As filed with the Securities and Exchange Commission on December 24, 1998
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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AMERICAN BIOGENETIC SCIENCES, INC.
(Exact Name of Registrant as Specified In Its Charter)
Delaware 11-2655906
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
1375 Akron Street, Copiague, NY 11726
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
--------------------------
RICHARD A. RUBIN, ESQ.
PARKER CHAPIN FLATTAU & KLIMPL, LLP
1211 Avenue of the Americas
New York, New York 10036
(212) 704-6000
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
--------------------------
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Maximum Maximum Amount of
Title of Each Class Amount to be Offering Price Aggregate Offering Registration
of Securities to be Registered Registered per Share (1) Price Fee
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<S> <C> <C> <C> <C>
Class A Common Stock, $.01 par
value per share.................... 10,800,000 $0.85937 $9,281,196 $2,580.17
Total Registration Fee...............................................................................$2,580.17
</TABLE>
(1) Represents the shares of Class A Common Stock being registered for
resale by the Selling Stockholders. Estimated solely for the purpose of
calculating the registration fee pursuant to Rule 457(c) of the
Securities Act of 1933, as amended, based on the average of the bid and
asked price on the Nasdaq National Market on December 21, 1998.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
The information in this Prospectus is not complete. We may not sell these
securities until the Registration Statement filed with the Securities and
Exchange Commission is effective. This Prospectus is not an offer to sell nor is
it seeking an offer to buy these securities in any State where the offer or sale
is not permitted.
SUBJECT TO COMPLETION, DATED DECEMBER 24, 1998
PROSPECTUS
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10,800,000 Shares
American Biogenetic Sciences, Inc.
Class A Common Stock
-------------------
The stockholders of American Biogenetic Sciences, Inc. listed on page
15 of this Prospectus are offering for sale 10,800,000 Shares of Class A Common
Stock of the Company under this Prospectus. This Prospectus may also be used by
those to whom such Selling Stockholders may pledge, donate or transfer their
Shares and their other successors in interest. We issued all of the Shares to
the Selling Stockholders in a private placement transaction in October 1998.
The Selling Stockholders may offer their Shares through public or
private transactions, at prevailing market prices, or at privately negotiated
prices. See "Plan of Distribution" on page 17.
The Selling Stockholders will receive all of the net proceeds from the
sale of the Shares. Accordingly, we will not receive any proceeds from the
resale of the Shares. We have agreed to bear the expenses incident to the
registration of the Shares, other than selling discounts and commissions.
Our Class A Common Stock is currently quoted on the Nasdaq National
Market under the symbol "MABXA." On December 23, 1998, the closing price of a
share of our Class A Common Stock on the Nasdaq National Market was $.78125.
Because the market price of a share of Class A Common Stock has been below $1.00
and certain other factors, we cannot assure you that our Class A Common Stock
will continue to be quoted on Nasdaq. See "Risk Factors - No Assurance of
Continued Nasdaq Listing," on page 5.
------------------------
This investment involves a high degree of risk. You should carefully consider
the factors described under the caption "risk factors" beginning on page 5 of
this Prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
----------------------
The date of this Prospectus is ______, 1999
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
over the Internet at the SEC's Website at "http://www.sec.gov."
We have filed with the SEC a registration statement on Form S-3 to
register the Shares being offered. This Prospectus is part of that registration
statement and, as permitted by the SEC's rules, does not contain all the
information included in the registration statement. For further information with
respect to us and our Class A Common Stock, you should refer to the registration
statement and to the exhibits and schedules filed as part of that registration
statement, as well as the documents we have incorporated by reference which are
discussed below. You can review and copy the registration statement, its
exhibits and schedules, as well as the documents we have incorporated by
reference, at the public reference facilities maintained by the SEC as described
above. The registration statement, including its exhibits and schedules, are
also available on the SEC's web site.
This Prospectus may contain summaries of contracts or other documents.
Because they are summaries, they will not contain all of the information that
may be important to you. If you would like complete information about a contract
or other document, you should read the copy filed as an exhibit to the
registration statement or incorporated in the registration statement by
reference.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this Prospectus, and information that we file later with
the SEC will automatically update or supersede this information. We incorporate
by reference the documents listed below and any future filings we will make with
the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934 (File No. 0-19041) until all of the Shares are sold:
o Annual Report on Form 10-K for the year ended December 31,
1997;
o Quarterly Reports on Form 10-Q for the fiscal quarters ended
March 31, 1998 (and amendments thereto), June 30, 1998 and
September 30, 1998;
o Current Reports on Form 8-K dated (date of earliest event
reported) April 27, 1998 (as filed on April 28, 1998) and May
20, 1998 (as filed on June 3, 1998); and
o The description of our Class A Common Stock contained in the
Registration Statement on Form 8-A filed on February 26, 1991,
including all amendments or reports filed for the purpose of
updating such description.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Chief Financial Officer.
American Biogenetic Sciences, Inc.
1375 Akron Street
Copiague, New York 11726
(516) 789-2600
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PROSPECTUS SUMMARY
This summary highlights some information from this Prospectus. It may not
contain all of the information important to you. To understand this offering
fully and get a better understanding of our business and operations, you should
read the entire Prospectus carefully, including the risk factors, and the
documents we have incorporated by reference in the section "Where You Can Find
More Information About Us."
Please note that references in this Prospectus to "we," "our" or "us" refer
to American Biogenetic Sciences, Inc. and our subsidiary, Stellar Bio Systems,
Inc., not to the Selling Stockholders.
The Company
We are engaged in researching, developing and marketing cardiovascular
and neurobiology products for commercial development. Product sales began during
the last quarter of 1997.
Certain of our products are designed to be used for in vivo, while
others are designed for in vitro, diagnostic procedures. In vivo diagnostic
procedures are those in which certain cells or organisms are injected directly
into the body or bloodstream to assess a particular reaction of the living
cells. During in vitro procedures, blood or tissue is extracted from the body
and the diagnostic tests are performed in a test tube or other laboratory
equipment.
Our products include:
o Thrombus Precursor Protein (TpP(TM)) test. This is an in vitro
diagnostic test used to assess the risk of active thrombosis
(blood clots) in the veins or arteries. This test is also used to
monitor the performance of anticoagulent (anti-clotting) therapy
or drugs used in the prevention of blood clots.
o Functional Intact Fibrinogen (FiF(TM)) test. This is an in vitro
diagnostic test which measures the levels of fibrinogen in blood.
Fibrinogen is a protein used in the blood-clotting process.
These tests assist doctors in diagnosing and treating blood clots
lodged deeply in the legs (known as DVT- deep vein thrombosis) and blood clots
in the lungs (known as PE - pulmonary embolisms). Deep vein thrombosis can move
to the lungs and cause pulmonary embolisms, which can be fatal. Thrombosis is
also associated with many other medical conditions, such as heart attacks,
strokes and complicated pregnancies. The Company is pursuing the application of
its tests in these areas with additional clinical testing.
We have also developed patented monoclonal antibodies called MH1 and
45J which we use in our TpP(TM) test. The 45J monoclonal antibody is also used
in our FIF(TM) test. Antibodies are produced in response to substances which are
recognized as foreign by the host. Our antibodies MH1 and 45J were developed
using our patented antigen-free mouse colony. We are evaluating the use of MH1
as an in vivo imaging agent. In this process, a radioisotope is attached to MH1
which emits a signal enabling instruments to detect where a thrombolytic (blood
clot) event has occurred within the body. We have completed the United States
Food and Drug Administration's Phase I/II studies for the use of the MH1 with a
radioisotope as an imaging agent. We must still complete the FDA's Phase II and
Phase III studies.
