10-Q 1 b39218abe10-q.txt AMERICAN BIOGENETIC SCIENCES, INC 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED MARCH 31, 2001 COMMISSION FILE NUMBER 0-19041 AMERICAN BIOGENETIC SCIENCES, INC. (Exact name of registrant as specified in its charter) DELAWARE 11-2655906 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 1375 AKRON STREET 631-789-2600 COPIAGUE, NEW YORK 11726 (Telephone number) (Address of Principal Executive Offices) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days YES X NO -- -- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class Outstanding at May 9, 2001 ------------------------------------- -------------------------- Class A Common Stock, par value $.001 41,339,222 Class B Common Stock, par value $.001 3,000,000
Page 1 2 AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARIES (a development stage company) Form 10-Q for the Quarter Ended March 31, 2001 INDEX Part I - FINANCIAL INFORMATION
Item 1: Financial Statements: Page No. -------- Consolidated Balance Sheets - March 31, 2001 and December 31, 2000 3 Consolidated Statements of Operations - Three Months Ended March 31, 2001 and March 31, 2000 and For the Period from Inception (September 1, 1983) Through March 31, 2001 4 Consolidated Statements of Cash Flows - Three Months Ended March 31, 2001 and March 31, 2000 and For the Period from Inception (September 1, 1983) Through March 31, 2001 5 Consolidated Statements of Stockholders' Equity - For the Period from Inception (September 1, 1983) Through March 31, 2001 6 - 9 Notes to Consolidated Financial Statements 10 - 12 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations 12 - 17 Item 3: Quantitative and Qualitative Disclosures about Market Risk 17 Part II - OTHER INFORMATION Item 6: Exhibits and Reports on Form 8-K 18 Signature 18
Page 2 3 AMERICAN BIOGENETIC SCIENCES, INC AND SUBSIDIARIES (a development stage company) CONSOLIDATED BALANCE SHEETS
March December 31, 2001 31, 2000 -------- -------- (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 396,000 $ 1,194,000 Accounts receivable 273,000 146,000 Inventories 554,000 531,000 Other current assets 23,000 74,000 ------------ ------------ Total current assets 1,246,000 1,945,000 ------------ ------------ Fixed assets, net of accumulated depreciation of $1,985,000 and $1,958,000, respectively 452,000 477,000 Patent costs, net of accumulated amortization of $685,000 and $633,000, respectively 2,005,000 1,967,000 Intangible assets, net 579,000 599,000 Other assets 31,000 98,000 ------------ ------------ $ 4,313,000 $ 5,086,000 ============ ============ LIABILITIES AND STOCKHOLDERS' INVESTMENT CURRENT LIABILITIES: Accounts payable and accrued expenses 483,000 $ 368,000 Current portion of capital lease obligation 16,000 16,000 Current portion of notes payable 177,000 184,000 ------------ ------------ Total current liabilities 676,000 568,000 ------------ ------------ LONG TERM LIABILITIES: Notes payable, less current portion -- 7,000 Capital lease obligation 71,000 71,000 ------------ ------------ Total liabilities 747,000 646,000 ------------ ------------ STOCKHOLDERS' EQUITY: Series A convertible preferred stock, par value $.001 per share 10,000,000 shares authorized; 7,000 shares issued and outstanding (liquidation preference of $3,500,000) -- -- Class A common stock, par value $.001 per share; 100,000,000 shares authorized; 41,102,255 and 41,027,255 shares issued and outstanding, respectively 41,000 41,000 Class B common stock, par value $.001 per share; 3,000,000 shares authorized; 3,000,000 shares issued and outstanding 3,000 3,000 Additional paid-in capital 72,954,000 72,935,000 Deficit accumulated during the development stage (69,432,000) (68,539,000) ------------ ------------ Total stockholders' equity 3,566,000 4,440,000 ------------ ------------ $ 4,313,000 $ 5,086,000 ------------ ------------
The accompanying notes are an integral part of these consolidated balance sheets. Page 3 4 AMERICAN BIOGENETIC SCIENCES, INC AND SUBSIDIARIES (a development stage company) CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
For the Period From Inception (September Three month period ended 1, 1983) Through March 31, 2001 March 31, 2000 March 31, 2001 -------------- -------------- -------------- REVENUES: Sales $ 488,000 $ 383,000 $ 4,825,000 Royalties / license fees 1,000 500,000 1,503,000 Collaborative agreements 34,000 76,000 575,000 ----------- ------------ ------------ 523,000 959,000 6,903,000 COSTS AND EXPENSES: Cost of sales 192,000 156,000 1,904,000 Research and development 331,000 261,000 32,188,000 Selling, general and administrative 901,000 1,059,000 38,723,000 Facility consolidation cost -- -- 252,000 ----------- ------------ ------------ Loss from operations (901,000) (517,000) (66,164,000) ----------- ------------ ------------ OTHER INCOME (EXPENSE): Interest expense (2,000) (11,000) (4,393,000) Net gain on sale of fixed assets 2,000 -- 13,000 Investment income, net 8,000 30,000 4,702,000 ----------- ------------ ------------ Loss before extraordinary charge (893,000) (498,000) (65,842,000) Extraordinary charge for early retirement of debentures, net -- -- (1,140,000) ----------- ------------ ------------ NET LOSS (893,000) (498,000) (66,982,000) Preferred stock dividend related to warrants -- (2,450,000) (2,450,000) ----------- ------------ ------------ Net loss attributable to common stockholders ($893,000) ($2,948,000) ($69,432,000) =========== ============ ============ PER SHARE INFORMATION (NOTE 2): Basic and Diluted net loss per share ($.02) ($.07) =========== ============ Common shares used in computing per share amounts: Basic and Diluted 44,089,000 42,129,000 =========== ============
