SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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, 2001 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 7, 2001
- ------------------------------------ --------------------------------
Class A Common Stock, par value $.001 41,419,909
Class B Common Stock, par value $.001 3,000,000
AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARIES
---------------------------------------------------
(a development stage company)
Form 10-Q for the Quarter Ended September 30, 2001
--------------------------------------------------
INDEX
Part I - FINANCIAL INFORMATION
Item 1: Financial Statements: Page No.
--------
Consolidated Balance Sheets -
September 30, 2001 and December 31, 2000 3
Consolidated Statements of Operations -
Three and Nine Months Ended September 30, 2001 and
September 30, 2000 and For the Period from Inception
(September 1, 1983) Through September 30, 2001 4
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 2001 and
September 30, 2000 and For the Period from Inception
(September 1, 1983) Through September 30, 2001 5
Consolidated Statements of Stockholders' Equity -
For the Period from Inception (September 1, 1983)
Through September 30, 2001 6 - 9
Notes to Consolidated Financial Statements 10 - 14
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations 15 - 19
Item 3: Quantitative and Qualitative Disclosures about Market Risk 19
Part II - OTHER INFORMATION
Item 2: Changes in Securities 20
Item 6: Exhibits and Reports on Form 8-K 20
Signature 20
Page 2
AMERICAN BIOGENETIC SCIENCES, INC AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2001 2000
----------------- -----------------
(Unaudited)
Assets
Current Assets:
Cash and cash equivalents $1,694,000 $1,194,000
Accounts receivable 17,000 146,000
Inventory 295,000 531,000
Other current assets 30,000 74,000
----------------- -----------------
Total current assets 2,036,000 1,945,000
----------------- -----------------
Fixed assets, at cost, net of accumulated depreciation and amortization of
$1,957,000 and $1,958,000, respectively 106,000 477,000
Patent costs, net of accumulated amortization of $789,000 and
$633,000, respectively 2,062,000 1,967,000
Intangible assets, net - 599,000
Other assets 42,000 98,000
----------------- -----------------
$4,246,000 $5,086,000
================= =================
Liabilities And Stockholders' Equity
Current Liabilities:
Accounts payable and accrued expenses $543,000 $368,000
Current portion of capital lease obligation 16,000 16,000
Current portion of notes payable 49,000 184,000
----------------- -----------------
Total current liabilities 608,000 568,000
----------------- -----------------
Long Term Liabilities:
Notes payable, less current portion - 7,000
Capital lease obligation 62,000 71,000
----------------- -----------------
Total liabilities 670,000 646,000
----------------- -----------------
Stockholders' Equity:
Series A & B convertible preferred stock, par value $.001 per share;
10,000,000 shares authorized; 10,333 and 7,000 shares issued and outstanding,
respectively
(liquidation preference of $5,500,000) - -
Class A common stock, par value $.001 per share; 150,000,000 shares authorized;
44,413,909 and 41,027,255 shares issued and outstanding, respectively 41,000 41,000
Class B common stock, par value $.001 per share; 3,000,000 shares authorized;
3,000,000 shares issued and outstanding 3,000 3,000
Additional paid-in capital 76,089,000 72,935,000
Deficit accumulated during the development stage (72,557,000) (68,539,000)
----------------- -----------------
Total stockholders' equity 3,576,000 4,440,000
----------------- -----------------
$4,246,000 $5,086,000
----------------- -----------------
The accompanying notes are an integral part of these
consolidated balance sheets.
