<PAGE>   1


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K
 [X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
       ACT OF 1934

       FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

 [ ]   TRANSITION REPORT 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



                       AMERICAN BIOGENETIC SCIENCES, INC.
                       ----------------------------------
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>

              DELAWARE                                11-2655906
             ---------                                ----------
       <S>                                            <C>
        (STATE OR OTHER JURISDICTION OF             (I.R.S. EMPLOYER
        INCORPORATION OR ORGANIZATION)             IDENTIFICATION NO.)
</TABLE>


                      1375 AKRON STREET, COPIAGUE NEW 11726
                     --------------------------------------
               (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)


                                  631-789-2600
                                  ------------
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

        SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:



                              CLASS A COMMON STOCK
                              --------------------
                                (TITLE OF CLASS)

         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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]

         As of the close of business on March 16, 2001, there were outstanding
41,102,255 shares of the registrant's Class A Common Stock and 3,000,000 shares
of its Class B Common Stock. The approximate aggregate market value (based upon
the closing price on the Nasdaq SmallCap Market) of shares held by
non-affiliates of the registrant as of March 16, 2001 was $22,742,000.

                       DOCUMENTS INCORPORATED BY REFERENCE

          Portions of the registrant's Proxy Statement relating to its
     2001 Annual Meeting of Stockholders are incorporated by reference into
                            Part III of this report.



<PAGE>   2



                    CAUTIONARY STATEMENT FOR THE PURPOSES OF
                       THE "SAFE HABOR" PROVISIONS OF THE
                PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

         This Report contains forward-looking statements. The words "believe,"
"expect," "anticipate," "estimate," "may," "will," "plan," "intend," "could,"
"estimate," "is being," "goal" and other expressions which are predictions of or
indicate future events and trends and which do not relate to historical matters
identify forward-looking statements. Such forward-looking statements are subject
to a number of known and unknown risks and uncertainties that, in addition to
general economic and business conditions (both in the United States and in the
overseas markets where the Company intends to distribute products), could cause
the Company's anticipated results, performance and achievements to differ
materially from those described or implied in the forward-looking statements.

         Examples of these risks and uncertainties include, without limitation,
the Company's ability to complete products under development and to maintain
superior technological capability, foresee changes and identify, develop and
commercialize innovative and competitive products (see "-- Products Under
Development"), obtain widespread acceptance of its products by the medical
community, including the reliability, safety and effectiveness of such products
(see "-- Marketing and Sales"), meet competition (see "-- Competition"),
comply with various governmental regulations related to the Company's products
and obtain government clearance to market its products (see "-- Government
Regulation"), successfully expand its manufacturing capability (see "--
Manufacturing"), attract and retain technologically qualified personnel (see
"-- Personnel"), and generate cash flows and obtain collaborative or other
arrangements with pharmaceutical companies or obtain other financing to support
its product development testing and marketing operations and growth (see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Item 7 of this Report).

         In addition to the foregoing, the Company's actual future results could
differ materially from those projected in the forward-looking statements as a
result of the risk factors set forth in the Company's various filings with the
Securities and Exchange Commission and of changes in general economic
conditions, changes in interest rates and changes in the assumptions used in
making such forward-looking statements. The Company undertakes no obligation to
publicly update or revise any forward-looking statement, whether as a result of
new information, future events or otherwise.



<PAGE>   3
PART I

ITEM 1.           BUSINESS

SUMMARY

         American Biogenetic Sciences, Inc. ("ABS" or the "Company") is a
development stage company engaged in researching, developing and marketing
cardiovascular and neurobiology products for commercial development. The Company
commenced selling its products during the last quarter of 1997, although it has
not yet derived any significant revenues from the sale of these products.

         The Company's products are designed for in vitro and in vivo diagnostic
procedures and therapeutic drugs. In vitro diagnostic procedures are those in
which blood, urine or other bodily fluid or tissue is extracted from the body
and diagnostic tests are performed in a test tube or other laboratory equipment.
In vivo diagnostic procedures are those in which proteins or compounds are
injected directly into the body or bloodstream to assess abnormal reactions or
conditions. The Company's therapeutic products have been identified for the
treatment of epilepsy, migraine and mania and neurodegenerative diseases.

         At the present time ABS' principal products or activities are:

         o        THROMBUS PRECURSOR PROTEIN DIAGNOSTIC TEST (TPP(TM)). This is
                  an in vitro diagnostic test used to assess the risk of blood
                  clots in the veins or arteries. This test is also used to
                  monitor the performance of anti-clotting therapy or drugs used
                  in the prevention of blood clots.

         o        FUNCTIONAL INTACT FIBRINOGEN DIAGNOSTIC TEST (FIF(R)).
                  This is an in vitro diagnostic test which measures the levels
                  of fibrinogen in blood. Fibrinogen is a protein used in the
                  blood-clotting process.

         o        ANTIGEN-FREE TECHNOLOGY. This enabling technology is designed
                  for the production of highly specific monoclonal antibodies
                  used in diagnostics and therapeutics for a variety of
                  diseases. The Company is currently performing contract
                  research and antibody manufacturing for certain corporate
                  partners.

         o        THERAPEUTIC NEUROCOMPOUNDS. These are chemical compounds which
                  have been identified for the treatment of epilepsy, migraine
                  and mania and neurodegenerative diseases. One of these
                  compounds, ABS-103 has been licensed to Abbott Laboratories.

         o        IN VITRO DIAGNOSTIC PRODUCTS FOR INFECTIOUS AND AUTO-IMMUNE
                  DISEASE. These can determine the status of such diseases as
                  human herpes and lupus.

                                       1
<PAGE>   4

         o        MOUSE SERUM. This is a blood component that lacks blood cells
                  which is used in diagnostic tests by major in vitro diagnostic
                  product manufacturers for a variety of purposes.

         ABS was incorporated in Delaware in September 1983. The Company's
principal executive offices are located at 1375 Akron Street, Copiague, New York
11726 and its telephone number is 631-789-2600.

CORE TECHNOLOGIES

THE ANTIGEN-FREE MOUSE COLONY - MONOCLONAL ANTIBODIES

         One of the Company's core technologies is a patented antigen-free mouse
colony which allows the generation of highly specific monoclonal antibodies that
are difficult to obtain from conventional systems. The Company utilizes this
technology to supply antibodies for its in vitro and in vivo diagnostic
products. The proprietary antigen-free mouse colony is maintained in a germ-free
environment and fed a chemically defined and ultrafiltered diet. When the
antigen-free mice are challenged with a foreign entity, there is a large immune
response that eventually results in the proliferation of a large number of
antibody secreting cells with a spectrum of specificities to the foreign entity.
The Company holds several United States patents covering the antigen-free mouse
colony and methods of producing antibodies relating to it. See "-- Intellectual
Property."

THERAPEUTIC NEUROCOMPOUNDS

         The Company has developed a series of neurocompounds for possible
treatment of epilepsy, migraine, mania and neurodegeneration diseases.

CURRENT PRODUCTS

MEDICAL BACKGROUND FOR CARDIOVASCULAR PRODUCTS

         Using its antigen-free mouse colony, the Company developed and patented
two antibodies, 45J and MH1. These antibodies react specifically with both
fibrinogen (a blood protein) and fibrin (a component of blood clots). These
antibodies are used in two of ABS' main products, the FiF and TpP tests. These
tests assist doctors in diagnosing blood clots lodged in the legs and the lungs,
known as thrombosis.

         Blood clots that form in the bloodstream consist of two major parts:

         o        a cellular component made up of platelets; and

         o        a meshwork of fibrin fibers that cements the platelets into an
                  insoluble mass which has the mechanical strength to withstand
                  the pressure of blood in the circulation.


                                      2
<PAGE>   5

         The fibrin component is insoluble and is derived from fibrinogen, a
blood protein that is manufactured in the liver. When thrombin, an enzyme
produced in response to injury of a blood vessel, is present in blood, it
converts soluble fibrinogen into fibrin at the site of vascular injury.

         Similarly, the generation of plasmin plays the major role in
fragmentation of the fibrin meshwork, a process known as fibrinolysis. Like
thrombin, plasmin does not ordinarily circulate in plasma but is derived from
the circulating protein plasminogen when the fibrinolytic system is activated.
In addition to causing fragmentation of fibrin, plasmin also attacks fibrinogen
and institutes changes in its structure that prevent its polymerization to
fibrin. In extreme cases, this process, called fibrinogenolysis, can lead to
bleeding caused by lack of clottable fibrinogen.

         Fragmentation of fibrin leads to the production of soluble fibrin
degradation products that circulate in plasma and are generally elevated in
patients following a thrombotic event. Since all these products are proteins, it
is possible to produce antibodies that can react specifically with individual
fibrin degradation products.

         Electrophoretic techniques have identified soluble fibrin polymers in
the plasma of patients with different clinical conditions, including myocardial
infarction and deep vein thrombosis. Laboratory tests have also reported
elevated soluble fibrin levels in other clinical intravascular fibrin formation
conditions, including disseminated intravascular coagulation and patients
undergoing surgical procedures who are experiencing thrombotic complications.

         Thrombosis itself can be fatal. It is also associated with a number of
other medical conditions, such as heart attack, stroke, and complications from
pregnancy.

         Some of the most hazardous sites for blood clot formation include the
coronary arteries where a blood clot can lead to myocardial infarction (heart
attack); the arteries leading to the brain, where a blood clot can cause stroke;
and the veins of the legs which can lead to a pulmonary embolism. There are
approximately 12 million surgical procedures performed each year in the United
States alone which put patients at risk of forming a blood clot.

         Approximately 10 million people in the United States go to emergency
rooms each year due to chest pain. However, as many as 80% of these individuals
are not suffering heart attacks and may have from some less serious conditions.

         An early warning test that establishes those patients that are not
having a heart attack will eliminate expensive diagnostic procedures and
unnecessary hospital admissions. Furthermore, the early identification of those
patients who are forming life threatening blood clots or suffering from a heart
attack would permit earlier use of clot dissolving drugs or anticoagulants.

         Current biochemical tests for acute myocardial infarction measure
cardiac muscle proteins which leak out as a result of dying heart muscle. This
release of cardiac specific proteins only occurs 4-6 hours after the onset of
clinical symptoms. There is a strong clinical need for an earlier warning of
myocardial infarction. The detection of blood clot formation early in the
clinical event should facilitate proper identification and treatment of
myocardial infarction patients with life saving, clot dissolving drugs.

                                       3
<PAGE>   6

         Several epidemiological studies have revealed a significant causal
relationship between high fibrinogen levels and coronary artery disease. It is
widely accepted that events leading to coronary artery disease are caused as
much by biochemical processes in the coagulation (blood-clotting) system as by
the metabolism of cholesterol. The most important landmark trial to show a
causal relationship between high fibrinogen and coronary artery disease is the
Framingham epidemiology study (1985) conducted at the Institute for Prevention
of Cardiovascular Disease at the Deaconess Hospital, Harvard Medical School.
That study concluded that elevated levels of fibrinogen "exceeded that of all
risk factors except elevated systolic blood pressure."

         Other studies indicate that individuals with elevated levels of
fibrinogen are predisposed to thrombosis. On the other hand, diminished levels
may result in hemorrhage. Thus, reagents that can be used to measure fibrinogen
can play a vital role in determining the appropriate level of thrombolytic
therapy, as well as determine an individual's risk of coronary artery disease.

THROMBUS PRECURSOR PROTEIN ASSAY (TPP)

         The Company's Thrombus Precursor Protein Assay (TpP) is an in vitro
diagnostic enzyme test using the Company's patented monoclonal antibodies MH1
and 45J to measure soluble fibrin polymers in blood to indicate active blood
clot formation (thrombosis) in individuals with possible myocardial infarction
and other clinical conditions precipitated by clot formation.

         TpP provides a means to measure intravascular coagulation (fibrin
formation) in post-operative patients to determine the risk of deep vein
thrombosis and its clinical sequelae, pulmonary embolism.

         It has also been demonstrated that thrombosis precursor protein levels
are significantly lower in patients who are undergoing invasive surgical
procedures and have been adequately anticoagulated. TpP relies on the
measurement of soluble fibrin polymers which are produced and circulate freely
when a clot starts to form, even before the onset of clinical symptoms, and is
elevated when the patient first begins to experience chest pain. TpP is also
expected to offer physicians a screening tool to monitor patients
post-operatively for blood clot formation and to effect therapeutic intervention
if required and monitor their response to anticoagulant therapy.

         A study using TpP to monitor patients post-operatively was conducted at
Johns Hopkins School of Medicine and a second at the University of Perugia,
Italy in 1997. These studies showed that thrombosis precursor protein was
elevated post operatively.

         The Company has patented:

          o   the TpP test kit itself;

          o   the antibodies used to recognize the presence of thrombosis
              precursor protein in blood; and

          o   the use of TpP to measure intravascular fibrin polymer formation
              in patients with symptoms indicating a blood clotting event.

                                       4
<PAGE>   7

See "Intellectual Property."

         In October 1996, ABS received 510(k) clearance from the FDA to market
TpP to aid in the risk assessment of blood clot formation and the monitoring of
anticoagulant therapy. See "-- Government Regulation." The Company began to
market TpP in late 1997 through independent distributors.

         ABS has put additional effort into clinical evaluation of TpP with the
goal to characterize the most promising applications and demonstrate the
advantages of TpP over competitor products. The following publications and
abstracts have been presented and/or published:

              o   Decreased TpP Levels Linked to Preeclampsia. Clinical Lab
                  Letter, April 15, 2000, Vol 21, No 7.

              o   Lepirudin Blunts Endotoxin-Induced Coagulation Activation.
                  T. Pernerstorfer, et al. Blood, 1 March 2000, Vol 95, No 5

              o   The Use of Thrombus Precursor Protein, D-dimer, Prothrombin
                  Fragment 1.2, and Thrombin  Antithrombin in the Exclusion of
                  Proximal Deep Vein Thrombosis and Pulmonary Embolism.
                  S. LaCapra, et al. Blood Coagulation and Fibrinolysis 2000,
                  Vol 11, No 4

         In addition, ABS has developed a hand-held, disposable, rapid assay
device which measures TpP levels in plasma. The prototype of a hand-held device
for obtaining semi-quantitative test results (i.e. qualitative test results
derived from numerical data) has been produced and the Company has recently
submitted a 510(k) to the FDA for marketing approval of the rapid assay format
TpP test. The Company believes that the more user-friendly and rapid
point-of-care format will greatly enhance the market opportunity for the TpP
test. The Company intends to seek outside sources for the manufacture of its
point-of-care device and corporate partners to market this product.

