000
Class B common stock, par value $.001 per
share; 3,000,000 shares authorized;
1,375,500 shares issued and outstanding 1,000 1,000
Additional paid-in capital 45,676,000 38,699,000
Deficit accumulated during the
development stage (39,142,000) (34,568,000)
------------ ------------
Total stockholders' equity 6,551,000 4,145,000
------------ ------------
18,085,000 12,521,000
============ ============
See notes to unaudited consolidated financial statements
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<TABLE>
AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARY
(a development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Period
<CAPTION> From Inception
Three Months Ended Nine Months Ended (September 1,
-------------------------- -------------------------- 1983) Through
September 30, September 30, September 30, September 30, September 30,
1996 1995 1996 1995 1996
------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Revenues:
Royalties / license fees $ - $ - $ - $ - $1,000,000
Collaborative agreements 8,000 - 34,000 - 273,000
------------ ------------ ------------ ------------ --------------
8,000 - 34,000 - 1,273,000
Expenses:
Research and development 686,000 694,000 1,952,000 2,280,000 22,652,000
General and administrative 788,000 692,000 2,678,000 2,170,000 20,032,000
------------ ------------ ------------ ------------ --------------
Loss from operations (1,466,000) (1,386,000) (4,596,000) (4,450,000) (41,411,000)
------------ ------------ ------------ ------------ --------------
Other Income (Expense):
Interest expense (65,000) - (318,000) - (1,195,000)
Net gain on sale of fixed assets - 6,000 - 6,000 6,000
Net investment income 101,000 57,000 340,000 213,000 3,458,000
------------ ------------ ------------ ------------ --------------
Net loss ($1,430,000) ($1,323,000) ($4,574,000) ($4,231,000) ($39,142,000)
============ ============ ============ ============ ==============
Net Loss Per Common Share ($0.08) ($0.09) ($0.27) ($0.29) ($5.78)
============ ============ ============ ============ ==============
Weighted Average Number of
Common Shares Outstanding 17,553,000 14,440,000 17,069,000 14,440,000 6,767,000
============ ============ ============ ============ ==============
See notes to unaudited consolidated financial statements
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<TABLE>
AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARY
(a development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Period
From Inception
<CAPTION> (September 1,
Nine Months Ended 1983)
-------------------------- Through
September 30, September 30, September 30,
1996 1995 1996
------------ ------------ --------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net loss ($4,574,000) ($4,231,000) ($39,142,000)
Adjustments to reconcile net (loss) to
net cash used in operating activities:
Depreciation and amortization 375,000 233,000 1,528,000
Net gain on sale of fixed assets - (6,000) (6,000)
Net gain on sale of marketable securities - - (217,000)
Other non-cash expenses accrued primarily for warrants 243,000 61,000 1,395,000
Write off of patent costs - - 93,000
(Increase) decrease in other current assets 43,000 164,000 (120,000)
(Increase) decrease in other assets 3,000 (4,000) 75,000
Increase in payables and accruals 270,000 17,000 668,000
Increase in interest payable to stockholder - - 112,000
------------ ------------ --------------
Net cash used in operating activities (3,640,000) (3,766,000) (35,614,000)
------------ ------------ --------------
Cash Flows From Investing Activities:
Capital expenditures (65,000) (47,000) (1,687,000)
Proceeds from sale of fixed assets - 16,000 16,000
Payments for patent costs and other assets (208,000) (108,000) (1,198,000)
Proceeds from maturity and sale of marketable securities 8,417,000 5,230,000 59,051,000
Purchases of marketable securities (9,741,000) (1,475,000) (64,555,000)
------------ ------------ --------------
Net cash provided by (used in) investing activities (1,597,000) 3,616,000 (8,373,000)
------------ ------------ --------------
Cash Flows From Financing Activities:
Proceeds from issuance of common stock, net 1,306,000 - 35,335,000
Proceeds from issuance of 7% convertible debentures, net 5,685,000 - 5,685,000
Proceeds from issuance of 8% convertible debentures, net - - 7,790,000