Page 3
AMERICAN BIOGENETIC SCIENCES, INC AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Period
From Inception
Three Months Ended Nine Months Ended (September 1,
------------------------------ ------------------------------- 1983) Through
September 30, September 30, September 30, September September 30,
2001 2000 2001 30, 2000 2001
--------------- -------------- --------------- --------------- ----------------
Revenues:
Sales $6,000 $367,000 $857,000 $1,211,000 $5,194,000
Royalties / license fees 1,000 - 3,000 500,000 1,505,000
Collaborative agreements - 51,000 34,000 142,000 575,000
--------------- -------------- --------------- --------------- ----------------
7,000 418,000 894,000 1,853,000 7,274,000
Expenses:
Cost of sales 1,000 159,000 314,000 447,000 2,026,000
Research and development 223,000 351,000 781,000 940,000 32,638,000
Selling, general and administrative 787,000 938,000 2,596,000 3,096,000 40,418,000
Facility consolidation cost - - - - 252,000
--------------- -------------- --------------- --------------- ----------------
Loss from operations (1,004,000) (1,030,000) (2,797,000) (2,630,000) (68,060,000)
--------------- -------------- --------------- --------------- ---------------
Other Income (Expense):
Interest expense (6,000) (4,000) (21,000) (16,000) (4,412,000)
Net gain on sale of fixed assets 2,000 - 4,000 - 15,000
Net loss on sale of business - - (288,000) - (288,000)
Investment income 9,000 37,000 18,000 117,000 4,712,000
Equity in loss of joint venture (21,000) - (43,000) - (43,000)
--------------- -------------- --------------- --------------- ----------------
Loss before extraordinary charge (1,020,000) (997,000) (3,127,000) (2,529,000) (68,076,000)
Extraordinary charge for early retirement
of debentures, net - - - - (1,140,000)
--------------- -------------- --------------- --------------- ----------------
Net loss (1,020,000) (997,000) (3,127,000) (2,529,000) (69,216,000)
Non-cash preferred stock dividend (891,000) - (891,000) (2,450,000) (3,341,000)
--------------- -------------- --------------- --------------- ----------------
Net loss attributable to common
stockholders ($1,911,000) ($997,000) ($4,018,000) ($4,979,000) ($72,557,000)
=============== ============== =============== =============== ================
Per Share Information (Note 4):
Basic and Diluted net loss per share
($ .04) ($ .02) ($ .09) ($ .12)
=============== ============== =============== ===============
Common shares used in computing per
share amounts:
Basic and Diluted 44,372,000 43,967,000 44,240,000 43,290,000
=============== ============== =============== ===============
The accompanying notes are an integral part of these
consolidated statements.
Page 4
AMERICAN BIOGENETIC SCIENCES, INC AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended For the Period From Inception
------------------------------------------ (September 1, 1983) Through
September 30, 2001 September 30, 2000 September, 30 2001
------------------ --------------------- -------------------------
Cash Flows From Operating Activities:
Net loss ($3,127,000) ($2,529,000) ($69,216,000)
Adjustments to reconcile net (loss) to net cash
provided by or (used) in operating activities:
Depreciation and amortization 258,000 240,000 3,626,000
Net gain on sale of fixed assets (4,000) - (15,000)
Net loss on sale of business 288,000 - 288,000
Net gain on sale of marketable securities - - (217,000)
Other noncash expenses accrued primarily for stocks
and warrants 57,000 239,000 2,926,000
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
Equity in loss of joint venture 43,000 - 43,000
Changes in operating assets and liabilities net
of effect of sale of business:
(Increase) decrease in accounts receivable (104,000) (129,000) (142,000)
(Increase) decrease in inventory (38,000) (51,000) (411,000)
(Increase) decrease in other current assets 44,000 22,000 (30,000)
(Increase) decrease in other assets (1,000) 3,000 57,000
Increase (decrease) in accounts payable and accrued
expenses 219,000 (1,137,000) 971,000
Increase in interest payable to stockholder - 8,000 120,000
------------------ --------------------- --------------------
Net cash provided by (used in) operating
activities (2,365,000) (3,334,000) (58,607,000)
------------------ --------------------- --------------------
Cash Flows From Investing Activities:
Capital expenditures (6,000) (30,000) (2,094,000)
Proceeds from sale of fixed assets 4,000 - 26,000
Payments for patent costs and other assets (251,000) (134,000) (2,921,000)
Proceeds from sale of business 1,200,000 - 1,200,000
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 947,000 (164,000) (3,691,000)
------------------ --------------------- --------------------
Cash Flows From Financing Activities:
Payments to debentureholders - - (2,246,000)
Proceeds from issuance of common stock, net 19,000 2,723,000 42,898,000
Proceeds from issuance of Series A convertible
preferred stock - 3,000,000 3,000,000
Proceeds from issuance of Series B convertible
preferred stock 2,050,000 - 2,050,000
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 (151,000) (25,000) (301,000)
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 130,000 81,000 3,582,000
Repayment of loans payable to stockholder / affiliates
(remainder contributed to capital by the stockholder) (130,000) (291,000) (1,721,000)
------------------ --------------------- --------------------
Net cash provided by (used in) financing 1,918,000 5,488,000 63,992,000
activities
------------------ --------------------- --------------------
Net Increase (Decrease) in Cash and Cash Equivalents 500,000 1,990,000 1,694,000
Cash and Cash Equivalents at Beginning of Period 1,194,000 93,000 -
------------------ --------------------- --------------------
Cash and Cash Equivalents at End of Period $1,694,000 $2,083,000 $1,694,000
------------------ --------------------- --------------------
Supplemental Disclosure of Non-cash Activities:
Capital expenditure made under capital lease obligation - - $107,000
------------------ --------------------- --------------------
Convertible debentures converted into 0, 0 and
10,470,583 shares of Common Stock, respectively - - $14,658,000
------------------ --------------------- --------------------
Warrants issued $891,000 $2,792,000 $4,271,000
------------------ --------------------- --------------------
Conversion of stockholder loan to preferred stock or - $500,000 $1,981,000
paid-in capital
------------------ --------------------- --------------------
The accompanying notes are an integral part of these
consolidated statements.