The accompanying notes are an integral part of these consolidated statements. Page 4 5 AMERICAN BIOGENETIC SCIENCES, INC AND SUBSIDIARIES (a development stage company) CONSOLIDATED STATEMENTS OF CASH FLOW (unaudited)
For the Period From Inception (September 1, Three Months Ended 1983) Through March 31, 2001 March 31, 2000 December 31,2000 -------------- -------------- ---------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) ($893,000) ($498,000) ($66,982,000) Adjustments to reconcile net (loss) to net cash used in operating activities: Depreciation and amortization 99,000 78,000 3,467,000 Net (gain) loss on sale of fixed assets (2,000) -- (13,000) Net (gain) loss on sale of marketable securities -- -- (217,000) Other noncash expenses accrued primarily for stocks and warrants 57,000 68,000 2,926,000 Amortization of debt discount included in interest expense -- -- 2,160,000 Extraordinary loss on repurchase of debt -- -- 1,140,000 Write-off of patent costs -- -- 93,000 CHANGES IN OPERATING ASSETS AND LIABILITIES: (Increase) decrease in accounts receivable (127,000) (73,000) (165,000) (Increase) decrease in inventories (23,000) (2,000) (396,000) (Increase) decrease in other current assets 51,000 8,000 (23,000) (Increase) decrease in other assets 10,000 -- 68,000 Increase (decrease) in accounts payable and accrued expenses 115,000 (886,000) 867,000 Increase in interest payable to stockholder -- 8,000 120,000 -------------------------------------------------------- Net cash used in operating activities (713,000) (1,297,000) (56,955,000) -------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (2,000) (2,000) (2,090,000) Proceeds from sale of fixed assets 2,000 -- 24,000 Payments for patent costs and other assets (90,000) (62,000) (2,760,000) Business acquisition, net of stock issued and cash acquired -- -- (119,000) Proceeds from maturity and sale of marketable securities -- -- 67,549,000 Purchases of marketable securities -- -- (67,332,000) -------------------------------------------------------- Net cash provided by (used in) investing activities (90,000) (64,000) (4,728,000) -------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Payments to debentureholders -- -- (2,246,000) Proceeds from issuance of common stock, net 19,000 2,551,000 42,898,000 Proceeds from issuance of Series A convertible preferred stock -- 3,000,000 3,000,000 Proceeds from issuance of 5% convertible debentures, net -- -- 3,727,000 Proceeds from issuance of 7% convertible debentures, net -- -- 8,565,000 Proceeds from issuance of 8% convertible debentures, net -- -- 7,790,000 Principal payments under capital lease obligation and notes payable (14,000) (7,000) (164,000) Redemption of 8% convertible debentures -- -- (500,000) Repurchase of 5% convertible debentures -- -- (3,852,000) Capital contributions from chairman -- -- 1,000,000 Increase in loans payable to stockholder / affiliates -- 81,000 3,452,000 Repayment of loans payable to stockholder / affiliates (remainder contributed to capital by the stockholder) -- (200,000) (1,591,000) -------------------------------------------------------- Net cash provided by (used in) financing activities 5,000 5,425,000 62,079,000 -------------------------------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (798,000) 4,064,000 396,000 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,194,000 93,000 -- -------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 396,000 $ 4,157,000 $ 396,000 -------------------------------------------------------- SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES: Capital expenditure made under capital lease obligation -- -- $ 107,000 -------------------------------------------------------- Convertible debentures converted into 0, 0 and 10,470,583 shares of Common Stock, respectively -- -- $ 14,658,000 -------------------------------------------------------- Warrants issued -- $ 2,792,000 $ 3,644,000 -------------------------------------------------------- Conversion of stockholder loan to preferred stock or paid-in capital -- $ 500,000 $ 1,981,000 --------------------------------------------------------
The accompanying notes are an integral part of these consolidated statements. Page 5 6 AMERICAN BIOGENETIC SCIENCES, INC AND SUBSIDIARIES (a development stage company) CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (unaudited)
