SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2011
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-19041
BIOGENETIC SCIENCES, INC.
(Exact Name Of Registrant
As Specified In Its Charter)
|(State of Incorporation)
Wall Street, 28th Floor
|(Address of Principal
Telephone Number, Including Area Code: (212) 400-7198
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 ¨
On September 30,
2011, the Registrant had 1,088,740 shares of common stock outstanding.
Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act).
||Accelerated filer ¨
AMERICAN BIOGENETIC SCIENCES, INC.Back to Table of
Notes to Unaudited Interim
September 30, 2011
Note 1. Basis of Presentation
American Biogenetic Sciences, Inc. (the "Company",
"We" or "ABS") was incorporated in Delaware on September 1, 1983.
In the opinion of management, the accompanying unaudited condensed
financial statements include all adjustments, consisting of only normal recurring
accruals, necessary for a fair statement of financial position, results of operations, and
cash flows. The information included in this Quarterly Report on Form 10-Q should be read
in conjunction with the financial statements and the accompanying notes included in our
Annual Report on Form 10-K for the year ended December 31, 2010. The accounting policies
are described in the Notes to the Financial Statements in the 2010 Annual
Report on Form 10-K and updated, as necessary, in this Form 10-Q. The year-end balance
sheet data presented for comparative purposes was derived from audited financial
statements, but does not include all disclosures required by accounting principles
generally accepted in the United States. The results of operations for the nine months
ended September 30, 2011 are not necessarily indicative of the operating results for the
full year or for any other subsequent interim period.
Fresh Start Accounting: We adopted "fresh-start" accounting as of September 20, 2002 in
accordance with procedures specified by AICPA Statement of Position ("SOP") No.
90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code.
In accordance with SOP No. 90-7, the reorganized value of the Company
was allocated to the Company's assets based on procedures specified by ASC 805,
"Business Combinations". Each liability existing at the plan sale date, other
than deferred taxes, was stated at the present value of the amounts to be paid at
appropriate market rates. It was determined that the Company's reorganization value
computed immediately before September 20, 2002 was $0. We adopted "fresh-start"
accounting because holders of existing voting shares immediately before filing and
confirmation of the sale received less than 50% of the voting shares of the emerging
entity and its reorganization value is less than its post-petition liabilities and allowed
Use of Estimates : The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statement and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ
from the estimates.
Fair Value of Financial Instruments : ASC # 825, "Disclosures about Fair Value
of Financial Instruments," requires disclosure of fair value information about
financial instruments. Fair value estimates discussed herein are based upon certain market
assumptions and pertinent information available to management as of September 30,
2011.These financial instruments include, accounts payable. Fair values were assumed to
approximate carrying values for these financial instruments since they are short-term in
nature and their carrying amounts approximate fair values or they are receivable or
payable on demand.
Earnings per Common Share : Basic net loss per share is computed using the weighted
average number of common shares outstanding during the period. Diluted net loss per common
share is computed using the weighted average number of common and dilutive equivalent
shares outstanding during the period. Dilutive common equivalent shares consist of options
to purchase common stock (only if those options are exercisable and at prices below the
average share price for the period) and shares issuable upon the conversion of preferred
stock. Due to the net losses reported, dilutive common equivalent shares were excluded
from the computation of diluted loss per share, as inclusion would be anti-dilutive for
the periods presented. There were no common equivalent shares required to be added to the
basic weighted average shares outstanding to arrive at diluted weighted average shares
outstanding during the period ended September 30, 2011 or 2010.
Income Taxes: The Company accounts for income taxes in accordance with ASC # 740,
"Accounting for Income Taxes," which requires recognition of estimated income
taxes payable or refundable on income tax returns for the current year and for the
estimated future tax effect attributable to temporary differences and carry-forwards.
Measurement of deferred income tax is based on enacted tax laws including tax rates, with
the measurement of deferred income tax assets being reduced by available tax benefits not
expected to be realized.
Note 2. Recent Accounting Pronouncements
In May 2011, the FASB issued ASU 2011-04, Amendments to Achieve Common
Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International
Financial Reporting Standards (IFRSs), which amends ASC 820, Fair Value
Measurement. ASU 2011-04 does not extend the use of fair value accounting, but provides
guidance on how it should be applied where its use is already required or permitted by
other standards within U.S. GAAP or IFRSs. ASU 2011-14 changes the wording used to
describe many requirements in U.S. GAAP for measuring fair value and for disclosing
information about fair value measurements. Additionally, ASU 2011-14 clarifies the
FASBs intent about the application of existing fair value measurements. ASU 2011-04
is effective for interim and annual periods beginning after December 15, 2011 and is
applied prospectively; therefore, the Company will adopt ASU 2011-04 in its first quarter
of fiscal 2012. The Company does not expect the adoption of ASU 2011-04 to have a material
impact on its consolidated financial statements.
