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,JUNE 30, 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) Identification No.)
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[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 Outstanding at August 3, 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,June 30, 2001
INDEX
Part I - FINANCIAL INFORMATION
Item 1: Financial Statements: Page No.
--------
Consolidated Balance Sheets -
March 31,June 30, 2001 and December 31, 2000 3
Consolidated Statements of Operations -
Three and Six Months Ended March 31,June 30, 2001 and March 31,June 30, 2000
and For the Period from Inception (September 1, 1983)
Through March 31,June 30, 2001 4
Consolidated Statements of Cash Flows -
ThreeSix Months Ended March 31,June 30, 2001 and March 31,June 30, 2000 and
For the Period from Inception (September 1, 1983)
Through March 31,June 30, 2001 5
Consolidated Statements of Stockholders' Equity -
For the Period from Inception (September 1, 1983)
Through March 31,June 30, 2001 6 - 9
Notes to Consolidated Financial Statements 10 - 12
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations 1213 - 1716
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 18 - 19
Item 5. Other Information 19
Item 6: Exhibits and Reports on Form 8-K 1819
Signature 1820
Page 2
3
AMERICAN BIOGENETIC SCIENCES, INC AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED BALANCE SHEETS
MarchJune 30, December 31,
2001 31, 2000
-------- -------------------- ------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 396,0001,268,000 $ 1,194,000
Accounts receivable 273,00017,000 146,000
Inventories 554,000297,000 531,000
Other current assets 23,00018,000 74,000
------------ ------------
Total current assets 1,246,0001,600,000 1,945,000
------------ ------------
Fixed assets, net of accumulated depreciation of $1,985,000$1,935,000 and $1,958,000,
respectively 452,000129,000 477,000
Patent costs, net of accumulated amortization of $685,000$737,000 and
$633,000, respectively 2,005,0002,012,000 1,967,000
Intangible assets, net 579,000-- 599,000
Other assets 31,00034,000 98,000
------------ ------------
$ 4,313,0003,775,000 $ 5,086,000
============ ============
LIABILITIES AND STOCKHOLDERS' INVESTMENTEQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses 483,000$ 961,000 $ 368,000
Current portion of capital lease obligation 16,000 16,000
Current portion of notes payable 177,000230,000 184,000
------------ ------------
Total current liabilities 676,0001,207,000 568,000
------------ ------------
LONG TERM LIABILITIES:
Notes payable, less current portion -- 7,000
Capital lease obligation 71,00066,000 71,000
------------ ------------
Total liabilities 747,0001,273,000 646,000
------------ ------------
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; 100,000,000150,000,000 shares authorized;
41,102,25541,339,222 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 72,954,00073,104,000 72,935,000
Deficit accumulated during the development stage (69,432,000)(70,646,000) (68,539,000)
------------ ------------
Total stockholders' equity 3,566,0002,502,000 4,440,000
------------ ------------
$ 4,313,0003,775,000 $ 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)
Three Months Ended Six Months Ended
------------------------------- -------------------------------
For the Period
From Inception
(September Three month period ended 1,
1983) Through
March 31,June 30, 2001 March 31,June 30, 2000 March 31,June 30, 2001 -------------- -------------- --------------June 30, 2000 June 30, 2001
------------- ------------- ------------- ------------- -------------
REVENUES:
Sales $ 488,000363,000 $ 383,000461,000 $ 4,825,000851,000 $ 844,000 $ 5,188,000
Royalties / license fees 1,000 -- 2,000 500,000 1,503,0001,504,000
Collaborative agreements -- 15,000 34,000 76,00091,000 575,000
-----------
------------ ------------ 523,000 959,000 6,903,000------------ ------------ ------------
364,000 476,000 887,000 1,435,000 7,267,000
COSTS AND EXPENSES:
Cost of sales 192,000 156,000 1,904,000121,000 132,000 313,000 288,000 2,025,000
Research and development 331,000 261,000 32,188,000227,000 328,000 558,000 589,000 32,415,000
Selling, general and administrative 901,000 1,059,000 38,723,000930,000 1,099,000 1,831,000 2,158,000 39,653,000
Facility consolidation cost -- -- -- -- 252,000
----------------------- ------------ ------------ ------------ ------------
Loss from operations (901,000) (517,000) (66,164,000)
----------- ------------ ------------(914,000) (1,083,000) (1,815,000) (1,600,000) (67,078,000)
============ ============ ============ ============ ============
OTHER INCOME (EXPENSE):
Interest expense (2,000) (11,000) (4,393,000)(13,000) (1,000) (15,000) (12,000) (4,406,000)