FUNCTIONAL INTACT FIBRINOGEN ASSAY (FIF)

         The Company's Functional Intact Fibrinogen Assay (FiF) is an in vitro
diagnostic tool using the Company's patented monoclonal antibody, 45J, to
provide a direct and accurate quantitative measurement of the amount of
fibrinogen present in plasma. FiF has received FDA approval for use.
See "-- Intellectual Property."

         Traditional clotting tests are an indirect measure of fibrinogen,
estimated by the amount of time that passes before a clot is formed, which can
be influenced by the presence of degradation products of fibrin/fibrinogen. FiF,
on the other hand, is a direct measure of fibrinogen that is not adversely
influenced by these products.

         In May 1996, a research group of the Framingham Heart Study reported
that FiF is an accurate method of detecting elevated fibrinogen levels, a risk
factor for cardiovascular disease. Furthermore, the findings demonstrated that
the fibrinogen levels measured by FiF were

                                       5
<PAGE>   8
correlated with the prevalence of cardiovascular disease both by itself and
when adjusted for age, weight, smoking and diabetes.

         In October 2000, an article published in the journal Circulation:
Journal of the American Heart Association (2000;102:1634-1638) reported results
that found the FiF test demonstrated a stronger association with cardiovascular
disease than did the Clauss method (the current standard in fibrinogen testing).
A total of 2,632 patients were evaluated in the Framingham Offspring Study - a
continuation of the Framingham Heart Study. The study utilized the FiF test and
demonstrated that the FiF test may be more adaptable for measuring fibrinogen
levels in large populations, as reported in this publication.

         The Company has been marketing FiF in a manual format kit since late
1997 and continues to seek corporate partners to include FiF on automated
diagnostic testing equipment.

THERAPEUTIC NEUROCOMPOUNDS

         The Company has developed a series of neurocompounds for possible
treatment of epilepsy, migraine, mania and neurodegenerative diseases.

         Epilepsy; Migraine; Mania. ABS is developing a series of anticonvulsant
compounds which have improved properties compared to valproate, a significant
drug which is currently used for the treatment of epilepsy, migraine and mania.
In pre-clinical trials in Germany, one of these compounds, ABS-103, has been
shown to control seizure activity without any of the sedative action or side
effects commonly associated with other anticonvulsants.

         Scientists have recently discovered that many drugs exist as two forms,
enantiomers, which are mirror images of each other and where one of the
enantiomers is responsible for the therapeutic effects and the other enantiomer
may be inactive or cause unwanted side effects. R-103 is the preferred chemical
entity for commercial development. The Company has isolated the R- enantiomer
(R-103) of ABS-103. ABS scientists were able to isolate the R (right) enantiomer
from the S (left) to produce R-103. The value of isolating R-103 lies in its
superior safety and efficacy profile. The Company has patented the use of
ABS-103 as an anticonvulsant in the U.S. and in Europe and additional
applications relating to this technology are pending. See "-- Intellectual
Property."

         In January 2000, ABS entered into a license agreement with Abbott
Laboratories ("Abbott") granting Abbott exclusive worldwide rights to ABS-103
for certain applications. See "-- Marketing and Sales."

         Neurodegenerative Diseases. The Company, in collaboration with the
University College Dublin, University of Hanover, Germany, University of Notre
Dame, United States and fellow researchers within the Global Scientific
Network(R), has identified certain chemical compounds for the potential
treatment of neurodegenerative diseases, designated as the ABS 200 series. See
"-- Research and Development Agreements -- Global Scientific Network."

                                       6
<PAGE>   9

         The ABS 200 series of compounds are putative neuroprotectants designed
to treat and halt the progression of neurodegenerative diseases. The compounds
have been evaluated in cells where they exhibit nerve growth factor-like
activity. The ABS 200 series of compounds can penetrate the blood-brain barrier,
unlike nerve growth factor, which requires specific development of a delivery
system.

         One of the ABS 200 Series compounds, ABS-205, has been shown to induce
the expression of a protein known as neural cell adhesion molecule in vitro.
Neural cell adhesion molecule is involved in memory, neurodevelopment and other
neuroplastic events. ABS-205 also has been shown to enhance neural cell adhesion
molecule function in the rat hippocampus and cortex, areas known to be involved
in memory formation. Moreover, ABS-205 protects against chemical induced memory
loss (amnesia) in animals. The Company has patented this technology in the
United States. See "-- Intellectual Property."

         The Company has also developed the ABS 300 series of compounds relating
to small molecules which may be useful for enhancing memory. It has filed two
United States patent applications and four foreign applications relating to this
series of compounds.

IN VITRO DIAGNOSTIC PRODUCTS FOR INFECTIOUS AND AUTO-IMMUNE DISEASE

         The Company also owns a series of in vitro diagnostic products for
infectious and auto-immune disease. These products are manufactured and
distributed by the Company's wholly owned subsidiary, Stellar Bio Systems, Inc.
("Stellar"). Stellar manufactures in vitro immunodiagnostic assays utilizing an
immunofluorescent antibody assay format. These assays determine the presence of
various infectious diseases and autoimmune conditions including:

<TABLE>
         <S>                                     <C>
     o  human herpes simplex virus 1;      o  human parvovirus B-19;
     o  human herpes simplex virus 2;      o  measles virus;
     o  Epstein-Barr virus;                o  rubella virus;
     o  cytomegalovirus;                   o  adenovirus;
     o  varicella zoster virus;            o  mumps virus;
     o  respiratory syncytial virus;       o  antinuclear bodies Hep-2;
     o  human herpes virus 6;              o  anti-nuclear bodies KB;
     o  human herpes virus 7;              o  anti-mitochondrial bodies; and
                                           o  anti-native DNA bodies.
</TABLE>

MOUSE SERUM; RESEARCH REAGENTS

         Stellar also is the largest domestic provider of high quality mouse
serum. Stellar's mouse serum is used as an assay component by in vitro
diagnostic assay manufacturers. Stellar additionally provides contract services
for the development, process scale up, manufacture and purification of research
reagents such as monoclonal and polyclonal antibodies. Research reagents are
individual components of diagnostic products, such as antibodies, calibrators
and serum used in the biotechnology industry.

PRODUCTS UNDER DEVELOPMENT

                                       7
<PAGE>   10

MH1

         MH1 as an Imaging Agent. ABS has labeled an antibody fragment of its
MH1 antibody that contains the binding site for fibrin with a radioisotope for
use as an in vivo imaging agent to show the size and location of blood clots.
Images have been generated in pre-clinical animal studies and clinical human
studies with the resolution required for commercial use. The product is intended
to permit the rapid imaging of blood clots in the lungs, a condition known as
pulmonary embolism, and the detection of blood clots in the legs (deep vein
thrombosis). The primary protein component of a thrombus is fibrin, and an
antibody that can differentiate fibrin from its plasma precursor, fibrinogen,
can be used when, appropriately labeled with a radioisotope, to image the site
and extent of an occlusion and to carry thrombolytic reagents to the site.

         Traditional methods for detecting a thrombus in the circulatory system
have consisted of angiography, venography, duplex doppler and monitoring radio
labeled blood clot components, derived from a human donor, injected into the
circulatory system and then absorbed by the clot. These procedures are costly,
often may lack sensitivity and some can pose potential risks to the patient. The
large quantity of dye required in angiography and venography may cause kidney
problems and may irritate the walls of blood vessels. Also, in angiography a
catheter is used for delivery of the dye into the arterial system which adds
further to the risk of the patient. In contrast, only a minimum quantity of ABS'
radio labeled MH1 need be used, and since the antibody is not derived from man,
there is no risk of human blood-borne disease. However, whenever a foreign
substance is introduced into the human body, there is the risk of an immune
reaction and cases of reactions to mouse-derived antibody have been reported.

         In January 1995, ABS completed Phase I testing of MH1 in imaging blood
clots for pulmonary embolism and deep vein thrombosis. The final Phase I report
was submitted to the FDA in October 1995. The Company has compiled all necessary
information regarding the Phase I/II clinical trials for MH1 imaging that were
subsequently conducted and submitted a final report to the FDA in 1998. Clinical
trial results demonstrated that MH1 is effective and safe as an imaging agent
for pulmonary embolism and deep vein thrombosis. ABS is seeking corporate
partners to fund, collaborate, license and to conduct full Phase II and Phase
III trials and market the product.

         MH1 as a Delivery Vehicle for Thrombolytic Therapy. The Company is
seeking to develop a product using MH1 as a delivery-vehicle for known
thrombolytics (drugs that dissolve blood clots). Tests by the Company have
demonstrated the ability to link MH1 to a known thrombolytic agent to form a
potent, fibrin specific, therapeutic agent which, in animals, has demonstrated
superior clot dissolving properties. In March 1998, ABS obtained a United States
patent for this application. See "-- Intellectual Property."

         MH1 as an Antithrombotic. The Company is also investigating the utility
of MH1 as an antithrombotic agent (to prevent clot formation) for the
interference and/or inhibition of excess fibrin deposition in surgical
procedures such as angioplasty. In January 1996, ABS obtained a United States
patent for this application. See "-- Intellectual Property."


                                        8
<PAGE>   11

         MH1 as a Delivery Vehicle for Anticancer Therapy. The Company is
seeking to develop a product using MH1 as a delivery-vehicle for known
anti-cancer drugs (example, cytotoxine) to tumors or cancers that contain
aggregated fibrin. In February 1999 and 2001, the Company obtained two United
States Patents covering the composition and method, respectively, for this
therapy. See "-- Intellectual Property".

NEUROBIOLOGY PROGRAM

         The goal of this longer term program is to develop fine chemical
compounds for use in the treatment of epilepsy, migraine and mania and to treat
and halt the progression of neurodegenerative diseases such as Alzheimer's,
Parkinson's, neuropathy, trauma and stroke. Most of the applications developed
to date have been developed in conjunction with scientists in the Company's
Global Scientific Network. See "-- Research and Development Agreements Global
Scientific Network."

         There can be no assurance that the Company's products in development
will prove to be commercially viable, that any of the products will receive
regulatory clearance or clearance for particular indications, or that ABS will
successfully market any products or achieve significant revenues or profitable
operations. The Company is seeking to enter into additional collaborative,
licensing, distribution, and/or co-marketing arrangements with third parties to
expedite the commercialization of its products. However, there can be no
assurance that ABS will be able to enter into any such additional arrangements
or, if it does, that any such arrangements will be on terms that will be
favorable to ABS.

RESEARCH AND DEVELOPMENT AGREEMENTS

GLOBAL SCIENTIFIC NETWORK

         The Company formed its Global Scientific Network to promote and
facilitate collaborative research leading to product development. The network is
comprised of certain of the members of the Company's Scientific Advisory
Committee and additional scientists from various disciplines. See "-- Scientific
Advisory Committee." The network is a joint effort to expedite the research,
development and commercialization of ABS' diagnostic and therapeutic products.
Though the network does not hold meetings, communication among its participants
is facilitated through the Company. The network offers the Company's management
an opportunity to review and evaluate new technologies. In addition, it offers a
network of scientific leaders who can offer advice and direction. To facilitate
the identification and screening of new technologies, the Company has scientific
coordinators in St. Petersburg, Russia; and Beijing, China. These activities are
coordinated from the Company's office in Dublin, Ireland.

         The Company is currently collaborating with leading medical and
scientific institutions worldwide including University College Dublin, Ireland;
University of Hanover, Germany; Chinese Academy of Medical Sciences, Beijing,
China.

                                       9
<PAGE>   12


         Through its Global Scientific Network, ABS has entered into various
agreements which generally grant the Company an exclusive license to the results
of the research, as discussed below.

AGREEMENTS FOR NEUROSCIENCE PROGRAMS

         ABS has entered into various agreements with universities and/or
individual scientists who are part of the Global Scientific Network. These
agreements generally grant the Company an exclusive license to the results of
the research for use in various neuroscience applications, which may include
compounds and antibodies. In general, the agreements are for a term equal to the
duration of any patents that may be granted, with a minimum term of 10 years. In
exchange for a license, ABS is obligated to pay certain research expenses and
the costs of filing and processing patent applications in the United States and
any other countries that ABS may select. Pursuant to these agreements, ABS is
also required to pay the inventors or the university a royalty, typically 5% of
net product sales. The Company is seeking to commercialize the products under
development by entering into collaborative arrangements, licensing agreements
and/or through research and development partners.

         ABS has also entered into development agreements with the National
Institutes of Health (NIH) for some of its neurobiology products, including an
agreement with the NIH (epilepsy branch) in 1998 to evaluate ABS-103 and R-103.
These evaluations have been completed and have demonstrated anticonvulsant
activity with little or no toxicity. In addition, results of an evaluation under
a Phase I Small Business Innovation Research (SBIR) grant from the NIH, have
demonstrated that ABS-205 can enhance learning and memory in pre-clinical
models.

         There can be no assurance that the Company's neurobiology products will
prove to be commercially viable, or that ABS will successfully market the
products or achieve significant revenues or profitable operations or enter into
any arrangements with third parties for development of the neurobiology
products, or if it does, that any such arrangements will be on terms that will
be favorable to ABS.

OTHER RESEARCH AND DEVELOPMENT AGREEMENTS

         As part of its development stage activities, ABS, in the ordinary
course of business, enters into various agreements that provide for the
expenditure by the Company of funds for research and development activities.
These agreements typically provide for the payment of royalties (typically 2% to
8% of net sales) by ABS if any products are successfully developed and marketed
as a result of the work being performed under the agreement. Reference is made
to Note 10 of the Notes to Consolidated Financial Statements for a discussion of
various arrangements which the Company has entered into for collaborative
research and development projects (including arrangements for the use of space
and services) and technology license arrangements for the development and
prospective manufacturing and sale of products being developed.