Note 3. Convertible Note to Related Party:
On October 2, 2009, we issued one convertible promissory note in the amount of $76,000
to our CEO. The note bears interests at 12% per annum until paid or converted.
Interest is payable upon the extended maturity date at December 31, 2012. The initial
conversion rate is $0.001 per share.
The notes formalize
a like amount of cash advances and the fair value of services provided without cost
covering several years.
Accounting Standard Codification ( ASC # 815), Accounting for Derivative
Instruments and Hedging Activities, we evaluated the holders
non-detachable conversion right provision and liquidated damages clause, contained in the
terms governing the Note to determine whether the features qualify as an embedded
derivative instruments at issuance. Such non-detachable conversion right provision and
liquidated damages clause did not need to be accounted as derivative financial
Note 4. Related Party Transactions:
Fair value of services:
The executive officer provides services to the Company, which services are accrued and
are valued at $2,000 in month. The total of these accrued expenses was $18,000 for the
nine months ended September 30, 2011 and is reflected in the statement of operations as
general and administrative expenses.
An entity affiliated with President provided office space valued at $1,000 per month or
$9,000 for the nine months ended September 30, 2011. This amount was also reflected in the
statement of operations as general and administrative expenses. In addition, an entity
affiliated with the CEO provided securities compliance services during the three months
ended September 30, 2011 valued at $5,000 or $20,000 for the nine-month period ended
September 30, 2011.
Due Related Parties:
Amounts due related parties consist of the fair value of services provided by our CEO
and the fair value of services provided by an entity affiliated with the CEO. These items
due totaled $115,113 at September 30, 2011.
The Company's financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and settlement of liabilities
and commitments in the normal course of business for the foreseeable future. Since adopting
"fresh-start" accounting as of September 20, 2002, the
Company has accumulated losses aggregating to $262,721 and has
insufficient working capital to meet operating needs for the next twelve months as of September 30, 2011, all of
which raise substantial doubt about the Company's ability to continue as a going concern.
MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION Back to Table of
Some of the statements contained in this quarterly
report of American Biogenetic Sciences, Inc., a Delaware corporation discuss future
expectations, contain projections of our plan of operation or financial condition or state
other forward-looking information. Forward-looking statements give our current
expectations or forecasts of future events. You can identify these statements by the fact
that they do not relate strictly to historical or current facts. They use of words such as
"anticipate," "estimate," "expect," "project,"
"intend," "plan," "believe," and other words and terms of
similar meaning in connection with any discussion of future operating or financial
performance. From time to time, we also may provide forward-looking statements in other
materials we release to the public.
Biogenetic Sciences, Inc., a Delaware corporation, is sometimes referred to herein as
"we", "us", "our", "Company" and the
"Registrant". The Registrant was formed in 1983 for the purpose of
researching, developing and marketing cardiovascular and neurobiology products for
commercial development and distributing vaccines. The Registrant's products were designed
for in vitro and in vivo diagnostic procedures and therapeutic drugs, and its products had
been identified for use in the treatment of epilepsy, migraine and mania,
neurodegenerative diseases, coronary artery diseases and cancer. The Registrant
commenced selling its products during the last quarter of 1997 but did not generate any
sufficient revenues from operations to fund its operating expenses.
On September 19, 2002, the Registrant filed a petition
under the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Eastern District of
New York. On November 4, 2005, the Bankruptcy Court approved an order authorizing a change
in control and provided that the Company, subsequent to the bankruptcy proceeding, is free
and clear of all liens, claims and other obligations.
Plan of Operation
We had no revenues during the three and
nine months ended September 30, 2011 and 2010. Our operating expenses for the three and
nine month-period ended September 30, 2011 were $16,780 and $60,236, respectively, and
$11,780 and $37,340, respectively, for the three and nine month-period ended September 30,
2010. These operating expenses consisted of general and administrative expenses and
Our current activities are related to
seeking new business opportunities, including seeking an acquisition or merger with an
operating company. If our management seeks to acquire another business or pursue a new
business opportunity, it would have substantial flexibility in identifying and selecting a
prospective business. Registrant would not be obligated nor does management intend to seek
pre-approval from our shareholders. Under the laws of the State of Delaware, the consent
of holders of a majority of the issued and outstanding shares, acting without a
shareholders meeting, can approve an acquisition.
