1
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 MARCH 31, 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 (I.R.S. Employer Identification No.)
incorporation or organization)
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 May 9, 2001
- ------------------------------------- --------------------------
Class A Common Stock, par value $.001 41,339,222
Class B Common Stock, par value $.001 3,000,000
Page 1
2
AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARIES
(a development stage company)
Form 10-Q for the Quarter Ended March 31, 2001
INDEX
Part I - FINANCIAL INFORMATION
Item 1: Financial Statements: Page No.
--------
Consolidated Balance Sheets -
March 31, 2001 and December 31, 2000 3
Consolidated Statements of Operations -
Three Months Ended March 31, 2001 and March 31, 2000
and For the Period from Inception (September 1, 1983)
Through March 31, 2001 4
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 2001 and March 31, 2000
and For the Period from Inception (September 1, 1983)
Through March 31, 2001 5
Consolidated Statements of Stockholders' Equity -
For the Period from Inception (September 1, 1983)
Through March 31, 2001 6 - 9
Notes to Consolidated Financial Statements 10 - 12
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations 12 - 17
Item 3: Quantitative and Qualitative Disclosures about Market Risk 17
Part II - OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K 18
Signature 18
Page 2
3
AMERICAN BIOGENETIC SCIENCES, INC AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED BALANCE SHEETS
March December
31, 2001 31, 2000
-------- --------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 396,000 $ 1,194,000
Accounts receivable 273,000 146,000
Inventories 554,000 531,000
Other current assets 23,000 74,000
------------ ------------
Total current assets 1,246,000 1,945,000
------------ ------------
Fixed assets, net of accumulated depreciation of $1,985,000 and
$1,958,000, respectively 452,000 477,000
Patent costs, net of accumulated amortization of $685,000 and
$633,000, respectively 2,005,000 1,967,000
Intangible assets, net 579,000 599,000
Other assets 31,000 98,000
------------ ------------
$ 4,313,000 $ 5,086,000
============ ============
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable and accrued expenses 483,000 $ 368,000
Current portion of capital lease obligation 16,000 16,000
Current portion of notes payable 177,000 184,000
------------ ------------
Total current liabilities 676,000 568,000
------------ ------------
LONG TERM LIABILITIES:
Notes payable, less current portion -- 7,000
Capital lease obligation 71,000 71,000
------------ ------------
Total liabilities 747,000 646,000
------------ ------------
STOCKHOLDERS' EQUITY:
Series A convertible preferred stock, par value $.001 per share 10,000,000
shares authorized; 7,000 shares issued and outstanding (liquidation
preference of $3,500,000) -- --
Class A common stock, par value $.001 per share; 100,000,000 shares authorized;
41,102,255 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 72,954,000 72,935,000
Deficit accumulated during the development stage (69,432,000) (68,539,000)
------------ ------------
Total stockholders' equity 3,566,000 4,440,000
------------ ------------
$ 4,313,000 $ 5,086,000
------------ ------------
The accompanying notes are an integral part of these consolidated balance
sheets.