Principal payments under capital lease obligation (3,000) (1,000) (5,000)
Capital contributions from chairman - - 1,000,000
Increase in loans payable to stockholder / affiliates - - 2,669,000
Repayment of loans payable to stockholder and affiliates
(remainder contributed to capital by the stockholder) - - (1,300,000)
------------ ------------ --------------
Net cash provided by (used in) financing activities 6,988,000 (1,000) 51,174,000
------------ ------------ --------------
Net Increase (Decrease) in Cash and Cash Equivalents 1,751,000 (151,000) 7,187,000
Cash and Cash Equivalents at Beginning of Period 5,436,000 2,029,000 -
------------ ------------ --------------
Cash and Cash Equivalents at End of Period $7,187,000 $1,878,000 $7,187,000
============ ============ ==============
Supplemental Disclosure of Noncash Activities:
Capital expenditures made under capital lease obligation - $20,000 $20,000
============ ============ ==============
8% Convertible Debentures converted into 2,237,684, 0,
and 2,591,888 shares of Common Stock, respectively $5,386,000 - $5,957,000
============ ============ ==============
Warrants issued to placement agent $45,000 - $525,000
============ ============ ==============
See notes to unaudited consolidated financial statements
Page 5
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<TABLE>
AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARY
(a development stage company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
Class A Class B
Per Common Stock Common Stock
Share --------------------------- ------------------------
Amount Shares Dollars Shares Dollars
------- ------------ ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, AT INCEPTION, (SEPTEMBER 1, 1983) $ - $ - - $ -
Sale of common stock to chairman for cash .33 78,000 - - -
Net (loss) for the period - - - -
------------ ------------- ----------- -----------
BALANCE, DECEMBER 31, 1983 78,000 - - -
Sale of common stock to chairman for cash .33 193,500 - - -
Net (loss) for the period - - - -
------------ ------------- ----------- -----------
BALANCE, DECEMBER 31, 1984 271,500 - - -
Sale of common stock to chairman for cash .33 276,700 - - -
Net (loss) for the period - - - -
------------ ------------- ----------- -----------
BALANCE, DECEMBER 31, 1985 548,200 1,000 - -
Sale of common stock to chairman for cash .33 404,820 - - -
Net (loss) for the period - - - -
------------ ------------- ----------- -----------
BALANCE, DECEMBER 31, 1986 953,020 1,000 - -
Sale of common stock to chairman for cash .33 48,048 - - -
Net (loss) for the period - - - -
------------ ------------- ----------- -----------
BALANCE, DECEMBER 31, 1987 1,001,068 1,000 - -
Exchange of common stock for Class B stock (1,001,068) (1,000) 1,001,068 1,000
Sale of Class B stock to chairman for cash .33 - - 1,998,932 2,000
Net (loss) for the period - - - -
------------ ------------- ----------- -----------
BALANCE, DECEMBER 31, 1988 - - 3,000,000 3,000
Net (loss) for the period - - - -
------------ ------------- ----------- -----------
BALANCE, DECEMBER 31, 1989 - - 3,000,000 3,000
Conversion of loans payable to stockholder into
additional paid-in capital - - - -
Sale of 1,150,000 Units to public consisting of
3,450,000 shares of Class A common stock and
warrants (net of $1,198,000 underwriting exp 2.00 3,450,000 3,000 - -
Conversion of Class B stock into
Class A stock 668,500 1,000 (668,500) (1,000)
Net (loss) for the period - - - -
------------ ------------- ----------- -----------
BALANCE, DECEMBER 31, 1990 4,118,500 $4,000 2,331,500 $2,000
------------ ------------- ----------- -----------
CONTINUED
Page 6
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BALANCE, DECEMBER 31, 1990 4,118,500 $4,000 2,331,500 $2,000
Exercise of Class A Warrants (net of $203,000
in underwriting expenses) for cash 3.00 3,449,955 3,000 - -
Exercise of Class B Warrants for cash 4.50 79,071 - - -
Conversion of Class B stock
into Class A stock 850,000 1,000 (850,000) (1,000)
Exercise of stock options 2.00 417,750 1,000 - -
Expense for warrants issued - - - -
Net (loss) for the period - - - -
------------ ------------- ----------- -----------
BALANCE, DECEMBER 31, 1991 8,915,276 9,000 1,481,500 1,000
Exercise of Class B Warrants (net of $701,000
