-----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, FwR/4M2ZsktNGsOAIbpJMQWC0x+4qvWhumuNWs8e3nobgHv7BGzsNmjTenVGXQ/z 0MPUpHVe798ut2QYx5Ldcg== 0000856984-97-000006.txt : 19970520 0000856984-97-000006.hdr.sgml : 19970520 ACCESSION NUMBER: 0000856984-97-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NASD 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: 1934 Act SEC FILE NUMBER: 000-19041 FILM NUMBER: 97607884 BUSINESS ADDRESS: STREET 1: 1375 AKRON STREET CITY: COPIAGUE STATE: NY ZIP: 11726 BUSINESS PHONE: (516)789-2600 10-Q 1 10 Q FIRST QTR. 3/31/97 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, 1997 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 516-789-2600 Copiague, New York 11726 (Telephone number) (Address of Principal Executive Offices) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days YES X NO Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at May 9, 1997 Class A Common Stock, par value $.001 18,361,538 Class B Common Stock, par value $.001 1,475,500 AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARY (a development stage company) Form 10-Q for the Quarter Ended March 31, 1997 INDEX Part I - FINANCIAL INFORMATION Item 1: Financial Statements: Page No. Consolidated Balance Sheets - March 31, 1997 and December 31, 1996 3 Consolidated Statements of Operations - Three Months Ended March 31, 1997 and March 31, 1996 and For the Period from Inception (September 1, 1983) Through March 31, 1997 4 Consolidated Statements of Cash Flows - Three Months Ended March 31, 1997 and March 31, 1996 and For the Period from Inception (September 1, 1983) Through March 31, 1997 5 Consolidated Statements of Stockholders' Equity - For the Period from Inception (September 1, 1983) Through March 31, 1997 6 - 8 Notes to Consolidated Financial Statements 9 - 10 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations 11 - 12 Part II - OTHER INFORMATION Item 2: Changes in Securities 13 -14 Item 6: Exhibits and Reports on Form 8-K 14 Signature 14 AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED BALANCE SHEETS
March 31, December 31, Assets 1997 1996 ------------ ------------ (Unaudited) Current Assets: Cash and cash equivalents $7,758,000 $10,760,000 Marketable securities 4,809,000 3,021,000 Other current assets 128,000 528,000 ------------ ------------ Total current assets 12,695,000 14,309,000 ------------ ------------ Fixed assets, at cost, net of accumulated depreciation and amortization of $1,258,000 and $1,183,000, respectively 652,000 591,000 Patent costs, net of accumulated amortization of $230,000 and $212,000, respectively 1,016,000 983,000 Debt issuance costs, net of accumulated amortization of $437,000 and $370,000, respectively 324,000 569,000 Other assets 26,000 21,000 ------------ ------------ $14,713,000 $16,473,000 ============ ============ Liabilities and Stockholders' Equity Current Liabilities: Accounts payable and accrued expenses $754,000 $609,000 Current portion of capital lease obligation 3,000 3,000 ------------ ------------ Total current liabilities 757,000 612,000 ------------ ------------ Long Term Liabilities: 7% convertible debentures, net of unamortized debt discount of $0 and $492,000, respectively 5,170,000 8,508,000 8% convertible debentures 1,650,000 1,800,000 Long-term portion of capital lease obligation 11,000 11,000 ------------ ------------ Total liabilities 7,588,000 10,931,000 ------------ ------------ Stockholders' Equity: Class A common stock, par value $.001 per share; 50,000,000 and 25,000,000 shares authorized, respectively; 17,560,989 and 16,270,994 shares issued and outstanding, respectively 18,000 16,000 Class B common stock, par value $.001 per share; 3,000,000 shares authorized; 1,475,500 and 1,375,500 shares issued and outstanding,respectively 1,000 1,000 Additional paid-in capital 52,021,000 47,793,000 Deficit accumulated during the development stage (44,915,000) (42,268,000) ------------ ------------ Total stockholders' equity 7,125,000 5,542,000 ------------ ------------ $14,713,000 $16,473,000 ============ ============ See notes to unaudited consolidated financial statements Page 3
AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARY (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, 1997 1996 1997 ------------ ------------ -------------- Revenues: Royalties / license fees $ - $ - $1,000,000 Collaborative agreements 9,000 18,000 302,000 ------------ ------------ -------------- 9,000 18,000 1,302,000 Expenses: Research and development 1,058,000 564,000 24,461,000 General and administrative 1,086,000 976,000 22,080,000 ------------ ------------ -------------- Loss from operations (2,135,000) (1,522,000) (45,239,000) ------------ ------------ -------------- Other Income (Expense): Interest expense (687,000) (173,000) (3,514,000) Net gain on sale of fixed assets - - 6,000 Investment income 175,000 129,000 3,832,000 ------------ ------------ -------------- Net loss ($2,647,000) ($1,566,000) ($44,915,000) ============ ============ ============== Net Loss Per Common Share ($0.14) ($0.10) ($6.25) ============ ============ ============== Weighted Average Number of Common Shares Outstanding 18,581,000 16,349,000 7,181,000 ============ ============ ============== See notes to unaudited consolidated financial statements Page 4
AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARY (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, 1997 1996 1997 ------------ ------------ -------------- Cash Flows From Operating Activities: Net loss ($2,647,000) ($1,566,000) ($44,915,000) Adjustments to reconcile net (loss) to net cash used in operating activities: Depreciation and amortization 160,000 149,000 1,854,000 Net gain on sale of fixed assets - - (6,000) Net gain on sale of marketable securities - - (217,000) Other non-cash expenses accrued primarily for warrants 65,000 159,000 1,502,000 Amortization of debt discount included in interest expense 492,000 - 1,843,000 Write off of patent costs - - 93,000 (Increase) decrease in other current assets 400,000 51,000 (128,000) (Increase) decrease in other assets (5,000) 2,000 69,000 Increase in payables and accruals 220,000 151,000 885,000 Increase in interest payable to stockholder - - 112,000 ------------ ------------ -------------- Net cash provided by (used in) operating activities (1,315,000) (1,054,000) (38,908,000) ------------ ------------ -------------- Cash Flows From Investing Activities: Capital expenditures (136,000) (21,000) (1,916,000) Proceeds from sale of fixed assets - - 16,000 Payments for patent costs and other assets (51,000) (8,000) (1,316,000) Proceeds from maturity and sale of marketable securities 1,008,000 987,000 62,740,000 Purchases of marketable securities (2,796,000) (4,036,000) (67,332,000) ------------ ------------ -------------- Net cash provided by (used in) investing activities (1,975,000) (3,078,000) (7,808,000) ------------ ------------ -------------- Cash Flows From Financing Activities: Payments to debentureholders (89,000) - (89,000) Proceeds from issuance of common stock, net 377,000 753,000 35,845,000 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 - (1,000) (6,000) Capital contributions from chairman - - 1,000,000 Increase in loans payable to stockholder / affiliates - - 2,669,000 Repayment of loans payable to stockholder and affiliates (remainder contributed to capital by the stockholder) - - (1,300,000) ------------ ------------ -------------- Net cash provided by (used in) financing activities 288,000 752,000 54,474,000 ------------ ------------ -------------- Net Increase (Decrease) in Cash and Cash Equivalents (3,002,000) (3,380,000) 7,758,000 Cash and Cash Equivalents at Beginning of Period 10,760,000 5,436,000 - ------------ ------------ -------------- Cash and Cash Equivalents at End of Period $7,758,000 $2,056,000 $7,758,000 ============ ============ ============== Supplemental Disclosure of Noncash Activities: Capital expenditures made under capital lease obligation - - $20,000 ============ ============ ============== 7% and 8% Convertible Debentures converted into 1,267,259 2,066,145 and 3,891,218 shares of Common Stock, respectively $3,838,000 $4,865,000 $9,894,000 ============ ============ ============== Warrants issued to placement agent - - $525,000 ============ ============ ============== See notes to unaudited consolidated financial statements Page 5
AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARY (a development stage company) CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
