SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
Amendment No. 1
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 March 31, 1998 Commission File Number 0-19041
American Biogenetic Sciences, Inc.
(Exact name of registrant as specified in its charter)
Delaware 11-2655906
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
1375 Akron Street 516-789-2600
Copiague, New York 11726 (Telephone number)
(Address of Principal Executive Offices)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days YES X NO
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at May 8, 1998
Class A Common Stock, par value $.001 20,117,455
Class B Common Stock, par value $.001 1,775,500
<PAGE>
AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARY
(a development stage company)
Form 10-Q for the Quarter Ended March 31, 1998
INDEX
Part I - FINANCIAL INFORMATION
Item 1: Financial Statements: Page No.
Consolidated Balance Sheets -
March 31, 1998 and December 31, 1997 3
Consolidated Statements of Operations -
Three Months Ended March 31, 1998 and March 31, 1997
and For the Period from Inception (September 1, 1983)
Through March 31, 1998 4
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1998 and March 31, 1997
and For the Period from Inception (September 1, 1983)
Through March 31, 1998 5
Consolidated Statements of Stockholders' Equity -
For the Period from Inception (September 1, 1983)
Through March 31, 1998 6 - 8
Notes to Consolidated Financial Statements 9 - 10
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations 11 - 12
Part II - OTHER INFORMATION
Item 2: Changes in Securities
13
Item 6: Exhibits and Reports on Form 8-K 14
Signature 14
Page 2
<PAGE>
<TABLE>
AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31, December 31,
Assets 1998 1997
------------ ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $5,281,000 $7,121,000
Marketable securities - -
Accounts receivable 93,000 -
Inventory 275,000 296,000
Other current assets 63,000 41,000
------------ ------------
Total current assets 5,712,000 7,458,000
------------ ------------
Fixed assets, at cost, net of accumulated
depreciation and amortization of $1,551,000
and $1,481,000, respectively 448,000 511,000
Patent costs, net of accumulated
amortization of $316,000 and $292,000,
respectively 1,368,000 1,337,000
Debt issuance costs, net of accumulated
amortization of $536,000 and $520,000,
respectively 28,000 59,000
Other assets 23,000 23,000
------------ ------------
$7,579,000 $9,388,000
============ ============
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued expenses $460,000 $494,000
Current portion of capital lease obligation 3,000 3,000
------------ ------------
Total current liabilities 463,000 497,000
------------ ------------
Long Term Liabilities:
7% convertible debentures 650,000 1,350,000
8% convertible debentures 800,000 850,000
Long-term portion of capital lease obligation 8,000 8,000
------------ ------------
Total liabilities 1,921,000 2,705,000
------------ ------------
Stockholders' Equity:
Class A common stock, par value $.001 per
share; 50,000,000 shares authorized;
19,635,645 and 19,341,617 shares issued
and outstanding, respectively 19,000 19,000
Class B common stock, par value $.001 per
share; 3,000,000 shares authorized; 1,725,500 shares
issued and outstanding 2,000 2,000
Additional paid-in capital 56,469,000 56,077,000
Deficit accumulated during the
development stage (50,832,000) (49,415,000)
------------ ------------
Total stockholders' equity 5,658,000 6,683,000
------------ ------------
$7,579,000 $9,388,000
============ ============
The accompanying notes are an integral part of these consolidated balance sheets.
