-----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, GyBruXDyExK3akryUa0FdzlwsJwuJPZ+KnRTlA6JS57tNUJYuwMlU0hqhlkkHsu+ XUF8g5HPTOmKVslCcIWjXw== 0000856984-99-000003.txt : 19991115 0000856984-99-000003.hdr.sgml : 19991115 ACCESSION NUMBER: 0000856984-99-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 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: 99749571 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 3RD QTR 9/30/99 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended September 30, 1999 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. EmployerIdentification 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 November 5, 1999 Class A Common Stock, par value $.001 36,881,898 Class B Common Stock, par value $.001 3,000,000 PAGE 1 AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARY (a development stage company) Form 10-Q for the Quarter Ended September 30, 1999 INDEX Part I - FINANCIAL INFORMATION Item 1: Financial Statements: Page No. Consolidated Balance Sheets - September 30, 1999 and December 31, 1998 3 Consolidated Statements of Operations - Three and Nine Months Ended September 30, 1999 and September 30, 1998 and For the Period from Inception (September 1, 1983) Through September 30, 1999 4 Consolidated Statements of Cash Flows - Nine Months Ended September 30, 1999 and September 30,1998 and For the Period from Inception (September 1, 1983) Through September 30, 1999 5 Consolidated Statements of Stockholders' Equity - For the Period from Inception (September 1, 1983) Through September 30, 1999 6 - 8 Notes to Consolidated Financial Statements 9 - 11 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations 11 - 17 Item 3: Quantitative and Qualitative Disclosures about Market Risk 17 Part II - OTHER INFORMATION Item 2: Changes in Securities 18 Item 4: Submission of Matters to Vote of Security Holders 19 Item 6: Exhibits and Reports on Form 8-K 19 Signature 20 PAGE 2 AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED BALANCE SHEETS
September 30, December 31, Assets 1999 1998 ------------ ------------ (Unaudited) Current Assets: Cash and cash equivalents $32,000 $3,047,000 Accounts receivable 227,000 177,000 Inventory 558,000 545,000 Other current assets 134,000 40,000 ------------ ------------ Total current assets 951,000 3,809,000 ------------ ------------ Fixed assets, at cost, net of accumulated depreciation and amortization of $1,830,000 and $1,718,000, respectively 506,000 631,000 Patent costs, net of accumulated amortization of $470,000 and $390,000, respectively 1,796,000 1,468,000 Intangible assets, net 677,000 580,000 Other assets 89,000 26,000 ------------ ------------ Total assets $4,019,000 $6,514,000 ============ ============ Liabilities and Stockholders' Equity Current Liabilities: Accounts payable and accrued expenses $1,017,000 $797,000 Current portion of capital lease obligation - 8,000 Current portion of notes payable 222,000 57,000 ------------ ------------ Total current liabilities 1,239,000 862,000 ------------ ------------ Long Term Liabilities: Notes payable, less current portion 38,000 56,000 ------------ ------------ Total liabilities 1,277,000 918,000 ------------ ------------ Stockholders' Equity: Class A common stock, par value $.001 per share; 100,000,000 shares authorized; 36,844,567 and 35,559,556 shares issued and outstanding, respectively 37,000 36,000 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 63,827,000 62,520,000 Deficit accumulated during the development stage (61,125,000) (56,963,000) ------------ ------------ Total stockholders' equity 2,742,000 5,596,000 ------------ ------------ $4,019,000 $6,514,000 ============ ============ The accompanying notes are an integral part of these consolidated balance sheets. 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 Nine Months Ended (September 1, -------------------------- ------------------------------ 1983) Through September 30, September 30, September 30, September 30, September 30, 1999 1998 1999 1998 1999 ------------ ------------ -------------- -------------- -------------- Revenues: Sales $353,000 $412,000 $988,000 $853,000 $2,335,000 Royalties / license fees - - - - 1,000,000 Collaborative agreements 3,000 - 82,000 - 384,000 ------------ ------------ -------------- -------------- -------------- 356,000 412,000 1,070,000 853,000 3,719,000 Expenses: Cost of sales 154,000 173,000 419,000 315,000 916,000 Research and development 385,000 587,000 1,423,000 1,663,000 30,229,000 Selling, general and administrative 957,000 1,082,000 3,412,000 3,213,000 32,505,000 Facility consolidation cost - - - - 252,000 ------------ ------------ -------------- -------------- -------------- Loss from operations (1,140,000) (1,430,000) (4,184,000) (4,338,000) (60,183,000) ------------ ------------ -------------- -------------- -------------- Other Income (Expense): Interest expense (2,000) (320,000) (7,000) (496,000) (4,363,000) Net gain on sale of fixed assets - - - - 7,000 Investment income 1,000 91,000 29,000 262,000 4,554,000 ------------ ------------ -------------- -------------- -------------- Loss before extraordinary charge (1,141,000) (1,659,000) (4,162,000) (4,572,000) (59,985,000) Extraordinary charge for early retirement of debentures, net - - - - (1,140,000) ------------ ------------ -------------- -------------- -------------- Net loss ($1,141,000) ($1,659,000) ($4,162,000) ($4,572,000) ($61,125,000) ============ ============ ============== ============== ============== Per Share Information (Note 2): Basic and Diluted net loss per share ($0.03) ($0.07) ($0.11) ($0.21) ============ ============ ============== ============== Common shares used in computing per share amounts: Basic and Diluted 39,318,000 22,442,000 39,056,000 21,854,000 ============ ============ ============== ============== The accompanying notes are an integral part of these consolidated 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, Nine Months Ended 1983) -------------------------- Through September 30, September 30, September 30, 1999 1998 1999 ------------ ------------ -------------- Cash Flows From Operating Activities: Net loss ($4,162,000) ($4,572,000) ($61,125,000) Adjustments to reconcile net (loss) to net cash provided by or (used) in operating activities: Depreciation and amortization 240,000 415,000 2,962,000 Net gain on sale of fixed assets - - (7,000) Net gain on sale of marketable securities - - (217,000) Other non-cash expenses accrued primarily for stocks and warrants 405,000 78,000 2,447,000 Amortization of debt discount included in interest expense - 254,000 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 (50,000) (142,000) (119,000) (Increase) decrease in inventory (13,000) (42,000) (400,000) (Increase) decrease in other current assets (94,000) (6,000) (134,000) (Increase) decrease in other assets 3,000 (9,000) 76,000 Increase (decrease) in accounts payable and accrued expenses 284,000 185,000 1,260,000 Increase in interest payable to stockholder - - 112,000 ------------ ------------ -------------- Net cash provided by (used in) operating activities (3,387,000) (3,839,000) (51,752,000) ------------ ------------ -------------- Cash Flows From Investing Activities: Capital expenditures (19,000) (37,000) (2,062,000) Proceeds from sale of fixed assets - - 18,000 Payments for patent costs and other assets (408,000) (210,000) (2,336,000) Business acquisition, net of stock issued and cash acquired - (119,000) (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 (427,000) (366,000) (4,282,000) ------------ ------------ -------------- Cash Flows From Financing Activities: Payments to debentureholders - (1,000,000) (2,246,000) Proceeds from issuance of common stock, net 660,000 98,000 40,144,000 Proceeds from issuance of 5% convertible debentures, net - 3,727,000 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 (37,000) (46,000) (107,000) 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 176,000 - 2,845,000 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 799,000 2,779,000 56,066,000 ------------ ------------ -------------- Net Increase (Decrease) in Cash and Cash Equivalents (3,015,000) (1,426,000) 32,000 Cash and Cash Equivalents at Beginning of Period 3,047,000 7,121,000 - ------------ ------------ -------------- Cash and Cash Equivalents at End of Period $32,000 $5,695,000 $32,000 ============ ============ ============== Supplemental Disclosure of Noncash Activities: Capital expenditures made under capital lease obligation - - $20,000 ============ ============ ============== Convertible Debentures converted into 0, 1,036,142, and 10,470,583 shares of Common Stock, respectively - $835,000 $14,658,000 ============ ============ ============== Warrants $264,000 $252,000 $852,000 ============ ============ ============== Conversion of stockholder loan to paid-in capital - - $1,481,000 ============ ============ ============== The accompanying notes are an integral part of these consolidated statements. Page 5
AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARY (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 0.52 839,761 1,000 - - Net (loss) for the period - - - - ------------ ------------- ----------- ----------- BALANCE, SEPTEMBER 30, 1999 36,844,567 $37,000 3,000,000 $3,000 ============ ============= =========== =========== The accompanying notes are an integral part of these consolidated 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 - 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 433,000 - 434,000 Net (loss) for the period - (4,162,000) (4,162,000) ------------ ------------- ----------- BALANCE, SEPTEMBER 30, 1999 $63,827,000 ($61,125,000) $2,742,000 ============ ============= =========== The accompanying notes are an integral part of these consolidated statements. CONTINUED Page - 8 (column continuation)
AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARY (a development stage company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) September 30, 1999 (1) INTERIM FINANCIAL STATEMENTS The interim unaudited consolidated financial statements presented herein have been prepared in accordance with generally accepted accounting principles for interim financial statements and with the instructions to Form 10-Q and Regulation S-X pertaining to interim financial statements. Accordingly, they do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. The interim financial statements presented herein reflect all adjustments (consisting of normal recurring adjustments and accruals) which, in the opinion of management, are necessary for a fair presentation of financial position as of September 30, 1999 and results of operations for the three and nine months ended September 30, 1999 and September 30, 1998. 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, 1998. The results of operations for the three and nine months ended September 30, 1999 are not necessarily indicative of the results for the full year. (2) NET LOSS PER COMMON SHARE Basic net loss per common share ("Basic EPS") is computed by dividing net loss by the weighted average number of common shares outstanding. Diluted net loss per common share ("Diluted EPS") is computed by dividing net loss by the weighted average number of common shares and dilutive potential common shares then outstanding. The provisions of Statement of Financial Accounting Standards ("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 each period presented is the same as Basic EPS because the inclusion of stock options and warrants outstanding would be antidilutive. PAGE 9 (3) INVENTORY Inventory consists of the following:
September 30, December 31, -------------------------- 1999 1998 ----- ----- Raw Materials $313,000 $339,000 Work in Process 75,000 91,000 Finished Goods 170,000 115,000 -------------------------- $558,000 $545,000 ==========================
(4) STOCKHOLDERS' EQUITY Stock Options - The following summarizes the stock option activity in all stock option plans for the three months ended September 30, 1999.
Weighted Avg Option Shares Price -------------------------- Granted 30,000 $1.00 Exercised 250 $0.61 Cancelled or expired 37,000 $2.00
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 the Company's former Boston research facility, the Company was entitled, at its option to pay a portion of the annual lease obligation with Class A Common Stock plus warrants. The Company paid $37,000 to terminate this lease and has no further obligations as of June 30, 1999. The number of shares of Common Stock issued was computed using the average market price of the Company's Class A Common Stock during the ten days prior to issuance. The warrants issued are 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. With respect to the three months ended February 26, 1999, on May 17, 1999, the Company issued 29,850 shares of Class A Common Stock, PAGE 10 as well as warrants to purchase 29,850 shares of Class A Common Stock at an exercise price of $1.28 per share. The fair value of the warrants were calculated using an option-pricing model as of February 26, 1999. The Company has no further obligation to issue stock or warrants to the landlord. The Company recorded a charge to operations of $24,000 in the first quarter of 1999. Pursuant to an investor relations agreement entered into January 1999, the Company issued a warrant to the investor relations firm to purchase up to 300,000 shares of Class A Common Stock at $1.00 per share for five years, with vesting based on the achievement of certain goals. Included in Other assets is the fair value of these warrants, as determined using an option-pricing model, of $264,000 which is being amortized over one year, the service period of the agreement. 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. General ABS, a development stage company incorporated in September 1983, launched two commercial products (TpP , ABS' Thrombus Precursor Protein diagnostic test, and FiF , ABS' Functional Intact Fibrinogen diagnostic test) in the fourth quarter of 1997. To date, ABS has not 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 (398,406 shares were issued), plus future contingent payments of up to $650,000 in Class A Common Stock to PAGE 11 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. The Company made a contingent payment of $150,000 in Class A Common Stock (131,118 shares) as of April 23, 1999 representing the first contingent payment. This amount was charged to Intangible assets and is being amortized over 10 years. Results of Stellar are included in the Company's results of operations only since its April 23, 1998 acquisition by the Company. Liquidity and Capital Resources ABS intends to continue to make substantial expenditures for research and product development in the neurobiology program and in the development and commercialization of a point of care format for TpP, as well as in the FDA approval process relating to additional 510(k) filings for TpP and Stellar's products. However, as of September 30, 1999, ABS had a negative working capital of $288,000, compared to a positive working capital of $2,947,000 at December 31, 1998. The Company implemented a cash conservation plan during the second and