SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended June 30, 1997 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 (I.R.S. Employer Identification No.)
of incorporation or organization)
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 August 7, 1997
Class A Common Stock, par value $.001 19,204,627
Class B Common Stock, par value $.001 1,475,500
<PAGE>
AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARY
(a development stage company)
Form 10-Q for the Quarter Ended June 30, 1997
INDEX
Part I - FINANCIAL INFORMATION
Item 1: Financial Statements: Page No.
Consolidated Balance Sheets -
June 30, 1997 and December 31, 1996 3
Consolidated Statements of Operations -
Three and Six Months Ended June 30, 1997 and June 30, 1996
and For the Period from Inception (September 1, 1983)
Through June 30, 1997 4
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1997 and June 30, 1996
and For the Period from Inception (September 1, 1983)
Through June 30, 1997 5
Consolidated Statements of Stockholders' Equity -
For the Period from Inception (September 1, 1983)
Through June 30, 1997 6 - 8
Notes to Consolidated Financial Statements 9 - 10
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations 11 - 13
Part II - OTHER INFORMATION
Item 2: Changes in Securities 14
Item 4: Submission of Matters to a Vote of Security Holders 15
Item 5: Other Events 16
Item 6: Exhibits and Reports on Form 8-K 16
Signature 16
<PAGE>
<TABLE>
AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30, December 31,
Assets 1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $9,624,000 $10,760,000
Marketable securities - 3,021,000
Other current assets 58,000 528,000
------------ ------------
Total current assets 9,682,000 14,309,000
------------ ------------
Fixed assets, at cost, net of accumulated
depreciation and amortization of $1,333,000
and $1,183,000, respectively 633,000 591,000
Patent costs, net of accumulated
amortization of $248,000 and $212,000,
respectively 1,166,000 983,000
Debt issuance costs, net of accumulated
amortization of $481,000 and $370,000,
respectively 106,000 569,000
Other assets 26,000 21,000
------------ ------------
$11,613,000 $16,473,000
============ ============
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued expenses $438,000 $609,000
Current portion of capital lease obligation 3,000 3,000
------------ ------------
Total current liabilities 441,000 612,000
------------ ------------
Long Term Liabilities:
7% convertible debentures, net of unamortized
debt discount of $0 and $492,000, respectively 1,650,000 8,508,000
8% convertible debentures 850,000 1,800,000
Long-term portion of capital lease obligation 10,000 11,000
------------ ------------
Total liabilities 2,951,000 10,931,000
------------ ------------
Stockholders' Equity:
Class A common stock, par value $.001 per
share; 50,000,000 and 25,000,000 shares authorized,
respectively; 19,204,627 and 16,270,994 shares issued
and outstanding, respectively 19,000 16,000
Class B common stock, par value $.001 per
share; 3,000,000 shares authorized; 1,475,500 and
1,375,500 shares issued and outstanding, respectivel 1,000 1,000
Additional paid-in capital 55,337,000 47,793,000
Deficit accumulated during the
development stage (46,695,000) (42,268,000)
------------ ------------
Total stockholders' equity 8,662,000 5,542,000
------------ ------------
$11,613,000 $16,473,000
============ ============
See notes to unaudited consolidated financial statements
Page 3
</TABLE>
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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 Six Months Ended (September 1,
-------------------------- ------------------------------ 1983) Through
June 30, June 30, June 30, June 30, June 30,
1997 1996 1997 1996 1997
------------ ------------ -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Revenues:
Royalties / license fees $ - $ - $ - $ - $1,000,000
Collaborative agreements - 8,000 9,000 26,000 302,000
------------ ------------ -------------- -------------- --------------
- 8,000 9,000 26,000 1,302,000
Expenses:
Research and development 914,000 702,000 1,972,000 1,266,000 25,375,000