Page 3
4
AMERICAN BIOGENETIC SCIENCES, INC AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
For the Period From
Inception (September
Three month period ended 1, 1983) Through
March 31, 2001 March 31, 2000 March 31, 2001
-------------- -------------- --------------
REVENUES:
Sales $ 488,000 $ 383,000 $ 4,825,000
Royalties / license fees 1,000 500,000 1,503,000
Collaborative agreements 34,000 76,000 575,000
----------- ------------ ------------
523,000 959,000 6,903,000
COSTS AND EXPENSES:
Cost of sales 192,000 156,000 1,904,000
Research and development 331,000 261,000 32,188,000
Selling, general and administrative 901,000 1,059,000 38,723,000
Facility consolidation cost -- -- 252,000
----------- ------------ ------------
Loss from operations (901,000) (517,000) (66,164,000)
----------- ------------ ------------
OTHER INCOME (EXPENSE):
Interest expense (2,000) (11,000) (4,393,000)
Net gain on sale of fixed assets 2,000 -- 13,000
Investment income, net 8,000 30,000 4,702,000
----------- ------------ ------------
Loss before extraordinary charge (893,000) (498,000) (65,842,000)
Extraordinary charge for early retirement of
debentures, net -- -- (1,140,000)
----------- ------------ ------------
NET LOSS (893,000) (498,000) (66,982,000)
Preferred stock dividend related to warrants -- (2,450,000) (2,450,000)
----------- ------------ ------------
Net loss attributable to common stockholders ($893,000) ($2,948,000) ($69,432,000)
=========== ============ ============
PER SHARE INFORMATION (NOTE 2):
Basic and Diluted net loss per share ($.02) ($.07)
=========== ============
Common shares used in computing per share amounts:
Basic and Diluted 44,089,000 42,129,000
=========== ============
The accompanying notes are an integral part of these consolidated statements.
Page 4
5
AMERICAN BIOGENETIC SCIENCES, INC AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOW
(unaudited)
For the Period From
Inception (September 1,
Three Months Ended 1983) Through
March 31, 2001 March 31, 2000 December 31,2000
-------------- -------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($893,000) ($498,000) ($66,982,000)
Adjustments to reconcile net (loss) to net cash
used in operating activities:
Depreciation and amortization 99,000 78,000 3,467,000
Net (gain) loss on sale of fixed assets (2,000) -- (13,000)
Net (gain) loss on sale of marketable securities -- -- (217,000)
Other noncash expenses accrued primarily for stocks and warrants 57,000 68,000 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
CHANGES IN OPERATING ASSETS AND LIABILITIES:
(Increase) decrease in accounts receivable (127,000) (73,000) (165,000)
(Increase) decrease in inventories (23,000) (2,000) (396,000)
(Increase) decrease in other current assets 51,000 8,000 (23,000)
(Increase) decrease in other assets 10,000 -- 68,000
Increase (decrease) in accounts payable and accrued expenses 115,000 (886,000) 867,000
Increase in interest payable to stockholder -- 8,000 120,000
--------------------------------------------------------
Net cash used in operating activities (713,000) (1,297,000) (56,955,000)
--------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2,000) (2,000) (2,090,000)
Proceeds from sale of fixed assets 2,000 -- 24,000
Payments for patent costs and other assets (90,000) (62,000) (2,760,000)
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 (90,000) (64,000) (4,728,000)
--------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments to debentureholders -- -- (2,246,000)
Proceeds from issuance of common stock, net 19,000 2,551,000 42,898,000
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 (14,000) (7,000) (164,000)
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 3,452,000
Repayment of loans payable to stockholder / affiliates
(remainder contributed to capital by the stockholder) -- (200,000) (1,591,000)
--------------------------------------------------------
Net cash provided by (used in) financing activities 5,000 5,425,000 62,079,000
--------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (798,000) 4,064,000 396,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,194,000 93,000 --
--------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 396,000 $ 4,157,000 $ 396,000
--------------------------------------------------------
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 -- $ 2,792,000 $ 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
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AMERICAN BIOGENETIC SCIENCES, INC AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (unaudited)
Class A Class B
Per Common Stock Common Stock
Share
Amount Shares Dollars Shares Dollars
------ ------ ------- ------ -------
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
-------------------------------------------------------
Deficit
Accumulated
Additional During the
Paid-in Development
Capital Stage Total
------- ----- -----
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
-------------------------------------------------------
Page 6
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AMERICAN BIOGENETIC SCIENCES, INC AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(unaudited) (continued)
Class A Class B
Per Common Stock Common Stock
Share
Amount Shares Dollars Shares Dollars
------ ------ ------- ------ -------
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 - -
Fair Value 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 - - -
Fair Value for warrants/options issued - - - -
Net (loss) for the period - - - -
---------------------------------------------------------
BALANCE, DECEMBER 31, 1995 13,431,364 $13,000 1,375,500 $1,000
---------------------------------------------------------
Deficit
Accumulated