Page 5
AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
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
------------ ------------- ------------ -----------
The accompanying notes are an integral part of these
consolidated statements.
CONTINUED
Page 6
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
------------ ------------- ------------ -----------
The accompanying notes are an integral part of these
consolidated statements.
CONTINUED
Page 7
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 .32 4,851,618 5,000 - -
Sale of Class B Common Stock to Chairman for cash .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 .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 .61 5,250 - - -
Expense for warrants issued - - - -
Class A Common Stock issued .50 913,704 1,000 - -
Net (loss) for the period - - - -
------------ ------------- ------------ -----------
BALANCE, DECEMBER 31, 1999 36,918,510 $37,000 3,000,000 $3,000
------------ ------------- ------------ -----------
The accompanying notes are an integral part of these
consolidated statements.
CONTINUED
Page 8
BALANCE, DECEMBER 31, 1999 36,918,510 $37,000 3,000,000 $3,000
Sale of Series A Convertible Preferred Stock (7,000 shares) - - - -
Warrants issued with the Convertible Preferred Stock - - - -
Non-cash preferred stock dividend - - - -
Exercise of stock options and warrants .97 1,278,675 1,000 - -
Expense for warrants issued - - - -
Class A Common Stock issued .55 2,830,070 3,000 - -
Net (loss) for the period - - - -
------------ ------------- ------------ -----------
BALANCE, DECEMBER 31, 2000 41,027,255 41,000 3,000,000 3,000
------------ ------------- ------------ -----------
Sale of Series B Convertible Preferred Stock (3,333 shares) - - - -
Warrants issued with the Convertible Preferred Stock - - - -
Non-cash preferred stock dividend - - - -
Exercise of stock options and warrants .25 75,000 - - -
Class A Common Stock issued .62 311,654 - - -
Net (loss) for the period - - - -
------------ ------------- ------------ -----------
BALANCE, SEPTEMBER 30, 2001 41,413,909 $41,000 3,000,000 $3,000
============ ============= ============ ===========
The accompanying notes are an integral part of these consolidated statements.
Page 9
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)
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)
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
------------ ------------- -------------
CONTINUED
Page - 8 (column continuation)
BALANCE, DECEMBER 31, 1999 $63,852,000 ($62,314,000) $1,578,000
Sale of Series A Convertible Preferred Stock (7,000 shares) 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 1,234,000 - 1,235,000
Expense for warrants issued 342,000 - 342,000
Class A Common Stock issued 1,557,000 - 1,560,000
Net (loss) for the period - (3,775,000) (3,775,000)
------------ ------------- -------------
BALANCE, DECEMBER 31, 2000 $72,935,000 ($68,539,000) $4,440,000
------------ ------------- -------------
Sale of Series B Convertible Preferred Stock (3,333 shares) 1,188,000 - 1,188,000
Warrants issued with the Convertible Preferred Stock 862,000 - 862,000
Non-cash preferred stock dividend 891,000 (891,000) -
Exercise of stock options and warrants 19,000 - 19,000
Class A Common Stock issued 194,000 - 194,000
Net (loss) for the period - (3,127,000) (3,127,000)
------------ ------------- -------------
BALANCE, SEPTEMBER 30, 2001 $76,089,000 ($72,557,000) $3,576,000
------------ ------------- -------------
The accompanying notes are an integral part of these consolidated statements.
CONTINUED
Page - 9 (column continuation)
AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARIES
---------------------------------------------------
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 2001
(1) INTERIM FINANCIAL STATEMENTS
The interim unaudited consolidated financial statements presented herein
have been prepared in accordance with generally accepted accounting principles
for interim financial statements and with the instructions to Form 10-Q and
Regulation S-X pertaining to interim financial statements. Accordingly, they do
not include all information and footnotes required by generally accepted
accounting principles for complete financial statements. The interim financial
statements presented herein reflect all adjustments (consisting of normal
recurring adjustments and accruals) which, in the opinion of management, are
necessary for a fair presentation of financial position as of September 30, 2001
and results of operations for the three and nine months ended September 30, 2001
and September 30, 2000. 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, 2000. The results of operations for
the three and nine months ended September 30, 2001 are not necessarily
indicative of the results for the full year.