Our products require approval from the FDA prior to marketing in the
United States. Some in vitro diagnostic products are eligible for an accelerated
FDA application process in accordance with Section 510(k) of the 1976 Medical
Device Amendments to the Federal Food, Drug and Cosmetic Act as a product
"substantially equivalent" to another product in commercial distribution in the
United States before May 28, 1976. To date, we have received Section 510(k)
Pre-Market Clearance from the FDA for our TpP(TM) and FiF(TM) tests. In November
1997, we commenced marketing efforts for the TpP(TM) and FiF(TM) tests.
On April 23, 1998, we purchased all of the issued and outstanding
shares of common stock of Stellar Bio Systems, Inc., a manufacturer and
distributor of in vitro diagnostic products and research reagents used in
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<PAGE>
the biotechnology industry. Stellar's in vitro diagnostic products focus on the
infectious disease and auto-immune disease markets. Stellar markets a complete
line of products to determine the immune status of numerous human herpes
viruses. In addition, auto-immune diseases, such as lupus, are detected using
Stellar's products. Stellar is also the largest domestic provider of normal
mouse serum, which is used as a test component by major in vitro diagnostic
product manufacturers for a variety of purposes.
Our company was incorporated in Delaware in September 1983. Our
principal executive offices are located at 1375 Akron Street, Copiague, New York
11726, and our telephone number at that address is (516) 789-2600.
The Offering
Class A Common Stock being offered by
the Selling Stockholders........ 10,800,000 Shares
Class A Common Stock outstanding after
this offering................... 35,559,556 Shares
Nasdaq/NMS Symbol........................ MABXA
Use of Proceeds.......................... The Selling Stockholders will receive
all net proceeds from the sale of the
Shares. Accordingly, we will not
receive any proceeds from the resale
of the Shares.
We received $2,700,000 in proceeds
from our sale of the Shares to the
Selling Stockholders. We used such
funds, together with other funds in
our treasury, to repurchase the
remaining 5% Convertible Debentures
and outstanding Warrants issued in a
private placement in May 1998.
We have agreed to bear customary
expenses incident to the registration
of the Shares for the benefit of the
Selling Stockholders, other than
discounts and commissions.
Risk Factors............................. The securities offered hereby involve
a high degree of risk. You should
carefully consider the factors
described under the caption "risk
factors."
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<PAGE>
RISK FACTORS
Before you buy shares of our Class A Common Stock, you should be aware
that there are various risks associated with such purchase, including those
described below. You should consider carefully these risk factors, together with
all of the other information in this Prospectus, and the documents we have
incorporated by reference in the section "Where You Can Find More Information
About Us" before you decide to purchase shares of our Class A Common Stock.
Some of the information in this Prospectus and in the documents we have
incorporated by reference, may contain forward-looking statements. Such
statements can be generally identified by the use of forward-looking words such
as "may," "will," "expect," "anticipate," "intend," "estimate," "continue,"
"believe," or other similar words. These statements discuss future expectations,
or state other "forward-looking" information. When considering such statements,
you should keep in mind the risk factors and other cautionary statements in this
Prospectus. The risk factors noted in this section and other factors noted in
this Prospectus could cause our actual results to differ materially from those
contained in any forward-looking statements.
Development Stage Company.
The Company remains in the development stage. We have not generated
significant revenues from product sales from our inception through September 30,
1998 and have incurred losses every year since our formation in 1983. Through
September 30, 1998, we have received an aggregate of $1,302,000 in licensing
fees, royalties and under collaborative agreements. Sales of the TpP(TM) and
FIF(TM) tests, which commenced during the fourth quarter of 1997, and sales of
Stellar's products since its acquisition on April 23, 1998, have totaled
$1,003,000 through September 30, 1998.
While we have products at various stages of development and have
started to generate revenues, we cannot assure you as to if and when we may
begin generating significant revenues from product sales and cease being a
development stage company.
History and Expectation of Future Losses; Accumulated Deficit.
Our research, development, and general and administrative expenses have
resulted in significant losses and are expected to continue to result in
significant losses for the foreseeable future. We have incurred the following
losses since 1994:
Fiscal year ended:
o December 31, 1994..................... $7,431,000
o December 31, 1995..................... $5,607,000
o December 31, 1996..................... $7,700,000
o December 31, 1997..................... $7,147,000
Nine months ended:
o September 30, 1998.................... $4,572,000
At September 30, 1998, we had net worth of $4,949,000, with an
accumulated retained earnings deficit of $53,987,000. We had $5,695,000 in cash
and cash equivalents at September 30, 1998. We expect to continue to have losses
in the near future. Our future profitability is dependent, in part, on our
ability to:
o successfully market our existing products and complete products
under development,
o obtain required regulatory approvals and manufacture and
market successfully such products directly or through partners,
and
o acquire products which can be successfully marketed.
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<PAGE>
No Assurance of Continued Nasdaq Listing.
Our Class A Common Stock is currently quoted on The Nasdaq National
Market. On February 23, 1998, Nasdaq adopted new requirements which issuers are
required to meet in order to maintain their listings. On September 24, 1998,
Nasdaq issued a letter indicating that our Class A Common would be delisted as
of December 28, 1998 unless we complied with the minimum bid requirement of $1
for a period of ten consecutive trading days. This requirement applies to a
listing on both Nasdaq's National Market and SmallCap Market. We provided data
to Nasdaq which shows that our Class A Common Stock met the $1 minimum bid
requirement on each of the twelve consecutive trading days from November 11,
1998 to November 27, 1998. Nevertheless, the Staff of Nasdaq has advised us that
it still intends to delist our Class A Common Stock. We have appealed the
delisting decision by requesting a hearing before an Appeals Panel. The
delisting has been stayed until after the hearing has been held. To date, no
hearing date has been set.
Our stockholders have authorized our Board of Directors to implement a
reverse split of our Class A and Class B Common Stock within a range of one new
share to be issued for each four to eight presently outstanding shares. We may
be required to implement a reverse split in order to maintain a Nasdaq listing
of our Class A Common Stock.
We are also required to maintain net tangible assets of at least
$4,000,000 for Nasdaq National Market, but may only need $2,000,000 to be traded
on the Nasdaq SmallCap Market. Net tangible assets is total assets (excluding
goodwill) minus total liabilities. At September 30, 1998, our net tangible
assets were approximately $4,463,000.
We cannot assure you that our Class A Common Stock will continue to be
quoted on Nasdaq. If we fail to maintain a Nasdaq listing, our securities will
likely be traded on the OTC Bulletin Board. As a result, the market value of our
Class A Common Stock could decline and stockholders may find it more difficult
to dispose of, or to obtain accurate quotations as to the market value of, our
Class A Common Stock.
Unproven Products.
Although we have had recent sales of our TpP(TM) and FiF(TM) kits and
products acquired as part of the acquisition of Stellar, our existing products
and our products under development are subject to the risks inherent in the
development of biotechnology products. In order to finalize these and other
future products for sale, we must complete further research, development and
testing and obtain regulatory clearance. In addition, we must calculate the
costs of large scale manufacturing before any products can deemed to be
commercially viable. We are unable to predict with any degree of certainty when,
or if, we will complete the research, development and testing of products under
development and other future products, or if completed, whether we will obtain
required regulatory approvals. In addition, we cannot assure you that once our
products are developed, tested and approved, that we will be able to produce our
products in commercial quantities at reasonable costs, that our products will be
acceptable to the medical community, or that our marketing and sales efforts
will be successful.
Risks in Developing Our Proposed Products
Our operations are subject to numerous risks associated with the
development of pharmaceutical products, including the competitive and regulatory
environment in which we operate. In addition, we may encounter unanticipated
problems, including development, manufacturing, distribution and marketing
difficulties, some of which may be beyond our financial and technical abilities
to resolve. Accordingly, we cannot assure you that our products will prove to be
commercially viable, or that we will successfully market any products or achieve
significant revenues or profitable operations.
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<PAGE>
Need For Additional Financing.