MARKETING AND SALES


                                       10
<PAGE>   13

MARKETS

         The Company's commercial sales of its in vitro test kits are directed
to hospitals, laboratories, clinical laboratories and physicians in large group
medical practices. The Company believes that sales to hospitals and clinical
laboratories will be dependent upon physician general acceptance of use of
direct fibrinogen level measurement as part of routine and special blood
analyses.

MARKETING AND SALES

         During fiscal year 2000, the Company had one customer account for 44%
of the Company's sales and a second customer accounted for 17% of the Company's
sales. The Company does not believe that the loss of any one of these customers
would have a material adverse effect on the consolidated operations of the
Company.

         Sales of ABS' proposed products on a commercial basis will be
substantially dependent on widespread acceptance by the medical community. The
use of any products that the Company may develop for diagnosis and therapy will
require educating the medical community as to their reliability, safety and
effectiveness. The Company, and any pharmaceutical company with which it may
collaborate, may use several approaches to obtain general acceptance in the
medical community of the Company's proposed products. Such promotional
approaches may include: publicizing existing studies; offering the products to
current practitioners and researchers who are leaders in their fields for their
use and publication of their findings; conducting comparative studies with
competitive products and methodologies and publishing the results of the
studies; and sponsoring professional symposia and seminars.

         The Company markets its TpP diagnostic kit through distributors. This
approach requires the Company to pay the expenses of developing promotional
literature and aids, hiring technical support personnel and performing studies
to support clinical use of the product. The independent distributors that ABS
uses also market similar products produced by others.

         ABS intends to rely on collaborative arrangements with pharmaceutical
firms to conduct and fund the major portion of the human clinical trials that
are necessary to obtain regulatory approval for any in vivo products it may
develop. The Company also intends to rely on these firms to market and sell the
products exclusively, especially during the first few years of the
collaboration. While arrangements may vary, the Company intends to require
payments of a royalty based on sales of the product, with an amount to be paid
"up front" upon entering into the arrangement.

         The personnel and financial resources of the Company are not sufficient
to permit the Company to alone gain the acceptance of the medical community for
ABS' proposed in vivo pharmaceutical products or vaccines. Accordingly, the
Company may be required to collaborate with one or more pharmaceutical
companies, which will provide the necessary financing and expertise, in order to
obtain medical community's acceptance. Such arrangements are likely to entail,
among other things, the sharing of revenue or profits with such companies. The
Company continues to seek arrangements with large pharmaceutical companies to
market its products. In

                                       11
<PAGE>   14

the event ABS is unable to enter into arrangements or if the arrangements into
which it enters are not successful, the Company will likely seek to market such
products through distributors. This would require ABS to develop a marketing
program to support sales.

         In January 1992, the Company entered into an agreement with Yamanouchi
Pharmaceutical Co., Ltd. ("Yamanouchi") of Japan granting Yamanouchi the
exclusive right to manufacture, use and sell in Japan and Taiwan diagnostic test
kits which utilize 45J. The Company received an initial payment of $900,000 (net
of Japanese taxes). The license agreement requires Yamanouchi to purchase its
45J requirements from ABS. The agreement is for a period of fifteen years,
provided that if any of the Company's patent rights for 45J have not yet expired
at the end of that period, the agreement will continue until such expiration.
The Company has filed a patent application in Japan relating to 45J. To date,
Yamanouchi has not made any sales of the diagnostic tests covered by this
agreement. The Company does not have any further obligations and could terminate
the agreement.

         In October 1995, ABS entered into a license and collaboration agreement
with F. Hoffmann-La Roche, Ltd. ("Hoffmann-La Roche") for the co-development and
marketing of the Company's TpP test for the detection of active blood clot
formation (thrombosis). The agreement grants Hoffmann-La Roche a worldwide
license to market the TpP test in a latex based particle agglutination format,
but does not obligate Hoffmann-La Roche to do so. Under the agreement, the
Company received a $60,000 non-refundable development payment to adapt the TpP
test in the latex based particle agglutination format to Hoffmann-La Roche's
automated diagnostic systems. The Company may also receive milestone payments
upon achievement of certain commercialization goals. The TpP test is to be
manufactured by the Company for use on Hoffmann-La Roche's instruments. Prior to
marketing the test, Hoffmann-La Roche must obtain 510(k) clearance.

         See "-- Government Regulation." ABS is to receive a percentage of
Hoffmann-La Roche's net selling price for the Company's manufacturing of the TpP
test plus a 5% royalty on net sales made by Hoffmann-La Roche. Under the
agreement, the TpP test is also to be sold by ABS and Hoffmann-La Roche to other
diagnostic companies using similar particle agglutination technology. On these
sales, gross profit is to be shared equally between the Company and Hoffmann-La
Roche. To date, ABS has not received any milestone or royalty payments.

         In December 1995, ABS entered into a license agreement with Abbott for
the marketing of the Company's TpP assay. The license agreement grants Abbott a
worldwide license to market the TpP test for Abbott's immunoassay formats, but
does not obligate Abbott to do so. The Company received a $100,000
non-refundable up-front payment and is to receive milestone payments upon
achievement of certain development and commercialization goals. The Company is
to receive a 5% royalty on net sales made by Abbott. In addition, the reagent
for the TpP test is to be manufactured by the Company for use by Abbott. Prior
to marketing the test, Abbott must obtain 510(k) clearance. See "-- Government
Regulation." To date, ABS has not received any milestone or royalty payments.

         In January 2000, ABS entered into a license agreement with Abbott
granting Abbott exclusive worldwide rights to its ABS-103 compound, related
technology and patent rights. The license gives Abbott the exclusive rights to
develop and market the compound which presently is

                                       12
<PAGE>   15

in the pre-clinical stage. Abbott will complete development of the product and
conduct appropriate clinical trials to test for safety and effectiveness. In
consideration for the license and in addition to customary royalties on net
sales, Abbott paid the Company a non-refundable up-front license fee of $500,000
and agreed to pay additional milestone payments aggregating up to $17 million
depending upon successfully reaching development milestones, generally by
indication. There can be no assurance that these milestones will be achieved.
In conjunction with entering into the license, Abbott made an additional
$1,500,000 equity investment in ABS.

         There can be no assurance that any future marketing arrangements will
be entered into or, that if entered into, they will be on terms similar to those
discussed above or on terms that will be favorable to the Company. If no
arrangements are entered into, ABS will require substantial alternative
financing in order to market its products. There can be no assurance that any
such financing arrangements will be available to the Company or, if available
to, it will be available on terms acceptable or favorable to the Company.

         There can be no assurance that any of the Company's products will be
accepted in the medical community, and ABS is unable to estimate whether it will
be able, and if so the length of time it would take, to gain such acceptance.

COMPETITION

         The biotechnology industry is characterized by rapid technological
advances, evolving industry standards and technological obsolescence. ABS has
numerous competitors, none of whom is believed to be dominant, and it is likely
that others may enter the field. Competitors may develop products which may
render ABS' products obsolete or which have advantages over ABS' products, such
as greater accuracy and precision or greater acceptance by the medical
community. ABS' inability to meet and surpass its competitors' technological
advances could have a material adverse effect on the Company's business,
financial condition and results of operations. Competing products may also get
through the regulatory approval process sooner than ABS' products, enabling
those competitors to market their products earlier than ABS. Usually, the first
person to market a product has a significant marketplace advantage. In addition,
other products now in use, presently undergoing the regulatory approval process,
or under development by others, may perform functions similar to ABS' existing
products or those which it has under development.

INTELLECTUAL PROPERTY

         Patents. ABS' policy is to seek patent protection for its proposed
products, whether resulting from its own research and development activities or
from development and licensing arrangements into which the Company enters.

         ABS has been issued United States Patents, Nos. 4,870,023 which will
expire in 2006, covering a recombinant occlusion body and 5,041,379, which will
expire 2008, covering a recombinant heliothis virus; United States Patent No.
5,294,548, relating to the Hepatitis A vaccine, filed jointly with the
University of Iowa, which will expire 2011. In addition, ABS has been issued
United States Patent, Nos. 5,091,512 and 5,120,834, each of which will expire in

                                       13
<PAGE>   16


2009, covering monoclonal antibodies specific for fibrinogen and monoclonal
antibodies specific for fibrin, respectively. ABS has also been issued United
States Patent No. 5,223,410, which will expire in 2010, covering the use of its
antigen-free mouse colony to generate monoclonal antibodies. ABS has also been
issued United States Patent No. 5,721,122 which expires in 2015, covering a
method of obtaining primed lymphocytes collected from immunized antigen-free
mice. ABS has further been issued United States Patent No. 5,453,359, which will
expire in 2012, covering an immunoassay for soluble fibrin using the Company's
proprietary fibrin-specific monoclonal antibody as a method of detecting a
thrombotic event, such as myocardial infarction. ABS has also been issued United
States Patent No. 5,487,892, which will expire in 2014, covering use of the
Company's proprietary fibrin-specific monoclonal antibody as an antithrombotic
agent. ABS has further been issued United States Patent No. 5,723,126, which
will expire in 2015, covering the use of the Company's propriety fibrin-specific
monoclonal antibody in conjunction with a thrombolytic reagent for the treatment
of thrombosis. ABS has been issued United States Patent No. 5,837,540, which
will expire in 2016, covering a method of producing fibrin-specific antibody.
ABS has also been issued United States Patent No. 5,843,690, which will expire
in 2015, covering a method and an assay kit for the in vitro detection of the
presence or amount of soluble fibrin polymers in a sample from a subject. ABS
has also been issued United States Patent No. 5,871,737, which will expire in
2008, covering a fibrin-specific monoclonal antibody conjugated with a cytotoxic
reagent. ABS has been issued United States Patent No. 6,080,384, which will
expire in 2017, covering methods for radionuclide-labeling of biomolecules and
kits utilizing the same. ABS has also been issued United States Patent No.
6,187,593, which will expire in 2008, covering a method for treatment for fibrin
encapsulated tumor using MH1 conjugated with a cytotoxic reagent.

         Additional patent applications are pending covering alternative
embodiments of the Company's proprietary fibrin-specific monoclonal antibody, as
well as improved methods of raising fibrin specific monoclonal antibodies and of
using the soluble fibrin immunoassay. ABS has twenty-two counterpart
applications (including designated countries under patent treaties) covering
monoclonal antibodies specific for fibrinogen, monoclonal antibodies specific
for fibrin, methods for use of the Company's proprietary fibrin-specific
monoclonal antibody in a soluble fibrin assay, and as an antithrombotic agent,
and the use of the antigen-free mouse colony to generate monoclonal antibodies.
ABS presently has issued three patents in Australia covering monoclonal
antibodies specific for fibrinogen, monoclonal antibodies specific for fibrin,
methods for localizing a blood clot in a patient, an immunoassay for determining
fibrin levels in a patient's blood, and use of the antigen-free mouse colony to
generate monoclonal antibodies.

         The Company has exclusive worldwide rights in technology relating to
certain methods and compositions for treating epilepsy. ABS has the exclusive
license for United States Patent No. 5,786,380, which will expire in 2015,
covering a method of reducing seizure activity in an individual by administering
an anti-epileptic composition that contains ABS-103. Six patents protect this
technology on behalf of the Company which include patents in the United States
and Europe. The European Patent has been activated in 16 European countries. ABS
has filed additional patent applications in the United States and other foreign
jurisdictions to further protect this technology. Exclusive worldwide rights
have also been obtained by the Company for technologies relating to certain
fluorinated anti-convulsant compounds. United States Patent

                                       14
<PAGE>   17


No. 6,184,401 issued on February 6, 2001 relating to this technology and will
expire on June 22, 2019. Another United States patent application and six
foreign applications are pending relating to these technologies. The Company
also has exclusive rights relating to the use of ABS-103 to treat migraine and
affective illness. One United States and 22 foreign applications are pending
relating to this technology. The Company has received a Notice of Allowance from
the United States Patent and Trademark Office indicating that the United States
application is in proper form for allowance. Technology for the enantioselective
synthesis of valproic acid analogues is also exclusively licensed to the
Company. One United States and two foreign applications are pending relating to
this technology.

         The Company also has exclusive worldwide rights in technology related
to certain novel neurotrophic methods and compositions. United States Patent
No. 5,672,746 was issued September 30, 1997. A reissue application for this
patent has been allowed. Foreign applications to protect this technology
worldwide are pending. Ono Pharmaceutical, Ltd., ("Ono"), has filed third party
observations in the patent applications relating to the neurotrophic compounds
in the Japan and Australian patent offices, as well as the European Patent
Office. These applications remain pending and the Company is continuing their
prosecution. ABS has filed a reissue application of its United States Patent
No. 5,672,746 to provide the United States Patent and Trademark Office an
opportunity to examine this patent in light of the issues raised by Ono. The
Company has received a Notice of Allowance from the United States Patent and
Trademark Office indicating that the patent will be reissued. On November 30,
1998, the United States Patent and Trademark office declared an interference
between an application of Ono and one of the Company's applications related to
its 5,672,746 patent to determine the priority of invention of commonly claimed
subject matter. The Company resolved the interference in the United States
Patent and Trademark Office. The Company received a judgment that permits it to
pursue patent protection relating to the use of ABS-205 as a therapeutic with
claims which were previously allowed prior to the interference.

         ABS is the worldwide exclusive licensee of United States Patent
No. 5,492,812, issued to Trinity College (Dublin, Ireland), which will expire in
2013, covering a method for diagnosing Alzheimer's disease, and a corresponding
pending European patent application.

         There can be no assurance that any of the claims in pending or future
applications will issue as patents, that any issued patents will provide ABS
with significant competitive advantages, or that challenges will not be
instituted against the validity or enforceability of any patent issued to ABS
or, if instituted, that such challenges will not be successful. The cost of
litigation to uphold the validity of patents and prevent infringement can be
substantial. Furthermore, there can be no assurance that others have not
independently developed or will not independently develop similar technologies
or will not develop distinctively patentable technology duplicating the
Company's technology or that they will not design around the patentable aspects
of the Company's technology. While obtaining patents is deemed important by ABS,
patents are not considered essential to the success of its business. However, if
patents do not issue from present or future patent applications, ABS may be
subject to greater competition. Moreover, unpatented technology could be
independently developed by others who would then be free to use the technology
in competition with unpatented technology of ABS.