General and administrative 891,000 914,000 1,977,000 1,890,000 22,971,000
------------ ------------ -------------- -------------- --------------
Loss from operations (1,805,000) (1,608,000) (3,940,000) (3,130,000) (47,044,000)
------------ ------------ -------------- -------------- --------------
Other Income (Expense):
Interest expense (126,000) (80,000) (813,000) (253,000) (3,640,000)
Net gain on sale of fixed assets - - - - 6,000
Net investment income 151,000 110,000 326,000 239,000 3,983,000
------------ ------------ -------------- -------------- --------------
Net loss ($1,780,000) ($1,578,000) ($4,427,000) ($3,144,000) ($46,695,000)
============ ============ ============== ============== ==============
Net Loss Per Common Share ($0.09) ($0.09) ($0.23) ($0.19) ($6.30)
============ ============ ============== ============== ==============
Weighted Average Number of
Common Shares Outstanding 20,024,000 17,299,000 19,306,000 16,824,000 7,414,000
============ ============ ============== ============== ==============
See notes to unaudited consolidated financial statements
Page 4
</TABLE>
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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,
Three Months Ended 1983)
-------------------------- Through
June 30, June 30, June 30,
1997 1996 1997
------------ ------------ --------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net loss ($4,427,000) ($3,144,000) ($46,695,000)
Adjustments to reconcile net (loss) to
net cash used in operating activities:
Depreciation and amortization 297,000 260,000 1,991,000
Net gain on sale of fixed assets - - (6,000)
Net gain on sale of marketable securities - - (217,000)
Other non-cash expenses accrued primarily for warrants 102,000 201,000 1,539,000
Amortization of debt discount included in interest expense 492,000 - 1,843,000
Write off of patent costs - - 93,000
(Increase) decrease in other current assets 470,000 33,000 (58,000)
(Increase) decrease in other assets (5,000) 3,000 69,000
Increase in payables and accruals 59,000 198,000 724,000
Increase in interest payable to stockholder - - 112,000
------------ ------------ --------------
Net cash provided by (used in) operating activities (3,012,000) (2,449,000) (40,605,000)
------------ ------------ --------------
Cash Flows From Investing Activities:
Capital expenditures (192,000) (49,000) (1,972,000)
Proceeds from sale of fixed assets - - 16,000
Payments for patent costs and other assets (219,000) (72,000) (1,484,000)
Proceeds from maturity and sale of marketable securities 5,817,000 4,397,000 67,549,000
Purchases of marketable securities (2,796,000) (6,676,000) (67,332,000)
------------ ------------ --------------
Net cash provided by (used in) investing activities 2,610,000 (2,400,000) (3,223,000)
------------ ------------ --------------
Cash Flows From Financing Activities:
Payments to debentureholders (1,122,000) - (1,122,000)
Proceeds from issuance of common stock, net 388,000 1,265,000 35,856,000
Proceeds from issuance of 7% convertible debentures, net - - 8,565,000
Proceeds from issuance of 8% convertible debentures, net - - 7,790,000
Principal payments under capital lease obligation - (2,000) (6,000)
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 (734,000) 1,263,000 53,452,000
------------ ------------ --------------
Net Increase (Decrease) in Cash and Cash Equivalents (1,136,000) (3,586,000) 9,624,000
Cash and Cash Equivalents at Beginning of Period 10,760,000 5,436,000 -
------------ ------------ --------------
Cash and Cash Equivalents at End of Period $9,624,000 $1,850,000 $9,624,000
============ ============ ==============
Supplemental Disclosure of Noncash Activities:
Capital expenditures made under capital lease obligation - - $20,000
============ ============ ==============
7% and 8% Convertible Debentures converted into 2,893,492
2,206,172 and 5,517,451 shares of Common Stock, respectively $8,104,000 $5,289,000 $14,160,000
============ ============ ==============
Warrants issued to placement agent - - $525,000
============ ============ ==============
See notes to unaudited consolidated financial statements
Page 5
</TABLE>
<PAGE>