Class A Class B Per Common Stock Common Stock Share Amount Shares Dollars Shares Dollars ------ ------ ------- ------ ------- BALANCE, AT INCEPTION, (SEPTEMBER 1, 1983) $ - $ - - $ - Sale of common stock to chairman for cash .33 78,000 - - - Net (loss) for the period - - - - ------------------------------------------------------- BALANCE, DECEMBER 31, 1983 78,000 - - - ------------------------------------------------------- Sale of common stock to chairman for cash .33 193,500 - - - Net (loss) for the period - - - - ------------------------------------------------------- BALANCE, DECEMBER 31, 1984 271,500 - - - ------------------------------------------------------- Sale of common stock to chairman for cash .33 276,700 1,000 - - Net (loss) for the period - - - - ------------------------------------------------------- BALANCE, DECEMBER 31, 1985 548,200 1,000 - - ------------------------------------------------------- Sale of common stock to chairman for cash .33 404,820 - - - Net (loss) for the period - - - - ------------------------------------------------------- BALANCE, DECEMBER 31, 1986 953,020 1,000 - - ------------------------------------------------------- Sale of common stock to chairman for cash .33 48,048 - - - Net (loss) for the period - - - - ------------------------------------------------------- BALANCE, DECEMBER 31, 1987 1,001,068 1,000 - - ------------------------------------------------------- Exchange of common stock for Class B stock (1,001,068) (1,000) 1,001,068 1,000 Sale of Class B stock to chairman for cash .33 - - 1,998,932 2,000 Net (loss) for the period - - - - ------------------------------------------------------- BALANCE, DECEMBER 31, 1988 - - 3,000,000 3,000 ------------------------------------------------------- Net (loss) for the period - - - - ------------------------------------------------------- BALANCE, DECEMBER 31, 1989 - - 3,000,000 3,000 ------------------------------------------------------- Conversion of loans payable to stockholder into additional paid-in capital - - - - Sale of 1,150,000 Units to public consisting of 3,450,000 shares of Class A common stock and warrants (net of $1,198,000 underwriting expenses) 2.00 3,450,000 3,000 - - Conversion of Class B stock into Class A stock 668,500 1,000 (668,500) (1,000) Net (loss) for the period - - - - ------------------------------------------------------- BALANCE, DECEMBER 31, 1990 4,118,500 $ 4,000 2,331,500 $ 2,000 -------------------------------------------------------
Deficit Accumulated Additional During the Paid-in Development Capital Stage Total ------- ----- ----- BALANCE, AT INCEPTION, (SEPTEMBER 1, 1983) $ - $ - $ - Sale of common stock to chairman for cash 26,000 - 26,000 Net (loss) for the period - (25,000) (25,000) ------------------------------------------------------- BALANCE, DECEMBER 31, 1983 26,000 (25,000) 1,000 ------------------------------------------------------- Sale of common stock to chairman for cash 65,000 - 65,000 Net (loss) for the period - (242,000) (242,000) ------------------------------------------------------- BALANCE, DECEMBER 31, 1984 91,000 (267,000) (176,000) ------------------------------------------------------- Sale of common stock to chairman for cash 92,000 - 93,000 Net (loss) for the period - (305,000) (305,000) ------------------------------------------------------- BALANCE, DECEMBER 31, 1985 183,000 (572,000) (388,000) ------------------------------------------------------- Sale of common stock to chairman for cash 134,000 - 134,000 Net (loss) for the period - (433,000) (433,000) ------------------------------------------------------- BALANCE, DECEMBER 31, 1986 317,000 (1,005,000) (687,000) ------------------------------------------------------- Sale of common stock to chairman for cash 16,000 - 16,000 Net (loss) for the period - (730,000) (730,000) ------------------------------------------------------- BALANCE, DECEMBER 31, 1987 333,000 (1,735,000) (1,401,000) ------------------------------------------------------- Exchange of common stock for Class B stock - - - Sale of Class B stock to chairman for cash 664,000 - 666,000 Net (loss) for the period - (1,031,000) (1,031,000) ------------------------------------------------------- BALANCE, DECEMBER 31, 1988 997,000 (2,766,000) (1,766,000) ------------------------------------------------------- Net (loss) for the period - (1,522,000) (1,522,000) ------------------------------------------------------- BALANCE, DECEMBER 31, 1989 997,000 (4,288,000) (3,288,000) ------------------------------------------------------- Conversion of loans payable to stockholder into additional paid-in capital 1,481,000 - 1,481,000 Sale of 1,150,000 Units to public consisting of 3,450,000 shares of Class A common stock and warrants (net of $1,198,000 underwriting expenses) 5,699,000 - 5,702,000 Conversion of Class B stock into Class A stock - - - Net (loss) for the period - (2,100,000) (2,100,000) ------------------------------------------------------- BALANCE, DECEMBER 31, 1990 $8,177,000 ($6,388,000) $ 1,795,000 -------------------------------------------------------
Page 6 7 AMERICAN BIOGENETIC SCIENCES, INC AND SUBSIDIARIES (a development stage company) CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (unaudited) (continued)