                                       15
<PAGE>   18

         Exclusive Licenses. The Company has exclusive worldwide rights in
technology relating to certain methods and compositions for treating epilepsy,
migraine and affective disorder. ABS has the exclusive license for United States
Patent No. 5,786,380, which will expire in 2015, covering a method of reducing
seizure activity in an individual by administering an anti-epileptic compound
that contains ABS-103. Patents protect this technology on behalf of the Company
in the United States and the European Patent Office. The European Patent has
been activated in 16 European countries. ABS has filed additional patent
applications in the United States and other foreign jurisdictions to further
protect this technology. The Company has also received a Notice of Allowance
from the United States Patent and Trademark Office indicating that a patent
application relating to the use of ABS-103 for the treatment of migraine is
allowable. Technology relating to the enatioselective synthesis of valproic acid
analogues such as ABS-103 is also exclusively licensed to the Company.

         The Company also has exclusive worldwide rights in technology related
to certain novel neurotrophic methods and compositions (United States Patent No.
5,672,746, issued September 30, 1997). Foreign applications to protect this
technology worldwide are pending. ABS is the worldwide exclusive licensee of a
United States patent covering a method for diagnosing Alzheimer's disease
(United States Patent No. 5,492,812, issued to Trinity College (Dublin,
Ireland), expiring in 2013) and a corresponding pending European patent
application.

         Trade Secrets. With respect to certain aspects of its technology, ABS
currently relies upon, and intends to continue to rely upon, trade secrets,
unpatented proprietary know-how and continuing technological innovation to
protect its potential commercial position. Relationships between ABS and its
scientific consultants and collaborators may provide access to the Company's
know-how, although, ABS has generally entered into confidentiality agreements
with the parties involved. Similarly, ABS' employees and consultants have
entered into agreements with the Company which require that they forebear from
disclosing confidential information of ABS and that they assign to the Company
all rights in any inventions made while in ABS' engagement relating to Company
activities. However, members of the Company's Scientific Advisory Committee may
be employed by or have consulting agreements with third parties, the businesses
of which may conflict with or compete with ABS, and any inventions discovered by
such individuals as part of their agreement with third parties will not become
the property of ABS. There can be no assurance that trade secrets will be
developed and maintained, that secrecy obligations will be honored, or that
others will not independently develop similar or superior technology. To the
extent that consultants, employees, collaborators or other third parties apply
technological information independently developed by them or by others to
Company projects, disputes may arise as to the ownership of such information
which may not be resolved in favor of ABS. See "-- Scientific Advisory
Committee."

         Trademarks. ABS owns trademarks registered with the United States
Patent and Trademark Office for the names FiF(R), Global Scientific Network(R)
and Cadkit(R). Federally registered trademarks have a perpetual life, as long as
they are renewed on a timely basis, subject to the rights of third parties to
seek cancellation of the marks. ABS has filed other trademark applications,
including TpP(TM), and may claim common law trade name rights as to other
potential products. It anticipates filing additional trademark applications in
the future. ABS does not believe that any of its trademarks (or applied for
trademarks) is material to its business.

                                       16
<PAGE>   19

GOVERNMENT REGULATION

         ABS' present and proposed activities are subject to government
regulation in the United States and most other countries in which the Company
may choose to market its proposed products or conduct product development,
research or manufacturing. ABS has not determined those countries, other than
the United States, where it will seek regulatory approvals to market its
proposed products. The following is a discussion of the processes required in
order to obtain FDA approval for marketing a product, which are different for
the three types of products being developed by ABS: monoclonal antibodies for in
vitro use, monoclonal antibodies for in vivo use and drugs to treat neurological
diseases.

         Regulation of In Vitro Products. Some in vitro diagnostic products are
regulated as medical devices and can be approved by the Food and Drug
Administration (FDA) under a process known as a "510(k)." This procedure is
available if the proposed product is "substantially equivalent" to another
product that was in commercial distribution in the United States before May 28,
1976 or is lawfully marketed under a 510(k) approval (a "predicate device").
When a 510(k) review is used, a sponsor is required to submit a pre-market
notification to the FDA. ABS cannot proceed with commercial sales of such
products for diagnostic use in the United States until it receives 510(k)
clearance from the FDA. In the event that the FDA requests additional
information for the pre-market notification, this could result in multiple
cycles of submissions, each potentially involving additional review periods
until 510(k) clearance is granted or the FDA determines that the device is not
substantially equivalent.

         In cases where ABS' product is determined by the FDA not to be
"substantially equivalent" to a predicate device, a pre-market approval
application ("PMA") will be required to be submitted and approved before
commercial distribution is permitted. There can be no assurance that any present
or future in vitro test ABS develops will be determined to be substantially
equivalent by the FDA or receive PMA approval by the FDA in a timely manner or
at all. A PMA may be required for some or all the Company's future proposed in
vitro products.

         The FDA sometimes requires supporting clinical data for a 510(k) and
invariably requires clinical data for a PMA. ABS expects that it will submit
clinical data in at least some of its anticipated 510(k) notices. The clinical
data must be gathered in accordance with FDA's regulations.

         Medical devices may be exported before receiving 510(k) clearance or
PMA approval under certain conditions. Once cleared for marketing in the United
States, a diagnostic device must comply with certain regulatory requirements,
such as good manufacturing practices (also known as the Quality System
Regulation), medical device reporting, and restrictions on advertising and
promotion. Failure to comply with these rules can lead to FDA enforcement
actions.

         The European Union also has developed a structure for the regulation of
in vitro diagnostic devices. ABS believes that there are no material regulatory
impediments to the sale of its in vitro diagnostic tests presently under
development in North Africa and the Middle East.


                                       17
<PAGE>   20

         Regulation of In Vivo Products. Any products intended for in vivo use,
including vaccines, will be subject to regulation by the FDA. The products
produced, depending on their characteristics, may be classified as "biologics"
or products regulated under the Public Health Service Act (the "PHS Act") and
the Federal Food, Drug, and Cosmetic Act (the "FDCA") or may be classified as
non-biologic drugs regulated only under the FDCA. Development of a
pharmaceutical product for use in humans under either statute is a multistep
process. First, laboratory animal testing establishes probable safety and
parameters of use of the experimental product for testing in humans and suggests
potential effectiveness with respect to a given disease. Once the general
investigative plan and protocols for specific human studies are developed, an
investigational new drug ("IND") application is submitted to the FDA. FDA
clearance of the IND is required before the study can begin.

         Normally, the initial phase of clinical testing (Phase I) is conducted
to evaluate the pharmacological actions and side effects of the experimental
product in humans, i.e. the safety of the drug. A demonstration of therapeutic
benefit is not required in order to complete such trials successfully. If
acceptable product safety is demonstrated, then Phase II trials may be
initiated. Phase II trials are designed to evaluate the effectiveness of the
product in the treatment of a given disease, and often involve well-controlled,
closely monitored studies in a relatively small number of patients. Routes,
dosages and schedules of administration may also be studied. If Phase II trials
are successfully completed, Phase III trials may be commenced. Phase III trials
are expanded, controlled trials which are intended to gather additional
information about safety and effectiveness in order to evaluate the overall
risk/benefit relationship of the product and provide the evidence of safety and
effectiveness necessary for product approval. Although this is the standard drug
testing pattern, different approaches are often used, such as combining Phases I
and II.

         It is not possible to estimate the time within which Phase I, II and
III studies will be completed with respect to a given product, although the
time period to complete all the testing can exceed five years. Following the
successful completion of clinical trials, the clinical evidence that has been
accumulated is submitted to the FDA as part of a marketing application. Approval
of the application is necessary before a company may market the product. The
approval process can be very lengthy and depends upon the FDA's review of the
application and the time required to provide satisfactory answers or additional
clinical data when requested. For any given product, there is no assurance that
an application will be approved in a timely manner, or at all. Failure to obtain
such approvals would prevent ABS from commercializing its products and would
have a material adverse effect on the Company's business.

         The process of seeking and obtaining FDA approval for a new product
generally requires substantial funding. ABS anticipates that in most instances
where it develops a product, the Company will seek to enter into a joint venture
or similar arrangement with an established chemical or pharmaceutical company
that will help conduct the required preclinical studies and clinical trials and
bear a substantial portion of the expense of obtaining FDA approval.

         Good Manufacturing Practices. The FDA also has extensive regulations
concerning good manufacturing practices applicable to both biologic and
non-biologic drug products once they are


                                       18
<PAGE>   21

approved. ABS' compliance with good manufacturing practice, and its ability to
assure the potency, purity and quality of the drugs and biologics manufactured,
must be documented in the applications submitted for the products, and
manufacturing facilities will be subject to pre-approval and other inspections
by the FDA and other government agencies.

         Failure to comply with the good manufacturing practice regulations, or
to comply with other applicable legal requirements, can lead to seizure of
violative products, injunctive actions, other enforcement actions, and potential
criminal and civil liability on the part of a Company and of the officers and
employees of a Company.

         In addition to complying with FDA regulations, ABS and the facilities
used by it are also required to comply with federal and state environmental,
occupational health and other applicable regulations. ABS believes that its
facilities comply with such regulations.

MANUFACTURING

         While ABS has produced a limited quantity of monoclonal antibodies for
testing and evaluation of its in vitro products, there can be no assurances that
ABS will be able to either finance or meet FDA regulations for good
manufacturing practices required in order to convert and operate its facility
for commercial production of such products. ABS does not intend to establish its
own manufacturing operations for its in vivo products unless and until, in the
opinion of management of ABS, the size and scope of its business and its
financial resources so warrant. It is the Company's intention to enter into
manufacturing agreements, joint ventures or license agreements for the
manufacture of monoclonal antibodies. Each joint venture partner or contract
manufacturer participating in the process of manufacturing the Company's
monoclonal antibody must comply with FDA regulations and provide documentation
to support that part of the manufacturing process in which it is involved. ABS
has contracted with several different GMP manufacturers for the production of
antibodies. Starting in February 2000, the Company has manufactured and
assembled TpP kits in house at the Stellar facility in Columbia, Maryland. The
Stellar facility presently complies with GMP regulations and has received
International Standards Organization ("ISO") 9001 series certification.

         There is no assurance that the Company will be able to enter into
arrangements for the manufacture of sufficient quantities of the Company's in
vivo monoclonal antibody necessary to obtain full FDA clearance, that the FDA
will accept the Company's manufacturing arrangements, or find the facilities in
GMP compliance, or that commercial manufacturing arrangements can be obtained on
acceptable terms.

PRODUCT LIABILITY

         The testing, marketing, manufacture and sale of pharmaceutical products
entails a risk of product and other liability claims by consumers and others.
ABS' monoclonal antibodies are generated from an antigen free mouse colony and
there have been clinical reports of instances of the human immune system
negatively reacting to mouse derived antibodies. Product and other liability
claims may be asserted by

                                       19
<PAGE>   22

physicians, laboratories, hospitals or patients relying upon the results of ABS'
diagnostic tests (MH1 imaging). Product liability claims may be asserted by
physicians, laboratories, hospitals or patients relying upon the results of the
Company's diagnostic tests (TpP, FiF and Stellar products). Claims may also be
asserted against ABS by end users of the Company's products, including persons
who may be treated with any in vivo diagnostic or therapeutics.

         Certain distributors of pharmaceutical products require minimum product
liability insurance coverage as a condition precedent to purchasing or accepting
products for distribution. Failure to satisfy these insurance requirements could
impede the ability of ABS to achieve broad distribution of its proposed
products, which would have a material adverse effect upon the business and
financial condition of ABS.

         ABS has obtained product liability insurance covering its TpP and FiF
products. Although ABS will attempt to obtain product liability insurance prior
to the marketing of any of its other proposed products, there is no assurance
that ABS will be able to obtain such insurance. Also, there can be no assurance
that any insurance obtained (including its existing policies) can be maintained
or that such insurance can be acquired or maintained at a reasonable cost or
will be sufficient to cover all possible liabilities. In the event of a
successful suit against ABS, lack or insufficiency of insurance coverage could
have a material adverse effect on ABS.

SCIENTIFIC ADVISORY COMMITTEE

         ABS has a Scientific Advisory Committee comprised of scientists and
physicians active in the fields of microbiology, immunology and molecular
biology and in cardiovascular disease, hepatic disease and drug development.
These scientists serve as advisors to the Company. Members of the Scientific
Advisory Committee are selected by the Company's management and generally make
themselves available on an informal basis for consultations with ABS.

         Members of the Scientific Advisory Committee review the feasibility of
the Company's proposed research and development programs review the progress of
programs undertaken and assist in establishing both the scientific goals of ABS
and the priorities of its product development. Members of the Scientific
Advisory Committee may be employed by or have consulting agreements with third
parties, the business of which may conflict or compete with ABS. Any inventions
discovered by such individuals as part of their agreements with third parties
will not become the property of ABS. These individuals are not required to
devote any, and are expected to devote only a small portion, of their time to
ABS, and are not expected to actively participate in the development of the
Company's technology. It is possible regulations or policies now in effect or
adopted in the future might limit the ability of the scientific advisors to
continue their relationship with ABS. Members of the Scientific Advisory
Committee were used on an informal basis for consultations in 2000.

         Members are paid $1,000 per meeting attended, plus expenses. Members of
the Scientific Advisory Committee have been granted ten year options to purchase
from 5,000 to 25,000 shares of Class A Common Stock from the Company. As of
December 31, 2000, there were outstanding options for an aggregate of 416,250
shares held by members of the Scientific Advisory Committee, at exercise prices
ranging from $.28 per share to $7.75 per share. The 2000 cash payments to the
advisors for informal meetings and other consultations as a group



                                       20
<PAGE>   23

were approximately $37,000. Certain members of the Committee are associated with
institutions with which ABS has undertaken or may in the future undertake
collaborative research efforts. Arrangements with these institutions may result
in a member of the Scientific Advisory Committee receiving royalties or other
compensation from that institution or from ABS if such member works as a
scientist in the collaborative effort.