<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 expenses) 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
<PAGE>
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
------------ ------------- ----------- -----------
CONTINUED
Page 7
<PAGE>
------------ ------------- ----------- -----------
BALANCE, DECEMBER 31, 1995 13,431,364 $13,000 1,375,500 $1,000
Conversion of 8% Convertible Debentures into
Class A Common Stock 2.74 2,269,755 2,000 - -
Exercise of stock options 2.53 569,875 1,000 - -
Expense for warrants/options issued - - - -
Discount on 7% convertible debentures - - - -
Net (loss) for the period - - - -
------------ ------------- ----------- -----------
BALANCE, DECEMBER 30, 1996 16,270,994 16,000 1,375,500 1,000
------------ ------------- ----------- -----------
Conversion of 8% Convertible Debentures into
Class A Common Stock 2.92 2,893,492 3,000 - -
Sale of Class B stock for cash 3.44 - - 100,000 -
Exercise of stock options 2.07 21,250 - - -
Expense for warrants issued - - - -
Class A Common Stock issued 3.97 18,891 - - -
Net (loss) for the period - - - -
------------ ------------- ----------- -----------
BALANCE, JUNE 30, 1997 19,204,627 $19,000 1,475,500 $1,000
============ ============= =========== ===========
See notes to unaudited consolidated financial statements
Page 8
</TABLE>
<PAGE>
<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)
<PAGE>
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
------------ ------------- -----------
CONTINUED
Page 7 (column continuation)
<PAGE>
BALANCE, DECEMBER 31, 1995 $38,699,000 ($34,568,000) $4,145,000
Conversion of 8% Convertible Debentures into
Class A Common Stock 5,483,000 - 5,485,000
Exercise of stock options 1,438,000 - 1,439,000
Expense for warrants/options issued 330,000 - 330,000
Discount on 7% convertible debentures 1,843,000 - 1,843,000
Net (loss) for the period - (7,700,000) (7,700,000)
------------ ------------- -----------
BALANCE, DECEMBER 31, 1996 47,793,000 (42,268,000) 5,542,000
------------ ------------- -----------
Conversion of 8% Convertible Debentures into
Class A Common Stock 6,979,000 - 6,982,000
Sale of Class B stock for cash 344,000 - 344,000
Exercise of stock options 44,000 - 44,000
Expense for warrants issued 102,000 - 102,000
Class A Common Stock issued 75,000 - 75,000
Net (loss) for the period - (4,427,000) (4,427,000)
------------ ------------- -----------
BALANCE, JUNE 30, 1997 $55,337,000 ($46,695,000) $8,662,000
============ ============= ===========
See notes to unaudited consolidated financial statements
CONTINUED
Page 8 (column continuation)
</TABLE>
<PAGE>
AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARY
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1997
(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 June 30, 1997 and results of
operations for the three and six months ended June 30, 1997 and June 30,
1996. 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, 1996. The results
of operations for the three and six months ended June 30, 1997 are not
necessarily indicative of the results for the full year.
(2) EARNINGS PER SHARE
Earnings per share is computed using the weighted average number of
common shares outstanding and, where applicable, common equivalent
shares issuable upon exercise of stock options calculated under the
treasury stock method. In February, 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards
(SFAS) No. 128, Earnings Per Share. SFAS No. 128 simplifies the
standards for computing earnings per share previously found in APB
Opinion No. 15, Earnings Per Share and is effective for financial
statements issued for periods ending after December 15, 1997, including
<PAGE>
interim periods; earlier adoption is not permitted. The Company does
not expect the adoption of SFAS No. 128 to have a significant impact to
its reported results.
(3) STOCKHOLDERS' EQUITY
Stock Options - The following summarizes the stock option activity in
all stock option plans for the three months ended June 30, 1997.
Shares Price
Granted 41,000 $2.38 - $3.50
Exercised 6,000 $1.75 - $2.00
Cancelled 140,000 $1.75 - $5.50
Each option entitles the holder to purchase one share of Class A Common
Stock of the Company.