Class A Class B Per Common Stock Common Stock Share Amount Shares Dollars Shares Dollars ------ ------ ------- ------ ------- BALANCE, DECEMBER 31, 1990 $ 4,118,500 $ 4,000 2,331,500 $2,000 Exercise of Class A Warrants (net of $203,000 in underwriting expenses) for cash 3.00 3,449,955 3,000 - - Exercise of Class B Warrants for cash 4.50 79,071 - - - Conversion of Class B stock into Class A stock 850,000 1,000 (850,000) (1,000) Exercise of stock options 2.00 417,750 1,000 - - Fair Value for warrants issued - - - - Net (loss) for the period - - - - --------------------------------------------------------- BALANCE, DECEMBER 31, 1991 8,915,276 9,000 1,481,500 1,000 --------------------------------------------------------- Exercise of Class B Warrants (net of $701,000 in underwriting expenses) for cash 4.50 3,370,884 3,000 - - Conversion of Class B stock into Class A stock 106,000 - (106,000) - Exercise of stock options 2.49 348,300 1,000 - - Net (loss) for the period - - - - --------------------------------------------------------- BALANCE, DECEMBER 31, 1992 12,740,460 13,000 1,375,500 1,000 --------------------------------------------------------- Sale of common stock to Medeva PLC. 7.50 200,000 - - - Exercise of stock options 2.00 32,700 - - - Net (loss) for the period - - - - --------------------------------------------------------- BALANCE, DECEMBER 31, 1993 12,973,160 13,000 1,375,500 1,000 --------------------------------------------------------- Exercise of stock options 2.16 91,250 - - - Net (loss) for the period - - - - --------------------------------------------------------- BALANCE, DECEMBER 31, 1994 13,064,410 13,000 1,375,500 1,000 --------------------------------------------------------- Conversion of 8% convertible debentures into Class A Common Stock 1.85 354,204 - - - Exercise of stock options 1.82 12,750 - - - Fair Value for warrants/options issued - - - - Net (loss) for the period - - - - --------------------------------------------------------- BALANCE, DECEMBER 31, 1995 13,431,364 $13,000 1,375,500 $1,000 ---------------------------------------------------------
Deficit Accumulated Additional During the Paid-in Development Capital Stage Total ------- ----- ----- BALANCE, DECEMBER 31, 1990 $ 8,177,000 ($6,388,000) $ 1,795,000 Exercise of Class A Warrants (net of $203,000 in underwriting expenses) for cash 10,143,000 - 10,146,000 Exercise of Class B Warrants for cash 356,000 - 356,000 Conversion of Class B stock into Class A stock - - - Exercise of stock options 835,000 - 836,000 Fair Value for warrants issued 900,000 - 900,000 Net (loss) for the period - (4,605,000) (4,605,000) ------------------------------------------------------------------ BALANCE, DECEMBER 31, 1991 20,411,000 (10,993,000) 9,428,000 ------------------------------------------------------------------ Exercise of Class B Warrants (net of $701,000 in underwriting expenses) for cash 14,465,000 - 14,468,000 Conversion of Class B stock into Class A stock - - - Exercise of stock options 865,000 - 866,000 Net (loss) for the period - (4,016,000) (4,016,000) ------------------------------------------------------------------ BALANCE, DECEMBER 31, 1992 35,741,000 (15,009,000) 20,746,000 ------------------------------------------------------------------ Sale of common stock to Medeva PLC. 1,500,000 - 1,500,000 Exercise of stock options 65,000 - 65,000 Net (loss) for the period - (6,521,000) (6,521,000) ------------------------------------------------------------------ BALANCE, DECEMBER 31, 1993 37,306,000 (21,530,000) 15,790,000 ------------------------------------------------------------------ Exercise of stock options 197,000 - 197,000 Net (loss) for the period - (7,431,000) (7,431,000) BALANCE, DECEMBER 31, 1994 37,503,000 (28,961,000) 8,556,000 Conversion of 8% convertible debentures into Class A Common Stock 571,000 - 571,000 Exercise of stock options 23,000 - 23,000 Fair Value for warrants/options issued 602,000 - 602,000 Net (loss) for the period - (5,607,000) (5,607,000) ------------------------------------------------------------------ BALANCE, DECEMBER 31, 1995 $38,699,000 ($34,568,000) $ 4,145,000 ------------------------------------------------------------------
Page 7 8 AMERICAN BIOGENETIC SCIENCES, INC AND SUBSIDIARIES (a development stage company) CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (unaudited) (continued)
Class A Class B Per Common Stock Common Stock Share Amount Shares Dollars Shares Dollars ------ ------ ------- ------ ------- BALANCE, DECEMBER 31, 1995 13,431,364 $13,000 1,375,500 $1,000 Conversion of 8% convertible debentures into Class A Common Stock 2.74 2,269,755 $ 2,000 - - Exercise of stock options 2.53 569,875 1,000 - - Fair Value for warrants/options issued - - - - Discount on 7% convertible debentures - - - - Net (loss) for the period - - - - ------------------------------------------------------- BALANCE, DECEMBER 31, 1996 16,270,994 16,000 1,375,500 1,000 ------------------------------------------------------- Conversion of 7% and 8% convertible debentures into Class A Common Stock 2.93 2,995,006 3,000 - - Sale of Class B Common Stock to Chairman for cash 2.23 - - 350,000 1,000 Exercise of stock options 2.00 27,500 - - - Fair Value for warrants issued - - - - Class A Common Stock issued 3.12 48,117 - - - Net (loss) for the period - - - - ------------------------------------------------------- BALANCE, DECEMBER 31, 1997 19,341,617 19,000 1,725,500 2,000 ------------------------------------------------------- Conversion of 5%, 7% and 8% convertible debentures into Class A Common Stock .32 4,851,618 5,000 - - Sale of Class B Common Stock to Chairman for cash .37 - - 1,274,500 1,000 Exercise of stock options 1.75 4,000 - - - Fair Value for warrants issued - - - - Class A Common Stock issued 1.06 163,915 - - - Class A Common Stock issued for Stellar 1.76 398,406 1,000 - Class A Common Stock issued for Private Placement .25 10,800,000 11,000 - - Discount on 5% convertible debentures - - - - Net (loss) for the period - - - - ------------------------------------------------------- BALANCE, DECEMBER 31, 1998 35,559,556 36,000 3,000,000 3,000 ------------------------------------------------------- Sale of Class A Common Stock to Chairman for cash 1.13 440,000 - - - Exercise of stock options .61 5,250 - - - Fair Value for warrants issued - - - - Class A Common Stock issued .50 913,704 1,000 - - Net (loss) for the period - - - - ------------------------------------------------------- BALANCE, DECEMBER 31, 1999 36,918,510 $37,000 3,000,000 $3,000 -------------------------------------------------------