         The members of the Scientific Advisory Committee have no general
fiduciary duties to ABS, have entered into limited confidentiality agreements
and may, in their discretion, engage in activities which are competitive with
those engaged in by the Company. The members of the Committee as of March 16,
2001 are:

         Giancarlo Agnelli, M.D., is Professor of Internal Medicine at the
University of Perugia, Italy, where he received his medical education. Prior to
appointment to his present post he was a research fellow and clinical fellow in
the Department of Pathology and Department of Medicine at McMaster University,
Hamilton, Ontario, Canada. He continues as an associate member of the Hamilton
Civic Hospital Research Center at McMaster University. He is co-chairman of the
Sub-Committee on Control of Anti-coagulation of the Scientific and
Standardization Committee of the International Society on Thrombosis and
Hemostasis. He has presented lectures at more than 200 international and
national meetings and is the author or co-author of more than 200 scientific
articles.

         Denian Ba, M.D., Ph.D., is presently Academician, The Chinese Academy
of Engineering; President of the Chinese Academy of Medical Sciences & Peking
Union Medical College; Chairman, Chinese Society of Immunology; Vice Chairman,
Chinese Medical Association. Dr. Ba was engaged in research on Cancer Immunology
as Associate Chief, Chief, Department of Immunology at the Institute of Cancer
Research in Harbin Medical University, and Deputy Director, Director at the
Institute of Cancer Research in Harbin Medical University. Dr. Ba received his
M.D. from the Department of Medicine of Harbin Medical University and received
his Ph.D. from the School of Medicine of Hokkaido University, Japan.

         Konrad T. Beyreuther, Ph.D., is presently professor of Molecular
Biology and Head of Laboratory for Molecular Neuropathology at the Center of
Molecular Biology, University of Heidelberg, Federal Republic of Germany. His
primary research deals with genetics and molecular biology of Alzheimer's
disease and related dementia disorders. He earned his doctorate at the Max-Plank
Institute for Biochemistry Munich, University of Munich, Germany.

         Gustav Victor Rudolf Born, M.D., D. Phil., F.R.S., is presently
Research Director of The William Harvey Research Institute at St. Bartholomew's
Hospital Medical College, London, England, and Emeritus Professor of
Pharmacology in the University of London. Among Professor Born's distinctions,
appointments and activities are: Fellowship and Royal Medal of the Royal
Society; Foundation President of the British Society for Thrombosis and
Haemostasis; Corresponding Member of the Belgian Royal Academy of Medicine;
Professor of the Foundation de France, Paris; Robert Pfleger, Paul Morawitz and
Alexander-von- Humbolst Prizes; Honorary Life Member of the New York Academy of
Sciences; Medical Advisor of the Heineman Medical Research Center, Charlotte,
North Carolina; Honorary Doctorates from eight universities, including Brown and
Loyola; Gold Medal for Medicine, Jung Foundation.

                                       21
<PAGE>   24

         Jeffrey Ginsberg, M.D., is a hematologist with research training in
clinical and laboratory aspects of thrombosis. His current research interests
include the clinical development of novel antithrombotic agents, the diagnosis
and management of thrombosis during pregnancy, the prevention and treatment of
the post- phlebitic syndrome, the investigation of the clinical complications of
antiphospholipid antibodies, and the diagnosis of venous thrombosis and
pulmonary embolism. He is currently the principal investigator of a number of
clinical trials relative to thrombosis. He is the Director of the
Thromboembolism Unit at Chedoke-McMaster Hospitals and a Career Investigator of
the Heart and Stroke Foundation of Ontario.

         Lawrence Grossman, Ph.D., is University Distinguished Service Professor
of Biochemistry at the Johns Hopkins University School of Hygiene and Public
Health, Baltimore, Maryland. He is consultant to Applied DNA Systems, Inc. He
earned a Ph.D. degree from the University of Southern California, and
subsequently trained and worked thereafter at Johns Hopkins University and
Brandeis University. His areas of expertise are in DNA repair, molecular basis
of mutagenesis and molecular biology in general.

         Thomas W. Meade, CBE, DM, FRCP, FRS, is presently Director of the
Medical Research Council Epidemiology and Medical Care Unit, Wolfson Institute
of Preventive Medicine, St. Bartholomew's and the Royal London Hospital School
of Medicine and Dentistry, London, England. Additional appointments include:
Professor of Epidemiology at the University of London, Hon. Consultant in
Epidemiology, North West London Hospitals NHS Trust, Hon. Consultant in
Epidemiology, St. Bartholomew's and Royal London Hospitals NHS Trust. He is:
Doctor of Medicine, Fellow of the Royal College of Physicians and Fellow of the
Royal Society.

         Daniel M. Michaelson, Ph.D., is presently Professor of Neurobiology,
Department of Neurobiochemistry, Tel Aviv University, Tel Aviv, Israel. He
earned a Ph.D. in Biophysics from the University of California, Berkeley. Among
Professor Michaelson's distinctions, appointments and activities are: Membership
of the International Society of Neurochemistry, International Society for
Developmental Neuroscience, International Brain Research Organization, the New
York Academy of Sciences, Israel Society of Neurosciences, Israel Biochemical
Society and the Israel Society for Pharmacology and Physiology. He is a member
of the Scientific Advisory Board of the Alzheimer Foundation, and a board member
of Ramot University Authority for Applied Research and Industrial Development
Ltd.

         Peter Victorovich Morozov, M.D., Ph.D., is Professor of Psychiatry at
the Russian State Medical University, Moscow. He has served as the Secretary of
the International Section of the National Scientific Society of Psychiatrists
and is currently secretary of the Russian Section of French-Russian Society of
Psychiatrists. Dr. Morozov's primary area of research is psychopharmacology,
problems of classification and diagnosis, post-traumatic stress disorders. Dr.
Morozov graduated from Pirogov II Medical School and received his doctorate from
the Institute of Psychiatry AMS USSR.

         Heinz Nau, Ph.D., is presently Professor and Chairman, Department of
Food Toxicology at the School of Veterinary Medicine in Hannover, Germany. He
obtained his Ph.D. degree in Chemistry from the University Innsbruck, Austria.
He then did post-doctoral work at



                                       22
<PAGE>   25

Massachusetts Institute of Technology, Cambridge, Massachusetts, and was a
Professor at the Institute of Toxicology and Embryopharmacology in Berlin,
Germany. Dr. Nau holds an Honorary Doctorate from the University of Uppsala,
Sweden, and is currently President of the European Teratology Society, and a
Member of the Scientific Committee of Food at the European Commission in
Brussels, Belgium, as well as a member of the International Federation of
Teratological Societies. He has published over 350 scientific papers and is an
editor of several books. He won the Warkany Award of the American Teratology
Society (1996) and the year 2000 prize for Development of Alternatives to
Experimental Animal Testing.

         Rem V. Petrov, M.D., is currently Vice-President of Russian Academy of
Sciences, Moscow, Russia and chief of the Immunology Department of the Institute
of Bioorganic Chemistry of the Academy. His main scientific interests are in the
fields of Immunogenetics (genetical control of Immune response, interactions of
syngeneic and nonsyngeneic cells) and Immunobiotechnology (artificial immunogens
and vaccines, immunopharmacology-myelopeptides and other natural
immunomodulators).

         Craig M. Pratt, M.D., is currently a Professor of Medicine and
Director, Clinical Cardiology Research, Section of Cardiology, Department of
Internal Medicine, Baylor College of Medicine, Houston, Texas. Dr. Pratt is
currently Director of the Coronary Care Unit and Non-invasive Laboratories at
The Methodist Hospital. Nationally, Dr. Pratt is a consultant to the
Cardiovascular and Renal Drugs Advisory Board to the Food and Drug
Administration.

         John H. Proctor, Ph.D., Fellow and formerly Secretary General of the
World Academy of Art and Science from 1986-1997, Life Fellow and Past President
of the Washington Academy of Sciences in Washington, D.C., a full member of the
Russian Academy of Sciences and a corresponding member of the Spanish Royal
Academy of Sciences. He has facilitated national and international technology
transfer, organizational development and productivity improvement projects for
over thirty years. Dr. Proctor has written three books and has published eighty
technical papers.

         Ciaran M. Regan, Ph.D., D.Sc. is presently Associate Professor of
Pharmacology at University College, Dublin, Ireland. Dr. Regan received his
B.Sc. and Ph.D. from University College, Dublin. He is a past Postdoctoral
Fellow, Department of Biochemistry, University of Nijmegen, The Netherlands and
past Scientific Officer of Medical Research Council, Institute of Neurology,
London. Dr. Regan has numerous publications.

         Jacob Szmuszkovicz, Ph.D., is a Professor of Chemistry at the
University of Notre Dame, South Bend, Indiana. He earned a doctorate in
Chemistry from the Hebrew University, Jerusalem. He served as a Member of Staff
at the Weizmann Institute before joining the Upjohn Company where he held the
position of a Distinguished Scientist in the CNS (Central Nervous System) Unit
from 1954 to 1985. Dr. Szmuszkovicz is co-inventor on over 100 patents. He has
served as a Member of the Executive Committee of the Organic Division of the
American Chemical Society.

PERSONNEL

                                       23
<PAGE>   26

         As of March 16, 2001, ABS had 29 full time employees and 4 part-time
employees. Of the full-time employees, 6 are research and development personnel,
including 3 Ph.D.s, 9 are manufacturing personnel, and the rest are executive
and administrative personnel.

         ABS' Executive Vice President is party to an employment agreement with
the Company ending September 30, 2001. This officer also is party to an
agreement with ABS to keep corporate information with regard to the business of
the Company confidential during and subsequent to employment with ABS.

         None of ABS' employees is represented by a labor organization. ABS
believes its relationship with its employees is satisfactory. The Company has
standardized procedures for recruiting, interviewing and reference checking
prospective personnel.

ITEM 2.           PROPERTIES

         ABS leases 6,000 square feet of office space in Copiague, New York
under a lease expiring July 2001 (with an annual base rent of $41,000), which it
intends to renew, and office space in Dublin, Ireland under a short-term
arrangement.

         ABS' subsidiary, Stellar, has a lease covering 16,000 square feet in
Columbia, Maryland, with an annual base rent of $184,000 and a term ending March
31, 2006. ABS has terminated its lease with Boston University and has
consolidated its research and development activities at Stellar's facility.

ITEM 3.           LEGAL PROCEEDINGS

         None.

ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
         None.




                                       24
<PAGE>   27



                                     PART II

ITEM 5.         MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
                HOLDER MATTERS.

         The Company's Class A Common Stock (the "Common Stock") was traded on
the Nasdaq National Market under the trading symbol "MABXA" until December 6,
1999 and on the Nasdaq Smallcap Market from December 6, 1999 to January 6, 2000
under the trading symbol "MABAC." Between January 6, 2000 and July 10, 2000, the
Common Stock has traded on the OTC Bulletin Board under the symbol "MABA." Since
July 11, 2000, the Common Stock has traded on the Nasdaq SmallCap Market under
the symbol "MABA". The following table sets forth the high and low closing bid
prices for the Company's Common Stock for the periods indicated, as reported by
the appropriate market, without retail mark-ups, mark-downs or commissions.
<TABLE>
<CAPTION>
Fiscal Years                                             High              Low
------------                                            -----             -----
<S>                                                     <C>               <C>

2000
First Quarter                                           $6.41             $ .38
Second Quarter                                           2.66              1.22
Third Quarter                                            2.84              1.50
Fourth Quarter                                           1.69               .53

1999
First Quarter                                           $1.44             $ .84
Second Quarter                                           1.22               .94
Third Quarter                                            1.16               .25
Fourth Quarter                                            .66               .28
</TABLE>

         There were approximately 623 holders of record of Common Stock as of
March 16, 2001 (exclusive of stockholders whose shares are held in street name
by brokers, depositories and other institutional firms).

         ABS has not paid any cash dividends on its Common Stock since its
inception and does not anticipate paying dividends for the foreseeable future.

ITEM 6.           SELECTED FINANCIAL DATA.

         The following selected financial data for the periods indicated have
been derived from the consolidated financial statements of the Company audited
by Arthur Andersen LLP, independent public accountants. This information should
be read in conjunction with the related financial statements and notes thereto
and management's discussion and analysis of financial conditions and results of
operations included elsewhere in this report.



                                       25
<PAGE>   28

<TABLE>
<CAPTION>


                                                            For the Year Ended December 31,
                                     --------------------------------------------------------------------------
                                         2000          1999             1998           1997            1996
                                     -----------   ------------    ------------    ------------    ------------
<S>                                   <C>          <C>             <C>             <C>             <C>
Operating Results
Revenues:
     Sales                            $1,629,000     $1,361,000      $1,197,000      $  150,000              --
     Royalties/License                $  502,000             --              --              --              --
     Collaborative Agreements         $  157,000     $   82,000              --      $    9,000      $   54,000
  Net Loss                           ($3,775,000)   ($5,351,000)    ($7,548,000)    ($7,147,000)    ($7,700,000)
  Net Loss attributable to common    ($6,225,000)   ($5,351,000)    ($7,548,000)    ($7,147,000)    ($7,700,000)
  stockholder
  Net Loss Per Share
     Basic and Diluted                     ($.14)         ($.14)          ($.29)          ($.35)          ($.45)
  Weighted Average Shares             43,475,000     39,266,000      25,740,000      20,223,000      17,209,000
</TABLE>

<TABLE>
<CAPTION>


                                                                   As of December 31,
                                     --------------------------------------------------------------------------
                                         2000          1999            1998            1997            1996
                                     -----------   ------------    ------------    ------------    ------------
<S>                                   <C>          <C>             <C>            <C>             <C>
Working Capital (Deficit)             $1,377,000    ($1,436,000)     $2,947,000      $4,761,000     $13,697,000
Total Assets                          $5,086,000     $3,938,000      $6,514,000      $9,388,000     $16,473,000
Long-Term Debt                           $78,000        $33,000         $56,000          $8,000     $10,319,000
Total Liabilities                       $646,000     $2,360,000        $918,000      $2,705,000     $10,931,000
Accumulated Deficit                 ($68,539,000)  ($62,314,000)   ($56,963,000)   ($49,415,000)   ($42,268,000)
</TABLE>


         ABS has not paid any cash dividends on its Common Stock since its
inception.



