-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WrcIdTTNnQdGlrC2qu2gBZBkQ3/yW06dqvErpmQxqU2mhRu08QgH8eTLsh/NQXC3 3KarGgLcF83V1YVK9Dgq3A== 0000856984-00-000001.txt : 20000515 0000856984-00-000001.hdr.sgml : 20000515 ACCESSION NUMBER: 0000856984-00-000001 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN BIOGENETIC SCIENCES INC CENTRAL INDEX KEY: 0000856984 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 112655906 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-19041 FILM NUMBER: 630003 BUSINESS ADDRESS: STREET 1: 1375 AKRON STREET STREET 2: P O BOX 1001 CITY: COPIAGUE STATE: NY ZIP: 11726 BUSINESS PHONE: 5167892600 10-Q 1 1ST QTR 3/31/00 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, 2000 Commission File Number 0-19041 American Biogenetic Sciences, Inc. (Exact name of registrant as specified in its charter) Delaware 11-2655906 (State or other jurisdiction of (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 8, 2000 Class A Common Stock, par value $.001 40,767,861 Class B Common Stock, par value $.001 3,000,000 Page 1 AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARIES (a development stage company) Form 10-Q for the Quarter Ended March 31, 2000 INDEX Part I - FINANCIAL INFORMATION Item 1: Financial Statements: Page No. Consolidated Balance Sheets - March 31, 2000 and December 31, 1999 3 Consolidated Statements of Operations - Three Months Ended March 31, 2000 and March 31, 1999 and For the Period from Inception (September 1, 1983) Through March 31, 2000 4 Consolidated Statements of Cash Flows - Three Months Ended March 31, 2000 and March 31, 1999 and For the Period from Inception (September 1, 1983) Through March 31, 2000 5 Consolidated Statements of Stockholders' Equity - For the Period from Inception (September 1, 1983) Through March 31, 2000 6 - 8 Notes to Consolidated Financial Statements 9 - 13 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations 13 - 16 Item 3: Quantitative and Qualitative Disclosures about Market Risk 17 Part II - OTHER INFORMATION Item 2: Changes in Securities 17 - 18 Item 6: Exhibits and Reports on Form 8-K 19 Signature 19 Page 2 AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED BALANCE SHEETS
March 31, December 31, Assets 2000 1999 ------------ ------------ (Unaudited) Current Assets: Cash and cash equivalents $4,157,000 $93,000 Accounts receivable 284,000 211,000 Inventory 513,000 511,000 Other current assets 68,000 76,000 ------------ ------------ Total current assets 5,022,000 891,000 ------------ ------------ Fixed assets, at cost, net of accumulated depreciation and amortization of $1,865,000 and $1,840,000, respectively 453,000 476,000 Patent costs, net of accumulated amortization of $536,000 and $502,000, respectively 1,923,000 1,895,000 Intangible assets, net 638,000 657,000 Other assets 332,000 19,000 ------------ ------------ $8,368,000 $3,938,000 ============ ============ Liabilities and Stockholders' Equity Current Liabilities: Accounts payable and accrued expenses $695,000 $1,581,000 Current portion of notes payable 134,000 746,000 ------------ ------------ Total current liabilities 829,000 2,327,000 ------------ ------------ Long Term Liabilities: Notes payable, less current portion 26,000 33,000 ------------ ------------ Total liabilities 855,000 2,360,000 ------------ ------------ Stockholders' Equity: Series A convertible preferreed stock, par value $.001 per share; 10,000,000 shares authorized; 7,000 and 0 shares issued and outstanding, respectively - - Class A common stock, par value $.001 per share; 100,000,000 shares authorized; 40,495,696 and 36,918,510 shares issued and outstanding, respectively 41,000 37,000 Class B common stock, par value $.001 per share; 3,000,000 shares authorized; 3,000,000 shares issued and outstanding, respectively 3,000 3,000 Additional paid-in capital 72,731,000 63,852,000 Deficit accumulated during the development stage (65,262,000) (62,314,000) ------------ ------------ Total stockholders' equity 7,513,000 1,578,000 ------------ ------------ $8,368,000 $3,938,000 ============ ============ 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 (September 1, -------------------------- 1983) Through March 31, March 31, March 31, 2000 1999 2000 ------------ ------------ -------------- Revenues: Sales $383,000 $292,000 $3,091,000 Royalties / license fees 500,000 - 1,500,000 Collaborative agreements 76,000 40,000 460,000 ------------ ------------ -------------- 959,000 332,000 5,051,000 Costs and expenses: Cost of sales 156,000 118,000 1,251,000 Research and development 261,000 518,000 30,792,000 Selling, general and administrative 1,059,000 1,186,000 34,640,000 Facility consolidation cost - - 252,000 ------------ ------------ -------------- Loss from