Other Shares and Warrants - In connection with a lease agreement for
certain facilities, the Company may, at its option, pay a portion of the
annual lease obligation with Class A Common Stock plus warrants. The
number of shares of Common Stock is to be computed using the average
market price of the Company's Class A Common Stock during the ten days
prior to issuance. The warrants are to be exercisable at a price equal
to the closing price of the underlying Class A Common Stock on the date
the warrant is issued and for a period of four years from the date of
issuance. The Company issued 11,405 shares of Class A Common Stock
during the quarter ended June 30, 1997, as well as a warrant to purchase
11,405 shares of Class A Common Stock at an exercise price of $3.06 per
share. The Company has recorded a noncash charge of $23,000 which
represents the fair value of the warrant.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Three Months ended June 30, 1997
The Company's net loss of $1,780,000 for the second quarter ended June
30, 1997 was $202,000 higher than the net loss of $1,578,000 for the
second quarter ended June 30, 1996.
Research and development expenses increased $212,000 (30%) from $702,000
to $914,000 primarily as a result of additional personnel and increased
rent costs offset, in part, by a reduction in payments for
research/collaborative projects.
General and administrative expenses decreased $23,000 (3%) from $914,000
to $891,000 primarily as a result of a decrease in consulting services
during the second quarter of 1997.
Interest expense increased by $46,000 (58%) from $80,000 in the 1996
period to $126,000 in the 1997 period, resulting from interest on the
remaining outstanding 7% Convertible Debentures issued in September 1996
and the amortized debt issuance cost component of interest expense over
the term of the debentures ($41,000 and $29,000 during the second
quarters of 1997 and 1996, respectively ). Upon conversion of the
Company's 7% and 8% Convertible Debentures ($4,320,000 and $450,000
during the second quarters of 1997 and 1996, respectively), the
related unamortized debt issuance costs ($174,000 and $48,000 during the
second quarters of 1997 and 1996, respectively) are charged to paid-in
capital.
Investment income increased $41,000 (37%) from $110,000 in the 1996
period to $151,000 in the 1997 period as a result of higher average cash
balances and higher interest rates on U.S. Government obligations in
which most of the Company s available cash is invested.
<PAGE>
Six Months Ended June 30, 1997
The Company s net loss increased $1,283,000 during the six months ended
June 30, 1997 from a loss of $3,144,000 during the 1996 period to a loss
of $4,427,000 in the 1997 period.
Revenue during the six months ended June 30, 1997 are from the sale of
reagents, research materials and services relating to collaborative
agreements.
Research and development expenses increased $706,000 (56%) from
$1,266,000 to $1,972,000 primarily as a result of relocating the
Company's research laboratories from South Bend, Indiana to Boston,
Massachusetts (including severance, relocation and moving costs during
the first quarter of 1997), increased rent costs and increased travel
and meeting costs.
General and administrative expenses increased $87,000 (5%) from
$1,890,000 to $1,977,000 as a result of increased consulting and other
costs in connection with the publication of research papers by the
Company, increased personnel and increased travel and meeting costs.
Interest expense increased by $560,000 from $253,000 to $813,000,
resulting primarily from $492,000 of noncash amortization of the debt
discount relating to the Company's 7% Convertible Debentures issued in
September 1996. Upon conversion of the Company's 7% and 8% Convertible
Debentures ($8,300,000 and $5,850,000 during the six months of 1997 and
1996, respectively), the related unamortized debt issuance costs
($353,000 and $713,000 during the six months of 1997 and 1996,
respectively) are charged to paid-in capital.
Investment income increased $87,000 (36%) from $239,000 in the 1996
period to $326,000 in the 1997 period as a result of higher average cash
balances and higher interest rates on U.S. Government obligations in
which most of the Company s available cash is invested.
<PAGE>
Liquidity and Capital Resources
As of June 30, 1997, the Company had working capital of $9,241,000
compared to $13,697,000 at December 31, 1996. During the second quarter
ended June 30, 1997, the Company invested its marketable securities in
shorter term US Government obligations (maturities of less than three
months), which is included on the Balance Sheet as cash and cash
equivalents. The Company's management believes that current working
capital will be sufficient to fund its liquidity needs beyond 1997.
During the six months ended June 30, 1997, $7,350,000 of the 7%
Convertible Debentures and $950,000 of the 8% Convertible Debentures
were converted into an aggregate of 2,893,492 Class A Common stock.
