SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended September 30, 2000 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 631-789-2600
Copiague, New York 11726 (Telephone number)
(Address of Principal Executive Offices)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days YES X NO
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at November 3, 2000
Class A Common Stock, par value $.001 41,027,255
Class B Common Stock, par value $.001 3,000,000
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AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARIES
(a development stage company)
Form 10-Q for the Quarter Ended September 30, 2000
INDEX
Part I - FINANCIAL INFORMATION
Item 1: Financial Statements: Page No.
Consolidated Balance Sheets -
September 30, 2000 and December 31, 1999 3
Consolidated Statements of Operations -
Three and Nine Months Ended September 30, 2000
and September 30, 1999 and For the Period from
Inception (September 1, 1983)
Through September 30, 2000 4
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 2000
and September 30, 1999 and For the Period from
Inception (September 1, 1983)
Through September 30, 2000 5
Consolidated Statements of Stockholders' Equity -
For the Period from Inception (September 1, 1983)
Through September 30, 2000 6 - 8
Notes to Consolidated Financial Statements 9 - 13
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations 13 - 18
Item 3: Quantitative and Qualitative Disclosures about
Market Risk 18
Part II - OTHER INFORMATION
Item 2: Changes in Securities 19
Item 6: Exhibits and Reports on Form 8-K 19
Signature 19
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<TABLE>
AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 30, December 31,
Assets 2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $2,083,000 $93,000
Accounts receivable 340,000 211,000
Inventory 562,000 511,000
Other current assets 54,000 76,000
------------ ------------
Total current assets 3,039,000 891,000
------------ ------------
Fixed assets, at cost, net of accumulated depreciation and
amortization of $1,919,000 and $1,840,000, respectively 427,000 476,000
Patent costs, net of accumulated
amortization of $605,000 and $502,000,
respectively 1,926,000 1,895,000
Intangible assets, net 619,000 657,000
Other assets 159,000 19,000
------------ ------------
$6,170,000 $3,938,000
============ ============
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued expenses $444,000 $1,581,000
Current portion of notes payable 39,000 746,000
------------ ------------
Total current liabilities 483,000 2,327,000
------------ ------------
Long Term Liabilities:
Notes payable, less current portion 13,000 33,000
------------ ------------
Total liabilities 496,000 2,360,000
------------ ------------
Stockholders' Equity:
Series A convertible preferred stock, par value $.001
per share; 10,000,000 shares authorized; 7,000 and 0
shares issued and outstanding, respectively - -
Class A common stock, par value $.001 per
share; 100,000,000 shares authorized;
40,989,755 and 36,918,510 shares issued
and outstanding, respectively 41,000 37,000
Class B common stock, par value $.001 per share;
3,000,000 shares authorized; 3,000,000 shares
issued and outstanding, respectively 3,000 3,000
Additional paid-in capital 72,923,000 63,852,000
Deficit accumulated during the development stage (67,293,000) (62,314,000)
------------ ------------
Total stockholders' equity 5,674,000 1,578,000
------------ ------------
$6,170,000 $3,938,000
============ ============
The accompanying notes are an integral part of these consolidated balance sheets.