The research, development, commercialization, manufacturing and
marketing of our products will likely require financial resources significantly
in excess of those presently available to us. We intend to seek additional
financing which may result in (1) borrowings that could affect our results of
operations and create an obligation to repay the loans and (2) the issuance of
additional shares of our capital stock and/or rights to acquire additional
shares of our capital stock. Such additional issuances of capital would result
in a reduction of your percentage interest in the Company. Future issuances
could cause dilution of the interests of the then existing stockholders of the
Company.
We also intend to continue to seek collaborative, licensing,
co-marketing or other arrangements with large pharmaceutical companies or other
third parties to:
o provide additional funding and clinical expertise,
o perform clinical trials necessary to obtain regulatory approvals,
o provide manufacturing expertise, and
o market our products.
These arrangements may result in our sharing the benefits (i.e.,
royalty payments) of our products with such third parties, as well as sharing
with, or relying upon, the management of others for the development, testing
and/or marketing of products.
We cannot assure you that we will be able to arrange financing,
collaborative arrangements or other third party arrangements on acceptable terms
necessary to fully develop and commercialize any of our products.
Possible Effects of Acquisition Strategy
Part of our growth strategy involves the acquisition of companies and
product lines which our management may believe could provide synergisms with our
products and operations or otherwise facilitate our growth. In April 1998, we
acquired all of the issued and outstanding shares of common stock of Stellar Bio
Systems, Inc., a manufacturer and distributor of diagnostic products and
research reagents. In exchange for the shares of Stellar, we paid $120,000 in
cash and issued 398,406 shares of our Class A Common Stock ($700,000 at then
market value). We also agreed to a contingent future payment of up to $650,000
in shares of our Class A Common Stock. The number of shares we may have to issue
depends on the level of Stellar's future revenues and the market price of our
Class A Common Stock at approximately the date of issuance. To date, the
acquisition of Stellar has been our only acquisition.
Any future acquisition may require us to borrow or result in the sale
or issuance of debt or equity securities to private sources or in public
markets. The issuance of any debt could result in the incurrence of significant
interest expense and an obligation to repay such debt. The issuance of equity
could result in substantial dilution in the equity interest of existing
stockholders. Although we are currently engaged in various stages of discussions
with regard to potential acquisitions, we are not presently a party to any
commitment with respect to any acquisition.
We cannot assure you that (1) we will be successful in identifying or
consummating acquisitions on favorable terms, if at all, or in integrating the
operations of Stellar or future acquisitions, or (2) that any businesses we
acquire will achieve sales and profitability that justify our investment.
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<PAGE>
Integration of Acquisitions.
The success of any acquisition will depend in large measure on our
ability to effectively integrate the operations, management and information
systems of the businesses we acquire. The process of integrating acquired
businesses often involves unforeseen difficulties and may require us to devote a
significant amount of our financial and other resources to such projects.
Acquisitions may also involve a number of additional risks, such as adverse
short-term effects on earnings, diversion of management's attention,
unanticipated problems or legal liabilities, and amortization expense for the
amount of the purchase price paid for acquired assets in excess of their fair
value. Some or all of such factors could have a material adverse effect on our
business, financial condition and results of operations.
In addition, to the extent that agreements relating to our acquisitions
provide for reimbursement to us with respect to contingent and other liabilities
of the acquired business, the reimbursement obligations may be, and in the case
of the acquisition of Stellar are, only available for a limited period of time
and are subject to negotiated limitations. Our business, financial condition and
results of operations could be materially and adversely effected if any future
claims or liabilities which we may have relating to acquisitions are not subject
to any reimbursement obligations, or if the amount of claims or liabilities
exceeds the limitations or the ability of the sellers of the acquired entities
to satisfy their reimbursement obligations.
Certain Effects of Government Regulation.
The investigation, manufacture, exportation, marketing and sale of
diagnostic and therapeutic products and vaccines in or from the United States is
subject to regulation by the Food and Drug Administration, as well as by
comparable foreign and state agencies. Noncompliance with applicable
requirements can result in, among other things, fines, injunctions, civil
penalties, recall or seizure of products, total or partial suspension of
production, failure of the government to grant pre-market clearance or
pre-market approval for devices, withdrawal of marketing or manufacturing
approvals, and criminal prosecutions.
Some in vitro diagnostic products are eligible for an accelerated
application process in accordance with Section 510(k) of the 1976 Medical Device
Amendments to the Federal Food, Drug and Cosmetic Act as a product
"substantially equivalent" to another product in commercial distribution in the
United States before May 28, 1976. In October 1996, we received a Section 510(k)
Pre-Market Clearance to market our TpP(TM) test as an aid in the risk assessment
of thrombosis and the monitoring of anticoagulant therapy. We plan to submit
additional pre-market notifications to obtain clearance to market the TpP(TM)
test for additional specific uses. In June 1997, we received Section 510(k)
Pre-Market Clearance to market our FiF(TM) diagnostic test for the quantitative
determination of fibrinogen in human blood.
Obtaining FDA approval and complying with FDA regulation with respect
to in vivo products (such as certain proposed uses of our MH1 product) is far
more expensive and time consuming than the costs associated with the review of
products for in vitro use. Therefore, we intend to seek joint ventures or
licensing arrangements with respect to our in vivo products in order to share
the costs associated with the regulatory review and/or approval process. We
cannot provide any assurance that we will be able to enter into any such
arrangements or that the terms of such agreement will be favorable to us.
Although we have obtained Pre-Market Clearance for some of our existing
products, we cannot assure you that any of our future products will be approved
by the FDA or other applicable foreign regulatory agency. Any FDA, foreign or
state regulatory approvals or clearances, once obtained, can be withdrawn or
modified. Our inability to obtain and maintain, any necessary United States or
foreign clearances or manufacturing and marketing approvals for our products
could have a material adverse effect on our business, financial condition and
results of operations.
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<PAGE>
Dependence on Acceptance by Medical Community.
The commercial success of our products is substantially dependent on
acceptance and use of our products by the medical community. Widespread
acceptance of our products as useful additional tools to diagnosis and treatment
will require educating the medical community about the product's benefits,
reliability and effectiveness. In addition, acceptance of our products may be
adversely affected by competing products which may be as or more effective than
our products for a specific use. Accordingly, we cannot assure you that any of
our products will be accepted by the medical community, or, if accepted, as to
the length of time it would take to gain such acceptance.
Marketing Arrangements or Other Sales Arrangements.
It is our strategy to seek arrangements with large pharmaceutical
companies to market our products. In the event we are unable to enter into such
arrangements in the future or if our arrangements are not successful, we may
seek to market our products through independent distributors. Independent
distributors may require us to develop a marketing program to support sales. In
that event, we may incur additional expenses for the development of promotional
literature and aides, the hiring of sales representatives and the completion of
studies in order to promote the interests of distributors in our products. We
cannot assure you that we will be able to develop such marketing arrangements on
satisfactory terms or that, if necessary, we would have the working capital to
establish the sales support generally required by independent distributors.
Manufacturing Facilities.
Although we are presently producing a limited quantity of monoclonal
antibodies for testing and evaluation of our in vitro products, we cannot
provide any assurance that we will able to either finance or meet FDA
regulations for good manufacturing practices required in order to convert and
operate our current facility for the commercial production of these products.
We do not intend to establish our own manufacturing operations for our
in vivo products unless and until, in the opinion of our management, the size
and scope of our business and our financial resources so warrant. Currently, we
have agreements with manufacturers for the production of each of our antibodies
(MH1 and 45J) and our TpP(TM) and FiF(TM) diagnostic kits.
We intend to seek additional third parties to manufacture our in vivo
monoclonal antibody and other in vivo products, or to enter into a joint venture
or license agreement with a partner who will be responsible for future
manufacturing. Each joint venture partner or contract manufacturer participating
in the manufacturing process of our products must comply with FDA regulations
and file documentation with the FDA to support that part of the manufacturing
process in which it is involved.