Page 3
</TABLE>
<PAGE>
<TABLE>
AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARY
(a development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the Period
From Inception
Three Months Ended (September 1,
-------------------------- 1983) Through
March 31, March 31, March 31,
1998 1997 1998
------------ ------------ --------------
<S> <C> <C> <C>
Revenues:
Sales $114,000 $ - $264,000
Royalties / license fees - - 1,000,000
Collaborative agreements - 9,000 302,000
------------ ------------ --------------
114,000 9,000 1,566,000
Expenses:
Cost of sales 36,000 - 68,000
Research and development 496,000 1,058,000 27,141,000
General and administrative 1,036,000 1,086,000 25,697,000
------------ ------------ --------------
Loss from operations (1,454,000) (2,135,000) (51,340,000)
------------ ------------ --------------
Other Income (Expense):
Interest expense (49,000) (687,000) (3,791,000)
Net gain on sale of fixed assets - - 7,000
Investment income 86,000 175,000 4,292,000
------------ ------------ --------------
Net loss ($1,417,000) ($2,647,000) ($50,832,000)
============ ============ ==============
Per Share Information (Note 2):
Net loss per common share
Basic ($0.07) ($0.14)
============ ============
Diluted ($0.07) ($0.14)
============ ============
Common shares used in computing
per share amounts:
Basic 21,280,000 18,581,000
============ ============
Diluted 21,280,000 18,581,000
============ ============
See notes to unaudited consolidated financial statements
Page 4
</TABLE>
<PAGE>
<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
March 31, March 31, March 31,
1998 1997 1998
------------ ------------ --------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net loss ($1,417,000) ($2,647,000) ($50,832,000)
Adjustments to reconcile net (loss) to net cash
provided or (used) in operating activities:
Depreciation and amortization 110,000 160,000 2,335,000
Net gain on sale of fixed assets - - (7,000)
Net gain on sale of marketable securities - - (217,000)
Other non-cash expenses accrued primarily for warrants 27,000 65,000 1,763,000
Amortization of debt discount included in interest expense - 492,000 1,843,000
Write off of patent costs - - 93,000
(Increase) decrease in accounts receivable (93,000) - (93,000)
(Increase) decrease in inventory 21,000 - (275,000)
(Increase) decrease in other current assets (22,000) 400,000 (63,000)
(Increase) decrease in other assets - (5,000) 72,000
Increase in payables and accruals 16,000 220,000 727,000
Increase in interest payable to stockholder - - 112,000
------------ ------------ --------------
Net cash provided by (used in) operating activities (1,358,000) (1,315,000) (44,542,000)
------------ ------------ --------------
Cash Flows From Investing Activities:
Capital expenditures (7,000) (136,000) (2,009,000)
Proceeds from sale of fixed assets - - 18,000
Payments for patent costs and other assets (55,000) (51,000) (1,754,000)
Proceeds from maturity and sale of marketable securities - 1,008,000 67,549,000
Purchases of marketable securities - (2,796,000) (67,332,000)
------------ ------------ --------------
Net cash provided by (used in) investing activities (62,000) (1,975,000) (3,528,000)
------------ ------------ --------------
Cash Flows From Financing Activities:
Payments to debentureholders (427,000) (89,000) (1,673,000)
Proceeds from issuance of common stock, net 7,000 377,000 36,309,000
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 - - (9,000)
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 (420,000) 288,000 53,351,000
------------ ------------ --------------
Net Increase (Decrease) in Cash and Cash Equivalents (1,840,000) (3,002,000) 5,281,000
Cash and Cash Equivalents at Beginning of Period 7,121,000 10,760,000 -
------------ ------------ --------------
Cash and Cash Equivalents at End of Period $5,281,000 $7,758,000 $5,281,000
============ ============ ==============
Supplemental Disclosure of Noncash Activities:
Capital expenditures made under capital lease obligation - - $20,000
============ ============ ==============
Convertible Debentures converted into 271,252, 1,267,259,
and 5,890,217 shares of Common Stock, respectively $320,000 $3,838,000 $13,531,000
============ ============ ==============
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 7% and 8% Convertible Debentures
into Class A Common Stock 2.93 2,995,006 3,000 - -
Sale of Class B stock for cash 2.23 - - 350,000 1,000
Exercise of stock options 2.00 27,500 - - -
Expense for warrants issued - - - -
Class A Common Stock issued 3.12 48,117 - - -
Net (loss) for the period - - - -
------------ ------------- ----------- -----------
BALANCE, DECEMBER 31, 1997 19,341,617 $19,000 1,725,500 $2,000
============ ============= =========== ===========
Conversion of 7% and 8% Convertible Debentures
into Class A Common Stock 2.81 271,252 - - -
Exercise of stock options 1.75 4,000 - - -
Expense for warrants issued - - - -
Class A Common Stock issued 2.00 18,776 - - -
Net (loss) for the period - - - -
------------ ------------- ----------- -----------
BALANCE, MARCH 31, 1998 19,635,645 $19,000 1,725,500 $2,000
============ ============= =========== ===========
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 7% and 8% Convertible Debentures
into Class A Common Stock 7,152,000 - 7,155,000
Sale of Class B stock for cash 778,000 - 779,000
Exercise of stock options 55,000 - 55,000
Expense for warrants issued 149,000 - 149,000
Class A Common Stock issued 150,000 - 150,000
Net (loss) for the period - (7,147,000) (7,147,000)
------------ ------------- -----------
BALANCE, DECEMBER 31, 1997 $56,077,000 ($49,415,000) $6,683,000
============ ============= ===========
Conversion of 7% and 8% Convertible Debentures
into Class A Common Stock 320,000 - 320,000
Exercise of stock options 7,000 - 7,000
Expense for warrants issued 27,000 - 27,000
Class A Common Stock issued 38,000 - 38,000
Net (loss) for the period - (1,417,000) (1,417,000)
------------ ------------- -----------
BALANCE, MARCH 31, 1998 $56,469,000 ($50,832,000) $5,658,000
============ ============= ===========
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)
March 31, 1998
(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 March 31, 1998 and results of
operations for the three months ended March 31, 1998 and March 31, 1997.