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</TABLE>
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<TABLE>
AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Period
<CAPTION> From Inception
Three Months Ended Nine Months Ended (September 1,
-------------------------- ------------------------------ 1983) Through
September 30, September 30, September 30, September 30, September 30,
2000 1999 2000 1999 2000
------------ ------------ -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Revenues:
Sales $367,000 $353,000 $1,211,000 $988,000 $3,919,000
Royalties / license fees - - 500,000 - 1,500,000
Collaborative agreements 51,000 3,000 142,000 82,000 526,000
------------ ------------ -------------- -------------- --------------
418,000 356,000 1,853,000 1,070,000 5,945,000
Expenses:
Cost of sales 159,000 154,000 447,000 419,000 1,542,000
Research and development 351,000 385,000 940,000 1,423,000 31,471,000
Selling, general and administrative 938,000 957,000 3,096,000 3,412,000 36,677,000
Facility consolidation cost - - - - 252,000
------------ ------------ -------------- -------------- --------------
Loss from operations (1,030,000) (1,140,000) (2,630,000) (4,184,000) (63,997,000)
------------ ------------ -------------- -------------- --------------
Other Income (Expense):
Interest expense (4,000) (2,000) (16,000) (7,000) (4,388,000)
Net gain on sale of fixed assets - - - - 11,000
Investment income 37,000 1,000 117,000 29,000 4,671,000
------------ ------------ -------------- -------------- --------------
Loss before extraordinary charge (997,000) (1,141,000) (2,529,000) (4,162,000) (63,703,000)
Extraordinary charge for early
retirement of debentures, net - - - - (1,140,000)
------------ ------------ -------------- -------------- --------------
Net loss ($997,000) ($1,141,000) ($2,529,000) ($4,162,000) ($64,843,000)
Preferred stock dividend related to warrants - - (2,450,000) - (2,450,000)
------------ ------------ -------------- -------------- --------------
Net loss attributable to common stockholders ($997,000) ($1,141,000) ($4,979,000) ($4,162,000) ($67,293,000)
============ ============ ============== ============== ==============
Per Share Information (Note 2):
Basic and Diluted net loss per share ($0.02) ($0.03) ($0.12) ($0.11)
============ ============ ============== ==============
Common shares used in computing
per share amounts:
Basic and Diluted 43,967,000 39,318,000 43,290,000 39,056,000
============ ============ ============== ==============
The accompanying notes are an integral part of these consolidated statements.
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</TABLE>
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<TABLE>
AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Period
From Inception
<CAPTION> (September 1,
Nine Months Ended 1983)
-------------------------- Through
September 30, September 30, September 30,
2000 1999 2000
------------ ------------ --------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net loss ($2,529,000) ($4,162,000) ($64,843,000)
Adjustments to reconcile net (loss) to net cash
provided by or (used) in operating activities:
Depreciation and amortization 240,000 240,000 3,280,000
Net gain on sale of fixed assets - - (11,000)
Net gain on sale of marketable securities - - (217,000)
Other noncash expenses accrued primarily for stocks and warrants 239,000 405,000 2,783,000
Amortization of debt discount included in interest expense - - 2,160,000
Extraordinary loss on repurchase of debt - - 1,140,000
Write off of patent costs - - 93,000
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (129,000) (50,000) (232,000)
(Increase) decrease in inventory (51,000) (13,000) (404,000)
(Increase) decrease in other current assets 22,000 (94,000) (54,000)
(Increase) decrease in other assets 3,000 3,000 83,000
Increase (decrease) in accounts payable and accrued expenses (1,137,000) 284,000 679,000
Increase in interest payable to stockholder 8,000 - 120,000
------------ ------------ --------------
Net cash provided by (used in) operating activities (3,334,000) (3,387,000) (55,423,000)
------------ ------------ --------------
Cash Flows From Investing Activities:
Capital expenditures (30,000) (19,000) (2,086,000)
Proceeds from sale of fixed assets - - 22,000
Payments for patent costs and other assets (134,000) (408,000) (2,601,000)
Business acquisition, net of stock issued and cash acquired - - (119,000)
Proceeds from maturity and sale of marketable securities - - 67,549,000
Purchases of marketable securities - - (67,332,000)
------------ ------------ --------------
Net cash provided by (used in) investing activities (164,000) (427,000) (4,567,000)
------------ ------------ --------------
Cash Flows From Financing Activities:
Payments to debentureholders - - (2,246,000)
Proceeds from issuance of common stock, net 2,723,000 660,000 42,867,000
Proceeds from issuance of Series A convertible preferred stock 3,000,000 - 3,000,000
Proceeds from issuance of 5% convertible debentures, net - - 3,727,000
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 and notes payable (25,000) (37,000) (139,000)
Redemption of 8% convertible debentures - - (500,000)
Repurchase of 5% convertible debentures - - (3,852,000)
Capital contributions from chairman - - 1,000,000
Increase in loans payable to stockholder / affiliates 81,000 176,000 3,452,000
Repayment of loans payable to stockholder and affiliates
(remainder contributed to capital by the stockholder) (291,000) - (1,591,000)
------------ ------------ --------------
Net cash provided by (used in) financing activities 5,488,000 799,000 62,073,000
------------ ------------ --------------
Net Increase (Decrease) in Cash and Cash Equivalents 1,990,000 (3,015,000) 2,083,000
Cash and Cash Equivalents at Beginning of Period 93,000 3,047,000 -
------------ ------------ --------------
Cash and Cash Equivalents at End of Period $2,083,000 $32,000 $2,083,000
============ ============ ==============
Supplemental Disclosure of Noncash Activities:
Capital expenditures made under capital lease obligation - - $20,000
============ ============ ==============
Convertible debentures converted into 0, 0,
and 10,470,583 shares of Common Stock, respectively - - $14,658,000
============ ============ ==============
Warrants issued $2,792,000 $264,000 $3,644,000
============ ============ ==============
Conversion of stockholder loan to preferred stock or paid-in capital $500,000 - $1,981,000
============ ============ ==============
The accompanying notes are an integral part of these consolidated statements.