Additional During the
Paid-in Development
Capital Stage Total
------- ----- -----
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
Fair Value 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
Fair Value 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
------------------------------------------------------------------
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AMERICAN BIOGENETIC SCIENCES, INC AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(unaudited) (continued)
Class A Class B
Per Common Stock Common Stock
Share
Amount Shares Dollars Shares Dollars
------ ------ ------- ------ -------
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 - -
Fair Value 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 - - -
Fair Value 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 - - -
Fair Value 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 - - -
Fair Value 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
-------------------------------------------------------
Deficit
Accumulated
Additional During the
Paid-in Development
Capital Stage Total
------- ----- -----
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
Fair Value 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 7,793,000 (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
Fair Value 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 6,077,000 (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
Fair Value 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 2,520,000 (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
Fair Value 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 $ 3,852,000 ($62,314,000) $ 1,578,000
----------------------------------------------------------
Page 8
9
AMERICAN BIOGENETIC SCIENCES, INC AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(unaudited) (continued)
Class A Class B
Per Common Stock Common Stock
Share
Amount Shares Dollars Shares Dollars
------ ------ ------- ------ -------
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 - - - -
Preferred stock dividend related to warrants - - - -
Exercise of stock options and warrants .97 1,278,675 1,000 - -
Fair Value 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
-------------------------------------------------
Exercise of stock options .25 75,000 -
Net (loss) for the period
-------------------------------------------------
BALANCE, MARCH 31, 2001 41,102,255 $41,000 3,000,000 $3,000
-------------------------------------------------
Deficit
Accumulated
Additional During the
Paid-in Development
Capital Stage Total
------- ----- -----
BALANCE, DECEMBER 31, 1999 $ 1,852,000 ($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 related to warrants - (2,450,000) (2,450,000)
Exercise of stock options and warrants 1,234,000 - 1,235,000
Fair Value 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
-------------------------------------------------------
Exercise of stock options 19,000 19,000
Net (loss) for the period (893,000) (893,000)
-------------------------------------------------------
BALANCE, MARCH 31, 2001 $72,954,000 ($69,432,000) $ 3,566,000
-------------------------------------------------------
The accompanying notes are an integral part of these consolidated statements.
Page 9
10
AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARIES
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 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 March 31, 2001 and
results of operations for the three months ended March 31, 2001 and March 31,
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 months
ended March 31, 2001 are not necessarily indicative of the results for the full
year.
(2) LIQUIDITY AND FINANCING
As of March 31, 2001, ABS had working capital of $570,000 compared to a working
capital of $1,377,000 as of December 31, 2000. Additionally, the Company had
cash and cash equivalents of $396,000 at March 31, 2001. As of April 30, 2001
the Company's cash and cash equivalents had decreased to approximately $175,000.
In April and May 2001, the Company began to implement a cash conservation
program, which includes executive officers deferring 50% to 100% of their
salaries and certain consultants deferring their compensation. As a result of
the Company's continuing to incur cash expenses in excess of cash receipts, the
Company will require the receipt of additional financing, the receipt of
additional licensing fees and milestone payments and the disposition of
nonstrategic assets. If this does not occur, the Company will be required to
carry out a significant cash conservation program to carry it beyond the next
few months. Due
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to the uncertainties involved in the receipt of milestone payments and
additional licensing fees 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 the need for additional capital, ABS is actively seeking to
license certain of its products and is aggressively working on those matters
within its control with respect to achievement of contractual milestones for
milestone payments. The Company's current products, which it is aggressively
seeking to license, include TpP, MH1, and the ABS-205 neurobiology compound. If
it is successful in licensing some of these products, the licensees might
provide additional funding or might perform additional testing necessary to
obtain regulatory approvals or provide clinical, manufacturing and marketing
expertise, which will indirectly lead to revenue for the Company. The Company is
also discussing collaborations and contract services involving its patented
Antigen-Free technology. The Company cannot guaranty that it will be successful
in generating funding from these sources.