in underwriting expenses) for cash 4.50 3,370,884 3,000 - -
Conversion of Class B stock
into Class A stock 106,000 - (106,000) -
Exercise of stock options 2.49 348,300 1,000 - -
Net (loss) for the period - - - -
------------ ------------- ----------- -----------
BALANCE, DECEMBER 31, 1992 12,740,460 13,000 1,375,500 1,000
Sale of common stock to Medeva PLC. 7.50 200,000 - - -
Exercise of stock options 2.00 32,700 - - -
Net (loss) for the period - - - -
------------ ------------- ----------- -----------
BALANCE, DECEMBER 31, 1993 12,973,160 13,000 1,375,500 1,000
Exercise of stock options 2.16 91,250 - - -
Net (loss) for the period - - - -
------------ ------------- ----------- -----------
BALANCE, DECEMBER 31, 1994 13,064,410 13,000 1,375,500 1,000
Conversion of 8% Convertible Debentures into
Class A Common Stock 1.85 354,204 -
Exercise of stock options 1.82 12,750 -
Expense for warrants/options issued - - - -
Net (loss) for the period - - - -
------------ ------------- ----------- -----------
BALANCE, DECEMBER 31, 1995 13,431,364 13,000 1,375,500 1,000
Conversion of 8% Convertible Debentures into
Class A Common Stock 2.73 2,237,684 2,000
Exercise of stock options 2.41 541,625 1,000
Expense for warrants/options issued - - - -
Net (loss) for the period - - - -
------------ ------------- ----------- -----------
BALANCE, SEPTEMBER 30, 1996 16,210,673 $16,000 1,375,500 $1,000
============ ============= =========== ===========
See notes to unaudited consolidated financial statements
Page 7
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<TABLE>
AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARY
(a development stage company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Deficit
Accumulated
Additional During the
Paid-in Development
Capital Stage Total
------------ ------------- -----------
<S> <C> <C> <C>
BALANCE, AT INCEPTION, (SEPTEMBER 1, 1983) $ - $ - $ -
Sale of common stock to chairman for cash 26,000 - 26,000
Net (loss) for the period - (25,000) (25,000)
------------ ------------- -----------
BALANCE, DECEMBER 31, 1983 26,000 (25,000) 1,000
Sale of common stock to chairman for cash 65,000 - 65,000
Net (loss) for the period - (242,000) (242,000)
------------ ------------- -----------
BALANCE, DECEMBER 31, 1984 91,000 (267,000) (176,000)
Sale of common stock to chairman for cash 92,000 - 92,000
Net (loss) for the period - (305,000) (305,000)
------------ ------------- -----------
BALANCE, DECEMBER 31, 1985 183,000 (572,000) (388,000)
Sale of common stock to chairman for cash 134,000 - 134,000
Net (loss) for the period - (433,000) (433,000)
------------ ------------- -----------
BALANCE, DECEMBER 31, 1986 317,000 (1,005,000) (687,000)
Sale of common stock to chairman for cash 16,000 - 16,000
Net (loss) for the period - (730,000) (730,000)
------------ ------------- -----------
BALANCE, DECEMBER 31, 1987 333,000 (1,735,000) (1,401,000)
Exchange of common stock for Class B stock - - -
Sale of Class B stock to chairman for cash 664,000 - 666,000
Net (loss) for the period - (1,031,000) (1,031,000)
------------ ------------- -----------
BALANCE, DECEMBER 31, 1988 997,000 (2,766,000) (1,766,000)
Net (loss) for the period - (1,522,000) (1,522,000)
------------ ------------- -----------
BALANCE, DECEMBER 31, 1989 997,000 (4,288,000) (3,288,000)
Conversion of loans payable to stockholder into
additional paid-in capital 1,481,000 - 1,481,000
Sale of 1,150,000 Units to public consisting of
3,450,000 shares of Class A common stock and
warrants (net of $1,198,000 underwriting expenses) 5,699,000 - 5,702,000
Conversion of Class B stock into
Class A stock - - -
Net (loss) for the period - (2,100,000) (2,100,000)
------------ ------------- -----------
BALANCE, DECEMBER 31, 1990 $8,177,000 ($6,388,000) $1,795,000
------------ ------------- -----------
CONTINUED
Page 6 (column continuation)
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BALANCE, DECEMBER 31, 1990 $8,177,000 ($6,388,000) $1,795,000
Exercise of Class A Warrants (net of $203,000
in underwriting expenses) for cash 10,143,000 - 10,146,000
Exercise of Class B Warrants for cash 356,000 - 356,000
Conversion of Class B stock
into Class A stock - - -
Exercise of stock options 835,000 - 836,000
Expense for warrants issued 900,000 - 900,000