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 - - - 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 30, 1996 16,270,994 16,000 1,375,500 1,000 ------------ ------------- ----------- ----------- Conversion of 8% Convertible Debentures into Class A Common Stock 3.10 1,267,259 2,000 - - Sale of Class B stock for cash 3.44 - - 100,000 - Exercise of stock options 2.18 15,250 - - - Expense for warrants issued - - - - Class A Common Stock issued 5.01 7,486 - - - Net (loss) for the period - - - - ------------ ------------- ----------- ----------- BALANCE, MARCH 31, 1997 17,560,989 $18,000 1,475,500 $1,000 ============ ============= =========== =========== See notes to unaudited consolidated financial statements Page 8
AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARY (a development stage company) CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Deficit Accumulated Additional During the Paid-in Development Capital Stage Total ------------ ------------- ----------- BALANCE, AT INCEPTION, (SEPTEMBER 1, 1983) $ - $ - $ - Sale of common stock to chairman for cash 26,000 - 26,000 Net (loss) for the period - (25,000) (25,000) ------------ ------------- ----------- BALANCE, DECEMBER 31, 1983 26,000 (25,000) 1,000 Sale of common stock to chairman for cash 65,000 - 65,000 Net (loss) for the period - (242,000) (242,000) ------------ ------------- ----------- BALANCE, DECEMBER 31, 1984 91,000 (267,000) (176,000) Sale of common stock to chairman for cash 92,000 - 92,000 Net (loss) for the period - (305,000) (305,000) ------------ ------------- ----------- BALANCE, DECEMBER 31, 1985 183,000 (572,000) (388,000) Sale of common stock to chairman for cash 134,000 - 134,000 Net (loss) for the period - (433,000) (433,000) ------------ ------------- ----------- BALANCE, DECEMBER 31, 1986 317,000 (1,005,000) (687,000) Sale of common stock to chairman for cash 16,000 - 16,000 Net (loss) for the period - (730,000) (730,000) ------------ ------------- ----------- BALANCE, DECEMBER 31, 1987 333,000 (1,735,000) (1,401,000) Exchange of common stock for Class B stock - - - Sale of Class B stock to chairman for cash 664,000 - 666,000 Net (loss) for the period - (1,031,000) (1,031,000) ------------ ------------- ----------- BALANCE, DECEMBER 31, 1988 997,000 (2,766,000) (1,766,000) Net (loss) for the period - (1,522,000) (1,522,000) ------------ ------------- ----------- BALANCE, DECEMBER 31, 1989 997,000 (4,288,000) (3,288,000) Conversion of loans payable to stockholder into additional paid-in capital 1,481,000 - 1,481,000 Sale of 1,150,000 Units to public consisting of 3,450,000 shares of Class A common stock and warrants (net of $1,198,000 underwriting expenses) 5,699,000 - 5,702,000 Conversion of Class B stock into Class A stock - - - Net (loss) for the period - (2,100,000) (2,100,000) ------------ ------------- ----------- BALANCE, DECEMBER 31, 1990 $8,177,000 ($6,388,000) $1,795,000 ------------ ------------- ----------- CONTINUED Page 6 (column continuation) 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 8% Convertible Debentures into Class A Common Stock 3,748,000 - 3,750,000 Sale of Class B stock for cash 344,000 - 344,000 Exercise of stock options 33,000 - 33,000 Expense for warrants issued 65,000 - 65,000 Class A Common Stock issued 38,000 - 38,000 Net (loss) for the period - (2,647,000) (2,647,000) ------------ ------------- ----------- BALANCE, MARCH 31, 1997 $52,021,000 ($44,915,000) $7,125,000 ============ ============= =========== See notes to unaudited consolidated financial statements CONTINUED Page 8 (column continuation)
AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARY (a development stage company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) March 31, 1997 (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, 1997 and results of operations for the three months ended March 31, 1997 and March 31, 1996. 