operations (517,000) (1,490,000) (61,884,000) ------------ ------------ -------------- Other Income (Expense): Interest expense (11,000) (1,000) (4,383,000) Net gain on sale of fixed assets - - 11,000 Investment income 30,000 20,000 4,584,000 ------------ ------------ -------------- Loss before extraordinary charge (498,000) (1,471,000) (61,672,000) Extraordinary charge for early retirement of debentures, net - - (1,140,000) ------------ ------------ -------------- Net loss (498,000) (1,471,000) (62,812,000) Preferred stock dividend related to warrants (2,450,000) - (2,450,000) ------------ ------------ -------------- Net loss attributable to common stockholders ($2,948,000) ($1,471,000) ($65,262,000) ============ ============ ============== Per Share Information (Note 2): Basic and Diluted net loss per share ($0.07) ($0.04) ============ ============ Common shares used in computing per share amounts: Basic and Diluted 42,129,000 38,683,000 ============ ============ 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) For the Period From Inception
(September 1, Three Months Ended 1983) -------------------------- Through March 31, March 31, March 31, 2000 1999 2000 ------------ ------------ -------------- Cash Flows From Operating Activities: Net loss ($498,000) ($1,471,000) ($62,812,000) Adjustments to reconcile net (loss) to net cash provided by or (used) in operating activities: Depreciation and amortization 78,000 83,000 3,118,000 Net gain on sale of fixed assets - - (11,000) Net gain on sale of marketable securities - - (217,000) Other non-cash expenses accrued primarily for stocks and warrants 68,000 167,000 2,612,000 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 (73,000) 2,000 (176,000) (Increase) decrease in inventory (2,000) (45,000) (355,000) (Increase) decrease in other current assets 8,000 (75,000) (68,000) (Increase) decrease in other assets - 5,000 80,000 Increase (decrease) in accounts payable and accrued expenses (886,000) (151,000) 930,000 Increase in interest payable to stockholder 8,000 - 120,000 ------------ ------------ -------------- Net cash provided by (used in) operating activities (1,297,000) (1,485,000) (53,386,000) ------------ ------------ -------------- Cash Flows From Investing Activities: Capital expenditures (2,000) (18,000) (2,058,000) Proceeds from sale of fixed assets - - 22,000 Payments for patent costs and other assets (62,000) (241,000) (2,529,000) 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 (64,000) (259,000) (4,467,000) ------------ ------------ -------------- Cash Flows From Financing Activities: Payments to debentureholders - - (2,246,000) Proceeds from issuance of common stock, net 2,551,000 498,000 42,695,000 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 (7,000) (16,000) (121,000) 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 and affiliates (remainder contributed to capital by the stockholder) (200,000) - (1,500,000) ------------ ------------ -------------- Net cash provided by (used in) financing activities 5,425,000 482,000 62,010,000 ------------ ------------ -------------- Net Increase (Decrease) in Cash and Cash Equivalents 4,064,000 (1,262,000) 4,157,000 Cash and Cash Equivalents at Beginning of Period 93,000 3,047,000 - ------------ ------------ -------------- Cash and Cash Equivalents at End of Period $4,157,000 $1,785,000 $4,157,000 ============ ============ ============== Supplemental Disclosure of Noncash Activities: Capital expenditures made under capital lease obligation - - $20,000 ============ ============ ============== Convertible Debentures converted into 0, 0, and 10,470,583 shares of Common Stock, respectively - - $14,658,000 ============ ============ ============== Warrants issued $2,792,000 $264,000 $3,644,000 ============ ============ ============== Conversion of stockholder loan to preferred stock or paid-in capital $500,000 - $1,981,000 ============ ============ ============== The accompanying notes are an integral part of these consolidated statements. Page 5
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 ------- ------------ ------------- ----------- ----------- BALANCE, AT INCEPTION, (SEPTEMBER 1, 1983) $ - $ - - $ - Sale of common stock to chairman for cash .33 78,000 - - - Net (loss) for the period - - - - ------------ ------------- ----------- ----------- BALANCE, DECEMBER 31, 1983 78,000 - - - Sale of common stock to chairman for cash .33 193,500 - - - Net (loss) for the period - - - - ------------ ------------- ----------- ----------- BALANCE, DECEMBER 31, 1984 271,500 - - - Sale of common stock to chairman for cash .33 276,700 1,000 - - Net (loss) for the period - - - - ------------ ------------- ----------- ----------- BALANCE, DECEMBER 31, 1985 548,200 1,000 - - Sale of common stock to chairman for cash .33 404,820 - - - Net (loss) for the period - - - - ------------ ------------- ----------- ----------- BALANCE, DECEMBER 31, 1986 953,020 1,000 - - Sale of common stock to chairman for cash .33 48,048 - - - Net (loss) for the period - - - - ------------ ------------- ----------- ----------- BALANCE, DECEMBER 31, 1987 1,001,068 1,000 - - Exchange of common stock for Class B stock (1,001,068) (1,000) 1,001,068 1,000 Sale of Class B stock to chairman for cash .33 - - 1,998,932 2,000 Net (loss) for the period - - - - ------------ ------------- ----------- ----------- BALANCE, DECEMBER 31, 1988 - - 3,000,000 3,000 Net (loss) for the period - - - - ------------ ------------- ----------- ----------- BALANCE, DECEMBER 31, 1989 - - 3,000,000 3,000 Conversion of loans payable to stockholder into additional paid-in capital - - - - Sale of 1,150,000 Units to public consisting of 3,450,000 shares of Class A common stock and warrants (net of $1,198,000 underwriting expenses) 2.00 3,450,000 3,000 - - Conversion of Class B stock into Class A stock 668,500 1,000 (668,500) (1,000) Net (loss) for the period - - - - ------------ ------------- ----------- ----------- BALANCE, DECEMBER 31, 1990 4,118,500 $4,000 2,331,500 $2,000 ------------ ------------- ----------- ----------- CONTINUED Page 6 BALANCE, DECEMBER 31, 1990 $ 4,118,500 $4,000 2,331,500 $2,000 Exercise of Class A Warrants (net of $203,000 in underwriting expenses) for cash 3.00 3,449,955 3,000 - - Exercise of Class B Warrants for cash 4.50 79,071 - - - Conversion of Class B stock into Class A stock 850,000 1,000 (850,000) (1,000) Exercise of stock options 2.00 417,750 1,000 - - Expense for warrants issued - - - - Net (loss) for the period - - - - ------------ ------------- ----------- ----------- BALANCE, DECEMBER 31, 1991 8,915,276 9,000 1,481,500 1,000 Exercise of Class B Warrants (net of $701,000 in underwriting expenses) for cash 4.50 3,370,884 3,000 - - Conversion of Class B stock into Class A stock 106,000 - (106,000) - Exercise of stock options 2.49 348,300 1,000 - - Net (loss) for the period - - - - ------------ ------------- ----------- ----------- BALANCE, DECEMBER 31, 1992 12,740,460 13,000 1,375,500 1,000 Sale of common stock to Medeva PLC. 7.50 200,000 - - - Exercise of stock options 2.00 32,700 - - - Net (loss) for the period - - - - ------------ ------------- ----------- ----------- BALANCE, DECEMBER 31, 1993 12,973,160 13,000 1,375,500 1,000 Exercise of stock options 2.16 91,250 - - - Net (loss) for the period - - - - ------------ ------------- ----------- ----------- BALANCE, DECEMBER 31, 1994 13,064,410 13,000 1,375,500 1,000 Conversion of 8% convertible debentures into Class A Common Stock 1.85 354,204 - - - Exercise of stock options 1.82 12,750 - - - Expense for warrants/options issued - - - - Net (loss) for the period - - - - ------------ ------------- ----------- ----------- BALANCE, DECEMBER 31, 1995 13,431,364 $13,000 1,375,500 $1,000 ------------ ------------- ----------- ----------- CONTINUED Page 7 ------------ ------------- ----------- ----------- BALANCE, DECEMBER 31, 1995 $ 13,431,364 $13,000 1,375,500 $1,000 Conversion of 8% convertible debentures into Class A Common Stock 2.74 2,269,755 2,000 - - Exercise of stock options 2.53 569,875 1,000 - - Expense for warrants/options issued - - - - Discount on 7% convertible debentures - - - - Net (loss) for the period - - - - ------------ ------------- ----------- ----------- BALANCE, DECEMBER 31, 1996 16,270,994 16,000 1,375,500 1,000 ------------ ------------- ----------- ----------- Conversion of 7% and 8% convertible debentures into Class A Common Stock 2.93 2,995,006 3,000 - - Sale of Class B Common Stock to Chairman for cash 2.23 - - 350,000 1,000 Exercise of stock options 2.00 27,500 - - - Expense for warrants issued - - - - Class A Common Stock issued 3.12 48,117 - - - Net (loss) for the period - - - - ------------ ------------- ----------- ----------- BALANCE, DECEMBER 31, 1997 19,341,617 19,000 1,725,500 2,000 ------------ ------------- ----------- ----------- Conversion of 5%, 7% and 8% convertible debentures into Class A Common Stock 0.32 4,851,618 5,000 - - Sale of Class B Common Stock to Chairman for cash 0.37 - - 1,274,500 1,000 Exercise of stock options 1.75 4,000 - - - Expense for warrants issued - - - - Class A Common Stock issued 1.06 163,915 - - - Class A Common Stock issued for Stellar 1.76 398,406 1,000 - - Class A Common Stock issued for Private Placement 0.25 10,800,000 11,000 - - Discount on 5% convertible debentures - - - - Net (loss) for the period - - - - ------------ ------------- ----------- ----------- BALANCE, DECEMBER 31, 1998 35,559,556 36,000 3,000,000 3,000 ------------ ------------- ----------- ----------- Sale of Class A Common Stock to Chairman for cash 1.13 440,000 - - - Exercise of stock options 0.61 5,250 - - - Expense for warrants issued - - - - Class A Common Stock issued 0.50 913,704 1,000 - - Net (loss) for the period - - - - ------------ ------------- ----------- ----------- BALANCE, DECEMBER 31, 1999 36,918,510 37,000 3,000,000 3,000 ------------ ------------- ----------- ----------- Sale of Series A Convertible Preferred Stock - - - - Warrants issued with the Convertible Preferred Stock - - - - Preferred stock dividend related to warrants - - - - Exercise of stock options and warrants 1.39 757,927 1,000 - - Expense for warrants issued - - - - Class A Common Stock issued 0.55 2,819,259 3,000 - - Net (loss) for the period - - - - ------------ ------------- ----------- ----------- BALANCE, MARCH 31, 2000 40,495,696 $41,000 3,000,000 $3,000 ============ ============= =========== =========== The accompanying notes are an integral part of these consolidated statements. Page 8
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 ------------ ------------- ----------- 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 ------------ ------------- ----------- Sale of Series A Convertible Preferred Stock 3,500,000 - 3,500,000 Warrants issued with the Convertible Preferred Stock 2,450,000 - 2,450,000 Preferred stock dividend relating to warrants - (2,450,000) (2,450,000) Exercise of stock options and warrants 1,050,000 - 1,051,000 Expense for warrants issued 342,000 - 342,000 Class A Common Stock issued 1,537,000 - 1,540,000 Net (loss) for the period - (498,000) (498,000) ------------ ------------- ----------- BALANCE, MARCH 31, 2000 $72,731,000 ($65,262,000) $7,513,000 ============ ============= =========== The accompanying notes are an integral part of these consolidated statements. CONTINUED Page - 8 (column continuation)
AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARIES (a development stage company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) March 31, 2000 (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, 2000 and results of operations for the three months ended March 31, 2000 and March 31, 1999. The Company's financial statements should be read in conjunction with the summary of significant accounting policies and the notes to consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. The results of operations for the three months ended March 31, 2000 are not necessarily indicative of the results for the full year. (2)NET LOSS PER COMMON SHARE The Company follows the provisions of Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings Per Share". In accordance with SFAS No. 128 basic net loss per common share ("Basic EPS") is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding. Diluted net loss per common share ("Diluted EPS") is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares and dilutive potential common shares then outstanding. The provisions of SFAS No. 128 requires the presentation of both Basic EPS and Diluted EPS on the face of the consolidated statements of operations. Diluted EPS for 2000 and 1999 is the same as Basic EPS because the inclusion of stock options, warrants and the conversion of series A preferred stock outstanding would be antidilutive. Page 9 (3)INVENTORY Inventory consists of the following: March 31, December 31, 2000 1999 Raw Materials $329,000 $334,000 Work in Process 84,000 71,000 Finished Goods 100,000 106,000 -------- -------- $513,000 $511,000 (4)STOCKHOLDERS' EQUITY Private Placement On December 31, 1999 the Company and Biotechnology Value Fund, L.P. ("BVF") signed a letter agreement, subject to negotiation of definitive agreements, authorization of preferred stock and certain other matters, for BVF to invest between $2 and $3 million for the purchase of between 4,000 and 6,000 shares of Series A Convertible Preferred Stock (the "Preferred Stock") and related Warrants. When the Company and BVF began negotiating the definitive agreements for the sale transaction in January 2000, in order to induce BVF to purchase the full $3 million, at the suggestion of BVF, the Company's Chairman Mr. Roach agreed that rather than demand repayment of his demand notes, he would convert $500,000 of the approximately $776,000 plus accrued interest owed to him into an additional investment in the Company on terms identical to the terms previously negotiated with BVF and that the balance of the amount owed him (approximately $276,000 of principal) could be repaid at the rate of $100,000 of principal and interest per month until repaid in full. Mr. Roach agreed and, accordingly, the Company entered into a Securities Purchase Agreement dated as of February 3, 2000 with BVF and Mr. Roach relating