Page 5
</TABLE>
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<TABLE>
AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
<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 1,000 - -
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
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BALANCE, DECEMBER 31, 1990 $ 4,118,500 $4,000 2,331,500 $2,000
Exercise of Class A Warrants (net of $203,000
in underwriting expenses) for cash 3.00 3,449,955 3,000 - -
Exercise of Class B Warrants for cash 4.50 79,071 - - -
Conversion of Class B stock
into Class A stock 850,000 1,000 (850,000) (1,000)
Exercise of stock options 2.00 417,750 1,000 - -
Expense for warrants issued - - - -
Net (loss) for the period - - - -
------------ ------------- ----------- -----------
BALANCE, DECEMBER 31, 1991 8,915,276 9,000 1,481,500 1,000
Exercise of Class B Warrants (net of $701,000
in underwriting expenses) for cash 4.50 3,370,884 3,000 - -
Conversion of Class B stock
into Class A stock 106,000 - (106,000) -
Exercise of stock options 2.49 348,300 1,000 - -
Net (loss) for the period - - - -
------------ ------------- ----------- -----------
BALANCE, DECEMBER 31, 1992 12,740,460 13,000 1,375,500 1,000
Sale of common stock to Medeva PLC. 7.50 200,000 - - -
Exercise of stock options 2.00 32,700 - - -
Net (loss) for the period - - - -
------------ ------------- ----------- -----------
BALANCE, DECEMBER 31, 1993 12,973,160 13,000 1,375,500 1,000
Exercise of stock options 2.16 91,250 - - -
Net (loss) for the period - - - -
------------ ------------- ----------- -----------
BALANCE, DECEMBER 31, 1994 13,064,410 13,000 1,375,500 1,000
Conversion of 8% convertible debentures into
Class A Common Stock 1.85 354,204 - - -
Exercise of stock options 1.82 12,750 - - -
Expense for warrants/options issued - - - -
Net (loss) for the period - - - -
------------ ------------- ----------- -----------
BALANCE, DECEMBER 31, 1995 13,431,364 $13,000 1,375,500 $1,000
------------ ------------- ----------- -----------
CONTINUED
Page 7
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------------ ------------- ----------- -----------
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 31, 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 Common Stock to Chairman 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 5%, 7% and 8% convertible debentures
into Class A Common Stock 0.32 4,851,618 5,000 - -
Sale of Class B Common Stock to Chairman for cash 0.37 - - 1,274,500 1,000
Exercise of stock options 1.75 4,000 - - -
Expense for warrants issued - - - -
Class A Common Stock issued 1.06 163,915 - - -
Class A Common Stock issued for Stellar 1.76 398,406 1,000 - -
Class A Common Stock issued for Private Placement 0.25 10,800,000 11,000 - -
Discount on 5% convertible debentures - - - -
Net (loss) for the period - - - -
------------ ------------- ----------- -----------
BALANCE, DECEMBER 31, 1998 35,559,556 36,000 3,000,000 3,000
------------ ------------- ----------- -----------
Sale of Class A Common Stock to Chairman for cash 1.13 440,000 - - -
Exercise of stock options 0.61 5,250 - - -
Expense for warrants issued - - - -
Class A Common Stock issued 0.50 913,704 1,000 - -
Net (loss) for the period - - - -
------------ ------------- ----------- -----------
BALANCE, DECEMBER 31, 1999 36,918,510 37,000 3,000,000 3,000
------------ ------------- ----------- -----------
Sale of Series A Convertible Preferred Stock - - - -
Warrants issued with the Convertible Preferred Stock - - - -
Preferred stock dividend related to warrants - - - -
Exercise of stock options and warrants 0.99 1,241,175 1,000 - -
Expense for warrants issued - - - -
Class A Common Stock issued 0.55 2,830,070 3,000 - -
Net (loss) for the period - - - -
------------ ------------- ----------- -----------
BALANCE, SEPTEMBER 30, 2000 40,989,755 $41,000 3,000,000 $3,000
============ ============= =========== ===========
The accompanying notes are an integral part of these consolidated statements.