We cannot assure you that we will be able to manufacture sufficient
quantities of our in vivo monoclonal antibody necessary to obtain full FDA
clearance or approval, that the FDA will accept our manufacturing arrangements,
or that we will maintain existing commercial manufacturing arrangements or
obtain new agreements on acceptable terms.
Patents and Protection of Proprietary Information.
Our business depends, in part, upon our proprietary technology. We rely
on a combination of trade secret laws, patents, trademarks and confidentiality
and other contractual agreements to establish, maintain and protect our
proprietary rights. However, all afford only limited protection.
We hold fifteen U.S. patents for various products and have additional
patent applications pending with the United States Patent and Trademark Office.
We have also obtained or applied for corresponding patents for certain of the
U.S. patents and patent applications in a limited number of foreign countries.
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With respect to certain aspects of our technology, we rely upon trade
secrets, unpatented proprietary know-how and continuing technological innovation
to protect access to our proprietary information. We have confidentiality and
invention assignment agreements with our employees, and generally enter into
non-disclosure agreements with our scientific consultants and collaborators. All
members of our Scientific Advisory Committee are employed by or have consulting
agreements with third parties, whose business may conflict or compete with our
business, and any inventions discovered by such individuals will not become our
property.
We cannot assure you that our pending patent applications will issue as
patents, that any issued patent will provide us with significant competitive
advantages or that challenges will not be instituted against the validity or
enforceability of any of our patents. Because foreign patents may afford less
protection under foreign law than is available under U.S. patent law, we cannot
assure that any such patents issued to us will adequately protect our
proprietary information. In addition, other companies may independently develop
similar or more advanced products, design patentable alternatives to our
products or duplicate our trade secrets, and our employees and collaborators
could breach their confidentiality agreements. Also, we may be required, in some
cases, to obtain licenses from third-parties or to redesign our products or
processes to avoid infringement. Any litigation by us to seek to protect our
intellectual property or against us, would be costly and could divert the
efforts and attention of our management and technical personnel, which could
have a material adverse effect on our business, financial condition and results
of operations.
Many of our therapeutic compounds are the subject of patent
applications which we license from various academic institutions. Such licenses
require us to pay royalties on the sales of products. We cannot assure you that
these licensed products will be commercially viable or that the licenses will
not be terminated.
Competition; Rapid Technological Changes.
The biotechnology industry is characterized by rapid technological
advances, evolving industry standards and technological obsolescence. Several of
our competitors, including large pharmaceutical, chemical, biotechnology and
agricultural concerns, universities and other research institutions, have
financial resources and research and development staffs and facilities
substantially greater than ours. Our competitors may develop products which may
render our products obsolete or which have advantages over our products, such as
greater accuracy and precision or greater acceptance by the medical community.
Competing products may also get through the regulatory approval process sooner
than our products, thereby enabling our competitors to market their products
earlier than we can. Usually, the first person to market a product has a
significant marketplace advantage. In addition, other products now in use,
presently undergoing the regulatory approval process, or under development by
others, may perform similar functions as our existing products or those under
development.
Any technical advisory issued by our competitors or our inability to
meet and surpass our competitors' technological advances, could have a material
adverse effect on our business, financial condition and results of operations.
Retention and Attraction of Key Personnel.
Our success depends to a significant extent upon the efforts of (1)
Alfred J. Roach, the Chairman of our Board of Directors and one of our major
stockholders, (2) Mr. John S. North, our President and Chief Executive Officer,
and (3) Dr. Emer Leahy, our Senior Vice President-Business Development. Mr.
Roach is not subject to any employment agreement. Our employment agreement with
Mr. North expires on November 15, 2001 and our employment agreement with Dr.
Leahy expires on November 30, 2001. We do not maintain life insurance on the
lives of Mr. Roach, Mr. North or Dr. Leahy. The loss of the services of Mr.
Roach, Mr. North or Dr. Leahy, as well as certain other personnel, could
adversely affect our business and prospects. Because of the nature of our
business, our success is dependent upon our ability to attract and retain
technologically qualified personnel, particularly research scientists. There is
substantial competition for qualified personnel, including competition from
companies with substantially greater resources than ours. We cannot assure you
that we will be successful in recruiting or retaining personnel of the requisite
caliber or in adequate numbers to enable us to conduct our business and
effectively compete in our industry.
- 10 -
<PAGE>
Scientific Advisors to the Company.
We have a Scientific Advisory Committee which consists of scientific
advisors who serve as consultants with respect to the fields of microbiology,
immunology and molecular biology and in cardiovascular disease, hepatic disease
and drug development. These scientists are employed by or work for others, and
they are expected to devote only a small portion of their time to our projects.
In addition, these individuals have employment, consulting or other advisory
arrangements with other entities. As a result, their obligations to these other
entities may conflict or compete with their obligations to us. Regulations,
corporate policies or agreements to which these individuals are or may become
subject with such other entities may limit the ability of the scientific
advisors to continue their relationship with us.
Product Liability; Requirement for Insurance Coverage.
The testing, marketing and sale of pharmaceutical products carries with
it a risk of product liability claims by consumers and others. Instances of
negative reactions by the human immune system to mouse derived antibodies, such
as those generated from our MH1 antigen-free mouse colony, have been reported.
In addition, product and other liability claims may be asserted by physicians,
laboratories, hospitals or patients relying upon the results of our diagnostic
tests. Claims may also be asserted against us by end users of our products,
including persons who may be treated with any in vivo diagnostic or therapeutic
products.
Certain distributors of pharmaceutical products require minimum product
liability insurance coverage as a condition to their purchase of or acceptance
of products for distribution. Our failure to satisfy these insurance
requirements could diminish our ability to achieve broad distribution of our
products which, in turn, would have a material adverse effect upon our business,
financial condition and results of operations.
We have product liability insurance which covers our TpP(TM) and
FiF(TM) products, but do not maintain product liability insurance coverage for
our other products. Although we plan to obtain product liability insurance prior
to the marketing of any of our proposed products, we cannot assure you that we
will be able to secure such insurance or, that if we can obtain insurance, that
insurance can be acquired at a reasonable cost or that our existing or future
insurance policies will be sufficient to cover all possible liabilities. In the
event of any claim or suit against us, lack or insufficiency of insurance
coverage could have a material adverse effect on our business, financial
condition and results of operations.
No Dividends.
The holders of Class A and Class B Common Stock are entitled to receive
dividends when, as and if declared by the Board of Directors out of funds
legally available for dividend payments. To date, we have not paid any cash
dividends. The payment of dividends, if any, in the future is within the
discretion of our Board of Directors and will depend upon our earnings, capital
requirements and financial condition, and other relevant factors. Our Board of
Directors does not intend to declare any dividends in the foreseeable future,
but intends to retain all earnings, if any, for use in our business operations.
Control By Alfred J. Roach.
As of December 15, 1998, Alfred J. Roach, the Chairman of our Board of
Directors, owned and had the power to vote all 3,000,000 outstanding shares of
our Class B Common Stock and 4,035,250 shares of our Class A Common Stock, of
which 4,000,000 shares are covered by this Prospectus. Each share of Class B
Common Stock is entitled to ten votes, while each share of Class A Common Stock
is entitled to one vote. Accordingly, at such date, Mr. Roach was entitled to
cast approximately 51.9% of all votes at meetings or by consent without a
meeting. As a result, Mr. Roach will be able to exercise significant control
over the Company through his ability to determine the outcome of votes of
stockholders regarding, among other things, nomination and election of directors
and approval of significant transactions. In addition, Mr. Roach holds options
to purchase an additional 1,160,000 shares of our Class A Common Stock which he
may exercise at any time.
- 11 -
<PAGE>
Dilution; Potential Issuances of Shares.
As of December 15, 1998, we had issued and outstanding:
o 35,559,556 shares of Class A Common Stock, and
o 3,000,000 shares of Class B Common Stock.