Net gain on sale of fixed assets -- -- 2,000 -- 13,000
Net loss on sale of business (288,000) -- (288,000) -- (288,000)
Investment income, net 8,000 30,000 4,702,000
-----------1,000 50,000 9,000 80,000 4,703,000
------------ ------------ ------------ ------------ ------------
Loss before extraordinary charge (893,000) (498,000) (65,842,000)(1,214,000) (1,034,000) (2,107,000) (1,532,000) (67,056,000)
Extraordinary charge for early retirement
of debentures, net -- -- -- -- (1,140,000)
----------------------- ------------ ------------ ------------ ------------
NET LOSS (893,000) (498,000) (66,982,000)(1,214,000) (1,034,000) (2,107,000) (1,532,000) (68,196,000)
Preferred stock dividend related to
warrants -- -- -- (2,450,000) (2,450,000)
----------------------- ------------ ------------ ------------ ------------
Net loss attributable to common
stockholders ($893,000) 1,214,000) ($2,948,000) 1,034,000) ($69,432,000)
=========== 2,107,000) ($ 3,982,000) ($70,646,000)
============ ============ ============ ============ ============
PER SHARE INFORMATION (NOTE 2)4):
Basic and Diluted net loss per share ($ .03) ($ .02) ($.07)
=========== .05) ($ .09)
============ ============ ============ ============
Common shares used in computing per share
amounts:
Basic and Diluted 44,089,000 42,129,000
===========44,339,000 43,767,000 44,173,000 42,948,000
============ ============ ============ ============
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)(UNAUDITED)
Six Months Ended For the Period From Inception
-------------------------------- (September 1, Three Months Ended 1983) Through
March 31,June 30, 2001 March 31,June 30, 2000 December 31,2000
-------------- -------------- ----------------June, 30 2001
------------- ------------- -----------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($893,000) 2,107,000) ($498,000) 1,532,000) ($66,982,000)68,196,000)
Adjustments to reconcile net (loss) to net cash
usedprovided by or (used) in operating activities:
Depreciation and amortization 99,000 78,000 3,467,000183,000 163,000 3,551,000
Net (gain) lossgain on sale of fixed assets (2,000) -- (13,000)
Net (gain) loss on sale of business 288,000 -- 288,000
Net gain on sale of marketable securities -- -- (217,000)
Other noncash expenses accrued primarily for stocks
and warrants 57,000 68,000154,000 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:LIABILITIES NET OF EFFECT
OF SALE OF BUSINESS:
(Increase) decrease in accounts receivable (127,000) (73,000) (165,000)(104,000) (105,000) (142,000)
(Increase) decrease in inventories (23,000) (2,000) (396,000)(40,000) (27,000) (413,000)
(Increase) decrease in other current assets 51,000 8,000 (23,000)56,000 11,000 (18,000)
(Increase) decrease in other assets 10,0007,000 -- 68,00065,000
Increase (decrease) in accounts payable and accrued
expenses 115,000 (886,000) 867,000636,000 (1,023,000) 1,388,000
Increase in interest payable to stockholder -- 8,000 120,000
------------------------------------------------------------------------------------------------------------------------
Net cash usedprovided by (used) in operating
activities (713,000) (1,297,000) (56,955,000)
--------------------------------------------------------(1,026,000) (2,351,000) (57,268,000)
----------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (6,000) (2,000) (2,000) (2,090,000)(2,094,000)
Proceeds from sale of fixed assets 2,000 -- 24,000
Payments for patent costs and other assets (90,000) (62,000) (2,760,000)(149,000) (94,000) (2,819,000)
Proceeds from sale of business 1,200,000 -- 1,200,000
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)
--------------------------------------------------------1,047,000 (96,000) (3,591,000)
----------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments to debentureholders -- -- (2,246,000)
Proceeds from issuance of common stock, net 19,000 2,551,0002,691,000 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)(96,000) (15,000) (246,000)
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 --130,000 81,000 3,452,0003,582,000
Repayment of loans payable to stockholder / affiliates
(remainder contributed to capital by the stockholder) -- (200,000)(291,000) (1,591,000)
------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing
activities 5,000 5,425,000 62,079,000
--------------------------------------------------------53,000 5,466,000 62,127,000
----------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (798,000) 4,064,000 396,00074,000 3,019,000 1,268,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,194,000 93,000 --
------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 396,0001,268,000 $ 4,157,0003,112,000 $ 396,000
--------------------------------------------------------1,268,000