(2) SALE OF BUSINESS
On June 29, 2001, the Company and its wholly-owned subsidiary, Stellar Bio
Systems, Inc. ("Stellar"), completed the sale of Stellar's in vitro
immunoflourescent antibody slide format assay business and Stellar's mouse serum
business (collectively, the "Stellar Business") to PanBio InDx Inc. ("PanBio
InDx"), a wholly owned subsidiary of PanBio Limited, an Australian company. The
Company received a purchase price of $1.2 million cash paid at closing and the
right to receive up to an additional $540,000, payable quarterly over three
years, based on revenues of certain portions of the Stellar Business. Assets
sold in the transaction included rights to specified products, rights under
certain contracts and leases, inventory, accounts receivable and intellectual
property related to the Stellar Business, rights to the name "Stellar", certain
computer hardware and software and other tangible assets and goodwill. PanBio
InDx assumed certain liabilities of the Stellar Business, including accounts
payable. The Company recorded a loss on the sale of $288,000, which included the
write-off of $705,000 of unamortized goodwill related to the Company's purchase
of Stellar in 1998. Any future quarterly receipts will be recorded as gains on
the sale.
In connection with the sale of the assets, the Company entered into a
Manufacture and Supply Agreement with PanBio InDx and PanBio Limited, pursuant
to which PanBio InDx will manufacture the Company's thrombus precursor protein
diagnostic test kit for annual periods that may be terminated on notice given at
least 45 days prior to the end of the term.
The following unaudited pro forma summary presents information as
if the Stellar Business had been sold as of December 31, 2000 and
1999. The pro forma amounts include certain adjustments, primarily the
elimination of Stellar results of operations and deferred payments
based on a portion of Stellar revenue. Pro
Page 10
forma information does not
necessarily reflect the actual results that would have occurred nor is it
necessarily indicative of future results of operations of the Company:
Pro Forma Consolidated Statements of Operations
Three Months Ended Nine Months Ended
---------------------------------- ----------------------------------
September 30, September 30, September 30, September 30,
2001 2000 2001 2000
---------------- ----------------- ---------------- -----------------
Total Revenue $7,000 $91,000 $126,000 $773,000
---------------- ----------------- ---------------- -----------------
Costs and expenses:
Cost of sales 1,000 2,000 8,000 6,000
Research and development 223,000 336,000 718,000 864,000
Selling, general and administrative 787,000 779,000 2,286,000 2,621,000
Other Income (Expense), Net: (16,000) 50,000 11,000 141,000
---------------- ----------------- ---------------- -----------------
Net loss (1,020,000) (976,000) (2,897,000) (2,577,000)
Non-cash preferred stock dividend (891,000) - (891,000) (2,450,000)
---------------- ----------------- ---------------- -----------------
Net loss attributable to common stockholders (1,911,000) ($976,000) ($3,788,000) ($5,027,000)
================ ================= ================ =================
Net Loss Per Common Share
Basic and Diluted net loss per share ($.04) ($.02) ($.09) ($.12)
Basic and Diluted 44,372,000 43,967,000 44,240,000 43,290,000
(3) LIQUIDITY AND FINANCING
On January 27, 2000, ABS granted to Abbott Laboratories 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 $17.0 million of milestone payments depending upon successfully reaching
development milestones plus customary royalties on commercial sales. In
addition, Abbott purchased 2,782,931 Class A Common Stock for $1.5 million. On
November 9, 2001, ABS announced the discontinuance of the license agreement.
Abbott will return all rights under the license agreement with no further
monetary obligations by either party. ABS will be free to license this compound
to other companies.
As of September 30, 2001, the Company had working capital of $1,428,000
compared to a working capital of $1,377,000 as of December 31, 2000.