At that date, there were an additional 9,237,445 shares of Class A
Common Stock reserved for possible future issuances as follows:
o 3,000,000 shares for issuance upon conversion of the
outstanding Class B Common Stock;
o 2,790,500 shares for issuance upon the exercise of outstanding
options under our 1986 Stock Option Plan. These options are
exercisable at prices ranging from $1.50 to $10.00 per share;
o 2,000,000 shares for issuance upon the exercise of presently
outstanding options or options which may be granted in the
future under our 1996 Stock Option Plan. Options to purchase
1,487,750 shares were outstanding at December 15, 1998. These
options are exercisable at prices ranging from $0.25 to $5.25
per share;
o 487,500 shares for issuance upon the exercise of presently
outstanding options or options which may be granted in the
future under our 1993 Non-Employee Director Stock Option Plan.
Options to purchase 120,000 shares are were outstanding at
December 15, 1998. These options are exercisable at prices
ranging from $1.00 to $6.75 per share and
o 959,445 shares for issuance upon exercise of other outstanding
warrants and options held by unaffiliated third parties. These
warrants and options are exercisable at prices ranging from
$0.75 to $4.25 per share.
The issuance of reserved shares would dilute the equity interest of
existing stockholders and could have a significant adverse effect on the market
price of our Class A Common Stock. See "--Shares Eligible for Future Sale."
Shares Eligible For Future Sale.
Future sales of substantial amounts of shares in the public market, or
the perception that such sales could occur, could adversely affect the market
price of our Class A Common Stock.
As of December 15, 1998, we had outstanding 38,559,556 shares,
consisting of 35,559,556 shares of Class A Common Stock and 3,000,000 shares of
Class B Common Stock. Shares of Class B Common Stock are convertible into Class
A Common Stock on a share for share basis. Of our outstanding shares,
approximately 20,705,368 shares of Class A Common Stock are presently freely
transferable without restriction under the Securities Act.
Of the remaining 14,854,188 outstanding shares (including the 3,000,000
shares of Class A Common Stock issuable upon conversion of Class B Common
Stock):
o 10,800,000 are "restricted securities" issued in October 1998;
o 600,438 shares are "restricted securities" issued between
February 1997 and December 1998; and
o 3,453,750 shares are held by persons who may be deemed to be our
"affiliates". Of these shares, 1,534,500 are "restricted
securities" issued between November 1997 and October 1998. The
- 12 -
<PAGE>
remaining 1,919,250 of such shares are "restricted securities"
that were acquired more than two years ago or are not "restricted
securities" because they were acquired in the market or pursuant
to a registration statement under the Securities Act.
In general, an "affiliate" is a person with the power to manage and
direct our policies. The SEC has stated that, generally, executive officers and
directors of an entity are deemed affiliates of the entity.
"Restricted securities" may be (1) sold pursuant to a Prospectus under
an effective registration statement under the Securities Act, (2) in compliance
with the exemption provisions of Rule 144 or (3) pursuant to another exemption
under the Securities Act. Rule 144 permits sales of "restricted securities" by
any person (whether or not an affiliate) after one year, at which time sales can
be made subject to the Rule's volume and other limitations and after two years
by non-affiliates without adhering to Rule 144's volume or other limitations.
Shares of our Class A Common Stock owned by our "affiliates" which are not
"restricted securities" may be sold at any time by complying with Rule 144's
volume and other limitations.
We have registered the following under the Securities Act for resale at
any time or from time to time:
o The 10,800,000 "restricted" shares of Class A Common Stock that
are covered by this Prospectus;
o 398,406 "restricted" shares of Class A Common Stock issued in
April 1998 in consideration for our acquisition of Stellar Bio
Systems, Inc.;
o 5,000 "restricted" shares of Class A Common Stock issued in June
1996;
o 25,000 shares of Class A Common Stock subject to an option held
by a former consultant; and
o 100,000 shares of Class A Common Stock subject to options held
by another former consultant.
All of these registered shares will also be freely transferable without
restriction under the Securities Act subject to applicable Prospectus delivery
requirements. In addition, all shares issuable upon the exercise of options
under our stock option plans have been registered under the Securities Act for
issuance and, unless held by our "affiliates", will be freely tradable upon
issuance. If acquired by our "affiliates," shares issued upon the exercise of
those options will not be "restricted securities" and, therefore, could be sold
at any time by complying with Rule 144's volume and other limitations. See " - -
Dilution; Potential Issuances of Shares."
Possible Volatility of Our Stock Price
The stock market and the price of our Class A Common Stock may be
subject to volatile fluctuations based on general economic and market
conditions, as well as our meeting expectations of our performance, including
the development and commercialization of our products and proposed products. The
price of our Class A Common Stock can also be affected by the number of shares
in the market at the time, as well as a perception of such number, including the
shares covered by this Prospectus. In addition, stock market volatility has had
a significant effect on the market prices of securities issued by many companies
for reasons unrelated to the operating performance of these companies. In the
past, following periods of volatility in the market price of a company's
securities, securities class action litigation has often been instituted against
such a company. If similar litigation were instituted against us, it could
result in substantial costs and a diversion of our management's attention and
resources, which could have an adverse effect on our business.
Year 2000 Issues
Historically, certain computerized systems have used two digits rather
than four to define the applicable year. Computer equipment and software and
devices with imbedded technology that are time-sensitive may recognize a date
using "00" as the year 1900 rather than the year 2000, resulting in system
failure or miscalculations. This problem is generally referred to as the "Year
2000 issue."
- 13 -
<PAGE>
We are in the process of assessing the impact of the Year 2000 issue on
our information systems. We have identified potential deficiencies and are
addressing them through updates and remediation. In accordance with accounting
rules, costs associated with modifying existing computer software for Year 2000
issues will be expensed as incurred. We are also in the process of assessing the
measures being taken by our customers and suppliers to address the Year 2000
issues. We are not dependent on any one customer or supplier and our management
believes that alternate sources of supply for product components are widely
available. We do not expect the cost of implementing the upgrades and
remediations to be material.
USE OF PROCEEDS
The Selling Stockholders are selling all of the Shares covered by this
Prospectus for their own account. Accordingly, we will not receive any proceeds
from the resale of the Shares.
We received $2,700,000 in proceeds from our sale of the Shares to the
Selling Stockholders. We used the proceeds, together with $1,152,000 of our
funds, to repurchase:
o the remaining 5% Convertible Debentures with an outstanding
principal amount of $3,248,000 plus interest and a 16% premium of
the principal amount; and
o outstanding Warrants to purchase 261,228 of our Class A Common
Stock at an exercise price of $1.9141 per share.
We had issued these Debentures and Warrants in a private placement in
May 1998.
We will bear the expenses relating to this registration, other than
discounts and commissions, which will be paid by the Selling Stockholders.
- 14 -
<PAGE>
SELLING STOCKHOLDERS
We issued the shares of Class A Common Stock covered by this Prospectus
to the Selling Stockholders on October 27, 1998 in a private placement
transaction. Under the terms of the private placement, we issued 10,800,000
shares of Class A Common Stock to the Selling Stockholders at a price of $0.25
per share. At the time of the issuances, the price per share of our Class A
Common Stock was $0.19. We agreed to register the Shares issued in the private
placement under the Securities Act at our expense, other than selling discounts
and commissions.
The following table lists certain information regarding the Selling
Stockholders' ownership of Shares of our Class A Common Stock as of December 15,
1998, and as adjusted to reflect the sale of the Shares. Information concerning
the Selling Stockholders may change from time to time. See "Plan of
Distribution."