to the issuance of a total of 7,000 shares of Preferred Stock and Warrants for 7,000,000 shares of Class A Common Stock. On February 7, 2000, BVF loaned $3,000,000 to the Company, equaling the purchase price for 6,000 shares of Preferred Stock and 6,000,000 Warrants. On March 3, 2000, after receiving stockholder consent to the proposed sale, the Company repaid BVF's loan and $500,000 Page 10 of the Company's indebtedness to Mr. Roach by issuing 6,000 shares of Preferred Stock and 6,000,000 Warrants to BVF and 1,000 shares of Preferred Stock and 1,000,000 Warrants to Mr. Roach. The shares of Preferred Stock: (i) have the right to participate with dividends declared on the Common Stock, if, as and when declared, on an as-converted basis; (ii) contain customary anti-dilution adjustments for mechanical adjustments in the event of stock splits and similar transactions; (iii) contain restrictions on subsequent issuances of other preferred stock ranking equal to or superior to the Preferred Stock without the consent of the holders of a majority of such Preferred Stock; (iv) have a liquidation preference equal to the original issue price of the Preferred Stock, plus any accrued and unpaid dividends; (v) will not be entitled to vote except as a separate class when its rights are affected; and (vi) will be convertible at any time after the original issue date at the option of the holder. Each share of Preferred Stock initially is convertible into 1,000 shares of Class A Common Stock, at a conversion price of $.50 per share of Class A Common Stock. Under the terms of the Securities Purchase Agreement, the Company also entered into a Registration Agreement under which it agreed to file a registration statement within 60 days after closing, which it did on May 2, 2000, registering the Class A Common Stock issuable upon conversion of the Preferred Stock or exercise of the Warrants. The Company further agreed to use its best efforts to cause that registration to become effective within 120 days after closing. All expenses of such registration other than selling commissions, will be borne by the Company. The 7,000,000 warrants are exercisable for a period of no more than five years at $1.00 per share. The fair value of these warrants as determined using an option-pricing model was $2,450,000, which was treated as a preferred stock noncash dividend. The following assumptions were used for this fair value computation: dividend yield of 0%, volatility of 106%, risk-free interest rate of 5.0% and expected lives of 5 years. Page 11 Stock Options - The following summarizes the stock option activity in all stock option plans for the three months ended March 31, 2000. Weighted Avg. Option Shares Price Granted 732,500 $.38 Exercised 704,096 $1.33 Cancelled 147,500 $.63 Each option entitles the holder to purchase one share of Class A Common Stock of the Company. Other Shares and Warrants - On January 27, 2000, the Company entered into an Exclusive License Agreement with Abbott Laboratories ("Abbott") under which the Company granted to Abbott an exclusive worldwide license to its ABS-103 compound, related technology and patent rights. The Exclusive License Agreement gives Abbott the exclusive right to develop and market the compound, which presently is in the pre-clinical stage. In consideration for the license grant and in addition to customary royalties on sales, Abbott paid the Company an initial license fee of $500,000 and agreed to pay additional milestone payments aggregating up to $17 million depending upon successfully reaching development milestones, generally by indication. In connection with the entering into of the Exclusive License Agreement, the Company and Abbott also entered into a Stock Purchase Agreement dated January 27, 2000 pursuant to which Abbott purchased 2,782,931 shares (the "Abbott Shares") of the Company's Class A Common Stock for $1,500,000. The Company also entered into a Registration Rights Agreement with Abbott pursuant to which, among other things, the Company agreed to register the Abbott Shares under the Securities Act of 1933, as amended upon Abbott's request at any time after the first anniversary of the sale and agreed to include the Abbott Shares in any other registration of the Company's securities under the Securities Act after that date. All expenses of registration of the Abbott Shares, other than underwriting discounts, selling commissions and fees and disbursements of counsel for Abbott, are to be borne by the Company. Page 12 Pursuant to an investor relations agreement renewed in March 2000, the Company issued a warrant to the investor relations firm to purchase up to 300,000 shares of Class A Common Stock at $3.00 per share for two years, with vesting based on the achievement of certain goals. Included in Other assets is the unamortized portion of the fair value of these warrants as determined using an option-pricing model of $342,000 which is being amortized over the one year service period of the agreement. The following assumptions were used for this fair value computation: dividend yield of 0%, volatility of 106%, risk-free interest rate of 6.5% and expected lives of 2 years. Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations The 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 Page 13 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 recorded the second contingent payment of $20,000 in Class A Common Stock (10,811 shares). On January 27, 2000, ABS granted to Abbott an exclusive worldwide license to its ABS-103 neurocompound. In consideration for the license, 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 entered into a Securities Purchase Agreement with Biotechnology Value Fund and the Company's Chairman Mr. Roach relating to the issuance of Series A Convertible Preferred Stock plus warrants for a total of $3.5 million. See Note 4 of the Notes to Consolidated Financial Statements starting on page 10 of this Form 10-Q for a more detailed description of these two transactions. 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 Chairman of the Board, (vi) initial license fee payments and fees from collaborative contract services and (vii) the income on funds invested in bank deposits, United States Treasury bills and notes and other high grade liquid investments. ABS expects to continue to incur substantial expenditures in research and product development in the neurobiology program and in the development and commercialization of a rapid assay format for TpP, as Page 14 well as in the FDA approval process relating to additional 510(k) filings for TpP and Stellar's products. As of March 31, 2000, ABS had working capital of $4,227,000 compared to a negative working capital of $1,436,000 as of December 31,1999. ABS' management believes that current working capital, together with the receipt of additional licensing fees and milestone payments projected to be received within the next 12 months will be sufficient to fund its planned activities through the first quarter of 2001. Currently, product development plans include licensing TpP and the ABS-205 neurobiology compound, to large pharmaceutical companies which provide additional funding, perform additional testing necessary to obtain regulatory approvals, provide clinical and manufacturing expertise and market ABS' products. Without such licensing fees, milestone payments or co-marketing arrangements, additional sources of funding may be required to finance ABS activities beyond the first quarter of 2001. The Company's cash and cash equivalents increased by $4,064,000 to $4,157,000 during the first quarter of 2000. This increase was primarily from financing activities ($5,425,000), which was offset by, cash used in operations ($1,297,000) and investing activities ($64,000). Net cash of $1,297,000 was used to fund the Company's cash loss from operations of $352,000 (net of non-cash expenses of $78,000 for depreciation and amortization, and $68,000 incurred in connection with the issuance of stock and warrants). Net cash of $945,000 was used by changes in operating assets and liabilities primarily as a result of decrease in accounts payable and accrued expenses ($886,000), an increase in accounts receivable ($73,000), an increase in inventory ($2,000), partially offset by an decrease in other current assets ($8,000) and an increase in interest payable to stockholder ($8,000). Cash used in investing activities was for the purchase of equipment ($2,000) and capitalized patent costs ($62,000) primarily for neurobiology compounds. Financing activities provided $5,433,000 from the sale of Series A Convertible Preferred Stock ($3,000,000), the sale of Class A Common Stock to Abbott ($1,500,000), the exercise of stock options and warrants ($1,051,000), additional loans from the Company's Chairman ($81,000), offset by the repayment of loans to the Company's Chairman of $200,000 ($500,000 of the loan payable to the Chairman was converted into Series A Preferred Stock) and payments of other notes payable ($7,000). Page 15 Results of Operations The Company had a net loss of $498,000 for the first quarter ended March 31, 2000 compared to a net loss of $1,471,000 for the first quarter ended March 31, 1999. The decrease in the net loss is attributable to the license fee of $500,000 received under the Abbott Exclusive License Agreement, reduced R&D and SG&A expenses and increased sales and collaborative agreement revenues. The increase in sales during the first quarter