In addition the Company is continuing discussions with certain potential
investors and private placement agents concerning additional financing. However,
in the current economic environment, financing has become more difficult to
obtain, including within the biotechnology industry, and there is no guaranty
that the Company will be able to obtain additional financing on reasonable
terms, or that it will be able to obtain financing at all. The Company's failure
to raise sufficient additional funds, either through licensing, milestone
payments or co-marketing activities or additional financing, will have a
material adverse effect on its financial condition and ability to continue as a
going concern.
(3) 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
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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 preferred stock outstanding would be antidilutive.
(4) INVENTORY
Inventory consists of the following:
March 31, December 31,
2001 2000
---- ----
Raw Materials $330,000 $328,000
Work in Process 120,000 132,000
Finished Goods 104,000 171,000
-------- --------
$554,000 $531,000
======== ========
(5) STOCKHOLDERS' EQUITY
Stock Options - The following summarizes the stock option activity in all stock
option plans for the three months ended March 31, 2001.
Weighted Avg.
Option
Shares Price
------ -----
Granted 329,000 $ .69
Exercised 75,000 $ .25
Expired 75,000 $2.00
Cancelled 340,000 $ .91
Each option entitles the holder to purchase one share of Class A Common Stock of
the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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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 set forth in the Company's various
filings with the Securities and Exchange Commission. 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.
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 (second fiscal
quarter), the Company made the second contingent payment of $20,000 in Class A
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Common Stock (10,811 shares). On April 24, 2001 (second fiscal quarter) the
Company made the third and final contingent payment of $150,000 in Class A
Common Stock (236,967 shares).
On January 27, 2000, ABS granted to Abbott Laboratories ("Abbott") an
exclusive worldwide license to its ABS-103 neurocompound. In consideration for
the license, ABS received an initial license fee of $500,000 and is to receive
up to $17 million of milestone payments upon successfully reaching development
milestones and royalties on commercial sales. In addition, Abbott purchased
2,782,931 Class A Common Stock for $1.5 million.
On February 3, 2000, ABS issued 7,000,000 shares of Series A
Convertible Preferred Stock and warrants to purchase 7,000,000 shares of Class A
Common Stock to Biotechnology Value Fund and the Company's Chairman, Mr. Roach
for an aggregate purchase price of $3.5 million.
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,
Convertible Preferred Series A Stock and Class A Common Stock, (iv) the exercise
of stock options and warrants, (v) capital contributions to ABS by it's CEO and
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 monoclonal antibody
programs 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.
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As of March 31, 2001, ABS had working capital of $570,000 compared to a
working capital of $1,377,000 as of December 31, 2000. Additionally, the Company
had cash and cash equivalents of $396,000 at March 31, 2001. As of April 30,
2001 the Company's cash and cash equivalents had decreased to approximately
$175,000. In April and May 2001, the Company began to implement a cash
conservation program, which includes executive officers deferring 50% to 100% of
their salaries and certain consultants deferring their compensation. As a result
of the Company's continuing to incur cash expenses in excess of cash receipts,
the Company will require the receipt of additional financing, the receipt of
additional licensing fees and milestone payments and the disposition of
nonstrategic assets. If this does not occur, the Company will be required to
carry out a significant cash conservation program to carry it beyond the next
few months. Due to the uncertainties involved in the receipt of milestone
payments and additional licensing fees 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 the need for additional capital, ABS is actively
seeking to license certain of its products and is aggressively working on those
matters within its control with respect to achievement of contractual milestones
for milestone payments. The Company's current products, which it is aggressively
seeking to license, include TpP, MH1, and the ABS-205 neurobiology compound. If
it is successful in licensing some of these products, the licensees might
provide additional funding or might perform additional testing necessary to
obtain regulatory approvals or provide clinical, manufacturing and marketing
expertise, which will indirectly lead to revenue for the Company. The Company is
also discussing collaborations and contract services involving its patented
Antigen-Free technology. The Company cannot guaranty that it will be successful
in generating funding from these sources.