Net (loss) for the period - (4,605,000) (4,605,000)
------------ ------------- -----------
BALANCE, DECEMBER 31, 1991 20,411,000 (10,993,000) 9,428,000
Exercise of Class B Warrants (net of $701,000
in underwriting expenses) for cash 14,465,000 - 14,468,000
Conversion of Class B stock
into Class A stock - - -
Exercise of stock options 865,000 - 866,000
Net (loss) for the period - (4,016,000) (4,016,000)
------------ ------------- -----------
BALANCE, DECEMBER 31, 1992 35,741,000 (15,009,000) 20,746,000
Sale of common stock to Medeva PLC. 1,500,000 - 1,500,000
Exercise of stock options 65,000 - 65,000
Net (loss) for the period - (6,521,000) (6,521,000)
------------ ------------- -----------
BALANCE, DECEMBER 31, 1993 37,306,000 (21,530,000) 15,790,000
Exercise of stock options 197,000 - 197,000
Net (loss) for the period - (7,431,000) (7,431,000)
------------ ------------- -----------
BALANCE, DECEMBER 31, 1994 37,503,000 (28,961,000) 8,556,000
Conversion of 8% Convertible Debentures into
Class A Common Stock 571,000 - 571,000
Exercise of stock options 23,000 - 23,000
Expense for warrants/options issued 602,000 - 602,000
Net (loss) for the period - (5,607,000) (5,607,000)
------------ ------------- -----------
BALANCE, DECEMBER 31, 1995 38,699,000 (34,568,000) 4,145,000
Conversion of 8% Convertible Debentures into
Class A Common Stock 5,384,000 - 5,386,000
Exercise of stock options 1,305,000 - 1,306,000
Expense for warrants/options issued 288,000 - 288,000
Net (loss) for the period - (4,574,000) (4,574,000)
------------ ------------- -----------
BALANCE, SEPTEMBER 30, 1996 $45,676,000 ($39,142,000) $6,551,000
============ ============= ===========
See notes to unaudited consolidated financial statements
Page 7 (column continuation)
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AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARY
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 1996
(1) INTERIM FINANCIAL STATEMENTS
The interim unaudited consolidated financial statements presented herein
have been prepared in accordance with generally accepted accounting
principles for interim financial statements and with the instructions to
Form 10-Q and Regulation S-X pertaining to interim financial statements.
Accordingly, they do not include all information and footnotes required
by generally accepted accounting principles for complete financial
statements. The interim financial statements presented herein reflect
all adjustments (consisting of normal recurring adjustments and
accruals) which, in the opinion of management, are necessary for a fair
presentation of financial position as of September 30, 1996 and results
of operations for the three and nine months ended September 30, 1996 and
September 30, 1995. The Company's financial statements should be read
in conjunction with the summary of significant accounting policies and
the notes to consolidated financial statements included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1995. The
results of operations for the three and nine months ended September 30,
1996 are not necessarily indicative of the results for the full year.
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(2) STOCKHOLDERS' EQUITY
Stock Options - The following summarizes the stock option activity for
the three months ended September 30, 1996.
1986 Plan Shares Price
Exercised 19,500 $1.750 - $4.625
Cancelled 13,125 $1.750 - $5.500
1993 Plan Shares Price
Exercised 2,500 $3.375
1996 Plan Shares Price
Granted 35,000 $4.438 - $5.250
Each option entitles the holder to purchase one share of Class A Common
Stock of the Company.
(3) LEGAL MATTERS
On December 13, 1994, certain stockholders filed a complaint
and, on August 5, 1995, certain other stockholders filed a similar
complaint, in the United States District Court for the Eastern District
of New York against the Company and certain of its present and former
executive officers and directors. The complaints allege, among other
things, that such persons made misleading statements relating to the
Company. The actions seek an unspecified amount of damages and possible
equitable relief.
While both of these matters are in very early stages, the
Company and its officers believe that the actions are without merit and
have denied liability and intend to vigorously defend the suits.