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, 1996. The results of operations for the three months ended March 31, 1997 are not necessarily indicative of the results for the full year. (2) EARNINGS PER SHARE Earnings per share is computed using the weighted average number of common shares outstanding and, where applicable, common equivalent shares issuable upon exercise of stock options calculated under the treasury stock method. In February, 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share. SFAS No. 128 simplifies the standards for computing earnings per share previously found in APB Opinion No. 15, Earnings Per Share and is effective for financial statements issued for periods ending after December 15, 1997, including interim periods; earlier adoption is not permitted. The Company does not expect the adoption of SFAS No. 128 to have a significant impact to its reported results. (3) STOCKHOLDERS' EQUITY Stock Options - The following summarizes the stock option activity in all stock option plans for the three months ended March 31, 1997. Shares Price Granted 711,000 $3.47 - $4.59 Exercised 15,250 $1.75 - $2.50 Cancelled 30,125 $1.75 - $5.50 Each option entitles the holder to purchase one share of Class A Common Stock of the Company. Other Shares and Warrants - In connection with a lease agreement for certain facilities, the Company may at its option pay a portion of the annual lease obligation with Class A Common Stock plus warrants. The number of shares of Common Stock is to be computed using the average market price of the Company's Class A Common Stock during the ten days prior to issuance. The warrants are to be exercisable at a price equal to the closing price of the underlying Class A Common Stock on the date the warrant is issued and for a period of four years from the date of issuance. The Company issued 7,486 shares of Class A Common Stock during the quarter ended March 31, 1997, as well as warrants to purchase 7,486 shares of Class A Common Stock at an exercise price of $4.75 per share. The Company has recorded a noncash charge of $23,000 which represents the fair value of these warrants. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations The Company's net loss of $2,647,000 for the first quarter ended March 31, 1997 increased by $1,081,000 from a net loss of $1,566,000 for the first quarter ended March 31, 1996. Revenue during the first quarters of 1997 and 1996 are from the sale of reagents, research materials and services relating to collaborative agreements. Research and development expenses increased by $494,000, from $564,000 to $1,058,000, primarily as a result of relocating the Company's research laboratories from South Bend, Indiana to Boston, Massachusetts (including severance, relocation and moving costs), increased rent costs and increased travel and meeting costs. General and administrative expenses increased by $110,000, from $976,000 to $1,086,000, as a result of increased consulting and other costs in connection with the publication of research papers by the Company, increased personnel and increased travel and meeting costs. Interest expense increased $514,000, from $173,000 to $687,000, resulting primarily from $492,000 of noncash amortization of the debt discount relating to the Company's 7% Convertible Debentures issued in September 1996. Upon the conversion of the Company's 8% and 7% Convertible Debentures ($3,980,000 and $5,400,000 during the first quarters of 1997 and 1996, respectively), the related unamortized debt issuance costs ($179,000 and $665,000 during the first quarters of 1997 and 1996, respectively) were charged to paid-in capital. Investment income increased $46,000, from $129,000 in 1996 to $175,000 in 1997, as a result of higher average fund balances. Interest rates on U.S. Government obligations were similar during both periods. Liquidity and Capital Resources As of March 31, 1997, the Company had working capital of $11,938,000 compared to $13,697,000 at December 31, 1996. The Company's management believes that current working capital will be sufficient to fund its liquidity needs beyond 1997. During the three months ended March 31, 1997, $150,000 of the 8% Convertible Debentures and $3,830,000 of the 7% Convertible Debentures were converted into an aggregate of 1,267,259 shares of Class A Common Stock. The Company expects to continue to incur substantial expenditures in research and product development and the FDA approval process, relating to Phase I and Phase II human clinical testing of the MH1 imaging product, additional clinical studies for