Page 8
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<TABLE>
AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
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 - 93,000
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 Common Stock to Chairman 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 5%, 7% and 8% convertible debentures
into Class A Common Stock 1,442,000 - 1,447,000
Sale of Class B Common Stock to Chairman for cash 465,000 - 466,000
Exercise of stock options 7,000 - 7,000
Expense for warrants issued 205,000 - 205,000
Class A Common Stock issued 174,000 - 174,000
Class A Common Stock issued for Stellar 699,000 - 700,000
Class A Common Stock issued for Private Placement 2,689,000 - 2,700,000
Discount on 5% convertible debentures 762,000 - 762,000
Net (loss) for the period - (7,548,000) (7,548,000)
------------ ------------- -----------
BALANCE, DECEMBER 31, 1998 62,520,000 (56,963,000) 5,596,000
------------ ------------- -----------
Sale of Class A Common Stock to Chairman for cash 495,000 - 495,000
Exercise of stock options 3,000 - 3,000
Expense for warrants issued 376,000 - 376,000
Class A Common Stock issued 458,000 - 459,000
Net (loss) for the period - (5,351,000) (5,351,000)
------------ ------------- -----------
BALANCE, DECEMBER 31, 1999 63,852,000 (62,314,000) 1,578,000
------------ ------------- -----------
Sale of Series A Convertible Preferred Stock 3,500,000 - 3,500,000
Warrants issued with the Convertible Preferred Stock 2,450,000 - 2,450,000
Preferred stock dividend relating to warrants - (2,450,000) (2,450,000)
Exercise of stock options and warrants 1,222,000 - 1,223,000
Expense for warrants issued 342,000 - 342,000
Class A Common Stock issued 1,557,000 - 1,560,000
Net (loss) for the period - (2,529,000) (2,529,000)
------------ ------------- -----------
BALANCE, SEPTEMBER 30, 2000 $72,923,000 ($67,293,000) $5,674,000
============ ============= ===========
The accompanying notes are an integral part of these consolidated statements.
CONTINUED
Page - 8 (column continuation)
</TABLE>
<PAGE>
AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARIES
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 2000
(1) INTERIM FINANCIAL STATEMENTS
The interim unaudited consolidated financial statements of American
Biogenetic Sciences, Inc. (together with its subsidiaries, the "Company"
or "ABS") presented herein have been prepared in accordance with
generally accepted accounting principles for interim financial
statements and with the instructions to Form 10-Q and Regulation S-X
pertaining to interim financial statements. Accordingly, they do not
include all information and footnotes required by generally accepted
accounting principles for complete financial statements. The interim
financial statements presented herein reflect all adjustments
(consisting of normal recurring adjustments and accruals) which, in the
opinion of management, are necessary for a fair presentation of
financial position as of September 30, 2000 and results of operations
for the three and nine months ended September 30, 2000 and September 30,
1999. 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, 1999. The results
of operations for the three and nine months ended September 30, 2000 are
not necessarily indicative of the results for the full year.