The Company 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, additional clinical studies for TpP , the Company's Thrombus
Precursor Protein diagnostic tests, and manufacturing of TpP and FiF
reagents and kits. Currently, product development plans of the Company
include entering into collaborative, licensing, distribution and co-
marketing arrangements with pharmaceutical and diagnostic 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, distribution or co-marketing arrangements,
longer term, additional sources of funding will be required to finance
the Company.
<PAGE>
PART II
OTHER INFORMATION
Item 2. Changes in Securities
During the quarter ended June 30, 1997, holders of $800,000 of the
Company's 8% Convertible Debentures and $3,520,000 of the Company's 7%
Convertible Debentures converted such debentures into 446,026 and
1,180,207 shares of the Company's Class A Common Stock, respectively.
The Company believes that the exemption from registration afforded by
Section 3(a)(9) of the Securities Act of 1933, as amended (the "Act"),
is applicable to the issuances of such shares as such issuances involved
a security exchanged by the Company with existing securityholders
exclusively where no commission or other remuneration was paid or given
directly or indirectly for soliciting such exchanges.
In connection with a lease agreement for certain facilities, the
Company may, at its option, pay a portion of the annual lease obligation
with Class A Common Stock (the "Issued Shares") plus a warrant (the
"Warrant") to purchase shares of Class A Common Stock (the "Warrant
Shares"). The number of Issued Shares are computed using the average
market price of the Company's Class A Common Stock during the ten days
prior to issuance. The Warrant Shares are to be exercisable at a price
equal to the closing price of the underlying Class A Common Stock on the
date the Warrant is issued and for a period of four years from the date
of issuance. Pursuant to the lease agreement, on May 31, 1997, the
Company issued 11,405 shares of Class A Common Stock and a Warrant to
purchase 11,405 shares of Class A Common Stock at an exercise price of
$3.06 per share. In connection with such acquisition, the purchaser
agreed to acquire the Issued Shares, the Warrant and the Warrant Shares
for investment and not with a view to the distribution of such
securities. In connection therewith, the Company has granted the
purchaser certain rights to cause the Warrant Shares to be registered
under the Act at the Company's expense. The Company believes that the
exemption from registration afforded by Section 4(2) of the Act is
applicable to the issuance of such securities.
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
At the Company s 1997 Meeting of Stockholders held on June 18, 1997:
(a) The following six directors, each of whom were nominated by the
Board of Directors, were elected by the following votes:
Voting Authority
For Withheld
Alfred J. Roach 30,164,421 222,023
Paul E. Gargan 30,176,731 209,713
Ellena M. Byrne 30,179,731 206,713
Timothy J. Roach 30,181,856 204,588
Joseph C. Hogan 30,171,611 214,833
William G. Sharwell 30,165,711 220,733
Gustav V. R. Born 30,180,856 205,588
(b) Ratified the appointment of Arthur Andersen LLP to serve as the
Company s independent public auditors for the year ending December 31,
1997 by the following vote:
For Against Abstain
30,214,144 47,690 124,610
Each matter was approved by the vote of Common Class A and Class B
stockholders voting together as one class, with each share of Class A
having one vote and each share of Class B having ten votes.
<PAGE>
Item 5. Other Events
At the annual meeting of the Board of Directors, following the annual
meeting of the Stockholders on June 18, 1997, the Board elected the
following as the executive officers of the Company.
Name Position
Alfred J. Roach Chairman of the Board and Chief Executive Officer
Paul E. Gargan President and Chief Scientific Officer
Stephen H. Ip Executive Vice President and Chief Operating Officer
Ellena M. Byrne Executive Vice President-Global Scientific Network
James H. McLinden Vice President-Molecular Biology
Josef C. Schoell Vice President Finance
Timothy J. Roach Treasurer and Secretary
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the quarter
ended June 30, 1997.
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 August 11, 1997 /s/Josef C. Schoell
Josef C. Schoell
Vice President, Finance
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SIX MONTH YEAR-TO-DATE SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM AMERICAN BIOGENETIC SCIENCES, INC. 1997
10Q FOR THE SECOND QUARTER ENDED JUNE 30, 1997
</LEGEND>
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