third quarters of 1999, which includes salary deferrals by executive officers and other employees ranging from 5% to 100% of salary. As of September 30, 1999, accounts payable and accrued expenses includes $145,000 of deferred salaries. In addition, non-essential projects and consultants have been terminated or have agreed to other methods of payment for services, including the issuance of stock, or to a deferral of payments. The Company's Chairman has funded operating cash needs since late August 1999. As noted below, during the first quarter of fiscal 1999, the Company's Chairman purchased 440,000 shares of Class A Common Stock for $495,000 and, during the third quarter of fiscal 1999, loaned to the Company $176,000 on a demand loan basis bearing interest at a rate of 6% per annum. In addition, during the second quarter of fiscal 1999, the Company's President and Chief Executive Officer purchased 82,000 shares of Class A Common Stock for $82,000. Between October 1, 1999 and November 9, 1999, the Company's Chairman loaned to the Company an additional $243,000 on a similar basis to the loan made during the third quarter. The Company's Chairman has indicated a present willingness to PAGE 12 provide further financing to the Company, although he has no commitment to continue to do so and there can be no assurance that he will continue to do so. As of September 30, 1999, the current portion of notes payable includes Promissory Notes to the Chairman of $176,000. The Company continues to seek to license TpP and its ABS 103 neurobiology compound to large pharmaceutical companies in order to provide additional funding and clinical expertise, to perform additional testing necessary to obtain regulatory approvals, to provide manufacturing expertise and to market ABS' products. Without significant licensing or co-marketing arrangements, additional sources of funding will be required to finance ABS. There can be no assurances that any funding will be available or, if available, the terms thereof. The Company's cash and cash equivalents decreased by $3,015,000 to $32,000 during the nine months ended September 30, 1999, primarily because cash used in operations of $3,387,000 and investing activities of $427,000 exceeded net cash provided by financing activities of $799,000. Net cash of $3,387,000 was used in operations to fund the Company's cash loss from operations of $3,517,000 (net of non cash expenses of $240,000 for depreciation and amortization, and $405,000 incurred as a result of the issuance of stock and warrants for services). Net cash of $130,000 was provided by changes in operating assets and liabilities as a result of a decrease in other assets ($3,000) and an increase in accounts payable ($284,000) partially offset by an increase in other current assets ($94,000) due to a contractually committed to loan made to the Company's President/CEO of $100,000 as part of the inducement to him to join the Company, an increase in inventory ($13,000) and an increase in accounts receivable ($50,000). Cash used in investing activities was for the purchase of fixed assets ($19,000) and capitalized patent costs ($408,000) primarily for neurobiology compounds. Financing activities provided $799,000 as a result of the purchase by the Company's Chairman of 440,000 shares of Class A Common Stock for $495,000, the purchase by the Company's President/CEO of 82,000 shares of Class A Common Stock for $82,000, the issuance of 500,000 shares of Class A Common Stock in lieu of a cash payment of $80,000 for the development and manufacture of the rapid assay format of TpP, loans from the Company's Chairman of $176,000 and the exercise of stock options, offset in part, by payments of $37,000 under capital lease obligations and notes payable. PAGE 13 Results of Operations Three Months Ended September 30, 1999 The Company's net loss of $1,141,000 for the third quarter ended September 30, 1999 decreased by $518,000 from a net loss of $1,659,000 for the third quarter ended September 30, 1998. The decrease in the net loss was primarily due to decreased interest expense of $318,000, a decrease in research and development expenses of $202,000 and decreased selling, general and administrative expenses of $125,000 offset by a decrease in investment income of $90,000 and a decrease in gross profit of $37,000. Revenue decreased $56,000 during the third quarter of 1999 as compared to the third quarter of 1998. Stellar sales were lower during the third quarter of 1999 compared to the same period of 1998 due to customer delays in qualifying reagents. These reagents are expected to be shipped during the fourth quarter of 1999. Sales of TpP and FiF diagnostic kits were higher during the third quarter of 1999 as compared to the third quarter of 1998 resulting from reorders from European distributors as well as direct U.S. sales to speciality laboratories. Collaborative agreement revenue of $3,000 in 1999 relates to contract services. Research and development expenses decreased by $202,000, from $587,000 to $385,000, primarily due to the