(2) NET LOSS PER COMMON SHARE
The Company follows the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 128 Earnings Per Share . In
accordance with SFAS No. 128 basic net loss per common share ("Basic
EPS") is computed by dividing net loss attributable to common
stockholders by the weighted average number of common shares
outstanding. Diluted net loss per common share ("Diluted EPS") is
computed by dividing net loss attributable to common stockholders by the
weighted average number of common shares and dilutive potential common
shares then outstanding. The provisions of SFAS No. 128 require the
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presentation of both Basic EPS and Diluted EPS on the face of the
consolidated statements of operations. Diluted EPS for 2000 and 1999 is
the same as Basic EPS because the inclusion of stock options, warrants
and the conversion of series A preferred stock outstanding would be
antidilutive.
(3) INVENTORY
Inventory consists of the following:
September 30, December 31,
2000 1999
Raw Materials $339,000 $334,000
Work in Process 113,000 71,000
Finished Goods 110,000 106,000
-------- --------
$562,000 $511,000
(4) STOCKHOLDERS' EQUITY
Private Placement
On December 31, 1999 the Company and Biotechnology Value Fund, L.P.
( BVF ) signed a letter agreement, subject to negotiation of definitive
agreements, authorization of preferred stock and certain other matters,
for BVF to invest between $2 and $3 million for the purchase of between
4,000 and 6,000 shares of Series A Convertible Preferred Stock (the
Preferred Stock ) and related Warrants.
When the Company and BVF began negotiating the definitive
agreements for the sale transaction in January 2000, in order to induce
BVF to purchase the full $3 million, at the suggestion of BVF, the
Company s Chairman Mr. Roach agreed that rather than demand repayment of
his demand notes, he would convert $500,000 of the approximately
$776,000 plus accrued interest owed to him into an additional investment
in the Company on terms identical to the terms previously negotiated
with BVF and that the balance of the amount owed him (approximately
$276,000 of principal) could be repaid at the rate of $100,000 of
principal and interest per month until repaid in full. Accordingly,
$500,000 of the amount owed Mr. Roach was converted into 1,000 shares of
Preferred Stock and 1,000,000 Warrants.
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The Company entered into a Securities Purchase Agreement dated as
of February 3, 2000 with BVF and Mr. Roach relating to the issuance of
the 7,000 shares of Preferred Stock and Warrants for 7,000,000 shares of
Class A Common Stock. On February 7, 2000, BVF loaned $3,000,000 to the
Company, equaling the purchase price for 6,000 shares of Preferred Stock
and 6,000,000 Warrants. On March 3, 2000, after receiving stockholder
consent to the proposed sale, the Company repaid BVF's loan and $500,000
of the Company's indebtedness to Mr. Roach by issuing 6,000 shares of
Preferred Stock and 6,000,000 Warrants to BVF and 1,000 shares of
Preferred Stock and 1,000,000 Warrants to Mr. Roach.
The Shares of Preferred Stock: (i) have the right to participate
with dividends declared on the Common Stock, if, as and when declared,
on an as-converted basis; (ii) contain customary anti-dilution
adjustments for mechanical adjustments in the event of stock splits and
similar transactions; (iii) contain restrictions on subsequent issuances
of other preferred stock ranking equal to or superior to the Preferred
Stock without the consent of the holders of a majority of such Preferred
Stock; (iv) have a liquidation preference equal to the original issue
price of the Preferred Stock, plus any accrued and unpaid dividends;
(v) will not be entitled to vote except as a separate class when its
rights are affected; and (vi) will be convertible at any time after the
original issue date at the option of the holder. Each share of
Preferred Stock initially will be convertible into 1,000 shares of Class
A Common Stock, or a conversion price of $.50 per share of Class A
Common Stock.
Under the terms of the Securities Purchase Agreement, the Company
also entered into a Registration Agreement under which it agreed to file
a registration statement within 60 days after closing, registering the
Class A Common Stock issuable upon conversion of the Preferred Stock or
exercise of the Warrants and to use its best efforts to cause that
registration to become effective within 120 days after closing. The
Company agreed to bear the expenses of such registration. The Company
filed the Form S-3 registration statement on May 2, 2000, which became
effective on June 30, 2000.
The 7,000,000 warrants are exercisable for a period of no more than
five years at $1.00 per share. The fair value of these warrants was
determined using an option-pricing model ($2,450,000), was treated as
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a noncash preferred dividend for purposes of computing the net loss
attributable to common stockholders. The following assumptions were
used for this fair value computation: dividend yield of 0%, volatility
of 106%, risk-free interest rate of 5.0% and expected lives of 5 years.