<TABLE>
<CAPTION>
Shares of Class A
Shares of Class A Common Stock
Common Stock Shares to be Beneficially
Beneficially Owned Offered Owned After
Name of Selling Stockholder Prior to Offering Hereunder Offering
--------------------------- ------------------- --------- ---------
<S> <C> <C> <C>
Alfred J. Roach.................................. 8,195,250 (1) 4,000,000 4,195,250 (1)
Larry Kupferberg................................. 522,200 (2) 400,000 122,200 (2)
Donehew Fund Limited Partnership................. 290,000 240,000 50,000
David Biggs...................................... 40,000 40,000 0
Robert Donehew................................... 90,000 80,000 10,000
R. Dave Garwood.................................. 50,000 40,000 10,000
The Rachel Beth Heller 1997 Trust Lawrence
Kupferberg, TTEEU/A dtd 7/9/97................. 400,000 400,000 0
The Evan Todd Heller 1997 Trust Lawrence
Kupferberg, TTEE U/A dtd 6/17/97.............. 400,000 400,000 0
Delaware Charter Guarantee &Trust
Company F/B/O Ronald I. Heller - IRA.......... 642,075 (3) 600,000 42,075 (3)
Delaware Charter Guarantee & Trust
Company F/B/O David S. Nagelberg - IRA........ 1,242,075 (4) 1,200,000 42,075 (4)
Tyler Runnels 292,700 280,000 12,700
Kevin Charos & Anthony Charos JTTEN.............. 200,000 200,000 0
Delaware Charter Guarantee & Trust
Company F/B/O Martin H. Meyerson -
IRA........................................... 100,000 100,000 0
</TABLE>
- 15 -
<PAGE>
<TABLE>
<CAPTION>
Shares of Class A
Shares of Class A Common Stock
Common Stock Shares to be Beneficially
Beneficially Owned Offered Owned After
Name of Selling Stockholder Prior to Offering Hereunder Offering
--------------------------- ------------------- --------- ---------
<S> <C> <C> <C>
Kenneth Koock.................................... 120,000 120,000 0
Jacqueline Knapp................................. 790,000 790,000 0
Janice Halle-Nesses.............................. 790,000 790,000 0
John Davies...................................... 160,000 160,000 0
Invest, Inc...................................... 160,000 160,000 0
Peter Janssen.................................... 800,000 800,000 0
------- ------- ------
Total 15,284,300 10,800,000 4,484,300
</TABLE>
- ------------
(1) Includes 3,000,000 shares of Class A Common Stock issuable upon
conversion of currently outstanding Class B Common Stock and 1,160,000
shares of Class A Common Stock issuable upon exercise of presently
exercisable options.
(2) Does not include 400,000 shares of Class A Common Stock beneficially
owned by the Evan Todd Heller 1997 Trust and 400,000 shares of Class A
Common Stock beneficially owned by the Rachel Beth Heller 1997 Trust,
which are listed separately below. Mr. Kupferberg is the trustee of
those trusts.
(3) Includes 42,075 shares of Class A Common Stock issuable upon exercise
of presently exercisable warrants beneficially owned by Mr. Heller.
Those warrants are exercisable at $.075 per share.
(4) Includes 42,075 shares of Class A Common Stock issuable upon exercise
of presently exercisable warrants beneficially owned by Mr. Nagelberg.
Those warrants are exercisable at $.075 per share.
Each of Messrs. Heller, Nagelberg, Koock and Meyerson are employees of
M.H. Meyerson, a financial advisor of ours since August 1998.
- 16 -
<PAGE>
PLAN OF DISTRIBUTION
The Selling Stockholders and their pledgees, donees, transferees and
other successors in interest, may offer their Shares at various times in or more
of the following transactions:
o in the over-the-counter market; or
o in privately negotiated transactions
at prevailing market prices at the time of sale, at prices related to such
prevailing market prices, at negotiated prices or at fixed prices.
The Selling Stockholders may also sell the Shares under Rule 144
instead of under this Prospectus, if Rule 144 is available for such sales.
The transactions in the Shares may be effected by one or more of the
following methods:
o ordinary brokerage transactions and transactions in which the
broker solicits purchasers;
o purchases by a broker or dealer as principal, and the resale by
such broker or dealer for its account pursuant to this Prospectus,
including resale to another broker or dealer;
o block trades in which the broker or dealer will attempt to sell
the Shares as agent but may position and resell a portion of the
block as principal in order to facilitate the transaction; or
o negotiated transactions between Selling Stockholders and purchasers
without a broker or dealer.
The Selling Stockholders and any broker-dealers or other persons acting
on the behalf of parties that participate in the distribution of the Shares may
be deemed to be underwriters. As such, any commissions or profits they receive
on the resale of the Shares may be deemed to be underwriting discounts and
commissions under the Securities Act.
As of the date of this Prospectus, we are not aware of any agreement,
arrangement or understanding between any broker or dealer and any of the Selling
Stockholders with respect to the offer or sale of the Shares pursuant to this
Prospectus.
We have advised the Selling Stockholders that during the time each is
engaged in distributing Shares covered by this Prospectus, each must comply with
the requirements of the Securities Act and Rule 10b-5 and Regulation M under the
Exchange Act. Under such rules and regulations, they:
o may not engage in any stabilization activity in connection with
our securities;
o must furnish each broker which offers Class A Common Stock covered
by this Prospectus with the number of copies of this Prospectus
which are required by each broker; and
o may not bid for or purchase any of our securities or attempt to
induce any person to purchase any of our securities other than as
permitted under the Exchange Act.
In the Purchase and Investment Agreements we executed in connection
with the October 1998 private placement we agreed to indemnify and hold harmless
each Selling Stockholder against certain liabilities, including liabilities
under the Securities Act, which may be based upon, among other things, any
untrue statement or alleged untrue statement of a material fact or any omission
or alleged omission of a material fact, unless made or omitted in reliance upon
written information provided to us by that Selling Stockholder. We have agreed
to bear the expenses incident to the registration of the Shares, other than
selling discounts and commissions.
- 17 -
<PAGE>
LEGAL MATTERS
The validity of the shares of Class A Common Stock being offered will
be passed upon for the Company by Parker Chapin Flattau & Klimpl, LLP.
EXPERTS
The audited consolidated financial statements, including the related
notes thereto, incorporated by reference in this Prospectus and elsewhere in the
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto. Such
financial statements and report are incorporated by reference herein in reliance
upon the authority of said firm as experts in accounting and auditing in giving
said reports.
- 18 -
<PAGE>
======================================== ==================================
We have not authorized any dealer, 10,800,000 Shares
salesperson or any other person to give
any information or to represent anything
not contained in this Prospectus. You
must not rely on any unauthorized American Biogenetic Sciences, Inc.
information. This Prospectus does not
offer to sell or buy any shares in any
jurisdiction where it is unlawful. The
information in this Prospectus is Class A Common Stock
current as of _____________, 1999.
--------------------- --------------------
TABLE OF CONTENTS PROSPECTUS
--------------------- ---------------------
Page
----
Where You Can Find More
Information About Us...............2
Prospectus Summary.....................3
Risk Factors...........................5
Use of Proceeds.......................14
Selling Stockholders .................15
Plan of Distribution .................17
Legal Matters.........................18
Experts ..............................18 ________ __, 1999
======================================== ==================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
Set forth below is an estimate of the fees and expenses payable in
connection with the proposed offering of the Shares which will be paid by the
Company.
SEC Registration Fee..............................$ 2,580.17
Accounting Fees and Expenses......................$ 3,500.00
Legal Fees and Expenses...........................$ 7,500.00
Miscellaneous.....................................$ 1,419.83
----------
TOTAL........................................$15,000.00
Item 15. Indemnification of Directors and Officers
Section 145 of the General Corporation Law of the State of Delaware
(the "DGCL") provides, in general, that a corporation incorporated under the
laws of the State of Delaware, such as the Registrant, may indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding (other than a derivative action
by or in the right of the corporation) by reason of the fact that such person is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such person's
conduct was unlawful. In the case of a derivative action, a Delaware corporation
may indemnify any such person against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
court determines such person is fairly and reasonably entitled to indemnity for
such expenses.