(4) LONG TERM LIABILITIES
On September 30, 1996, the Company completed a private
placement to twelve accredited investors of an aggregate of $9,000,000
of its 7% Convertible Debentures due September 30, 1998 (the
"Debentures"). Interest on the Debentures is payable quarterly at the
rate of 7% per annum. On October 18, 1996, the Company filed a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), with the Securities and Exchange Commission to
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register for resale the shares of Common stock issuable upon conversion
of the Debentures. Debentures (together with any accrued but unpaid
interest) will become convertible to the extent of 25% of the principal
amount thereof commencing on the earlier of the effective date of the
registration statement or December 29, 1996, with an additional 25% of
the principal amount of the Debentures becoming convertible on each of
the 30th, 60th and 90th days thereafter at a conversion price equal to
83% of the average of the closing prices of the Company's Class A Common
stock for the five consecutive trading days ending on the trading day
immediately preceding the conversion date of the Debentures (the
"Current Market Price"); provided, however, that in no event may the
conversion price be less than $3.00 per share (the "Minimum Conversion
Price") nor greater than $8.00 per share (the "Maximum Conversion
Price"). In the event that, but for the Minimum Conversion Price, the
number of shares that would have been issued is greater than the number
of shares actually issued, the holder converting such Debenture shall
also be entitled to receive cash in an amount equal to such difference
multiplied by the Current Market Price. In the event any Debenture
remains outstanding at its maturity date, the Company has the option to
either convert such Debenture into shares of Class A Common Stock on the
same basis as the Debentureholder could have converted such Debenture or
pay the outstanding principal amount thereof, plus any accrued and
unpaid interest thereon, in cash.
The Company has also entered into Registration Rights
Agreements with each of the investors pursuant to which, among other
things, the Company has agreed to file on or prior to October 20, 1996
(which was filed on October 18, 1996) a registration statement under the
Securities Act covering the shares issuable upon conversion of the
Debentures, use its best efforts to have such registration statement
declared effective as soon thereafter as practicable and maintain such
registration statement effective and current (with certain exceptions)
until all of such shares are either sold either pursuant to such
registration statement or under Rule 144 promulgated under the
Securities Act or such time as Rule 144 would permit the investors to
sell all of such shares without registration during a 90 consecutive day
period. Should such registration statement not become effective before
December 29, 1996, the Company will be required to pay each
Debentureholder an amount equal to 1% of the principal amount of such
holder's Debentures during the first 30 days thereafter, and 2% for each
30 days thereafter, that the registration statement is not effective.
The Company may elect, in certain instances, in lieu of cash, to pay
such amount by delivery of Class A Common Stock having an aggregate
market value equal to the amount so payable but only if such shares are
freely tradeable without restriction under the Securities Act or any
state securities laws. All expenses of all such registrations are to be
borne by the Company, other than brokerage commissions, underwriting
discounts and commissions, other fees and expenses of investment bankers
Page 10
<PAGE>
and any fees and expenses of counsel employed by the investors which are
the obligations of the investors.
In conjunction with this offering, the Company incurred both
cash and noncash issuance costs totaling $480,000. These issuance costs
will be amortized as a component of interest expense over the term of
the Debentures. Upon the conversion of the Debentures the related
unamortized deferred financing costs are charged to paid-in-capital. As
compensation, the Company paid Shoreline Pacific Institutional Finance,
The Institutional Division of Financial West Group, the placement agent
of the Debentures, a 4% commission of $360,000 and issued to brokers
affiliated with the placement agent warrants entitling them to purchase
an aggregate of 15,618 shares of Common Stock at an exercise price of
$5.7625 per share at any time until September 30, 1998. The estimated
noncash value of these warrants, $45,000, has been recorded as
additional paid-in capital, while their cost is included in the $480,000
total issuance costs.
As of September 30, 1996, the Company received $5,685,000 of
the net proceeds from the offering, the remainder of $2,880,000 included
in "Other current assets" on the September 30, 1996 Consolidated Balance
Sheets was received by the Company from the escrow agent on October 1,
1996.
Page 11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Three Months Ended September 30, 1996
The Company's net loss of $1,430,000 for the third quarter ended
September 30, 1996 was $107,000 higher than the net loss of $1,323,000
for the third quarter ended September 30, 1995.
Research and development expenses decreased by $8,000 from $694,000 to
$686,000 primarily as a result of reduced consulting services, reduced
personnel and reduced payments for research/collaborative projects
offset by increases in travel and meeting costs and increases in costs
associated with the TpP diagnostic test.
General and administrative expenses increased by $96,000 from $692,000
to $788,000 as a result of increased public relations costs, increased
personnel cost and increased travel and meeting costs offset by a
reduction in consulting services.
Interest expense of $65,000, including $23,000 of amortization of debt
issuance costs, resulted from the issuance of $8.5 million of 8%
Convertible Debentures in late October 1995. The debt issuance costs
are being amortized as a component of interest expense over the term of
the debentures. Upon the conversion of debentures ($100,000 during the
third quarter of 1996), the related unamortized debt issuance costs
($10,000 during the third quarter of 1996) are charged to paid-in
capital.