Deficit Accumulated Additional During the Paid-in Development Capital Stage Total ------- ----- ----- BALANCE, DECEMBER 31, 1995 $38,699,000 ($34,568,000) $4,145,000 Conversion of 8% convertible debentures into Class A Common Stock 5,483,000 - 5,485,000 Exercise of stock options 1,438,000 - 1,439,000 Fair Value for warrants/options issued 330,000 - 330,000 Discount on 7% convertible debentures 1,843,000 - 1,843,000 Net (loss) for the period - (7,700,000) (7,700,000) ---------------------------------------------------------- BALANCE, DECEMBER 31, 1996 7,793,000 (42,268,000) 5,542,000 ---------------------------------------------------------- Conversion of 7% and 8% convertible debentures into Class A Common Stock 7,152,000 - 7,155,000 Sale of Class B Common Stock to Chairman for cash 778,000 - 779,000 Exercise of stock options 55,000 - 55,000 Fair Value for warrants issued 149,000 - 149,000 Class A Common Stock issued 150,000 - 150,000 Net (loss) for the period - (7,147,000) (7,147,000) ---------------------------------------------------------- BALANCE, DECEMBER 31, 1997 6,077,000 (49,415,000) 6,683,000 ---------------------------------------------------------- Conversion of 5%, 7% and 8% convertible debentures into Class A Common Stock 1,442,000 - 1,447,000 Sale of Class B Common Stock to Chairman for cash 465,000 - 466,000 Exercise of stock options 7,000 - 7,000 Fair Value for warrants issued 205,000 - 205,000 Class A Common Stock issued 174,000 - 174,000 Class A Common Stock issued for Stellar 699,000 - 700,000 Class A Common Stock issued for Private Placement 2,689,000 - 2,700,000 Discount on 5% convertible debentures 762,000 - 762,000 Net (loss) for the period - (7,548,000) (7,548,000) ---------------------------------------------------------- BALANCE, DECEMBER 31, 1998 2,520,000 (56,963,000) 5,596,000 ---------------------------------------------------------- Sale of Class A Common Stock to Chairman for cash 495,000 - 495,000 Exercise of stock options 3,000 - 3,000 Fair Value for warrants issued 376,000 - 376,000 Class A Common Stock issued 458,000 - 459,000 Net (loss) for the period - (5,351,000) (5,351,000) ---------------------------------------------------------- BALANCE, DECEMBER 31, 1999 $ 3,852,000 ($62,314,000) $ 1,578,000 ----------------------------------------------------------
Page 8 9 AMERICAN BIOGENETIC SCIENCES, INC AND SUBSIDIARIES (a development stage company) CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (unaudited) (continued)
Class A Class B Per Common Stock Common Stock Share Amount Shares Dollars Shares Dollars ------ ------ ------- ------ ------- BALANCE, DECEMBER 31, 1999 $ 36,918,510 $37,000 3,000,000 $3,000 Sale of Series A Convertible Preferred Stock (7,000 shares) - - - - Warrants issued with the Convertible Preferred Stock - - - - Preferred stock dividend related to warrants - - - - Exercise of stock options and warrants .97 1,278,675 1,000 - - Fair Value for warrants issued - - - - Class A Common Stock issued .55 2,830,070 3,000 - - Net (loss) for the period - - - - ------------------------------------------------- BALANCE, DECEMBER 31, 2000 41,027,255 41,000 3,000,000 3,000 ------------------------------------------------- Exercise of stock options .25 75,000 - Net (loss) for the period ------------------------------------------------- BALANCE, MARCH 31, 2001 41,102,255 $41,000 3,000,000 $3,000 -------------------------------------------------
Deficit Accumulated Additional During the Paid-in Development Capital Stage Total ------- ----- ----- BALANCE, DECEMBER 31, 1999 $ 1,852,000 ($62,314,000) $ 1,578,000 Sale of Series A Convertible Preferred Stock (7,000 shares) 3,500,000 - 3,500,000 Warrants issued with the Convertible Preferred Stock 2,450,000 - 2,450,000 Preferred stock dividend related to warrants - (2,450,000) (2,450,000) Exercise of stock options and warrants 1,234,000 - 1,235,000 Fair Value for warrants issued 342,000 - 342,000 Class A Common Stock issued 1,557,000 - 1,560,000 Net (loss) for the period - (3,775,000) (3,775,000) ------------------------------------------------------- BALANCE, DECEMBER 31, 2000 72,935,000 (68,539,000) 4,440,000 ------------------------------------------------------- Exercise of stock options 19,000 19,000 Net (loss) for the period (893,000) (893,000) ------------------------------------------------------- BALANCE, MARCH 31, 2001 $72,954,000 ($69,432,000) $ 3,566,000 -------------------------------------------------------