The Registrant is entirely dependent on
the judgment of its executive officer/director in connection with pursuing a new business
opportunity or a selection process for a target operating company. In evaluating a
prospective new business opportunity or an operating company, he would consider, among
other factors, the following: (i) costs associated with effecting a transaction; (ii)
equity interest in and opportunity to control the prospective candidate; (iii) growth
potential of the target business; (iv) experience and skill of management and availability
of additional personnel; (v) necessary capital requirements; (vi) the prospective
candidate's competitive position; (vii) stage of development of the business opportunity;
(viii) the market acceptance of the business, its products or services; (ix) the
availability of audited financial statements of the potential business opportunity; and
(x) the regulatory environment that may be applicable to any prospective business
The foregoing criteria are not intended
to be exhaustive and there may be other criteria that management may deem relevant. In
connection with an evaluation of a prospective or potential business opportunity,
management may be expected to conduct a due diligence review.
Liquidity and Capital Resources
We will use our limited personnel and
financial resources in connection with seeking new business opportunities, including
seeking an acquisition or merger with an operating company. It may be expected that
entering into a new business opportunity or business combination will involve the issuance
of a substantial number of restricted shares of common stock. If such additional
restricted shares of common stock are issued, our shareholders will experience a dilution
in their ownership interest in the Registrant. If a substantial number of restricted
shares are issued in connection with a business combination, a change in control may be
expected to occur.
connection with our plan to seek new business opportunities and/or effecting a business
combination, we may determine to seek to raise funds from the sale of restricted stock or
debt securities.We have no agreements to issue any debt or equity securities and cannot
predict whether equity or debt financing will become available at terms acceptable to us,
if at all.
are no limitations in our articles of incorporation on our ability to borrow funds or
raise funds through the issuance of restricted common stock to effect a business
combination. Our limited resources and lack of operating history may make it difficult to
do borrow funds or raise capital. Our inability to borrow funds or raise funds through the
issuance of restricted common stock required to effect or facilitate a business
combination may have a material adverse effect on our financial condition and future
prospects, including the ability to complete a business combination. To the extent that
debt financing ultimately proves to be available, any borrowing will subject us to various
risks traditionally associated with indebtedness, including the risks of interest rate
fluctuations and insufficiency of cash flow to pay principal and interest, including debt
of an acquired business.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Back to Table of
We have not entered
into, and do not expect to enter into, financial instruments for trading or hedging
CONTROLS AND PROCEDURES Back to Table of
Evaluation of disclosure controls and
procedures. As of September 30, 2011, the
Company's chief executive officer/chief financial officer conducted an evaluation
regarding the effectiveness of the Company's disclosure controls and procedures (as
defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act. Based upon the
evaluation of these controls and procedures, our chief executive officer/chief financial
officer concluded that our disclosure controls and procedures were effective as of the
date of filing this quarterly report.
Changes in internal controls. During the quarterly period covered by this report, no changes
occurred in our internal control over financial reporting that materially affected, or is
reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL
PROCEEDINGS Back to Table of Contents
RISK FACTORS Back to Table of Contents
In addition to the other
information set forth in this report, you should carefully consider the factors discussed
in Part I, Item 1. Description of Business, subheading Risk Factors in
our Annual Report on Form 10-K for the year ended December 31, 2010, which could
materially affect our business, financial condition or future results. The risks described
in our Annual Report on Form 10-K are not the only risks facing our company.
Additional risks and uncertainties not currently known to us or that we currently deem to
be immaterial also may materially adversely affect our business, financial condition
and/or operating results.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Back to Table of
3. DEFAULTS UPON SENIOR SECURITIES Back to Table of
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Back to Table of
5. OTHER INFORMATION Back to Table of
6. EXHIBITS Back to Table of Contents
(a) The following documents are filed as exhibits to
this report on Form 10-QSB or incorporated by reference herein. Any document incorporated
by reference is identified by a parenthetical reference to the SEC filing that included
||Certification of CEO/CFO
pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
||Certification of CEO/CFO
pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Pursuant to the
requirements of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on the date
CEO, CFO and Chairman
Dated: November 14, 2011