In addition the Company is continuing discussions with certain
potential investors and private placement agents concerning additional
financing. However, in the current economic environment, financing has become
more difficult to obtain, including within the biotechnology industry, and there
is no guaranty that the Company will be able to obtain additional financing on
reasonable terms, or that it will be able to obtain financing at all. The
Company's failure to raise sufficient additional funds, either through
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licensing, milestone payments or co-marketing activities or additional
financing, will have a material adverse effect on its financial condition and
ability to continue as a going concern.
The Company's cash and cash equivalents decreased by $798,000 to
$396,000 during the first quarter of 2001. This decrease was primarily due to
net cash used in operations ($713,000) and used in investing activities
($90,000) which was partly offset by financing activities ($5,000). Net cash of
$713,000 was used to fund the Company's cash loss from operations of $739,000
(net of non-cash expenses of $99,000 for depreciation and amortization, $57,000
incurred in connection with the issuance of stock and warrants and $2,000 net
gain from the sale of a fixed asset). Net cash of $26,000 was provided by
changes in operating assets and liabilities primarily as a result of an increase
in accounts payable and accrued expenses ($115,000), a decrease in other current
assets ($51,000), a decrease in other assets ($10,000) offset by an increase in
accounts receivable ($127,000), and an increase in inventory ($23,000). Cash
used in investing activities was for the purchase of equipment ($2,000) and
capitalized patent costs ($90,000) partially offset by the proceeds from the
sale of fixed assets ($2,000). Financing activities provided $5,000 from the
exercise of stock options ($19,000), offset by payments of other notes payable
($14,000).
RESULTS OF OPERATIONS
Three Months Ended March 31, 2001
The Company had a net loss of $893,000 for the first quarter ended
March 31, 2001 compared to a net loss of $498,000 for the first quarter ended
March 31, 2000. The increase in the net loss is attributable primarily to the
Company not receiving a license fee of $500,000 in the first quarter of 2001, as
it had in the first quarter of 2000, and secondarily to reduced revenue from
collaborative agreements and investment income, an increase in R&D expenses
offset by reduced SG&A expenses, interest expense and increased gross margin on
increased sales.
The increase in sales during the first quarter of 2001 was primarily
from sales of Stellar products and an increase in TpP diagnostic kits sales.
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Research and development expenses increased by $70,000, from $261,000
to $331,000, primarily due to the increase in the neurobiology research program.
Selling, general and administrative expenses decreased by $158,000,
from $1,059,000 to $901,000, as a result of reduced professional service costs,
reduced personnel costs and a decrease in investor relations cost, which were
offset in part by increased depreciation and amortization costs.
Interest expense decreased by $9,000, from $11,000 to $2,000, resulting
primarily from the repayment of loans to the Company's Chairman in the first
quarter of 2000.
Investment income decreased by $22,000, from $30,000 in the first
quarter of 2000 to $8,000 in first quarter of 2001, as a result of lower average
cash balances.
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. The Company does not have operations
subject to risks of foreign currency fluctuations, nor does it use derivative
financial instruments in its operations. The Company does not have exposure to
market risks associated with changes in interest rates as it has no variable
interest rate debt outstanding. The Company 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 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 January 11, 2001
(date of earliest event reported) on January 16, 2001,
reporting under Item 5, Other Events, relating to certain
changes in management.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN BIOGENETIC SCIENCES, INC.
(Registrant)
Date May 14, 2001 /s/ Josef C. Schoell
------------------ ---------------------------------------
Josef C. Schoell
President, Chief Operating Officer and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
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