consolidation of R&D operations in Stellar's facilities which resulted in savings in personnel costs, rent and maintenance costs, partially offset by increases in Stellar's research and development costs relating to FDA 510(k) filings and continued TpP point of care development and clinical costs. Selling, general and administrative expenses decreased by $125,000, from $1,082,000 during the third quarter of 1998 to $957,000 during the third quarter of 1999, as a result of the reduced personnel and reduced consulting services partially offset by an increase in the cost of public relations, the noncash value of warrants issued for services and increased travel and meeting costs. PAGE 14 Interest expense decreased by $318,000, from $320,000 to $2,000, resulting from the absence of convertible debentures which were repurchased in the fourth quarter of fiscal 1998. Investment income decreased by $90,000, from $91,000 in the third quarter of 1998 to $1,000 in 1999, as a result of lower average cash balances. Nine Months Ended September 30, 1999 The Company's net loss of $4,162,000 for the nine months ended September 30, 1999 decreased by $410,000 from a net loss of $4,572,000 for the nine months ended September 30, 1998. The decrease in the net loss was primarily due to lower interest expense of $489,000, reduced research and development expenses of $240,000 and an increase in gross profit of $113,000 partially offset by lower investment income of $233,000 and an increase in selling, general and administrative expenses of $199,000. The increase in sales during the nine months ended September 30, 1999 of $135,000 was primarily due to sales of Stellar products. Partially offsetting this increase were lower sales of TpP and FiF diagnostic kits during the first six months of 1999 than in the comparable period of 1998 due to a slow market acceptance of the current test format. Sales of TpP during the first quarter of 1998 was the result of distributors initial stocking of the product. Collaborative agreement revenue of $82,000 reflects the earned portion of an NIH National Institute on Aging grant and contract services. The Company obtained a grant of $135,000 from the NIH for additional studies of the Company's neurobiology compound ABS 205. The study has been completed and the final report is expected to be submitted during the fourth quarter of 1999. Research and development expenses decreased by $240,000, from $1,663,000 to $1,423,000, primarily due to the consolidation of R&D facilities offset in part by the inclusion of Stellar's costs for the full nine month period of 1999 compared to approximately five months in 1998, increases in Stellar's post-acquisition research and development costs relating to FDA 510(k) filings and continued TpP point of care development and clinical costs. PAGE 15 Selling, general and administrative expenses increased by $199,000, from $3,213,000 to $3,412,000, as a result of the inclusion of Stellar's selling and general expenses for the full nine month period of 1999 compared to approximately five months of 1998, increases in the cost of investor relations and the noncash value of warrants issued for services offset, in part, by a reduction in other consulting costs. Interest expense decreased by $489,000, from $496,000 to $7,000, resulting from the absence of convertible debentures which were repurchased in the fourth quarter of fiscal 1998. Investment income decreased by $233,000, from $262,000 in the nine month period of 1998 to $29,000 in 1999, as a result of lower average cash balances. Year 2000 State of Readiness:The Year 2000 problem is the result of some computer programs being written using two-digits rather than four to define the applicable year. Therefore, it is possible that programs that have time-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000, which could result in a system failure or miscalculation. ABS uses software developed and supported by third parties for various applications, including financial reporting, sales, purchasing and inventory, which will require upgrade. ABS has assessed the impact of the Year 2000 issue on its information systems. The Company believes that the upgrade can be completed within one month through the purchase of readily available software, if it elects to upgrade (see "Contingency Plan" below). The Company has delayed purchasing and installing this software in order to conserve cash. In addition, ABS may face some risk to the extent that suppliers of products and others with whom ABS has a material business relationship will not be Year 2000 compliant. Accordingly, ABS initiated formal communications with significant suppliers and third parties in order to determine the extent to which ABS may be vulnerable to the failure of these suppliers and third parties to remediate their own Year 2000 issues. The Company received written responses from its material PAGE 16 suppliers and service providers which indicate that they are Year 2000 compliant. ABS is not dependent upon any one supplier and believes that it could readily