----------------------------------------------------------------
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
--------------------------------------------------------3,380,000
----------------------------------------------------------------
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 $8,177,000$ 8,177,000 ($6,388,000) $ 1,795,000
------------------------------------------------------------------------------------------------
Page 6
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AMERICAN BIOGENETIC SCIENCES, INC AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(unaudited) (continued)
Class A Class B
Per Common Stock Common Stock
Share
Amount Shares Dollars Shares Dollars
------ ------ ------- ------ ------------------- ------------ ------------ ------------ ------------
BALANCE, DECEMBER 31, 1990 $ 4,118,500 $ 4,000 2,331,500 $2,000$ 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.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 $13,000$ 13,000 1,375,500 $1,000
---------------------------------------------------------$ 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.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 $38,699,000$ 38,699,000 ($34,568,000) $ 4,145,000
--------------------------------------------------------------------------------------------------------------
Page 7
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AMERICAN BIOGENETIC SCIENCES, INC AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (unaudited) (continued)
Class A Class B
Per Common Stock Common Stock
Share
Amount Shares Dollars Shares Dollars
------ ------ ------- ------ ------------------- ------------ ------------ ------------ ------------
BALANCE, DECEMBER 31, 1995 13,431,364 $13,000$ 13,000 1,375,500 $1,000$ 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 $37,000$ 37,000 3,000,000 $3,000
-------------------------------------------------------$ 3,000
---------------------------------------------------------
Deficit
Accumulated
Additional During the
Paid-in Development
Capital Stage Total
------- ----- ----------------- ------------ ------------
BALANCE, DECEMBER 31, 1995 $38,699,000$ 38,699,000 ($34,568,000) $4,145,000$ 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 7,793,00047,793,000 (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 6,077,00056,077,000 (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 2,520,00062,520,000 (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 $ 3,852,00063,852,000 ($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 $37,000$ 37,000 3,000,000 $3,000$ 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 --- -- --
Class A Common Stock issued .63 236,967 -- -- --
Net (loss) for the period --------------------------------------------------- -- -- --
---------------------------------------------------------
BALANCE, MARCH 31,JUNE 30, 2001 41,102,255 $41,00041,339,222 $ 41,000 3,000,000 $3,000
-------------------------------------------------$ 3,000
---------------------------------------------------------
Deficit
Accumulated
Additional During the
Paid-in Development
Capital Stage Total
------- ----- ----------------- ------------ ------------
BALANCE, DECEMBER 31, 1999 $ 1,852,00063,852,000 ($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
Class A Common Stock issued 150,000 -- 150,000
Net (loss) for the period (893,000) (893,000)
--------------------------------------------------------- (2,107,000) (2,107,000)
--------------------------------------------
BALANCE, MARCH 31,JUNE 30, 2001 $72,954,000$ 73,104,000 ($69,432,000)70,646,000) $ 3,566,000
-------------------------------------------------------2,502,000
--------------------------------------------
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,June 30, 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,June 30, 2001 and
results of operations for the three and six months ended March 31,June 30, 2001 and March 31,June
30, 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 and
six months ended March 31,June 30, 2001 are not necessarily indicative of the results for
the full year.
(2) SALE OF BUSINESS
On June 29, 2001, the Company and its wholly owned subsidiary, Stellar
Bio Systems, Inc. ("Stellar"), completed the sale of Stellar's in vitro
immunoflourescent antibody slide format assay business and Stellar's mouse serum
business (collectively, the "Stellar Business") to PanBio InDx Inc. ("PanBio
InDx"), a wholly owned subsidiary of PanBio Limited, an Australian company. The
Company and Stellar received a purchase price of $1.2 million cash paid at
closing and the right to receive up to an additional $540,000, payable quarterly
over three years, based on revenues of certain portions of the Stellar Business.