Additionally, the Company had cash and cash equivalents of $1,694,000 at
September 30, 2001. During the second quarter of 2001, the Company implemented a
cash conservation program whereby executive officers deferred 50% to 100% of
their salaries and certain consultants deferred their compensation. In addition
the Chairman, Mr. Roach, loaned the Company $130,000 during the second quarter
of 2001, which was repaid during the third quarter of 2001. On June 29, 2001,
the Company sold the Stellar Business for net proceeds of $1,200,000. On August
28, 2001, the Company raised $2,050,000 from the issuance of Series B Preferred
Stock and warrants to Biotechnology Value Fund, L.P. The receipt of $3,250,000
from these two transactions allowed for the repayment of amounts owed and
provides the Company with approximately six months of operating funds. As a
result of the Company's continuing to incur cash expenses in excess of cash
receipts, the Company will need to raise additional funds from the receipt of
licensing fees, contract service revenue, or additional financing, or implement
another cash conservation program, or a combination of these items, in
order to be able to
Page 11
continue as a going
concern. Due to the uncertainties involved in the receipt of licensing fees and
revenue contract service or receipt of additional financing, many of which are
outside the control of the Company, the Company's independent public accountants
have qualified their year-end December 31, 2000 audit opinion with regard to the
Company's ability to continue as a going concern.
In order to address its future cash needs, the Company is actively seeking
to license certain of its products, which includes TpP, MH1, and the ABS-103 and
ABS-205 neurobiology compounds. If it is successful in licensing some of these
products, the licensees may provide additional funding or perform additional
testing necessary to obtain regulatory approvals or provide clinical,
manufacturing and marketing expertise, which will lead to revenue for the
Company. The Company is also discussing collaborations and contract services
involving its patented Antigen-Free technology. The Company cannot guarantee
that it will be successful in generating funding from these sources or that it
will be able to continue in business.
(4) 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 presentation of
both Basic EPS and Diluted EPS on the face of the consolidated statements of
operations. Diluted EPS for 2001 and 2000 is the same as Basic EPS because the
inclusion of stock options, warrants and the conversion of series A and B
preferred stock outstanding would be antidilutive.
(5) INVENTORY
Inventory consists of the following:
September 30, December 31,
2001 2000
---- ----
Raw Materials $291,000 $328,000
Work in Process - 132,000
Finished Goods 4,000 71,000
------- ------
$295,000 $531,000
(6) STOCKHOLDERS' EQUITY
Stock Options - The following summarizes the stock option activity in all
stock option plans for the three months ended September 30, 2001.
Weighted
Avg. Option
Shares Price
Granted 60,000 $ .51
Expired 535,500 $ 4.68
Cancelled 128,500 $ .90
Page 12
Each option entitles the holder to purchase one share of Class A Common Stock of
the Company.
(7) PRIVATE PLACEMENT
On August 28, 2001, Biotechnology Value Fund, L.P. and certain of its
affiliates (collectively, "BVF") made an additional $2,050,000 investment in
American Biogenetic Sciences, Inc. pursuant to a Securities Purchase Agreement
dated as of August 23, 2001. In exchange for BVF's investment, ABS issued BVF
3,333 shares of newly designated Series B Convertible Preferred Stock at a price
of $600 per share and five year Series B Warrants to purchase 3,333,000 shares
of Common Stock at an exercise price of $1.00 per share. The proceeds have been
allocated based on the relative fair values of the Series B Convertible
Preferred Stock and the Series B Warrants. Additionally, the Company agreed to
amend certain terms of the previously issued Series A Convertible Preferred
Stock and related Series A Warrants to conform them to the Series B Preferred
Stock and Series B Warrants and issued a Revenue Participation Note. The fair
value of this amendment to the Series A Warrants was estimated using the
Black-Scholes option-pricing model and is included in the non-cash preferred
stock dividend for the nine months ended September 30, 2001.
In connection with the transactions under the Securities Purchase
Agreement, the Company entered into various related agreements dated August 28,
2001 with BVF. As a condition of increasing its aggregate investment in the
Company to $5 million, BVF required the Company to issue to it a Revenue
Participation Note, under which the Company agreed to pay BVF 25% of any
royalties the Company actually receives under the January 2000 Exclusive License
Agreement with Abbott Laboratories, up to a maximum of $25 million in payments
under the Revenue Participation Note. The Company was given the right, each time
payment is made under the Revenue Participation Note, to redeem a percentage of
the Series A Preferred Stock and Series B Preferred Stock and the related Series
A Warrants and Series B Warrants which equals the percentage of the $25 million
ceiling which the payments the Company made under the Revenue Participation Note
constitute. The Company also granted BVF a security interest in the percentage
of the royalty payments to which it is entitled under the Revenue Participation
Note in order to secure the obligations. As a result of the discontinuance of
the Abbott License Agreement, announced on November 9, 2001, the Revenue
Participation Note and related security agreement have no further effect.