replace non-compliant suppliers should that become necessary. ABS has also reviewed its non-information technology systems to determine the extent of any changes that may be necessary and currently believes all these systems are Year 2000 compliant. Costs: The Company currently estimates that the cost of the Year 2000 project will not exceed $50,000. This cost estimate may change as ABS progresses in its Year 2000 project and obtains additional information. Risks: Some risks of non-compliance that ABS faces include: the failure of internal information systems, a slow down in receipt of manufactured product and in customers' ability to make payments. Contingency Plans: ABS believes that, on a contingency basis, it can operate its financial reporting, sales, purchasing and inventory systems on a manual basis, including if it elects not to expend the funds needed to upgrade its software for Year 200 compliance. Item 3. Quantitative and Qualitative Disclosures about Market Risk At present, the Company's cash position does not enable it to invest its cash. Its policy has been to invest any available cash in highly liquid investments (primarily United States Treasury Bills) which have a maturity, at the time of purchase, of less than three months. ABS does not have operations subject to risks of foreign currency fluctuations, nor does it use derivative financial instruments in its operations. ABS does not have exposure to market risks associated with changes in interest rates as it has no variable interest rate debt outstanding. ABS does not believe it has any other material exposure to market risks associated with interest rates. PAGE 17 PART II OTHER INFORMATION Item 2. Changes in Securities During the nine months ended September 30, 1999, the Company sold 440,000 and 82,000 shares of its Class A Common Stock to Alfred J. Roach, Chairman of the Board of Directors, and John S. North, the Company's President and Chief Executive Officer, respectively, for $495,000 and $82,000, respectively. Each agreed to acquire the shares issued to him for investment only and not with a view to the distribution of such shares. The Company believes that the exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the "Act"), is applicable to each issuance of such shares. During the three months ended September 30, 1999, the Company issued an aggregate of 49,187 Class A Common Stock to four consultants in partial consideration for services rendered, valued at $31,000. In connection with such issuances, the consultants agreed to acquire the shares issued to them for investment only and not with a view to the distribution of such securities. The Company believes that the exemption from registration afforded by Section 4(2) of the Act is applicable to each issuance of such shares. During the three months ended September 30, 1999, the Company issued 500,000 shares of Class A Common Stock in lieu of a cash payment of $80,000 due to the company developing and manufacturing the rapid assay format of TpP. In connection with such issuances, the company agreed to acquire the shares issued to them for investment only and not with a view to the distribution of such securities. The Company believes that the exemption from registration afforded by Section 4(2) of the Act is applicable to the issuance of such shares. PAGE 18 Item 4. Submission of Matters to a Vote of Security Holders A Notice of Solicitation of Consents was mailed to stockholders on September 1, 1999 seeking authorization of an amendment to the Company's Restated Certificate of Incorporation to enable the Board of Directors to effect a reverse split of each class of Common Stock pursuant to which the Company's Class A and Class B stock would each be exchanged for new shares of Class A Common Stock and Class B Common Stock, respectively, in an exchange ratio to be approved by the Board of Directors, ranging from one newly issued shares for each two outstanding shares to one newly issued share for each eight outstanding shares. To date, the reverse split has not been implemented. The Amendment to the Company's Restated Certificate of Incorporation was authorized by the following vote: For Against Abstain 57,719,063 3,590,689 184,485 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 for the quarter covered by this Report. PAGE 19 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMERICAN BIOGENETIC SCIENCES, INC. (Registrant) Date: November 12, 1999 /s/ Josef C. Schoell Josef C. Schoell Vice President, Finance (Principal Financial and Accounting Officer) PAGE 20 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS NINE MONTH YEAR TO DATE SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AMERICAN BIOGENETIC SCIENCES, INC. 1999 10-Q FOR THE THIRD QUARTER ENDED SEPTEMBER 30, 1999. 9-MOS DEC-31-1999 SEP-30-1999 32,000 0 227,000 0 558,000 951,000 2,336,000 1,830,000 4,019,000 1,239,000 0 0 0 40,000 2,702,000 4,019,000 988,000 1,070,000 419,000 419,000 1,423,000 0 7,000 (4,162,000) 0 (4,162,000) 0 0 0 (4,162,000) (.11) (.11)
-----END PRIVACY-ENHANCED MESSAGE-----