Investment income increased by $44,000 from $57,000 in the 1995 period
to $101,000 in the 1996 period as a result of higher average cash
balances offset, in part, by lower interest rates on U.S. Government
obligations in which most of the Company's available cash is invested.
Page 12
<PAGE>
Nine Months Ended September 30, 1996
The Company's net loss increased $343,000 during the nine months ended
September 30, 1996 from a loss of $4,231,000 during the 1995 period to
a loss of $4,574,000 in 1996.
Research and development expenses decreased by $328,000 from $2,280,000
to $1,952,000 primarily as a result of reduced personnel, reduced
payments for research/collaborative projects, reduced consulting
services offset by increases in travel and meeting costs and costs
associated with the TpP diagnostic test.
General and administrative expenses increased by $508,000 from
$2,170,000 to $2,678,000 as a result of increased public relations
costs, personnel cost and travel and meeting costs.
Interest expense of $318,000, including $119,000 of amortization of debt
issuance costs, resulted from the issuance of $8.5 million of 8%
Convertible Debentures in late October 1995. The debt issuance costs are
being amortized as a component of interest expense over the term of the
debentures. Upon the conversion of debentures ($5,950,000 during the
nine months ended September 30, 1996) the related unamortized debt
issuance costs ($723,000 during the nine months ended September 30,
1996) are charged to paid-in capital.
Interest income increased by $127,000 from $213,000 in the 1995 period
to $340,000 in the 1996 period as a result of higher average fund
balances offset in part by lower interest rates.
Liquidity and Capital Resources
As noted in Note 4 to the consolidated interim financial statements, on
September 30, 1996 the Company completed a private placement offering of
7% Convertible Debentures which resulted in net cash proceeds of $8.6
million. The Company plans to use the proceeds for general working
capital principally for clinical programs for testing diagnostic and
therapeutic products, sales and marketing, research and development
programs, facility expansion and the purchase of equipment.
Page 13
<PAGE>
As of September 30, 1996, the Company had working capital of $15,286,000
compared to $9,485,000 at December 31, 1995. The Company's management
believes that current working capital will be sufficient to fund its
liquidity needs through 1996 and beyond. During the nine months ended
September 30, 1996, $5,950,000 of the 8% Convertible Debentures were
converted into 2,237,684 Class A Common shares.
The Company still expects to continue to incur substantial expenditures
in research and product development and the FDA approval process,
relating to Phase I and Phase II human clinical testing of the MH1
imaging product and 510(k) filings for TpP , the Company's Thrombus
Precursor Protein diagnostic tests, and FiF , the Company's Functional
Intact Fibrinogen diagnostic test. Currently product development plans
of the Company include entering into collaborative, licensing and co-marketing
arrangements with large pharmaceutical companies to provide
additional funding and clinical expertise to perform tests necessary to
obtain regulatory approvals, provide manufacturing expertise and market
the Company's products. Without such collaborative, licensing or co-marketing
arrangements, longer term, additional sources of funding will
be required to finance the Company.
Page 14
<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule - filed herewith
(b) Reports on Form 8-K
On October 7, 1996, the Company filed a report on Form 8-K dated
September 30, 1996 (date of earliest event
reported), reporting under Item 5 Other Events.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN BIOGENETIC SCIENCES, INC.
(Registrant)
Date November 13, 1996 /s/ Josef C. Schoell
----------------- -------------------------
Josef C. Schoell
Vice President, Finance
(Principal Financial and
Accounting Officer)
Page 15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS NINE MONTH YEAR-TO-DATE SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM AMERICAN BIOGENETIC SCIENCES INC. 1996
THIRD QUARTER FORM 10-Q SEPTEMBER 30,1996
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1996
<CASH> 7,187,000
<SECURITIES> 5,721,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15,908,000
<PP&E> 1,681,000
<DEPRECIATION> 1,116,000
<TOTAL-ASSETS> 18,085,000
<CURRENT-LIABILITIES> 622,000
<BONDS> 10,900,000
0
0
<COMMON> 17,000
<OTHER-SE> 6,534,000
<TOTAL-LIABILITY-AND-EQUITY> 18,085,000
<SALES> 0
<TOTAL-REVENUES> 34,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,952,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 318,000
<INCOME-PRETAX> (4,574,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,574,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,574,000)
<EPS-PRIMARY> (.27)
<EPS-DILUTED> (.27)
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