Assets sold in the transaction included rights to specified products, rights
under certain contracts and leases, inventory, accounts receivable and
intellectual property related to the Stellar Business, rights to the name
"Stellar", certain computer hardware and software and other tangible assets and
goodwill. PanBio InDx assumed certain liabilities of the Stellar Business,
including accounts payable. The Company recorded a loss on the sale of $288,000,
which included the write-off of $705,000 of unamortized goodwill. Any future
quarterly receipts will be recorded as gains on the sale.
In connection with the sale of the assets, the Company entered into a
Manufacture and Supply Agreement with PanBio InDx and PanBio Limited, pursuant
to which PanBio InDx will manufacture the Company's thrombus precursor protein
diagnostic test kit for annual periods that may be terminated on notice given at
least 45 days prior to the end of the term.
The following unaudited pro forma summary presents information as if
the Stellar Business had been sold as of December 31, 2000 and 1999. The pro
forma amounts include certain adjustments, primarily to the elimination of
Stellar results of operations and deferred payments based on a portion of
Stellar revenue.
Page 10
11
Pro forma information does not necessarily reflect the actual results that would
have occurred nor is it necessarily indicative of future results of operations
of the Company:
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
June 30, 2001 June 30, 2000 June 30, 2001 June 30, 2000
------------- ------------- ------------- -------------
Total Revenue $ 29,000 $ 72,000 $ 119,000 $ 682,000
------------- ------------- ------------- -------------
Costs and expenses:
Cost of sales 6,000 3,000 7,000 4,000
Research and development 195,000 302,000 483,000 528,000
Selling, general and administrative 785,000 937,000 1,521,000 1,842,000
Other Income (Expense), Net: (1,000) 61,000 27,000 91,000
------------- ------------- ------------- -------------
Net loss (958,000) (1,109,000) (1,865,000) (1,601,000)
Preferred stock dividend related to warrants -- -- -- (2,450,000)
------------- ------------- ------------- -------------
Net loss attributable to common stockholders ($958,000) ($1,109,000) ($1,865,000) ($4,051,000)
============= ============= ============= =============
Net Loss Per Common Share
Basic and Diluted net loss per share ($.02) ($.03) ($.04) ($.09)
Basic and Diluted 44,339,000 43,767,000 44,173,000 42,948,000
(3) LIQUIDITY AND FINANCING
As of March 31,June 30, 2001, ABSthe Company had working capital of $570,000$393,000
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$1,268,000 at March 31,June
30, 2001. AsDuring the second quarter 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 implementimplemented a cash
conservation program which includeswhereby executive officers deferringdeferred 50% to 100% of their
salaries and certain consultants deferringdeferred their compensation. In addition the
Chairman, Mr. Roach, loaned the Company $130,000, which is included in current
liabilities as of June 30, 2001. On June 29, 2001, the Company sold the Stellar
Business for proceeds of $1,200,000 (See Note 2). The receipt of $1,200,000
provides the Company several months of operating funds and allows for the
repayment of amounts owed. 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 and the receipt of additional licensing fees and milestone
payments and the disposition of
nonstrategic assets.payments. If this does not occur, the Company will be required to carry out a
significant cash conservation program to carry it beyond the next fewseveral
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, ABSthe Company 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,
Page 11
12
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,The Company has made significant progress in negotiating a financing
package although no binding agreement has yet been entered into. In the current
economic environment, financing has become more difficult to obtain including(including
within the biotechnology industry,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)(4) 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)(5) INVENTORY
Inventory consists of the following:
March 31,June 30, December 31,
2001 2000
---- ----
Raw Materials $330,000$291,000 $328,000
Work in Process 120,000-- 132,000
Finished Goods 104,000 171,0006,000 71,000
-------- --------
$554,000$297,000 $531,000
======== ========
(5)(6) STOCKHOLDERS' EQUITY
Stock Options - The following summarizes the stock option activity in
all stock option plans for the three months ended March 31,June 30, 2001.
Weighted Avg.
Shares Option
Shares Price
------ -----------------
Granted 329,0002,802,500 $ .69.67
Exercised 75,000/ Cancelled -- $ .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.