The accompanying notes are an integral part of these consolidated statements. Page 9 10 AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARIES (a development stage company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) March 31, 2001 (1) INTERIM FINANCIAL STATEMENTS The interim unaudited consolidated financial statements presented herein have been prepared in accordance with generally accepted accounting principles for interim financial statements and with the instructions to Form 10-Q and Regulation S-X pertaining to interim financial statements. Accordingly, they do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. The interim financial statements presented herein reflect all adjustments (consisting of normal recurring adjustments and accruals) which, in the opinion of management, are necessary for a fair presentation of financial position as of March 31, 2001 and results of operations for the three months ended March 31, 2001 and March 31, 2000. The Company's financial statements should be read in conjunction with the summary of significant accounting policies and the notes to consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2000. The results of operations for the three months ended March 31, 2001 are not necessarily indicative of the results for the full year. (2) LIQUIDITY AND FINANCING As of March 31, 2001, ABS had working capital of $570,000 compared to a working capital of $1,377,000 as of December 31, 2000. Additionally, the Company had cash and cash equivalents of $396,000 at March 31, 2001. As of April 30, 2001 the Company's cash and cash equivalents had decreased to approximately $175,000. In April and May 2001, the Company began to implement a cash conservation program, which includes executive officers deferring 50% to 100% of their salaries and certain consultants deferring their compensation. As a result of the Company's continuing to incur cash expenses in excess of cash receipts, the Company will require the receipt of additional financing, the receipt of additional licensing fees and milestone payments and the disposition of nonstrategic assets. If this does not occur, the Company will be required to carry out a significant cash conservation program to carry it beyond the next few months. Due Page 10 11 to the uncertainties involved in the receipt of milestone payments and additional licensing fees or receipt of additional financing, many of which are outside the control of the Company, the Company's independent public accountants have qualified their year-end December 31, 2000 audit opinion with regard to the Company's ability to continue as a going concern. In order to address the need for additional capital, ABS is actively seeking to license certain of its products and is aggressively working on those matters within its control with respect to achievement of contractual milestones for milestone payments. The Company's current products, which it is aggressively seeking to license, include TpP, MH1, and the ABS-205 neurobiology compound. If it is successful in licensing some of these products, the licensees might provide additional funding or might perform additional testing necessary to obtain regulatory approvals or provide clinical, manufacturing and marketing expertise, which will indirectly lead to revenue for the Company. The Company is also discussing collaborations and contract services involving its patented Antigen-Free technology. The Company cannot guaranty that it will be successful in generating funding from these sources. In addition the Company is continuing discussions with certain potential investors and private placement agents concerning additional financing. However, in the current economic environment, financing has become more difficult to obtain, including within the biotechnology industry, and there is no guaranty that the Company will be able to obtain additional financing on reasonable terms, or that it will be able to obtain financing at all. The Company's failure to raise sufficient additional funds, either through licensing, milestone payments or co-marketing activities or additional financing, will have a material adverse effect on its financial condition and ability to continue as a going concern. (3) NET LOSS PER COMMON SHARE The Company follows the provisions of Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings Per Share". In accordance with SFAS No. 128, basic net loss per common share ("Basic EPS") is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding. Diluted net loss per common share ("Diluted EPS") is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares and Page 11 12 dilutive potential common shares then outstanding. The provisions of SFAS No. 128 require the presentation of both Basic EPS and Diluted EPS on the face of the consolidated statements of operations. Diluted EPS for 2001 and 2000 is the same as Basic EPS because the inclusion of stock options, warrants and the conversion of series A preferred stock outstanding would be antidilutive. (4) INVENTORY Inventory consists of the following:
March 31, December 31, 2001 2000 ---- ---- Raw Materials $330,000 $328,000 Work in Process 120,000 132,000 Finished Goods 104,000 171,000 -------- -------- $554,000 $531,000 ======== ========
(5) STOCKHOLDERS' EQUITY Stock Options - The following summarizes the stock option activity in all stock option plans for the three months ended March 31, 2001.