                                       26
<PAGE>   29



SELECTED QUARTERLY DATA

         Summarized unaudited quarterly financial data for the year ended
December 31, 2000 and 1999 was as follows:


<TABLE>
<CAPTION>


                                                       For the Quarter Ended
                                     ---------------------------------------------------------
                                     Mar 31, 2000   Jun 30, 2000   Sep 30, 2000   Dec 31, 2000
                                     ------------   ------------   ------------   ------------
<S>                                      <C>            <C>            <C>            <C>
  Revenues:
     Sales                               383,000        461,000        367,000        418,000
     Royalties/License                   500,000           --             --            2,000
     Collaborative Agreements             76,000         15,000         51,000         15,000
                                      ----------     ----------     ----------     ----------
       Total Revenues                    959,000        476,000        418,000        435,000
  Gross profit                           227,000        329,000        208,000        248,000
  Loss from operations                  (517,000)    (1,083,000)    (1,030,000)    (1,266,000)
  Net Loss                              (498,000)    (1,034,000)      (997,000)    (1,246,000)
  Preferred stock dividend related
  to warrants                         (2,450,000)          --             --
  Net loss attributable to common
  stockholders                        (2,948,000)    (1,034,000)      (997,000)    (1,246,000)
  Basic and diluted net loss per
  share                                    (0.07)         (0.02)         (0.02)         (0.03)

</TABLE>



<TABLE>
<CAPTION>


                                                       For the Quarter Ended
                                     ---------------------------------------------------------
                                     Mar 31, 1999   Jun 30, 1999   Sep 30, 1999   Dec 31, 1999
                                     ------------   ------------   ------------   ------------
<S>                                      <C>            <C>            <C>            <C>
  Revenues:
     Sales                              292,000         343,000        353,000        373,000
     Royalties/License                       --              --             --             --
     Collaborative Agreements            40,000          39,000          3,000           --
                                     ----------      ----------     ----------     ----------
          Total Revenues                332,000         382,000        356,000        373,000

  Gross profit                          174,000         196,000        199,000        194,000
  Loss from operations               (1,490,000)     (1,554,000)    (1,140,000)    (1,184,000)
  Net Loss                           (1,471,000)     (1,550,000)    (1,141,000)    (1,189,000)
  Basic and diluted net loss per
  share                                   (0.04)          (0.04)         (0.03)         (0.03)

</TABLE>


                                       27
<PAGE>   30


ITEM 7.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                  AND RESULTS OF OPERATIONS.

         The following discussion and analysis provides information which ABS'
management believes is relevant to an assessment and understanding of the
Company's results of operations and financial condition. This discussion should
be read in conjunction with the consolidated financial statements and notes
appearing elsewhere herein.

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 respective 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,
the Company made the second contingent payment of $20,000 in Class A Common
Stock (10,811 shares). (see Note 5 to the Consolidated Financial Statements)

         On January 27, 2000, ABS granted to Abbott an exclusive worldwide
license to its ABS-103 neurocompound. In consideration for the license, Abbott
paid ABS an initial non-refundable license fee of $500,000 and agreed to pay up
to $17 million of milestone payments depending upon successfully reaching
development milestones plus customary royalties on commercial sales. In
addition, Abbott purchased 2,782,931 shares of Class A Common Stock for $1.5
million. (See Note 8 to the Consolidated Financial Statements.)

         On February 3, 2000, ABS entered into a Stock Purchase Agreement with
Biotechnology Value Fund and the Company's chairman Mr. Roach relating to the
issuance of Series A Convertible Preferred Stock plus warrants for a total of
$3.5 million. (See Note 8 to the Consolidated Financial Statements.)

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



                                       28
<PAGE>   31


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 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.

         As of December 31, 2000, ABS, had working capital of $1,377,000,
compared to a negative working capital of $1,436,000 at December 31, 1999.
Additionally, the Company had cash and cash equivalents of $1,194,000 at
December 31, 2000. As of March 16, 2001 the Company's cash and cash equivalents
had decreased to approximately $506,000. 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 licensing fees and milestone payments, additional
financing or the disposition of 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 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 has entered into preliminary discussions with a
number of 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.

         During fiscal year 2000, the Company's cash and cash equivalents
increased by $1,101,000 to $1,194,000, primarily from financing activities
($5,489,000) offset by cash used in operating activities ($4,153,000) and cash
used in investing activities ($235,000). Net cash of $4,153,000 was used to fund
the Company's cash loss from operations of $3,122,000 (net of non cash expenses
of $328,000 for depreciation and amortization and $325,000 incurred in


                                       29
<PAGE>   32

connection with the issuance of stock and warrants). Net cash of $1,031,000 was
used by changes in operating assets and liabilities, primarily as a result of a
decrease in accounts payable and accrued expenses ($1,064,000), an increase in
inventory ($20,000) an increase in other assets ($22,000) partially offset by a
decrease in accounts receivable ($65,000), a decrease in other current assets
($2,000) and an increase in interest payable to stockholder ($8,000). Cash used
in investing activities was for capitalized patent costs ($203,000) and the
purchase of equipment ($32,000). Financing activities provided $5,489,000 as a
result of the cash proceeds from the sale of Series A Convertible Preferred
Stock ($3,000,000), the sale of Class A Common Stock to Abbott ($1,500,000), the
exercise of stock options and warrants ($1,235,000), additional loans from the
Company's Chairman ($81,000) partially offset by the repayment of loans to the
Company's Chairman of $291,000 ($500,000 of the loan payable to the Chairman was
converted into Series A Convertible Preferred Stock) and payments of other notes
payable ($36,000). The Company entered into a capital lease obligation of
$87,000 for the acquisition of new computers, network and software which is
disclosed as Supplemental Non-cash Activities. The warrants issued of $2,792,000
represents the noncash fair value of the warrants issued to BVF and Mr. Roach in
the private placement of Preferred Stock ($2,450,000) and warrants issued to an
investor relations consultant ($342,000), both determined by using an
option-pricing model.

         At December 31, 2000, ABS had net operating loss carryforwards of
approximately $63,000,000 for income tax purposes. The net operating loss
carryforwards will expire in varying amounts through 2020. In addition, ABS has
approximately $1,300,000 of available research and development tax credits to
offset future taxes. These credits expire through 2020. In accordance with
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes," ABS has recorded a valuation allowance of $64,300,000 to fully reserve
for the deferred tax benefit attributable to its net operating loss and tax
credit carryforwards due to the uncertainty as to their ultimate realizability.

         In accordance with certain provisions of the Tax Reform Act of 1986, a
change in ownership of a corporation of greater than 50 percentage points within
a three-year period places an annual limitation on the corporation's ability to
utilize its existing net operating loss carryforwards, investment tax and
research and development credit carryforwards (collectively "tax attributes").
Such a change in ownership was deemed to have occurred in connection with ABS'
1990 initial public offering at which time ABS' tax attributes amounted to
approximately $4.9 million. The annual limitation of the utilization of such tax
attributes is approximately $560,000. To the extent the annual limitation is not
utilized, it may be carried forward for utilization in future years. At December
31, 2000, $4,900,000 million of net operating losses is no longer subject to
this limitation.

RESULTS OF OPERATIONS

         ABS has not generated any significant revenues from the sale of any
products. Revenues from inception through December 31, 2000 of $6,380,000 are
attributable to nonrefundable initial license fees and collaborative research
agreements, sales of TpP and FiF and, since April 1998, sales of Stellar
products. As a result of ABS' substantial start-up expenses and minimal
revenues, ABS had an accumulated deficit of $68,539,000 as of December 31, 2000.
ABS'



                                       30
<PAGE>   33

research and development expenses are anticipated to be substantial for the
foreseeable future and ABS expects to continue to incur significant operating
losses.

         ABS initiated its marketing efforts for TpP and FiF in the microtiter
plate format in November 1997. TpP kits have been marketed through European,
Japanese and United States distributors as well as direct sales to specialty
laboratories and research hospitals. ABS' efforts in 2001 will be directed
toward entering into license agreements for TpP, FiF, MH1 and ABS-205, adding
new distributors and specialty labs for TpP, launching the rapid assay format
(POC) of TpP upon approval of the 510K filed with the FDA and continue clinical
studies with TpP to expand into other clinical indications. ABS' efforts will
also be directed to expanding Stellar's revenue based by adding new distributors
and increasing the sales force. ABS has licenses for TpP with Abbott and Roche
in the automated instrument format and a license for 45J with Yamanouchi. ABS
does not have any performance obligations under these agreements. In order to
market the product the licensees will be required to file for the appropriate
governmental clearances. ABS has a sufficient quantity of antibodies to
initially supply these licensees. Management believes that the POC format will
increase the commercial potential of the TpP test and encourage the licensees to
complete the commercialization process under these agreements.

COMPARISON OF YEARS ENDED DECEMBER 31, 2000 AND 1999

         ABS' net loss for the year ended December 31, 2000 was $3,775,000
compared to $5,351,000 for the year ended December 31, 1999. The decrease in the
loss was primarily the result of the license fee of $500,000 received under the
Abbott license agreement, increased product sales by Stellar, reduced R&D and
SG&A expenses and increased investment income.

         Sales during fiscal year 2000 of $1,629,000 increased $268,000 or 20%
over the fiscal year 1999. Sales of Stellar products increased 20% and sales of
TpP remained flat. Royalties and license fees increased $502,000 due to the
license fee received in connection with the Abbott agreement and $2,000 of
royalties received from the Trevigen agreement. Collaborative agreements
increased by $75,000 due to an increase in research contracts.

         Cost of sales increased $19,000 during 2000 compared to 1999 resulting
from increases in sales. Cost of sales as a percentage of sales decreased 6%
from 44% during 1999 compared to 38% during 2000. The decrease was due to
increased volume and manufacturing efficiencies at the Stellar facility on both
Stellar products and in-house production of TpP kits.

         Research and development expenses decreased $399,000 from $1,725,000 in
1999 to $1,326,000 in 2000 primarily from the full year of cost saving program
implemented in 1999 as well as cost savings from the consolidations of
operations at Stellar.

         Selling, general and administrative expenses decreased $247,000 from
$4,488,000 in 1999 to $4,241,000 in 2000, as a result of reduced personnel costs
and other general costs associated with the cost saving program implemented in
1999 and continued throughout fiscal 2000, a decrease in travel and meeting
costs, offset in part, by increased professional service costs relating to the
Abbott license agreement and other contracts.

                                       31
<PAGE>   34

         Interest expense increased by $3,000 from $16,000 in 1999 to $19,000 in
2000, resulting primarily from the loans payable to the Company's Chairman.

         Investment income increased $111,000, from $29,000 in fiscal year 1999
to $140,000 in fiscal year 2000, as a result of higher average cash balances.

         The preferred stock dividend of $2,450,000 relates to the fair value of
warrants issued in connection with a private placement represents the noncash
fair value of the warrants issued to BVF and Mr. Roach, determined by using an
option-pricing model, in the private placement. See Note 8 of the Notes to
Consolidated Financial Statements on Page F-15 of this Form 10K for a more
detailed description of this transaction.

COMPARISON OF YEARS ENDED DECEMBER 31, 1999 AND 1998

         ABS' net loss for the year ended December 31, 1999 was $5,351,000
compared to $7,548,000 for the year ended December 31, 1998. The decrease was
primarily the result of the absence of an extraordinary charge for the early
retirement of debentures ($1,140,000), a $598,000 decrease in interest expense,
a $436,000 decrease in research and development expense and a $246,000 increase
in revenues. The Company completed its consolidation of facilities in Maryland
which resulted in savings in R&D expenses.

         Sales during 1999 of $1,361,000 include sales of Stellar products for a
full year and sales of TpP. Sales of TpP declined in 1999 due to a slow market
acceptance of the current test format. Stellar product sales increased over 1998
due to a full years' operation. Collaborative agreement revenue of $82,000
reflects the earned portion of an NIH National Institute on Aging grant and
contract services. The Company obtained a grant of $135,000 from the NIH for
additional studies of the Company's ABS-205 therapeutic neurocompound. These
studies have been completed and the final report filed at the end of 1999.

         Cost of sales increased by $133,000 during 1999 compared to 1998 due
primarily to increased sales. Cost of sales as a percentage of sales was 43.9%
in 1999 and 38.8% in 1998. The percentage increase was due to increased payroll
costs and higher fixed TpP costs being absorbed by a lower sales volume.

         Research and development costs decreased $436,000 from $2,161,000 in
1998 to $1,725,000 in 1999 primarily due to the consolidation of R&D facilities
in Columbia, Maryland. This was partially offset by the inclusion of Stellar's
costs for the full year of 1999 compared to eight months in 1998, increases in
Stellar's post-acquisition research and development costs relating to FDA 510(k)
filings, and continued TpP rapid assay POC development and clinical costs.

         Selling, general and administrative expenses increased by $56,000 from
$4,432,000 in 1998 to $4,488,000 in 1999, primarily as a result of the inclusion
of Stellar's selling and general expenses for the full year of 1999 compared to
eight months in 1998, increased cost of investor



                                       32
<PAGE>   35

relations, and the noncash value of warrants issued for services. This was
offset in part by a reduction in other consulting costs.

         Interest expense was $598,000 lower in 1999 than in 1998, resulting
from the repurchase of convertible debentures in the fourth quarter of fiscal
1998.

         Interest income, net, was $290,000 lower in 1999 than in 1998 due to
lower average cash balances.

ITEM 7A. 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. ABS does not have operations subject to
risks of foreign currency fluctuations, nor does it use derivative financial
instruments in its operations. ABS does not have exposure to market risks
associated with changes in interest rates because it has no variable interest
rate debt outstanding. ABS does not believe it has any other material exposure
to market risks associated with interest rates.

ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         The response to this item is submitted in a separate section of this
report, starting on page F-1.

ITEM 9.           CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                  AND FINANCIAL DISCLOSURE.

         None.



                                       33
<PAGE>   36

                                    PART III

         The information called for by Part III (Items 10, 11, 12 and 13 of Form
10-K) is incorporated herein by reference to such information which will be
contained in ABS' Proxy Statement to be filed pursuant to Regulation 14A of the
Securities Exchange Act of 1934 with respect to ABS' 2001 Annual Meeting of
Stockholders.

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K.

         (a) 1. and 2. Financial Statements and Financial Statement Schedules

         The following consolidated financial statements of ABS are annexed
hereto immediately following the signature page of this Report.

<TABLE>
<CAPTION>
                                                                                           Page
                                                                                       ------------

<S>                                                                                     <C>
Index to Consolidated Financial Statements                                              F-1

Report of Independent Public Accountants                                                F-2

Consolidated Balance Sheets                                                             F-3

Consolidated Statements of Operations                                                   F-4

Consolidated Statements of Cash Flows                                                   F-5

Consolidated Statements of Stockholders' Equity                                         F-6 - F-8

Notes to Consolidated Financial Statements                                              F-9 - F-28
</TABLE>

Information required by schedules called for under Regulation S-X is either not
applicable or the information required therein is included in the consolidated
financial statements or notes thereto.

                                       34
<PAGE>   37

         (b)      Exhibits

<TABLE>
<CAPTION>
Exhibit No.          Description
-----------          -----------
<S>                  <C>
3.1                  Restated Certificate of Incorporation of ABS, as filed with
                     the Secretary of State of Delaware on July 30, 1996 and
                     amended through March 3, 2000. Incorporated herein by
                     reference to Exhibit 3.1 to ABS' Form 10-K for the fiscal
                     year ended December 31, 1999, File No. 0-19041.

3.2                  Amended and Restated  By-Laws of ABS.  Incorporated  herein
                     by reference to Exhibit 4.02 to ABS' Registration Statement
                     on Form S-8, File No. 333-09473.

4.1                  Form of Purchase and Investment Agreement executed by ABS
                     and several investors on October 27, 1998. Incorporated
                     herein by reference to Exhibit 99 to ABS' Registration
                     Statement on Form S-3, file number 333-69735, filed with
                     the Commission on December 24, 1998.

4.2                  Form of Warrant issued to several  individuals under ABS'
                     Financial Advisory Agreement with M.H. Meyerson  &  Co.,
                     Inc.,  dated  as  of  August  13,  1998  and  schedule  of
                     holders  thereof. Incorporated  herein by reference to
                     Exhibit  4.1(e) to ABS' Form 10-K for the fiscal year ended
                     December 31, 1998, File No. 0-19041.

4.3(a)               Stock Purchase Agreement, dated as of January 27, 2000,
                     between ABS and Abbott Laboratories. Incorporated  herein
                     by reference to Exhibit 99.1 to ABS' Current Report on
                     Form 8-K dated January 27, 2000 (date of earliest event
                     reported), File No. 0-19041.

4.3(b)               Registration Rights Agreement, dated as of January 27,
                     2000, between ABS and Abbott Laboratories. Incorporated
                     herein by reference to Exhibit 4.1 to ABS' Current Report
                     on Form 8-K dated January 27, 2000 (date of earliest event
                     reported), File No. 0-19041.

4.4(a)               Securities Purchase Agreement, dated as of February 3,
                     2000, among ABS and Biotechnology Value Fund, L.P.,
                     Biotechnology Value Fund II, L.P., Investment 10 L.L.C. and
                     Alfred J. Roach. Incorporated  herein by reference to
                     Exhibit 4.4(a) to ABS' Form 10-K for the fiscal year ended
                     December 31, 1999, File No. 0-19041.

4.4(b)               Registration Agreement, dated as of March 3, 2000, among
                     ABS and  Biotechnology  Value  Fund, L.P., Biotechnology
                     Value Fund II, L.P., Investment 10 L.L.C. and Alfred J.
                     Roach. Incorporated  herein by reference to Exhibit 4.4(b)
                     to ABS' Form 10-K, for the fiscal year ended December 31,
                     1999, File No. 0-19041.

4.4(c)               Form of Warrant issued to Redington, Inc. (one of three
                     Warrants substantially
</TABLE>



                                       35
<PAGE>   38

<TABLE>
<CAPTION>
Exhibit No.          Description
-----------          -----------
<S>                  <C>
                     identical except for the date and price information.
                     Incorporated  herein  by  reference  to  Exhibit 4 to ABS'
                     Registration Statement on Form S-3, file number 333-36116,
                     filed with the Commission on May 2, 2000.

10.1(a)+             Employment Agreement dated October 1, 1996 between ABS and
                     Ellena M. Byrne.  Incorporated herein by reference to
                     Exhibit 10.1(b) to ABS' Form 10-K/A, dated April 30, 1997,
                     File No. 0-19041.

10.1(b)+             Employment Agreement dated November 2, 1998 between ABS and
                     Mr. John S. North.  Incorporated herein by reference to
                     Exhibit 10.1(b) to ABS' Form 10-K for the fiscal year ended
                     December 31, 1998, File No. 0-19041.

10.1(c)+*            Memorandum of Understanding dated January 4, 2001 between
                     ABS and Mr. John S.North.

10.2(a)+             ABS' Stock Option Plan, as amended. Incorporated herein by
                     reference to Exhibit 28.1 to ABS' Registration Statement on
                     Form S-8, File No. 33-51240.

10.2(b)+             ABS' 1993 Non-Employee Director Stock Option Plan.
                     Incorporated herein by reference to Exhibit 99.01 to ABS'
                     Registration Statement on Form S-8, File No. 33-65416.

10.2(c)+             ABS' 1996 Stock Option Plan, as amended. Incorporated
                     herein by reference to Exhibit 10.2(c) to Form 10-K for the
                     fiscal year ended December 31, 1999, File No. 0-19041.

10.2(d)+             ABS' 2000 Stock Option Plan. Incorporated herein by
                     reference to Exhibit 99.01 to ABS' Registration Statement
                     on Form S-8, File No. 33-45644.

10.3                 Exclusive License Agreement dated January 24, 1992 between
                     ABS and Yamanouchi Pharmaceutical Co., Ltd. Incorporated
                     herein by reference to Exhibit 10.29 to ABS' Current Report
                     on Form 8-K dated January 24, 1992, File No. 0-19041.

10.4                 Warrant dated October 25, 1995 issued to Swartz
                     Investments, Inc. Incorporated  herein by reference to
                     Exhibit 10.13 to ABS' Current Report on Form 8-K dated
                     October 12, 1995, File No. 0-19041.

10.5                 Exclusive License Agreement, dated as of January 27, 2000,
                     between ABS and Abbott Laboratories. Incorporated herein by
                     reference to Exhibit 10.1 to ABS' Current Report on
                     Form 8-K dated January 27, 2000, File No. 0-19041.

21                   List of Subsidiaries. Incorporated herein by reference to
                     Exhibit 21 to ABS' Form 10-K for the fiscal year ended
                     December 31, 1998, File No. 0-19041.

23*                  Consent of Independent Public Accountants.
</TABLE>

                                       36
<PAGE>   39

*Filed herewith. All other exhibits are incorporated by reference to the
document following the description thereof. +Management contract or compensatory
plan.

(b)      Reports on Form 8-K.
         None


                                       37
<PAGE>   40




                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) 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.

     March 28, 2001                     AMERICAN BIOGENETIC SCIENCES, INC.
---------------------------
          (Date)                                  (Registrant)

                                        By:  /s/ Josef C. Schoell
                                             -----------------------------------
                                             Josef C. Schoell
                                             President, Chief Operating Officer,
                                             Chief Financial Officer
                                             (Principal Financial and
                                             Accounting Officer)

         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 dates indicated.

<TABLE>


<S>                                       <C>
     March 28, 2001                       /s/ Alfred J. Roach
-----------------------                   --------------------------------------
        (Date)                            Alfred J. Roach, Chairman of the
                                          Board of Directors and Chief
                                          Executive Officer

     March 28, 2001                       /s/ Josef C. Schoell
-----------------------                   --------------------------------------
        (Date)                            Josef C. Schoell, President, Chief
                                          Operating Officer,
                                          Chief Financial Officer and Director

     March 28, 2001                       /s/ Timothy J. Roach
-----------------------                   --------------------------------------
        (Date)                            Timothy J. Roach, Secretary,
                                          Treasurer and Director

     March 28, 2001                       /s/ Ellena M. Byrne
-----------------------                   --------------------------------------
        (Date)                            Ellena M. Byrne, Executive
                                          Vice President and Director

     March 28, 2001                       /s/ Joseph C. Hogan
-----------------------                   --------------------------------------
        (Date)                            Joseph C. Hogan, Director


     March 28, 2001                       /s/ Joseph M. Danis
-----------------------                   --------------------------------------
        (Date)                            Joseph M. Danis, Director


     March 28, 2001                       /s/ Glenna M. Crooks
-----------------------                   --------------------------------------
        (Date)                            Glenna M. Crooks, Director

</TABLE>
<PAGE>   41


              AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARIES

                          (a development stage company)

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

                                                                      Page
                                                                      ----
<S>                                                                   <C>
Report of Independent Public Accountants                              F-2

Consolidated Balance Sheets                                           F-3

Consolidated Statements of Operations                                 F-4

Consolidated Statements of Cash Flows                                 F-5

Consolidated Statements of Stockholders' Equity                       F-6 - F-8

Notes to Consolidated Financial Statements                            F-9 - F-28

</TABLE>


         Information required by schedules called for under Regulation S-X is
either not applicable or the information required therein is included in the
consolidated financial statements or notes thereto.


                                      F-1
<PAGE>   42


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To American Biogenetic Sciences, Inc.:

         We have audited the accompanying consolidated balance sheets of
American Biogenetic Sciences, Inc. (a Delaware corporation in the development
stage) and subsidiaries as of December 31, 2000 and 1999, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 2000 and for the period
from inception (September 1, 1983) to December 31, 2000. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

         In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of American Biogenetic
Sciences, Inc. and subsidiaries as of December 31, 2000 and 1999, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2000 and for the period from inception to December
31, 2000 in conformity with accounting principles generally accepted in the
United States.

         The accompanying consolidated financial statements for the year ended
December 31, 2000 have been prepared assuming the Company will continue as a
going concern. As discussed in Note 1 to the consolidated financial statements,
the Company has incurred significant losses since inception and anticipates that
it will continue to incur significant losses in the foreseeable future. These
factors raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are described in
Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.


                                                       ARTHUR ANDERSEN LLP


Melville, New York
March 23, 2001


                                      F-2
<PAGE>   43
              AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARIES
                          (a development stage company)

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                           December 31,
                                                              -------------------------------------
                                                                   2000                    1999
                                                              -------------            ------------
<S>                                                           <C>                      <C>
                          ASSETS
CURRENT ASSETS:
 Cash and cash equivalents                                    $  1,194,000             $     93,000
 Accounts receivable                                               146,000                  211,000
 Inventories                                                       531,000                  511,000
 Other current assets                                               74,000                   76,000
                                                              ------------             ------------
  Total current assets                                           1,945,000                  891,000
                                                              ------------             ------------
Fixed assets, net                                                  477,000                  476,000

Patent costs, net of accumulated amortization
 of $633,000 and $502,000, respectively                          1,967,000                1,895,000

Intangible assets, net                                             599,000                  657,000

Other assets                                                        98,000                   19,000
                                                              ------------             ------------
                                                              $  5,086,000             $  3,938,000
                                                              ------------             ------------
           LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
 Accounts payable and accrued expenses                        $    368,000             $  1,581,000
 Current portion of capital lease obligation                        16,000                        -
 Current portion of notes payable                                  184,000                  746,000
                                                              ------------             ------------
  Total current liabilities                                        568,000                2,327,000
                                                              ------------             ------------

Long Term Liabilities:
 Notes payable, less current portion                                 7,000                   33,000
 Capital lease obligation                                           71,000                        -
                                                              ------------             ------------
  Total liabilities                                                646,000                2,360,000
                                                              ------------             ------------

Commitments and Contingencies (Notes 1, 5, 8, 10 and 11)

STOCKHOLDERS' EQUITY:
 Series A convertible preferred stock, par value
  $.001 per share 10,000,000 shares authorized; 7,000 and
  0 shares issued and outstanding, respectively
  (liquidation preference of $3,500,000)                                 -                        -

 Class A common stock, par value $.001 per share;
  100,000,000 shares authorized; 41,027,255 and 36,918,510
  shares issued and outstanding, respectively                       41,000                   37,000

 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                                      72,935,000               63,852,000

Deficit accumulated during the development stage               (68,539,000)             (62,314,000)
                                                              ------------             ------------
Total stockholders' equity                                       4,440,000                1,578,000
                                                              ------------             ------------
                                                              $  5,086,000             $  3,938,000
                                                              ------------             ------------
</TABLE>


              The accompanying notes are an integral part of these
                          consolidated balance sheets.