Page 12
13
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 judgementjudgment 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'the
Company's (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,(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). See Note 2 on page 10 for a
discussion of the sale of the Stellar business.
On January 27, 2000, ABS granted to Abbott Laboratories ("Abbott") an exclusive worldwide
license to its ABS-103 neurocompound. In consideration for the license, Abbott
paid ABS received an initial license fee of $500,000 and isagreed to receivepay up to $17$17.0
million of milestone payments depending upon successfully reaching development
milestones andplus customary royalties on commercial sales. In addition, Abbott
purchased 2,782,931 Class A Common Stock for $1.5 million. As discussed in the
Company Annual Report for the fiscal year 2000, Abbott is steadily proceeding
with its preclinical studies using ABS-103R. The Company continues to be
encouraged by the progress reports issued by Abbott.
Page 13
14
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.
On June 29, 2001, ABS sold the Stellar Business, which consisted of
$1.2 million upfront cash payment at closing plus up to a total of $540,000
payable quarterly over the next three years, based on revenues of a portion of
the Stellar Business. Under the terms of the sale, the buyer of Stellar will
continue contract manufacturing of ABS' Thrombus Precursor Protein (TpP(TM))
ELISA diagnostic test kit for ABS. ABS recorded a loss on the sale of $288,000,
which included the write-off of $705,000 of unamortized goodwill. Any future
quarterly receipts will be recorded as gains on the sale.
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,
Series A Convertible Preferred Series A Stock and Class A Common Stock, (iv) the exercise
of stock options and warrants, (v) capital contributions and loans to ABS by
it's CEO andits Chairman of the Board, (vi) initial license fee payments and fees from
collaborative contract services, (vii) sale of a business and (vii)(viii) 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
15TpP.
As of March 31,June 30, 2001, ABS had working capital of $570,000$393,000 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$1,268,000 at March 31,June 30, 2001. AsDuring the second
quarter 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 implementimplemented a cash conservation program which includeswhereby
executive officers deferringdeferred 50% to 100% of their salaries and certain
consultants deferringdeferred their compensation. In addition the Chairman, Mr. Roach,
loaned the Company $130,000, which is included in current liabilities as of June
30, 2001. On June 29, 2001, the Company sold the Stellar Business for proceeds
of $1,200,000. The receipt of $1,200,000 provides the Company several months of
operating funds and allows for the repayment of amounts owed. 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 and the receipt of
additional licensing fees and milestone payments and the disposition of
nonstrategic assets.payments. If this does not occur, the
Company will be required to carry out a significant cash conservation program to
carry it beyond the next fewseveral 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
Page 14
15
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,The Company has made significant progress in negotiating a financing
package although no binding agreement has yet been entered into. In the current
economic environment, financing has become more difficult to obtain including(including
within the biotechnology industry,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 decreasedincreased by $798,000$74,000 to
$396,000$1,268,000 during the first quartersix months ended June 30, 2001, primarily from investing
activities ($1,047,000) which includes the proceeds from the sale of 2001. This decrease was primarily due to
netthe Stellar
Business and financing activities ($53,000) offset by cash used in operations
($713,000) and used in investing activities
($90,000) which was partly offset by financing activities ($5,000)1,026,000). Net cash of $713,000$1,026,000 was used in operations to fund the
Company's cash loss from operations of $739,000$1,581,000 (net of non-cashnon cash expenses of
$99,000$183,000 for depreciation and amortization, net loss on sale of business
$288,000 and $57,000 incurred in connection with the issuance of stock and
warrants, and $2,000offset by a net gain from theon sale of a fixed asset)assets $2,000). Net cash of
$26,000$555,000 was provided by changes in operating assets and liabilities primarily
as a result of an increase in accounts payable and accrued expenses ($115,000)636,000),
a decrease in other current assets ($51,000)56,000), a decrease in other assets
($10,000)7,000), partially offset by an increase in accounts receivable ($127,000),104,000) and
an increase in inventory ($23,000)40,000). Cash used inprovided from investing activities was
forfrom the purchasesale of equipmentthe Stellar Business ($2,000)1,200,000) and
capitalized patent costs ($90,000) partially offset by the proceeds from the sale of fixed assets
($2,000), offset by payment for patents ($149,000) and the purchase of equipment
($6,000). Financing activities provided $5,000$53,000 as a result of loans from the
Company's Chairman ($130,000), the exercise of stock options ($19,000), offset
by payments of otherunder capital lease obligations and notes payable ($14,000)96,000).