TpP , the Company's Thrombus Precursor Protein diagnostic tests, and manufacturing of TpP and FiF reagents and kits. Currently, product development plans of the Company include entering into collaborative, licensing and co-marketing arrangements with large pharmaceutical companies to provide additional funding and clinical expertise to perform tests necessary to obtain regulatory approvals, provide manufacturing expertise and market the Company's products. Without such collaborative, licensing or co- marketing arrangements, longer term, additional sources of funding will be required to finance the Company. PART II OTHER INFORMATION Item 2. Changes in Securities During the quarter ended March 31, 1997, holders of the $150,000 of the Company's 8% Convertible Debentures and $3,830,000 of the Company's 7% Convertible Debentures converted such debentures into 49,149 and 1,218,110 shares of the Company's Class A Common Stock, respectively. The Company believes that the exemption from registration afforded by Section 3(a)(9) of the Securities Act of 1933, as amended (the "Act"), is applicable to the issuances of such shares as such issuances involved a security exchanged by the Company with existing securityholders exclusively where no commission or other remuneration was paid or given directly or indirectly for soliciting such exchanges. On January 17, 1997, the Company sold 100,000 shares of the Company's Class B Common Stock to Mr. Alfred J. Roach, the Company's Chairman of the Board of Directors, for $343,750 or $3.4375 per share, the closing bid price of the Company's Class A Common Stock (into which the Company's Class B Common Stock is convertible on a share-for-share basis) on the Nasdaq Stock Market's National Market on that date. Mr. Roach agreed to acquire the shares for investment and not with a view to the distribution thereof. The Company believes that the exemption from registration afforded by Section 4(2) of the Act is applicable to the issuance of such shares. In connection with a lease agreement for certain facilities, the Company may at its option pay a portion of the annual lease obligation with Class A Common Stock (the "Issued Shares") plus a warrant (the "Warrant") to purchase shares of Class A Common Stock (the "Warrant Shares"). The number of Issued Shares are computed using the average market price of the Company's Class A Common Stock during the ten days prior to issuance. The Warrant Shares are to be exercisable at a price equal to the closing price of the underlying Class A Common Stock on the date the warrant is issued and for a period of four years from the date of issuance. Pursuant thereto on February 28, 1997, the Company issued 7,486 shares of Class A Common Stock and a warrant to purchase 7,486 shares of Class A Common Stock at an exercise price of $4.75 per share. In connection with such acquisition, the purchaser agreed to acquire the Issued Shares, the Warrant and the Warrant Shares for investment and not with a view to the distribution of such securities. In connection therewith, the Company has granted the purchaser certain rights to cause the Warrant Shares to be registered under the Act at the Company's expense. The Company believes that the exemption from registration afforded by Section 4(2) of the Act is applicable to the issuance of such securities. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27 Financial Data Schedule (b) Reports on Form 8-K No Reports on Form 8-K were filed during the quarter ended March 31, 1997. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMERICAN BIOGENETIC SCIENCES, INC. (Registrant) Date May 15, 1997 /s/ Josef C. Schoell Josef C. Schoell Vice President, Finance (Principal Financial and Accounting Officer) EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS THREE MONTHS YEAR-TO-DATE SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AMERICAN BIOGENETIC SCIENCES, INC. 1997 10-Q FOR THE FIRST QUARTER ENDED MARCH 31, 1997 3-MOS DEC-31-1997 MAR-31-1997 7,758,000 4,809,000 0 0 0 12,695,000 1,910,000 1,258,000 14,713,000 757,000 6,820,000 0 0 19,000 7,106,000 14,713,000 0 9,000 0 0 1,058,000 0 687,000 (2,647,000) 0 (2,647,000) 0 0 0 (2,647,000) (.14) (.14)
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