of 2000 was primarily from sales of Stellar products. Sales of TpP diagnostic kits continues to be slow. Research and development expenses decreased by $257,000, from $518,000 to $261,000, primarily as a result of cost savings implemented in 1999 and continued during the first quarter of 2000, as well as the cost savings associated with the consolidation of operation at Stellar. Selling, general and administrative expenses decreased by $127,000, from $1,186,000 to $1,059,000, as a result of reduced personnel costs and reduced travel and meeting costs associated with the cost savings implemented in 1999 and a decrease in investor relations cost, which were offset in part, by increased professional costs relating to the Abbott Exclusive License Agreement. Interest expense increased by $10,000, from $1,000 to $11,000, resulting primarily from the loans payable to the Company's Chairman. Investment income increased by $10,000, from $20,000 in first quarter of 1999 to $30,000 in first quarter of 2000, as a result of higher average cash balances. Preferred stock dividend related to warrants of $2,450,000 represents the noncash fair value of the BVF and Mr. Roach warrants, determined by using an option-pricing model, issued in connection with the private placement. See Note 4 of the Notes to Consolidated Financial Statements starting on page 10 of this Form 10-Q for a more detailed description of this transaction. Page 16 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. PART II OTHER INFORMATION Item 2. Changes in Securities On January 27, 2000, the Company entered into a Stock Purchase Agreement pursuant to which Abbott purchased 2,782,931 shares of the Company's Class A Common Stock for $1,500,000. On February 3, 2000, the Company entered into a Securities Purchase Agreement with BVF and Mr. Roach relating to the issuance of a total of 7,000 shares of Preferred Stock and Warrants for 7,000,000 shares of Class A Common Stock. On February 7, 2000, BVF loaned $3,000,000 to the Company, equaling the purchase price for 6,000 shares of Preferred Stock and 6,000,000 Warrants. On March 3, 2000, after receiving stockholder consent to the proposed sale, the Company repaid BVF's loan and $500,000 of the Company's indebtedness to Mr. Roach by issuing 6,000 shares of Preferred Stock and 6,000,000 Warrants to BVF and 1,000 shares of Preferred Stock and 1,000,000 Warrants to Mr. Roach. The shares of Preferred Stock: (i) have the right to participate with dividends declared on the Common Stock, if, as and when declared, on an as-converted basis; (ii) contain customary anti-dilution Page 17 adjustments for mechanical adjustments in the event of stock splits and similar transactions; (iii) contain restrictions on subsequent issuances of other preferred stock ranking equal to or superior to the Preferred Stock without the consent of the holders of a majority of such Preferred Stock; (iv) have a liquidation preference equal to the original issue price of the Preferred Stock, plus any accrued and unpaid dividends; (v) will not be entitled to vote except as a separate class when its rights are affected; and (vi) will be convertible at any time after the original issue date at the option of the holder. Each share of Preferred Stock initially is convertible into 1,000 shares of Class A Common Stock, at a conversion price of $.50 per share of Class A Common Stock. Pursuant to an investor relations agreement renewed in March 2000, the Company issued a warrant to the investor relations firm to purchase up to 300,000 shares of Class A Common Stock at $3.00 per share for two years, with vesting based on the achievement of certain goals. Page 18 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27 Financial Data Schedule (b) Reports on Form 8-K The Company filed a report on Form 8-K dated January 27, 2000 (date of earliest event reported) on March 7, 2000, reporting under Item 5, Other Events, relating to the Abbott Exclusive License Agreement and related transactions. 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 12, 2000 /s/ Josef C. Schoell -------------- --------------------------------- Josef C. Schoell Vice President, Finance (Principal Financial and Accounting Officer) Page 19 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS THREE MONTH YEAR TO DATE SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AMERICAN BIOGENETIC SCIENCES, INC. 2000 10-Q FOR THE FIRST QUARTER ENDED MARCH 31, 2000. 3-MOS DEC-31-2000 MAR-31-2000 4,157,000 0 284,000 0 513,000 5,022,000 2,318,000 1,865,000 8,368,000 829,000 0 0 0 44,000 7,469,000 8,368,000 383,000 959,000 156,000 156,000 261,000 0 11,000 (498,000) 0 (498,000) 0 0 0 (498,000) (.07) (.07)
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