Stock Options - The following summarizes the stock option activity in
all stock option plans for the three months ended September 30, 2000.
Weighted Avg.
Option
Shares Price
Granted 30,000 $1.56
Exercised 62,333 $0.52
Each option entitles the holder to purchase one share of Class A Common
Stock of the Company.
Other Shares and Warrants -
On January 27, 2000, the Company entered into an Exclusive License
Agreement with Abbott Laboratories ( Abbott ) under which the Company
granted to Abbott an exclusive worldwide license to its ABS-103
compound, related technology and patent rights. The Exclusive License
Agreement gives Abbott the exclusive right to develop and market the
compound, which presently is in the pre-clinical stage. In consideration
for the license grant and in addition to customary royalties on sales,
Abbott paid the Company an initial license fee of $500,000 and agreed to
pay additional milestone payments aggregating up to $17 million,
depending upon successfully reaching development milestones, generally
by indication. In connection with the entering into of the Exclusive
License Agreement, the Company and Abbott also entered into a Stock
Purchase Agreement dated January 27, 2000 pursuant to which Abbott
purchased 2,782,931 shares (the Abbott Shares ) of the Company's Class
A Common Stock for $1,500,000.
The Company also entered into a Registration Rights Agreement with
Abbott pursuant to which, among other things, the Company agreed to
register the Abbott Shares under the Securities Act of 1933, as amended,
upon Abbott's request at any time after the first anniversary of the
sale and to include the Abbott Shares in any other registration of the
Company's securities under the Securities Act after that date. All
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expenses of registration of the Abbott Shares, other than underwriting
discounts, selling commissions and fees and disbursements of counsel for
Abbott, are to be borne by the Company.
Pursuant to an investor relations agreement renewed in March 2000,
the Company issued a warrant to the investor relations firm to purchase
up to 300,000 shares of Class A Common Stock at $3.00 per share for two
years, with vesting based on the achievement of certain goals. Included
in Other assets is the fair value of these warrants as determined using
an option-pricing model of $342,000 which is being amortized over the
one year service period of the agreement. The following assumptions
were used for this fair value computation: dividend yield of 0%,
volatility of 106%, risk-free interest rate of 6.5% and expected lives
of 2 years.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The matters discussed in this Management's Discussion and Analysis
of Financial Condition and Results of Operations contain forward-looking
statements that involve risks and uncertainties, including the timely
development, introduction and acceptance of new products, dependence on
collaborators and licensees, the impact of competitive products, third
party reimbursement issues, changing market conditions and other risks.
These forward-looking statements represent management's judgement as of
the date of filing of this Form 10-Q and should be considered with the
risk factors discussed in the Annual Report on Form 10-K for the year
ended December 31, 1999. The Company disclaims any intent or obligation
to update these forward-looking statements.
The following discussion and analysis provides information which
ABS' management believes is relevant to an assessment and understanding
of the Company's results of operations and financial condition. This
discussion should be read in conjunction with the consolidated financial
statements and notes appearing elsewhere herein.
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Overview
ABS is a development stage company incorporated in September 1983.
To date, ABS has launched two commercial products (TpP, ABS' Thrombus
Precursor Protein diagnostic test, and FiF, ABS' Functional Intact
Fibrinogen diagnostic test), although it has not yet derived any
significant revenues from the sale of these products.
On April 23, 1998, the Company acquired Stellar Bio Systems, Inc.
("Stellar"), a manufacturer and distributor of in vitro diagnostic
products and research reagents. Reagents are individual components of
diagnostic products, such as antibodies, calibrators and serum used in
the biotechnology industry. The purchase price was $120,000 in cash and
$700,000 in Class A Common Stock at the market value on the acquisition
date (398,406 shares), 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, with the Class A Common Stock to be valued at its
market value on the acquisition agreement anniversary dates. On April
23, 1999, the Company made the first contingent payment of $150,000 in
Class A Common Stock (131,118 shares). On April 24, 2000, the Company
made the second contingent payment of $20,000 in Class A Common Stock
(10,811 shares).