Weighted Avg. Option Shares Price ------ ----- Granted 329,000 $ .69 Exercised 75,000 $ .25 Expired 75,000 $2.00 Cancelled 340,000 $ .91
Each option entitles the holder to purchase one share of Class A Common Stock of the Company. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Page 12 13 The matters discussed in this Management's Discussion and Analysis of Financial Condition and Results of Operations contain forward-looking statements that involve risks and uncertainties, including the timely development, introduction and acceptance of new products, dependence on collaborators and licensees, the impact of competitive products, third party reimbursement issues, changing market conditions and other risks. These forward-looking statements represent management's judgement as of the date of filing of this Form 10-Q and should be considered with the risk factors set forth in the Company's various filings with the Securities and Exchange Commission. The Company disclaims any intent or obligation to update these forward-looking statements. The following discussion and analysis provides information which ABS' management believes is relevant to an assessment and understanding of the Company's results of operations and financial condition. This discussion should be read in conjunction with the consolidated financial statements and notes appearing elsewhere herein. OVERVIEW ABS is a development stage company incorporated in September 1983. To date, ABS has launched two commercial products ( TpP, ABS' Thrombus Precursor Protein diagnostic test, and FiF, ABS' Functional Intact Fibrinogen diagnostic test), although it has not yet derived any significant revenues from the sale of these products. On April 23, 1998, the Company acquired Stellar Bio Systems, Inc. ("Stellar"), a manufacturer and distributor of in vitro diagnostic products and research reagents. Reagents are individual components of diagnostic products, such as antibodies, calibrators and serum used in the biotechnology industry. The purchase price was $120,000 in cash and $700,000 in Class A Common Stock at the market value on the acquisition date (398,406 shares), plus future contingent payments of $650,000 in Class A Common Stock to be paid over three years based upon future sales levels of Stellar, with the Class A Common Stock to be valued at its market value on the acquisition agreement anniversary dates. On April 23, 1999, the Company made the first contingent payment of $150,000 in Class A Common Stock (131,118 shares). On April 24, 2000 (second fiscal quarter), the Company made the second contingent payment of $20,000 in Class A Page 13 14 Common Stock (10,811 shares). On April 24, 2001 (second fiscal quarter) the Company made the third and final contingent payment of $150,000 in Class A Common Stock (236,967 shares). On January 27, 2000, ABS granted to Abbott Laboratories ("Abbott") an exclusive worldwide license to its ABS-103 neurocompound. In consideration for the license, ABS received an initial license fee of $500,000 and is to receive up to $17 million of milestone payments upon successfully reaching development milestones and royalties on commercial sales. In addition, Abbott purchased 2,782,931 Class A Common Stock for $1.5 million. On February 3, 2000, ABS issued 7,000,000 shares of Series A Convertible Preferred Stock and warrants to purchase 7,000,000 shares of Class A Common Stock to Biotechnology Value Fund and the Company's Chairman, Mr. Roach for an aggregate purchase price of $3.5 million. LIQUIDITY AND CAPITAL RESOURCES The Company has funded its research and development activities to date principally from (i) the sale of Common Stock issued in an initial public offering, (ii) the exercise of the Class A and Class B Warrants issued in the initial public offering, (iii) private placements of Convertible Debentures, Convertible Preferred Series A Stock and Class A Common Stock, (iv) the exercise of stock options and warrants, (v) capital contributions to ABS by it's CEO and Chairman of the Board, (vi) initial license fee payments and fees from collaborative contract services and (vii) the income on funds invested in bank deposits, United States Treasury bills and notes and other high grade liquid investments. ABS expects to continue to incur substantial expenditures in research and product development in the neurobiology program and monoclonal antibody programs and in the development and commercialization of a rapid assay format for TpP, as well as in the FDA approval process relating to additional 510(k) filings for TpP and Stellar's products. Page 14 15 As of March 31, 2001, ABS had working capital of $570,000 compared to a working capital of $1,377,000 as of December 31, 2000. Additionally, the Company had cash and cash equivalents of $396,000 at March 31, 2001. As of April 30, 2001 the Company's cash and cash equivalents had decreased to approximately $175,000. In April and May 2001, the Company began to implement a cash conservation program, which includes executive officers deferring 50% to 100% of their salaries and certain consultants deferring their compensation. As a result of the Company's continuing to incur cash expenses in excess of cash receipts, the Company will require the receipt of additional financing, the receipt of additional licensing fees and milestone payments and the disposition of nonstrategic assets. If this does not occur, the Company will be required to carry out a significant cash conservation program to carry it beyond the next few months. Due to the uncertainties involved in the receipt of milestone payments and additional licensing fees or receipt of additional financing, many of which are outside the control of the Company, the Company's independent public accountants