Article VII of the registrant's By-laws provides for indemnification of
directors, officers, employees and agents of the Company to the fullest extent
permitted under Delaware law. In addition, Article TENTH of the registrant's
Restated Certificate of Incorporation provides, in general, that no director of
the registrant shall be personally liable to the registrant or any of its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL (which provides that under certain circumstances,
directors may be jointly and severally liable for willful or negligent
violations of the DGCL provisions regarding the payment of dividends or stock
repurchases or redemptions), as the same exists or hereafter may be amended, or
(iv) for any transaction from which the director derived an improper personal
benefit.
Pursuant to the Purchase and Investment Agreements between the Company
and each Selling Stockholder, the Company has agreed to indemnify and hold
harmless the Selling Stockholder, its officers, directors and partners and each
person controlling such Selling Stockholder (within the meaning of the
Securities Act) and each underwriter, if any, and each person who so controls
any underwriter against all, claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based upon any untrue
II-1
<PAGE>
statement (or alleged untrue statement) of a material fact contained in the
Registration Statement (including any prospectus or other document incident to
any such registration or related qualification or compliance with state
securities laws) or based on any omission (or alleged omission) to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading or any violation by the Company of the
Securities Act or any state securities law, relating to any action or inaction
required by the Company in connection with any such registration, qualification
or compliance, and to reimburse each such indemnified person for any legal and
other expenses reasonably incurred in connection with investigating and
defending any such claim, loss, damages, liabilities or action; provided that
the Company will not be liable in any such case to the extent that any such
claim, loss, damage, liabilities or expense arises out of or is based on any
untrue statement or omission (or alleged untrue statement or omission) made in
reliance upon and in conformity with written information furnished to the
Company by any indemnified person stated to be specifically for use in the
Registration Statement (as to which the Selling Stockholders have agreed to
indemnify the Company, its officers and directors and each person who controls
the Company or such Underwriter).
The Company has purchased a Directors and Officers Liability and
Reimbursement policy that covers certain liabilities of directors and officers
of the Company arising out of claims based upon acts or omissions in their
capacities as directors and officers.
Item 16. Exhibits
Exhibit
Number
- -------
3.1 Restated Certificate of Incorporation of the Company, as filed
with the Secretary of State of the State of Delaware on July 30,
1996 (filed as Exhibit 4.01 to the Company's Registration
Statement on Form S-8, File No. 333-09473).*
3.2 Amended and Restated By-Laws of the Company (filed as Exhibit
4.02 to the Company's Registration Statement on Form S-8, File
No. 333-09473).*
5 Opinion of Parker Chapin Flattau & Klimpl, LLP to the legality of
the Class A Common Stock being offered.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Parker Chapin Flattau & Klimpl, LLP (contained in
Exhibit 5).
24 Power of Attorney (contained on Signature Page of this
Registration Statement)
99 Form of Purchase and Investment Agreement executed by the Company
and each of the Selling Stockholders on October 27, 1998.
- -----------------------
* Not filed herewith. In accordance with Rule 411 promulgated pursuant to the
Securities Act of 1933, as amended, reference is made to the documents
previously filed with the Commission, which are incorporated by reference
herein.
II-2
<PAGE>
Item 17. Undertakings
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the Registration Statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in this Registration Statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do
not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the Registrant's By-Laws, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Copiague, State of New York, on the 23rd day of
December, 1998.
AMERICAN BIOGENETIC SCIENCES, INC.
By: /s/ Alfred J. Roach
--------------------------
Alfred J. Roach,
Chairman of the Board
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below
constitutes and appoints each of Alfred J. Roach, Josef C. Schoell and Timothy
J. Roach and each of them with power of substitution, as his attorney-in-fact,
in all capacities, to sign any amendments to this registration statement
(including post-effective amendments) and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that said
attorney-in-facts or their substitutes may do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the 23rd day of December, 1998.
Signature Title
--------- -----
/s/ Alfred J. Roach
- -------------------------------------
Alfred J. Roach Chairman of the Board, Director
/s/ John S. North
- ------------------------------------- President, Chief Executive Officer,
John S. North Director
/s/ Josef C. Schoell
- ------------------------------------- Vice President-Finance (Principal
Josef C. Schoell Financial and Accounting Officer)
/s/ Gustav Victor Rudolph Born
- -------------------------------------
Gustav Victor Rudolph Born Director
/s/ Ellena M. Byrne
- -------------------------------------
Ellena M. Byrne Director
/s/ Joseph C. Hogan
- -------------------------------------
Joseph C. Hogan Director
/s/ Timothy J. Roach
- -------------------------------------
Timothy J. Roach Director
/s/ William G. Sharwell
- -------------------------------------
William G. Sharwell Director
II-4
<PAGE>
EXHIBIT INDEX
Exhibit
Number
- -------
3.1 Restated Certificate of Incorporation of the Company, as filed
with the Secretary of State of the State of Delaware on July 30,
1996 (filed as Exhibit 4.01 to the Company's Registration
Statement on Form S-8, File No. 333-09473).*
3.2 Amended and Restated By-Laws of the Company (filed as Exhibit
4.02 to the Company's Registration Statement on Form S-8, File
No. 333-09473).*
5 Opinion of Parker Chapin Flattau & Klimpl, LLP to the legality of
the Class A Common Stock being offered.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Parker Chapin Flattau & Klimpl, LLP (contained in
Exhibit 5).
24 Power of Attorney (contained on Signature Page of this
Registration Statement)
99 Form of Purchase and Investment Agreement executed by the Company
and each of the Selling Stockholders on October 27, 1998.
- -----------------------
* Not filed herewith. In accordance with Rule 411 promulgated pursuant to the
Securities Act of 1933, as amended, reference is made to the documents
previously filed with the Commission, which are incorporated by reference
herein.
EXHIBIT 5
PARKER CHAPIN FLATTAU & KLIMPL LLP.
1211 Avenue of the Americas
New York, NY 10036
(212) 704-6000
December 23, 1998
American Biogenetic Sciences, Inc.
1375 Akron Street
Copiague, New York 11726
Gentlemen:
We have acted as counsel to American Biogenetic Sciences, Inc, a
Delaware corporation (the "Company"), in connection with a Registration
Statement on Form S-3 (the "Registration Statement") being filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended,
covering an aggregate of 10,800,000 shares (the "Shares") of the Company's Class
A Common Stock, $.001 par value, issued in a private placement transaction in
October 1998 (the "Private Placement").
In connection with the foregoing, we have examined originals or copies,
satisfactory to us, of all such corporate records and of all such agreements,
certificates and other documents as we have deemed relevant and necessary as a
basis for the opinion hereinafter expressed. In such examination, we have
assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as originals and the conformity with the original documents of
all documents submitted to us as copies or facsimiles. As to any facts material
to such opinion, we have, to the extent that relevant facts were not
independently established by us, relied on certificates of public officials and
certificates of officers or other representatives of the Company.
Based upon and subject to the foregoing, we are of the opinion that the
Shares are validly issued, fully paid and non-assessable.
We hereby consent to the use of our name under the caption "Legal
Matters" in the Prospectus constituting a part of the Registration Statement and
to the filing of this opinion as an exhibit to the Registration Statement.
Very truly yours,
/s/ Parker Chapin Flattau & Klimpl, LLP
PARKER CHAPIN FLATTAU & KLIMPL, LLP
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our report dated February 18, 1998,
included in American Biogenetic Sciences, Inc.'s Form 10- K for the year ended
December 31, 1997, and to all references to our firm included in this
Registration Statement.
/s/ Arthur Andersen LLP
Melville, New York
December 23, 1998
EXHIBIT 99
FORM OF PURCHASE AND INVESTMENT AGREEMENT
October 27, 1998
American Biogenetic Sciences, Inc.
1375 Akron Street
Copiague, NY 11726
Gentlemen:
The following will constitute our agreement between American Biogenetic
Sciences, Inc. ("Company") and the undersigned (the "Purchaser").