On January 27, 2000, ABS granted to Abbott an exclusive worldwide
license to its ABS-103 neurocompound. In consideration for the license,
Abbott paid ABS an initial license fee of $500,000 and agreed to pay up
to $17 million of milestone payments depending upon successfully
reaching development milestones plus customary royalties on commercial
sales. In addition, Abbott purchased 2,782,931 shares of Class A Common
Stock for $1.5 million.
On February 3, 2000, ABS entered into a Securities Purchase
Agreement with Biotechnology Value Fund and the Company s Chairman Mr.
Roach relating to the issuance of Series A Convertible Preferred Stock
plus warrants for a total of $3.5 million. See Note 4 of the Notes to
Consolidated Financial Statements on page 10 of this Form 10-Q for a
more detailed description of this transaction.
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Liquidity and Capital Resources
The Company has funded its research and development activities to
date principally from (i) the sale of Common Stock issued in an initial
public offering, (ii) the exercise of the Class A and Class B Warrants
issued in the initial public offering, (iii) private placements of
Convertible Debentures, Series A Convertible Preferred Stock and Class
A Common Stock, (iv) the exercise of stock options and warrants, (v)
capital contributions to ABS by it's Chairman of the Board, (vi) initial
license fee payments and fees from collaborative contract services and
(vii) the income on funds invested in bank deposits, United States
Treasury bills and notes and other high grade liquid investments.
ABS expects to continue to incur substantial expenditures in
research and product development in the neurobiology program and in the
development and commercialization of a rapid assay format for TpP, as
well as in the FDA approval process relating to additional 510(k)
filings for TpP and Stellar's products.
As of September 30, 2000, ABS had working capital of $2,556,000,
compared to a negative working capital of $1,436,000 as of December 31,
1999. ABS' management believes that current working capital, together
with the receipt of additional licensing fees and milestone payments
projected to be received within the next twelve months, will be
sufficient to fund its planned activities for the next twelve months.
Currently, product development plans include licensing TpP, FiF, MH-1
and the ABS-205 neurobiology compound to large pharmaceutical companies
who would provide additional funding, perform additional testing
necessary to obtain regulatory approvals and provide clinical,
manufacturing and marketing expertise. The Company is also discussing
collaborations and contract services involving its patented Antigen-Free
technology. Without such licensing fees, milestone payments,
collaboration fees or co-marketing arrangements, additional sources of
funding may be required to finance ABS activities beyond the first
quarter of 2001.
The Company's cash and cash equivalents increased by $1,990,000 to
$2,083,000 during the nine months ended September 30, 2000, primarily
from financing activities ($5,488,000) offset by cash used in operations
($3,334,000) and investing activities ($164,000). Net cash of
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$3,334,000 was used in operations to fund the Company s cash loss from
operations of $2,050,000 (net of noncash expenses of $240,000 for
depreciation and amortization, and $239,000 incurred in connection with
the issuance of stock and warrants). Net cash of $1,284,000 was used by
changes in operating assets and liabilities, primarily as a result of a
decrease in accounts payable and accrued expenses ($1,137,000), an
increase in accounts receivable ($129,000), an increase in inventory
($51,000), partially offset by a decrease in other current assets
($22,000), a decrease in other assets ($3,000) and an increase in
interest payable to stockholder ($8,000). Cash used in investing
activities was for capitalized patent costs ($134,000), primarily for
neurobiology compounds and the purchase of equipment ($30,000).
Financing activities provided $5,488,000 as a result of the cash
proceeds from the sale of Series A Convertible Preferred Stock
($3,000,000), the sale of Class A Common Stock to Abbott ($1,500,000),
the exercise of stock options and warrants ($1,223,000), additional
loans from the Company s Chairman ($81,000), offset by the repayment of
loans to the Company s Chairman of $291,000 ($500,000 of the loan
payable to the Chairman was converted into Series A Convertible
Preferred Stock) and payments of other notes payable ($25,000).
Results of Operations
Three Months Ended September 30, 2000
The Company's net loss of $997,000 for the third quarter ended
September 30, 2000 decreased by $144,000 from a net loss of $1,141,000
for the third quarter ended September 30, 1999. The decrease in the net
loss was due to increased sales ($14,000) and collaboration agreements
($48,000), reduced research and development expenses ($34,000), reduced
selling, general and administration expenses ($19,000) and increased
investment income ($36,000).