have qualified their year-end December 31, 2000 audit opinion with regard to the Company's ability to continue as a going concern. In order to address the need for additional capital, ABS is actively seeking to license certain of its products and is aggressively working on those matters within its control with respect to achievement of contractual milestones for milestone payments. The Company's current products, which it is aggressively seeking to license, include TpP, MH1, and the ABS-205 neurobiology compound. If it is successful in licensing some of these products, the licensees might provide additional funding or might perform additional testing necessary to obtain regulatory approvals or provide clinical, manufacturing and marketing expertise, which will indirectly lead to revenue for the Company. The Company is also discussing collaborations and contract services involving its patented Antigen-Free technology. The Company cannot guaranty that it will be successful in generating funding from these sources. In addition the Company is continuing discussions with certain potential investors and private placement agents concerning additional financing. However, in the current economic environment, financing has become more difficult to obtain, including within the biotechnology industry, and there is no guaranty that the Company will be able to obtain additional financing on reasonable terms, or that it will be able to obtain financing at all. The Company's failure to raise sufficient additional funds, either through Page 15 16 licensing, milestone payments or co-marketing activities or additional financing, will have a material adverse effect on its financial condition and ability to continue as a going concern. The Company's cash and cash equivalents decreased by $798,000 to $396,000 during the first quarter of 2001. This decrease was primarily due to net cash used in operations ($713,000) and used in investing activities ($90,000) which was partly offset by financing activities ($5,000). Net cash of $713,000 was used to fund the Company's cash loss from operations of $739,000 (net of non-cash expenses of $99,000 for depreciation and amortization, $57,000 incurred in connection with the issuance of stock and warrants and $2,000 net gain from the sale of a fixed asset). Net cash of $26,000 was provided by changes in operating assets and liabilities primarily as a result of an increase in accounts payable and accrued expenses ($115,000), a decrease in other current assets ($51,000), a decrease in other assets ($10,000) offset by an increase in accounts receivable ($127,000), and an increase in inventory ($23,000). Cash used in investing activities was for the purchase of equipment ($2,000) and capitalized patent costs ($90,000) partially offset by the proceeds from the sale of fixed assets ($2,000). Financing activities provided $5,000 from the exercise of stock options ($19,000), offset by payments of other notes payable ($14,000). RESULTS OF OPERATIONS Three Months Ended March 31, 2001 The Company had a net loss of $893,000 for the first quarter ended March 31, 2001 compared to a net loss of $498,000 for the first quarter ended March 31, 2000. The increase in the net loss is attributable primarily to the Company not receiving a license fee of $500,000 in the first quarter of 2001, as it had in the first quarter of 2000, and secondarily to reduced revenue from collaborative agreements and investment income, an increase in R&D expenses offset by reduced SG&A expenses, interest expense and increased gross margin on increased sales. The increase in sales during the first quarter of 2001 was primarily from sales of Stellar products and an increase in TpP diagnostic kits sales. Page 16 17 Research and development expenses increased by $70,000, from $261,000 to $331,000, primarily due to the increase in the neurobiology research program. Selling, general and administrative expenses decreased by $158,000, from $1,059,000 to $901,000, as a result of reduced professional service costs, reduced personnel costs and a decrease in investor relations cost, which were offset in part by increased depreciation and amortization costs. Interest expense decreased by $9,000, from $11,000 to $2,000, resulting primarily from the repayment of loans to the Company's Chairman in the first quarter of 2000. Investment income decreased by $22,000, from $30,000 in the first quarter of 2000 to $8,000 in first quarter of 2001, as a result of lower average cash balances. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's available cash is invested in highly liquid investments (primarily United States Treasury Bills) which have a maturity, at the time of purchase, of less than three months. The Company does not have operations subject to risks of foreign currency fluctuations, nor does it use derivative financial instruments in its operations. The Company does not have exposure to market risks associated with changes in interest rates as it has no variable interest rate debt outstanding. The Company does not believe it has any other material exposure to market risks associated with interest rates. Page 17 18 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits None (b) Reports on Form 8-K The Company filed a report on Form 8-K dated January 11, 2001 (date of earliest event reported) on January 16, 2001, reporting under Item 5, Other Events, relating to certain changes in management. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMERICAN BIOGENETIC SCIENCES, INC. (Registrant) Date May 14, 2001 /s/ Josef C. Schoell ------------------ --------------------------------------- Josef C. Schoell President, Chief Operating Officer and Chief Financial Officer (Principal Financial and Accounting Officer) Page 18