The Company also granted BVF certain demand and piggyback registration
rights with respect to the Series B Preferred Stock and Series B Warrants, and
amended the terms of the registration rights previously granted to the Series A
Preferred Stock and Series A Warrants in March 2000 to conform to the terms
applicable to the Series B.
(8) JOINT VENTURE
In October 2000, American Healing Technologies, Inc. ("AHT"), a (Delaware)
corporation, was founded as a joint venture by the Company and other non
affiliated third parties. AHT is a distributor and marketer of authentic
classical Chinese herbal formulas and new healing technologies. The Company
accounts for its investment in AHT under the equity method of accounting. The
carrying value of the investment is equal to the Company's cumulative investment
less its fifty percent share of the cumulative net loss of AHT. AHT's fiscal
year is the same as the Company's fiscal year.
Page 13
(9) RECENTLY ISSSUED ACCOUNTING STANDARDS
In June 2001, SFAS No. 141, "Business Combinations" and SFAS No. 142,
"Goodwill and Other Intangible Assets" were issued. These Statements establish
financial accounting and reporting standards for acquired goodwill and other
intangible assets. Specifically, the standards address how acquired intangible
assets should be accounted for both at the time of acquisition and after they
have been recognized in the financial statements. The provisions of SFAS No. 141
apply to all business combinations initiated after June 30, 2001. SFAS No. 142
is effective for fiscal years beginning after December 15, 2001; however, early
application is permitted for entities with fiscal years beginning after March
15, 2001. The Company does not believe the adoption of SFAS No. 141 and SFAS No.
142 will be material.
The Financial Accounting Standards Board recently issued SFAS No. 144,
which addresses the financial accounting and reporting for the impairment or
disposal of long-lived assets. SFAS No. 144 supersedes SFAS No. 121 but retains
fundamental provisions of SFAS No. 121 for (a) recognition/measurement of
impairment of long-lived assets to be held and used and (b) measurement of
long-lived assets to be disposed of by sale. SFAS No. 144 also supersedes the
accounting/reporting provisions of Accounting Principles Board Opinion No. 30
for segments of a business to be disposed of but retains APB 30's requirement to
report discontinued operations separately from continuing operations and extends
that reporting to a component of an entity that either has been disposed of or
is classified as held for sale. SFAS No. 144 is effective for fiscal years
beginning after December 15, 2001, and interim periods within those fiscal
years, with early application encouraged. The Company does not believe the
adoption of SFAS No 144 will be material.
Page 14
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 judgment as of the date of filing of this Form 10-Q and
should be considered with the risk factors set forth in the Company's various
filings with the Securities and Exchange Commission. The Company disclaims any
obligation to update these forward-looking statements.
The following discussion and analysis provides information which the
Company's (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.
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 up to $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 April 24, 2001 the Company made the third and final
contingent payment of $150,000 in Class A Common Stock (236,967 shares). See
Note 2 to the financial statements on page 10 for a discussion of the sale of
the Stellar business.
On January 27, 2000, ABS granted to Abbott Laboratories 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 $17.0 million of milestone payments depending upon successfully reaching
development milestones plus customary royalties on commercial sales. In
addition, Abbott purchased 2,782,931 Class A Common Stock for $1.5 million. On
November 9, 2001, ABS announced the discontinuance of the license agreement.
Abbott will return all rights under the license agreement with no further
monetary obligations by either party. ABS will be free to license this compound
to other companies.
Page 15
On February 3, 2000, ABS issued 7,000 shares of Series A Convertible
Preferred Stock and warrants to purchase 7,000,000 shares of Class A Common
Stock to Biotechnology Value Fund ("BVF") and the Company's Chairman, Mr. Roach
for an aggregate purchase price of $3.5 million.
On June 29, 2001, ABS sold the Stellar Business, which consisted of $1.2
million upfront cash payment at closing plus up to a total of $540,000 payable
quarterly over the next three years, based on revenues of a portion of the
Stellar Business. Under the terms of the sale, the buyer of Stellar will
continue contract manufacturing of ABS' Thrombus Precursor Protein (TpP(TM))
ELISA diagnostic test kit for ABS. ABS recorded a loss on the sale of $288,000,
which included the write-off of $705,000 of unamortized goodwill related to the
Company's purchase of Stellar in 1998. Any future quarterly receipts will be
recorded as gains on the sale.