1. Purchaser purchases from the Company _______________ shares of the
Company's Class A Common Stock, $.001 par value, (the "Shares") at a price of
$0.25 per share, for a total purchase price of
$---------------.
2. The company shall deliver to Purchaser a certificate registered in
the name of Purchaser, representing the Share within five (5) business days
after Purchaser shall have paid to the Company the full purchase price of the
Shares of Common Stock in the above amount payable to the Company.
3. To induce the Company to issue the Shares, Purchaser represents that
(a) Purchaser is acquiring the Shares for investment only and not with a view to
the distribution of all or any part thereof, as the phrases "investment only"
and "distribution" have meaning under the Securities Act of 1933, as amended
(the "Act"); and (b) Purchaser has been informed that the Shares have not been
registered under the Act; that the Shares must be held unless they are
subsequently registered under the Act or an exemption from such registration is
available; that any sales of the Shares made in reliance upon Rule 144 of the
Securities and Exchange Commission (the "Commission") can be made only in
amounts in accordance with the terms and conditions of that rule; that in case
the rule is not applicable to a disposition of the Shares, compliance with
Regulation A of the Commission of some other disclosure exemption will be
required; and that the Company is under no obligation to register the Shares
under the Act.
4. In connection with the purchase of the Shares, the Purchaser
acknowledges that the Company will be relying on the information and on the
representations set forth herein, and represents, warrants, agrees and
acknowledges that:
(a) The Purchaser is an Accredited Investor under rule 501(a) of
Regulation under the Securities Act of 1933, as amended.
(b) the Purchaser has had substantial experience in previous
private and public purchases of securities and has sufficient
knowledge and experience in financial and business matters so
that the Purchaser is able to evaluate, alone, the merits and
risks of purchasing the Shares;
(c) The Purchaser does not require the funds being used to
purchase the shares for liquidity needs, has adequate means to
provide for the Purchaser's personal needs, possesses the
ability to bear the economic risk of holding the Shares
indefinitely, and can afford a complete loss on the purchase
of the Shares; and
<PAGE>
(d) Purchaser has received a copy of the company's Form 10-K for
the year ended December 31, 1997, its Quarterly Reports of
Form 10-Q, for the periods ending March 31, 1998 and June 30,
1998, its proxy statement for the 1998 Annual Meeting of
Stockholders and all reports on Form 8-K filed since January
1, 1998 (collectively "SEC Reports"), has had an opportunity
to obtain such additional information necessary to verify the
accuracy of and to appropriately supplement the information
set forth in such SEC Reports as Purchaser has requested
through discussions with officers and directors of the
Company. The Purchaser does not require any other documents or
information prior to completing the Purchase of the Shares.
5. Purchaser agrees that the certificates evidencing the Shares may
bear the following legend restricting their transferability under the Act:
LEGEND
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED ("ACT"). NO SALE, OFFER TO SELL OR TRANSFER OF THE SHARES
REPRESENTED BY THIS CERTIFICATE SHALL BE MADE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER THE ACT, OR AN
OPINION OF COUNSEL TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED
UNDER THE ACT.
6. Purchaser agrees to give the Company written notice before effecting
any proposed disposition of the Shares, describing therein the manner of
proposed disposition and such other information as the Company or its Counsel
may request. Such notice shall not contain any untrue statement nor omit any
statement necessary to make the statements made not false or misleading.
7. This Agreement may not be changed unless in writing and signed by
both parties and supersedes all prior agreements between the parties with
respect to its subject matter. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York. A signed
photocopy or facsimile copy of the Agreement is valid and binding as if it were
an original.
8. The Company shall register under a registration statement
("Registration Statement") filed pursuant to the Act and such state "Blue Sky"
laws of those states as are reasonably selected by the Purchaser, the Shares
(hereinafter, the "Registrable Securities"). The Company agrees to file the
Registration Statement on or before 60 days of the date hereof. The Company
agrees to use its best efforts to have the Registration Statement declared
effective within six months of the date hereof. The Company shall keep the
Registration Statement effective and current until all the securities registered
thereunder are sold or until all such securities may be sold by the Purchasers
thereof under Rule 144 without volume limitations.
The Company shall bear all the expenses and pay all the fees
it incurs in connection with the preparation, filing and modification or
amendment of the Registration Statement with the Securities and Exchange
Commission, selected states and the NASD, including but not limited to all
registration and filing fees, printing expenses, fees and disbursements of
counsel and the fees and disbursements of one counsel, selected by a majority of
the Purchasers, to review the Registration Statement and assist in the clearance
of the registration with the NASD. Moreover, if the Company willfully fails to
comply with the provisions of this Section 8, the Company shall, in addition to
any other equitable or other relief available to the Purchaser, be liable for
any and all incidental, special and consequential damages and damages due to
loss of profits sustained by the Purchaser.
To the extent permitted by law, the Company will indemnify and
hold harmless each holder of the Registrable Securities ("Holder"), the officers
and directors of each Holder and each person, if any, who controls such Holder
within the meaning of the Act or Securities Exchange Act of 1934, as amended
("Exchange Act") against any losses, claims, damages, or liabilities to which
they may become subject under the Act, the Exchange Act or any state securities
law or regulation (including all reasonable attorneys' fees and other expenses
<PAGE>
reasonably incurred in investigating, preparing or defending against any claim
whatsoever incurred by the indemnified party in any action or proceeding between
the indemnitor and indemnified party or between the indemnified party and any
third party or otherwise) to which any of them may become subject under the Act,
the Exchange Act or any other statute or common law or otherwise under the laws
of foreign countries, arising from such registration statement or based upon any
untrue statement or alleged untrue statement of a material fact contained in (i)
any preliminary prospectus, the registration statement or prospectus (as from
time to time each may be amended and supplemented); (ii) in any post-effective
amendment or amendments or any new registration statement and prospectus in
which it included the Registrable Securities; or (iii) any application or other
document or written communication (collectively called "application") executed
by the Company or based upon written information furnished by the Company in any
jurisdiction in order to qualify the Registrable Securities under the securities
laws thereof or filed with the Securities and Exchange Commission, any state
securities commission or agency, Nasdaq or any securities exchange; or the
omission or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, unless such statement
or omission is made in reliance upon, and in strict conformity with, written
information furnished to the Company with respect to such Holder expressly for
use in any preliminary prospectus, such registration statement or prospectus, or
any amendment or supplement thereof, or in any application, as the case may be.
The Company agrees promptly to notify the Holder of the Registrable Securities
of the commencement of any litigation or proceedings against the Company or any
of its officers, directors or controlling persons in connection with the issue
and sale or resale of the Registrable Securities or in connection with any such
registration statement or prospectus.
9. The Company represent and warrants: (a) that the SEC Reports taken
as a whole, do not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; (b) that the Shares have been duly and validly authorized and,
upon payment therefore in accordance with the terms of this Agreement, will be
fully paid and nonassessable; and (c) this Agreement has been duly authorized,
executed and delivered by the Company and is a legal, valid and binding
obligation of the Company enforceable in accordance with its terms.
10. The Company covenants and agrees that (a) the proceeds of the sale
of the Shares will be used solely for the purpose of redeeming the Company's
outstanding convertible debentures ("Debentures") within 30 days of the date
hereof; and (b) it shall take such action as is necessary to have the Shares
approved for listing on the Nasdaq National Market System promptly after the
date hereof. If the Company does not redeem the Debentures within such 30 day
period, the Purchaser shall have the right to rescind the purchase within 60
days thereafter and the Company shall be required to purchase the Shares from
each rescinding Purchaser.
This letter serves as an offer by the undersigned to purchase the
Shares and is subject to acceptance by the Company.
American Biogenetic Sciences, Inc. Purchaser
By: ______________________ _____________________________
Name: Josef C. Schoell Name: Signature
Title: Vice President Finance Name Printed: _______________
Address: _________________
_________________
Soc. Sec. No.: ______________