RESULTS OF OPERATIONS
Three Months Ended March 31,June 30, 2001
The Company hadCompany's net loss of $1,214,000 for the three months ended June
30, 2001 increased by $180,000 from a net loss of $893,000$1,034,000 for the firstthree
months ended June 30, 2000. The increase in the net loss was primarily due to
the net loss on sale of the Stellar Business ($288,000), decreased sales
($98,000), decreased investment income ($49,000), offset by reduced research and
development expenses ($101,000) and reduced selling, general and administration
expenses ($169,000).
Sales during the second quarter ended
March 31,of 2001 decreased $98,000 primarily due
to lower sales of Stellar products ($85,000) as compared to the second quarter
of 2000. Sales of TpP diagnostic kits were also lower during the second quarter
of 2001 as compared to the second quarter of 2000.
Cost of Sales decreased $11,000 during the second quarter of 2001. This
decrease was not in proportion to the sales decrease due to the product mix in
Stellar products sales.
Page 15
16
Research and development expenses decreased by $101,000, from $328,000
for the three months ended June 30, 2000 to $227,000 for the three months ended
June 30, 2001, primarily from savings in personnel costs, reduced costs
associated with the TpP development program, travel and meeting costs, partially
offset by increases in research and development funding for ABS-205.
Selling, general and administrative expenses decreased by $169,000,
from $1,099,000 in the second quarter of 2000 to $930,000 in the second quarter
of 2001, as a result of savings in personnel costs, investor relations costs and
travel and meeting costs, offset by increased cost of professional service fees
associated with the sale of business and licensing activities.
Interest expense increased $12,000 from $1,000 in the second quarter of
2000 to $13,000 in the second quarter of 2001, primarily from an increase in
notes payable and capital lease obligations.
Investment income decreased by $49,000, from $50,000 in the second
quarter of 2000 to $1,000 in the second quarter of 2001, as a result of lower
average cash balances.
Six Months Ended June 30, 2001
The Company's net loss of $2,107,000 for the six months ended June 30,
2001 increased by $575,000 from a net loss of $498,000$1,532,000 for the first quartersix months
ended March 31,June 30, 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 period, as it
had in the first2000 period and the loss on the sale of the Stellar Business of
$288,000.
Sales and cost of sales during the six months of 2001 remained
relatively flat compared to the same six months of 2000. As previously
discussed, sales decreased during the second quarter of 2000, and secondarily to reduced revenue from
collaborative agreements and investment income, an2001 which offset the sales
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. TpP sales were up 10% for the six
months of 2001, was primarilyagain from increased sales in the first quarter of Stellar products and an increase in TpP diagnostic kits sales.
Page 16
172001.
Research and development expenses increaseddecreased by $70,000,$31,000, from $261,000$589,000
during the six months ended June 30, 2000 to $331,000,$558,000 during the six months
ended June 30, 2001, primarily due tofrom reduced personnel costs, reduced costs
associated with the TpP development program, offset by an increase in the
neurobiology research program.
Selling, general and administrative expenses decreased by $158,000,$327,000,
from $1,059,000$2,158,000 during the six months ended June 30, 2000 to $901,000,$1,831,000 during
the six months ended June 30, 2001, 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 depreciationcosts, reduced travel and meeting costs, reduced
amortization costs.of warrant values and reduced professional service costs during the
six months of 2001.
Interest expense decreasedincreased by $9,000,$3,000, from $11,000$12,000 during the six
months of 2000 compared to $2,000,$15,000 during the six months of 2001, resulting primarily from
the repaymenthigher balances of loans to the Company's Chairman in the first
quarter of 2000.note payables and capital lease obligations.
Investment income decreased by $22,000,$71,000, from $30,000$80,000 during the six
months ended June 30, 2000 as compared to $9,000 in the first
quarter of 2000 to $8,000 in first quartersix months of 2001, as a
result of lower average cash balances.