On August 28, 2001, ABS issued 3,333 shares of Series B Convertible
Preferred Stock and warrants to purchase 3,333,000 shares of Class A Common
Stock to Biotechnology Value Fund ("BVF") for an aggregate purchase price of
$2,050,000. The transaction is described in more detail in Note 7 to the
financial statements on page 12.
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 and Series B Convertible Preferred Stock and Class A Common Stock, (iv)
the exercise of stock options and warrants, (v) capital contributions and loans
to ABS by its Chairman of the Board, (vi) initial license fee payments and fees
from collaborative contract services, (vii) sale of a business and (viii) 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 monoclonal antibody programs
and in the development and commercialization of TpP, including the FDA approval
process relating to additional 510(k) filings.
As of September 30, 2001, the Company had working capital of $1,428,000
compared to a working capital of $1,377,000 as of December 31, 2000.
Additionally, the Company had cash and cash equivalents of $1,694,000 at
September 30, 2001. During the second quarter of 2001, the Company implemented a
cash conservation program whereby executive officers deferred 50% to 100% of
their salaries and certain consultants deferred their compensation. In addition
the Chairman, Mr. Roach, loaned the Company $130,000 during the second quarter
of 2001, which was repaid during the third quarter of 2001. On June 29, 2001,
the Company sold the Stellar Business for net proceeds of $1,200,000. On August
28, 2001, the Company raised $2,050,000 from the issuance of Series B Preferred
Stock and warrants to Biotechnology Value Fund, L.P. The receipt of $3,250,000
from these two transactions allowed for the repayment of amounts owed and
provides the Company with approximately six months of operating funds. As a
result of the Company's continuing to incur cash expenses in excess of cash
receipts, the Company will need to raise additional funds from the receipt of
licensing fees, contract service revenue, or additional financing, or implement
another cash conservation program, or a combination of these items, in
order to be able to continue as a going concern. Due to the uncertainties
involved in the receipt of licensing fees and revenue contract service or
receipt of additional financing, many of which are outside the control of the
Company,
Page 16
the Company's independent public accountants have qualified their year-end
December 31, 2000 audit opinion with regard to the Company's ability to continue
as a going concern.
In order to address its future cash needs, the Company is actively seeking
to license certain of its products, which includes TpP, MH1, and the ABS-103 and
ABS-205 neurobiology compounds. If it is successful in licensing some of these
products, the licensees may provide additional funding or perform additional
testing necessary to obtain regulatory approvals or provide clinical,
manufacturing and marketing expertise, which will lead to revenue for the
Company. The Company is also discussing collaborations and contract services
involving its patented Antigen-Free technology. The Company cannot guarantee
that it will be successful in generating funding from these sources or that it
will be able to continue in business.
The Company's cash and cash equivalents increased by $500,000 to
$1,694,000 during the nine months ended September 30, 2001, primarily from
financing activities ($1,918,000) which includes the proceeds from the issuance
of Series B convertible preferred stock and warrants and investing activities
($947,000) which includes the proceeds from the sale of the Stellar Business,
offset by cash used in operations ($2,365,000). Net cash of $2,365,000 was used
in operations to fund the Company's cash loss from operations of $2,485,000 (net
of non cash expenses of $258,000 for depreciation and amortization, net loss on
sale of business $288,000, $57,000 incurred in connection with the issuance of
stock and warrants and $43,000 for the Company's equity in the loss of its joint
venture, offset by a net gain on sale of fixed assets $4,000). Net cash of
$120,000 was provided by changes in operating assets and liabilities primarily
as a result of an increase in accounts payable and accrued expenses ($219,000),
a decrease in other current assets ($44,000), partially offset by an increase in
accounts receivable ($104,000), an increase in inventory ($38,000) and an
increase in other assets ($1,000). Cash provided from investing activities was
from the sale of the Stellar Business ($1,200,000) and the sale of fixed assets
($4,000), offset by payment for patents ($251,000) and the purchase of equipment
($6,000). Financing activities provided $1,918,000 primarily from the proceeds
of the issuance of the Series B convertible preferred stock and warrants
($2,050,000), the exercise of stock options ($19,000), offset by payments under
capital lease obligations and notes payable ($151,000).
Results of Operations
Three Months Ended September 30, 2001
The Company's net loss of $1,020,000 for the three months ended September
30, 2001 increased by $23,000 from a net loss of $997,000 for the three months
ended September 30, 2000. The increase in the net loss was primarily due to
decreased revenues ($411,000) and decreased investment income ($28,000), offset
by reduced research and development expenses ($128,000) and reduced selling,
general and administration expenses ($151,000) resulting from the sale of the
Stellar business.