Revenue during the third quarter of 2000 was primarily from sales
of Stellar products. Stellar sales increased 11% primarily from U.S.
sales of reagents. Sales of TpP diagnostic kits were slightly lower
during the third quarter of 2000 as compared to the third quarter of
1999. Collaborative agreement revenue of $51,000 reflects an increase
in contracted research projects.
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Cost of Sales increased $5,000 during the third quarter of 2000
from the 1999 quarter due to the increase in sales. Cost of Sales as a
percentage of sales remained flat at 43% during the third quarter of
2000 and 1999.
Research and development expenses decreased by $34,000, from
$385,000 to $351,000, primarily from reduced personnel costs, reduced
consulting and travel costs, partially offset by increases in TpP point
of care development costs and increased costs associated with ABS-205.
Selling, general and administrative expenses decreased by $19,000,
from $957,000 to $938,000, as a result of a decrease in personnel, a
decrease in travel and meeting expenses during the quarter offset by
increases in shareholder relations costs and consulting and professional
service costs.
Investment income increased by $36,000, from $1,000 in the third
quarter of 1999 to $37,000 in 2000, as a result of higher average cash
balances.
Nine Months Ended September 30, 2000
The Company's net loss of $2,529,000 for the nine months ended
September 30, 2000 decreased by $1,633,000 from a net loss of $4,162,000
for the nine months ended September 30, 1999. The decrease in the net
loss is attributable to the license fee of $500,000 received under the
Abbott license agreement, reduced R&D and SG&A expenses and increased
sales and collaborative agreement revenues.
The increase in sales during the nine months of 2000 of $223,000
was primarily from sales of Stellar products. Sales of TpP diagnostic
kits remained flat.
Cost of Sales increased $28,000 during the nine months of 2000 over
the same period in 1999, as a result of increased sales. Cost of Sales
as a percentage of sales improved from 42% during the nine months of
1999 to 37% during the nine months of 2000 resulting from the increase
in sales and manufacturing efficiency at the Stellar facility on both
Stellar products and in house production of TpP kits.
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Research and development expenses decreased by $483,000, from
$1,423,000 to $940,000, primarily from cost savings implemented in 1999
and continued during the three quarters of 2000, as well as the cost
savings associated with the consolidation of operations at Stellar.
Selling, general and administrative expenses decreased by $316,000,
from $3,412,000 to $3,096,000, as a result of reduced personnel costs
and other general costs associated with the cost savings implemented in
1999, a decrease in investor relations cost, offset in part, by
increased professional service costs relating to the Abbott license
agreement and other contracts.
Interest expense increased by $9,000, from $7,000 to $16,000,
resulting primarily from the loans payable to the Company s Chairman.
Investment income increased by $88,000, from $29,000 in nine months
of 1999 to $117,000 in nine months of 2000, as a result of higher
average cash balances.
Preferred stock dividend related to warrants of $2,450,000
represents the noncash fair value of the warrants issued to BVF and Mr.
Roach, determined by using an option-pricing model, in the private
placement. See Note 4 of the Notes to Consolidated Financial Statements
starting on page 10 of this Form 10-Q for a more detailed description of
this transaction.
Item 3 Quantitative and Qualitative Disclosures about Market Risk
The Company s available cash is invested in highly liquid
investments (primarily United States Treasury Bills) which have a
maturity, at the time of purchase, of less than three months. ABS does
not have operations subject to risks of foreign currency fluctuations,
nor does it use derivative financial instruments in its operations. ABS
does not have exposure to market risks associated with changes in
interest rates as it has no variable interest rate debt outstanding.
ABS does not believe it has any other material exposure to market risks
associated with interest rates.
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PART II
OTHER INFORMATION
Item 2. Changes in Securities
None
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
covered by this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN BIOGENETIC SCIENCES, INC.
(Registrant)
Date November 13, 2000 /s/ Josef C. Schoell
Josef C. Schoell
Vice President, Finance
(Principal Financial and
Accounting Officer)
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