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, 1997. The results
of operations for the three months ended March 31, 1998 are not
necessarily indicative of the results for the full year.
(2) NET LOSS PER SHARE
Basic net loss per common share ("Basic EPS") is computed by dividing
net loss by the weighted average number of common shares outstanding.
Diluted net loss per common share ("Diluted EPS") is computed by
dividing net loss by the weighted average number of common shares and
dilutive potential common shares then outstanding. SFAS No. 128
requires the presentation of both Basic EPS and Diluted EPS on the
face of the consolidated statements of operations. Diluted EPS for
1997 and 1998 is the same as Basic EPS because the inclusion of stock
options and convertible debentures outstanding would be antidilutive.
Page 9
<PAGE>
(3) STOCKHOLDERS' EQUITY
Stock Options - The following summarizes the stock option activity in
all stock option plans for the three months ended March 31, 1998.
Weighted Avg.
Option
Shares Price
Granted 20,000 $1.62
Exercised --- ---
Cancelled 78,875 $3.69
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 18,776 shares of Class A Common Stock
during the quarter ended March 31, 1998, as well as warrants to purchase
18,776 shares of Class A Common Stock at an exercise price of $2.19 per
share. The Company has recorded a noncash charge of $27,000 which
represents the fair value of these warrants.
(4) SUBSEQUENT EVENT
On April 23, 1998, the Company acquired all of the Capital Stock of
Stellar Bio Systems, Inc., ("Stellar") a manufacturer of
immunodiagnostic kits and reagents. The purchase price was $120,000 in
cash and $700,000 in Class A Common Stock plus future contingent
payments of $650,000 in Class A Common Stock to be paid over three years
based upon future sales levels of Stellar. The acquisition was
accounted for by the purchase method. Stellar is not considered a
significant subsidiary under the Securities and Exchange Commission
Regulations S-X.
Page 10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
The Company's net loss of $1,417,000 for the first quarter ended March
31, 1998 decreased by $1,230,000 from a net loss of $2,647,000 for the
first quarter ended March 31, 1997. The reduction in the net loss is
primarily attributable to the sales of TpP diagnostic kits (gross
profit of $78,000), reduced R&D expenses ($562,000), reduced S,G&A
expenses ($50,000) and reduced interest expense ($638,000) offset by
lower investment income ($89,000).
<R/>
Revenue during the first quarter of 1998 was from the sales of TpP
diagnostic kits. The Company launched this product during the fourth
quarter of 1997 and continues its marketing efforts in Europe, Japan and
the U.S.
Research and development expenses decreased by $562,000, from $1,058,000
to $496,000, primarily due to the absence of costs incurred primarily
during the first quarter of 1997 relating to the relocation of the
Company's research laboratories from South Bend, Indiana to Boston,
Massachusetts. The costs of such relocation included severance,
relocation and moving costs as well as duplicate facility costs.
Selling, general and administrative expenses decreased by $50,000, from
$1,086,000 to $1,036,000, as a result of reduced costs in connection
with the publication of research papers by the Company, offset, in part,
by increased personnel costs and selling expenses related to the
promotion of TpP.