Sales during the third quarter of 2001 decreased $361,000 as compared to
the third quarter of 2000 primarily due to the sale of the Stellar business at
the end of the second quarter of fiscal 2001. Sales of TpP diagnostic kits
during the third quarter of 2001 was equal to sales of TpP during the third
quarter of 2000.
Cost of Sales decreased $158,000 during the third quarter of 2001 from the
corresponding period last year. This decrease was due to the sale of the Stellar
business.
Page 17
Research and development expenses decreased by $128,000, from $351,000 for
the three months ended September 30, 2000 to $223,000 for the three months ended
September 30, 2001, primarily as a result of savings in personnel costs, reduced
costs associated with the TpP development program, partially offset by increases
in research and development funding for ABS-205.
Selling, general and administrative expenses decreased by $151,000, from
$938,000 in the third quarter of 2000 to $787,000 in the third quarter of 2001,
as a result of the sale of the Stellar business, savings in personnel costs,
reduced investor relations costs, offset by increased cost of professional
service fees associated with the sale of business and financing activities.
Interest expense increased $2,000 from $4,000 in the third quarter of 2000
to $6,000 in the third quarter of 2001, primarily from an increase in capital
lease obligations.
Investment income decreased by $ 28,000, from $37,000 in the third quarter
of 2000 to $9,000 in the third quarter of 2001, as a result of lower average
cash balances.
Equity in loss of joint venture of $21,000 related to the market launch of
the American Healing Technology product line.
Nine Months Ended September 30, 2001
The Company's net loss of $3,127,000 for the nine months ended September
30, 2001 increased by $598,000 from a net loss of $2,529,000 for the nine months
ended September 30, 2000. The increase in the net loss is attributable primarily
to the Company not receiving a license fee of $500,000 in the 2001 period, as it
had in the 2000 period and the loss on the sale of the Stellar Business of
$288,000, offset by reductions in research and development costs and selling,
general and administrative costs.
Sales and cost of sales during the nine months of 2001 were below the 2000
period due primarily to the sale of Stellar. TpP sales were up 13% for the nine
months of 2001, resulting from increased sales in the first quarter of 2001.
Research and development expenses decreased by $159,000, from $940,000
during the nine months ended September 30, 2000 to $781,000 during the nine
months ended September 30, 2001, primarily from reduced personnel costs, reduced
travel and meeting costs and reduced costs associated with the TpP development
program, offset by an increase in the neurobiology research program.
Selling, general and administrative expenses decreased by $500,000, from
$3,096,000 during the nine months ended September 30, 2000 to $2,596,000 during
the nine months ended September 30, 2001, as a result of the sale of the Stellar
business, reduced personnel costs, a decrease in investor relations costs,
reduced travel and meeting costs and reduced amortization of warrant values,
partially offset by an increase in professional service costs associated with
the sale of business and financing activities.
Interest expense increased by $5,000, from $16,000 during the nine months
of 2000 compared to $21,000 during the nine months of 2001, resulting from
higher balances of note payables and capital lease obligations.
Page 18
Investment income decreased by $99,000, from $117,000 during the nine
months ended September 30, 2000 as compared to $18,000 in the nine months of
2001, as a result of lower average cash balances.
Equity in loss of joint venture was $43,000 relating to American Healing
Technology's preparation and market launch of its Traditional Chinese Medicine
product line.
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.
Page 19
PART II
OTHER INFORMATION
Item 2. Changes in Securities
During the quarter ended September 30, 2001, the Company issued 74,687
shares of Class A Common Stock to a consultant in partial consideration for
services rendered, valued at $44,000. In connection with the issuance, the
consultant agreed to acquire the shares issued to him for investment only and
not with a view to the distribution of such securities. The Company believes
that the exemption from registration afforded by Section 4(2) of the Securities
Act of 1933 is applicable to the issuance of such shares.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
The Company filed a report on Form 8-K dated August 28, 2001(date of
earliest event reported) on September 18, 2001, reporting under Item
5, Other Events, relating to Biotechnology Value Fund, L.P. and
certain of its affiliates making an additional approximately $2
million investment in American Biogenetic Sciences, Inc. pursuant to
a Securities Purchase Agreement dated as of August 23, 2001
SIGNATURE
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 14, 2001 /s/ Josef C. Schoell
-------------------- ------------------------------------
Josef C. Schoell
President, COO & CFO
(Principal Financial and
Accounting Officer)
Page 20