Page 16
17
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 CompanyABS does not have operations subject to
risks of foreign currency fluctuations, nor does it use derivative financial
instruments in its operations. The CompanyABS does not have exposure to market risks
associated with changes in interest rates as it has no variable interest rate
debt outstanding. The CompanyABS does not believe it has any other material exposure to
market risks associated with interest rates.
Page 17
18
PART II
OTHER INFORMATION
ItemITEM 2. CHANGES IN SECURITIES
During the quarter ended June 30, 2001, the Company issued 236,967
shares of Class A Common Stock to the sellers of Stellar in satisfaction of the
third and final contingent payment obligation of $150,000 under the terms of the
April 1998 agreement for the purchase of that business. Under the agreement, the
sellers 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 Securities Act
of 1933 is applicable to the issuance of such shares.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's 2001 Annual Meeting of Stockholders held on June 19,
2001 the following matters were voted on:
(a) Election of the following seven persons to serve as directors until
the next annual meeting of stockholders and until their respective successors
are elected and qualified, by the following vote:
Voting
Authority
For Withheld
--- --------
Alfred J. Roach 67,704,870 152,155
Josef C. Schoell 67,786,870 70,155
Ellena M. Byrne 67,704,870 152,155
Glenna M. Crooks 67,786,870 70,155
Joseph C. Hogan 67,786,470 70,555
Timothy J. Roach 67,704,870 152,155
Joseph M. Danis 67,786,470 70,555
(b) Adoption of a proposal to authorize an amendment of the Company's
Certificate of Incorporation to increase the number of shares of Class A Common
Stock which the Company is authorized to issue from 100,000,000 shares to
150,000,000 shares by the following vote:
For Against Abstain
--- ------- -------
66,090,076 1,747,964 18,985
(c) Adoption of a proposal to authorize an amendment of the Company's
Certificate of Incorporation in order to effect a reverse stock split, pursuant
to which the Company's outstanding shares of Class A Common Stock and Class B
Common Stock would 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,
Page 18
19
ranging from one newly issued share for each two outstanding shares to one newly
issued share for each ten outstanding shares by the following vote:
For Against Abstain
--- ------- -------
65,959,190 1,869,910 27,925
(d) Adoption of proposal to amend the Company's 1993 Non-Employee
Director Stock Option Plan to increase the number of shares subject to options
to be granted thereunder at the time of a director's initial election and at
each annual meeting of stockholders from 10,000 shares to 25,000 shares by the
following vote:
For Against Abstain
--- ------- -------
65,960,110 1,867,180 29,735
(e) Ratification of the selection of Arthur Andersen LLP to serve as
the Company's independent auditors for the year ending December 31, 2001 by the
following vote:
For Against Abstain
--- ------- -------
67,763,972 76,690 16,363
Each matter was approved by the vote of Class A and Class B Common
Stock stockholders voting together as one class, with each share of Class A
having one vote and each share of Class B having ten votes, and the matters
described in paragraphs (b) and (d) above were additionally approved by the vote
of Class A Common Stock, voting as a separate class, with each share of Class A
Common Stock having one vote per share.
ITEM 5. OTHER INFORMATION
At the annual meeting of the Board of Directors following the annual
meeting of the Stockholders on June 19, 2001, the Board elected the following
persons to serve as the executive officers of the Company.
Name Position
---- --------
Alfred J. Roach Chairman of the Board and Chief Executive Officer
Josef C. Schoell President, Chief Operating Officer and Chief Financial Officer
Ellena M. Byrne Executive Vice President-Global Scientific Network
James H. McLinden Senior Vice President and Chief Scientific Officer
Timothy J. Roach Treasurer and Secretary
ITEM 6. Exhibits and Reports on FormEXHIBITS 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
(dateJune 29,
2001(date of earliest event reported) on January 16,July 13, 2001,
reporting under Item 5, Other Events,2, Acquisition or Disposition of Assets,
relating to
certain
changes in management.Page 19
20
the sale of the business of its wholly owned subsidiary,
Stellar Bio Systems, Inc., to PanBio Limited.
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,Date: August 10, 2001 /s/ Josef C. Schoell
------------------ --------------------------------------------------------------- -------------------------------------
Josef C. Schoell
President, Chief Operating Officer and
Chief Financial OfficerCOO & CFO
(Principal Financial and
Accounting Officer)
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