Interest expense decreased $638,000, from $687,000 to $49,000, resulting
from the absence of $492,000 of noncash amortization of the debt
discount relating to the Company's 7% Convertible Debentures included in
the first quarter of 1997, and lower outstanding Debentures during the
first quarter of 1998 (average $1.8 million) compared to the first
quarter of 1997 (average $8.6 million). Upon the conversion of the
Company's 8% and 7% Convertible Debentures ($750,000 and $3,980,000
Page 11
<PAGE>
during the first quarters of 1998 and 1997, respectively), the related
unamortized debt issuance costs ($15,000 and $179,000 during the first
quarters of 1998 and 1997, respectively) were charged to paid-in
capital.
Investment income decreased by $89,000, from $175,000 in 1997 to $86,000
in 1998, as a result of lower average fund balances. Interest rates on
U.S. Government obligations were slightly higher during the 1998 period.
Liquidity and Capital Resources
As of March 31, 1998, the Company had working capital of $5,249,000
compared to $6,961,000 at December 31, 1997. The Company's management
believes that current working capital will be sufficient to fund its
liquidity needs throughout 1998. During the three months ended March
31, 1998, $50,000 of the 8% Convertible Debentures and $700,000 of the
7% Convertible Debentures were converted into an aggregate of 271,252
shares of Class A Common Stock.
The Company expects to continue to incur substantial expenditures
relating to new diagnostic and therapeutic product development,
additional clinical studies for TpP , the Company's Thrombus Precursor
Protein diagnostic test, marketing and manufacturing of TpP and FiF
reagents and kits, developing point of care (POC) formats for the TpP
test, additional preclinical development of neurological compounds (ABS 103
and ABS 205), and developing new monoclonal antibodies and products based on
the proprietary antigen free mouse technology. In addition, the Company is
seeking strategic acquisitions of products and/or companies which may entail
the use of cash, issuance of stock or debt. (See Note 4: Acquisition of
Stellar) While the Company has begun marketing its products directly, its
product development plans still include entering into collaborative, licensing
and co-marketing arrangements with other diagnostic and pharmaceutical
companies to provide additional funding and clinical expertise to perform
tests necessary to obtain regulatory approvals, provide manufacturing
expertise and market the Company's products. Without such
collaborative, licensing or co-marketing arrangements, additional
sources of funding will be required to finance the Company.
Page 12
<PAGE>
PART II
OTHER INFORMATION
Item 2. Changes in Securities
During the quarter ended March 31, 1998, holders of $50,000 of the
Company's 8% Convertible Debentures and $700,000 of the Company's 7%
Convertible Debentures converted such debentures into 37,272 and 233,980
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 is 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 during a
period of four years from the date of issuance, at a price equal to the
closing price of the underlying Class A Common Stock on the date the
warrant is issued. Pursuant thereto on February 28, 1998, the Company
issued 18,776 shares of Class A Common Stock and a warrant to purchase
18,776 shares of Class A Common Stock at an exercise price of $2.19 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 13
<PAGE>
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 March 31, 1998. However, on April 27, 1998, the
Company filed a report on Form 8-K dated April 27, 1998,
(date of earliest event reported), reporting under Item
5 Other Events.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN BIOGENETIC SCIENCES, INC.
(Registrant)
Date May 15, 1998 /s/ Josef C. Schoell
Josef C. Schoell
Vice President, Finance
(Principal Financial and
Accounting Officer)
Page 14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS THREE MONTHS YEAR-TO-DATE SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM AMERICAN BIOGENETIC SCIENCES, INC. 1998 10-Q FOR THE FIRST
QUARTER ENDED MARCH 31, 1998
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 5,281,000
<SECURITIES> 0
<RECEIVABLES> 93,000
<ALLOWANCES> 0
<INVENTORY> 275,000
<CURRENT-ASSETS> 5,712,000
<PP&E> 1,999,000
<DEPRECIATION> 1,551,000
<TOTAL-ASSETS> 7,579,000
<CURRENT-LIABILITIES> 463,000
<BONDS> 1,450,000
0
0
<COMMON> 21,000
<OTHER-SE> 5,637,000
<TOTAL-LIABILITY-AND-EQUITY> 7,579,000
<SALES> 114,000
<TOTAL-REVENUES> 114,000
<CGS> 36,000
<TOTAL-COSTS> 36,000
<OTHER-EXPENSES> 496,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 49,000
<INCOME-PRETAX> (1,417,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,417,000)
<DISCONTINUED> 0
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<NET-INCOME> (1,417,000)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
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