                                       F-3


<PAGE>   44


              AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARIES
                          (a development stage company)

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                                                           For the Period
                                                                                                           From Inception
                                                                                                            (September 1,
                                                                  Year Ended December 31,                   1983) Through
                                                  ----------------------------------------------------       December 31,
                                                      2000                1999                 1998             2000
                                                  -----------         -----------         ------------     --------------
<S>                                               <C>                 <C>                 <C>              <C>
REVENUES:
Sales                                             $ 1,629,000         $ 1,361,000          $ 1,197,000       $  4,337,000
Royalties / license fees                              502,000                  -                    -           1,502,000
Collaborative agreements                              157,000              82,000                   -             541,000
                                                  -----------         -----------         ------------     --------------
                                                    2,288,000           1,443,000            1,197,000          6,380,000
COSTS AND EXPENSES:
Cost of sales                                         617,000             598,000              465,000          1,712,000
Research and development                            1,326,000           1,725,000            2,161,000         31,857,000
Selling, general and administrative                 4,241,000           4,488,000            4,432,000         37,822,000
Facility consolidation cost                                -                   -               252,000            252,000
                                                  -----------         -----------         ------------     --------------
Loss from operations                               (3,896,000)         (5,368,000)          (6,113,000)       (65,263,000)
                                                  -----------         -----------         ------------     --------------
OTHER INCOME (EXPENSE):
Interest expense                                      (19,000)            (16,000)            (614,000)        (4,391,000)
Net gain on sale of fixed assets                           -                4,000                    -             11,000
Investment income, net                                140,000              29,000              319,000          4,694,000
                                                  -----------         -----------         ------------     --------------
Loss before extraordinary charge                   (3,775,000)         (5,351,000)          (6,408,000)       (64,949,000)
Extraordinary charge for early
retirement of debentures, net                               -                   -           (1,140,000)        (1,140,000)
                                                  -----------         -----------         ------------     --------------
NET LOSS                                          $(3,775,000)        $(5,351,000)         $(7,548,000)      $(66,089,000)
Preferred stock dividend related to warrants       (2,450,000)                  -                    -         (2,450,000)
                                                  -----------         -----------         ------------     --------------
Net loss attributable to common stockholders      $(6,225,000)        $(5,351,000)         $(7,548,000)      $(68,539,000)
                                                  ===========         ===========         ============     ==============
PER SHARE INFORMATION (NOTE 2):

Basic and Diluted net loss per share                   $(0.14)             $(0.14)              $(0.29)
                                                  ===========         ===========         ============

Common shares used in computing per share
  amounts:
Basic and Diluted                                  43,475,000          39,266,000           25,740,000
                                                  ===========         ===========         ============

</TABLE>

              The accompanying notes are an integral part of these
                            consolidated statements.

                                      F-4




<PAGE>   45


              AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARIES
                          (a development stage company)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                                                     For the Period
                                                                                                                     From Inception
                                                                                                                      (September 1,
                                                                            Year Ended December 31,                   1983) Through
                                                            ----------------------------------------------------       December 31,
                                                                2000                1999                 1998             2000
                                                            -----------         -----------         ------------     --------------
<S>                                                         <C>                 <C>                 <C>              <C>
Cash Flows From Operating Activities:
Net income (loss)                                           $(3,775,000)        $(5,351,000)        $ (7,548,000)     $(66,089,000)
Adjustments to reconcile net (loss) to net cash
used in operating activities:
Depreciation and amortization                                   328,000             318,000              497,000         3,368,000
Net (gain) loss on sale of fixed assets                              -               (4,000)                  -            (11,000)
Net (gain) loss on sale of marketable securities                     -                   -                    -           (217,000)
Other noncash expenses accrued primarily for
  stocks and warrants                                           325,000             502,000              306,000         2,869,000
Amortization of debt discount included in interest expense           -                   -               317,000         2,160,000
Extraordinary loss on repurchase of debt                             -                   -             1,140,000         1,140,000
Write-off of patent costs                                            -                   -                    -             93,000
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable                       65,000             (34,000)             (69,000)          (38,000)
(Increase) decrease in inventories                              (20,000)             34,000              (91,000)         (373,000)
(Increase) decrease in other current assets                       2,000             (36,000)               1,000           (74,000)
(Increase) decrease in other assets                             (22,000)              7,000                1,000            58,000
Increase (decrease) in accounts payable and
  accrued expenses                                           (1,064,000)            840,000              265,000           752,000
Increase in interest payable to stockholder                       8,000                 -                     -            120,000
                                                            -----------         -----------         ------------     --------------
  Net cash used in operating activities                      (4,153,000)         (3,724,000)          (5,181,000)      (56,242,000)
                                                            -----------         -----------         ------------     --------------
Cash Flows From Investing Activities:
Capital expenditures                                            (32,000)            (13,000)             (41,000)       (2,088,000)
Proceeds from sale of fixed assets                                   -                4,000                   -             22,000
Payments for patent costs and other assets                     (203,000)           (539,000)            (229,000)       (2,670,000)
Business acquisition, net of stock issued and cash acquired          -                   -              (119,000)         (119,000)
Proceeds from maturity and sale of marketable securities             -                   -                    -         67,549,000
Purchases of marketable securities                                   -                   -                    -        (67,332,000)
                                                            -----------         -----------         ------------     --------------
  Net cash provided by (used in) investing activities          (235,000)           (548,000)            (389,000)       (4,638,000)
                                                            -----------          ----------         ------------     --------------
Cash Flows From Financing Activities:
Payments to debentureholders                                         -                   -            (1,000,000)       (2,246,000)
Proceeds from issuance of common stock, net                   2,735,000             660,000            3,182,000        42,879,000
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         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                                                 (36,000)            (44,000)             (61,000)         (150,000)
Redemption of 8% convertible debentures                             -                    -              (500,000)         (500,000)
Repurchase of 5% convertible debentures                             -                    -            (3,852,000)       (3,852,000)
Capital contributions from chairman                                 -                    -                    -          1,000,000
Increase in loans payable to stockholder / affiliates            81,000             702,000                   -          3,452,000
Repayment of loans payable to stockholder / affiliates
(remainder contributed to capital by the stockholder)          (291,000)                 -                    -         (1,591,000)
                                                            -----------          ----------         ------------     --------------
  Net cash provided by (used in) financing activities         5,489,000           1,318,000            1,496,000        62,074,000
                                                            -----------          ----------         ------------     --------------
Net Increase (Decrease) in Cash and Cash Equivalents          1,101,000          (2,954,000)          (4,074,000)        1,194,000
Cash and Cash Equivalents at Beginning of Period                 93,000           3,047,000            7,121,000                 0
                                                            -----------          ----------         ------------     --------------
Cash and Cash Equivalents at End of Period                  $ 1,194,000         $    93,000         $  3,047,000     $    1,194,000
                                                            ===========         ===========         ============     ==============
Supplemental Disclosure of Non-cash Activities:
Capital expenditure made under capital lease obligation     $    87,000                  -                    -           $107,000
                                                            ===========         ===========         ============     ==============
Convertible debentures converted into 0, 0, 4,851,618,
  and 10,470,583 shares of Common Stock, respectively                -                   -          $  1,447,000      $ 14,658,000
                                                            ===========         ===========         ============     ==============
Warrants issued                                             $ 2,792,000                  -          $     63,000      $  3,380,000
                                                            -----------          ----------         ------------     --------------
Conversion of stockholder loan to preferred stock
  or paid-in capital                                        $   500,000                  -                    -       $  1,981,000
                                                            -----------          ----------         ------------     --------------
</TABLE>

              The accompanying notes are an integral part of these
                            consolidated statements.


                                       F-5

<PAGE>   46


              AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARIES
                          (a development stage company)

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                                                                            Deficit
                                                                                                           Accumulated
                                       Per     Class A Common Stock    Class B Common Stock   Additional   During the
                                      Share   ---------------------    --------------------    Paid-in     Development
                                      Amount    Shares     Dollars      Shares     Dollars     Capital       Stage         Total
                                     -------- ----------- ---------    ---------   --------  ------------ ------------   ----------
<S>                                  <C>      <C>         <C>          <C>         <C>       <C>           <C>           <C>
BALANCE, AT INCEPTION,
 (SEPTEMBER 1, 1983)                 $  -              -    $   -            0     $    -    $      -    $         -    $       -

Sale of common stock to chairman
  for cash                            .33          78,000       -            -          -       26,000             -        26,000
Net (loss) for the period                              -        -            -          -           -          (25,000)    (25,000)
                                              -----------  -------    ---------   --------   ---------    ------------  ----------
BALANCE, DECEMBER 31, 1983                         78,000       -            -          -       26,000         (25,000)      1,000
                                              -----------  -------    ---------   --------   ---------    ------------  ----------

Sale of common stock to chairman
  for cash                            .33         193,500       -            -          -       65,000             -        65,000
Net (loss) for the period                              -        -            -          -           -         (242,000)   (242,000)
                                              -----------  -------    ---------   --------   ---------    ------------  ----------
BALANCE, DECEMBER 31, 1984                        271,500       -            -          -       91,000        (267,000)   (176,000)
                                              -----------  -------    ---------   --------   ---------    ------------  ----------

Sale of common stock to chairman
 for cash                             .33         276,700    1,000           -          -       92,000              -       93,000
Net (loss) for the period                                       -            -          -           -         (305,000)   (305,000)
                                              -----------  -------    ---------   --------   ---------    ------------  ----------
BALANCE, DECEMBER 31, 1985                        548,200    1,000           -          -      183,000        (572,000)   (388,000)
                                              -----------  -------    ---------   --------   ---------    ------------  ----------

Sale of common stock to chairman
  for cash                            .33         404,820       -            -          -      134,000              -      134,000
Net (loss) for the period                              -        -            -          -           -         (433,000)   (433,000)
                                              -----------  -------    ---------   --------   ---------    ------------  ----------
BALANCE, DECEMBER 31, 1986                        953,020    1,000           -          -      317,000      (1,005,000)   (687,000)
                                              -----------  -------    ---------   --------   ---------    ------------  ----------

Sale of common stock to chairman
  for cash                            .33          48,048       -            -          -       16,000             -        16,000
Net (loss) for the period                              -        -            -          -           -         (730,000)   (730,000)
                                              -----------  -------    ---------   --------   ---------    ------------  ----------
BALANCE, DECEMBER 31, 1987                      1,001,068    1,000           -          -      333,000      (1,735,000) (1,401,000)
                                              -----------  -------    ---------   --------   ---------    ------------  ----------

Exchange of common stock for
  Class B stock                                (1,001,068)  (1,000)   1,001,068      1,000           -             -             0
Sale of Class B stock to chairman
  for cash                            .33              -        -     1,998,932      2,000      664,000            -       666,000
Net (loss) for the period                              -        -            -          -            -      (1,031,000) (1,031,000)
                                              -----------  -------    ---------   --------   ---------    ------------  ----------
BALANCE, DECEMBER 31, 1988                             -        -     3,000,000      3,000      997,000     (2,766,000) (1,766,000)
                                              -----------  -------    ---------   --------   ---------    ------------  ----------

Net (loss) for the period                              -        -            -          -            -      (1,522,000) (1,522,000)
                                              -----------  -------    ---------   --------   ---------    ------------  ----------
BALANCE, DECEMBER 31, 1989                             -        -     3,000,000      3,000      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)                          2.00       3,450,000    3,000           -           -    5,699,000              -   5,702,000
Conversion of Class B stock into
Class A stock                                     668,500    1,000     (668,500)     (1,000)         -               -           0
Net (loss) for the period                              -        -            -           -           -      (2,100,000) (2,100,000)
                                              -----------  -------    ---------   --------   ---------    ------------  ----------
BALANCE, DECEMBER 31, 1990                      4,118,500  $ 4,000     2,331,500   $  2,000  $8,177,000   $ (6,388,000) $1,795,000
                                              -----------  -------    ---------   --------   ---------    ------------  ----------

</TABLE>



                                      F-6



<PAGE>   47
              AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARIES
                          (a development stage company)

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY


<TABLE>
<CAPTION>

                                                                                                            Deficit
                                                                                                           Accumulated
                                       Per     Class A Common Stock    Class B Common Stock   Additional   During the
                                      Share   ---------------------    --------------------    Paid-in     Development
                                      Amount    Shares     Dollars      Shares     Dollars     Capital       Stage         Total
                                     -------- ----------- ----------   ---------   --------  ------------ ------------  -----------
<S>                                   <C>      <C>          <C>        <C>         <C>        <C>         <C>           <C>
BALANCE, DECEMBER 31, 1990            $         4,118,500     $4,000   2,331,500    $ 2,000   $ 8,177,000 $ (6,388,000) $ 1,795,000

Exercise of Class A Warrants
  (net of $203,000
in underwriting expenses) for cash     3.00     3,449,955      3,000          -          -     10,143,000           -    10,146,000
Exercise of Class B Warrants for cash  4.50        79,071         -           -          -        356,000           -       356,000
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          -          -        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                      8,915,276      9,000   1,481,500      1,000    20,411,000  (10,993,000)   9,428,000
                                              ----------- ----------   ---------   --------  ------------ ------------  -----------

Exercise of Class B Warrants
  (net of $701,000 in underwriting
  expenses) for cash                   4.50      3,370,88      3,000          -          -     14,465,000           -    14,468,000
Conversion of Class B stock
into Class A stock                                106,000         -     (106,000)        -             -            -            -
Exercise of stock options              2.49       348,300      1,000          -          -        865,000           -       866,000
Net (loss) for the period                              -          -           -          -             -    (4,016,000)  (4,016,000)
                                              ----------- ----------   ---------   --------  ------------ ------------  -----------
BALANCE, DECEMBER 31, 1992                     12,740,460     13,000   1,375,500      1,000    35,741,000  (15,009,000)  20,746,000
                                              ----------- ----------   ---------   --------  ------------ ------------  -----------

Sale of common stock to Medeva PLC.    7.50       200,000         -           -          -      1,500,000           -     1,500,000
Exercise of stock options              2.00        32,700         -           -          -         65,000           -        65,000
Net (loss) for the period                              -          -           -          -             -    (6,521,000)  (6,521,000)
                                              ----------- ----------   ---------   --------  ------------ ------------  -----------
BALANCE, DECEMBER 31, 1993                     12,973,160     13,000   1,375,500      1,000    37,306,000  (21,530,000)  15,790,000
                                              ----------- ----------   ---------   --------  ------------ ------------  -----------

Exercise of stock options              2.16        91,250         -           -          -        197,000           -       197,000
Net (loss) for the period                                         -           -          -             -    (7,431,000)  (7,431,000)
                                              ----------- ----------   ---------   --------  ------------ ------------  -----------
BALANCE, DECEMBER 31, 1994                     13,064,410     13,000   1,375,500      1,000    37,503,000  (28,961,000)   8,556,000
                                              ----------- ----------   ---------   --------  ------------ ------------  -----------


Conversion of 8% convertible
  debentures into
  Class A Common Stock                 1.85       354,204         -           -          -        571,000           -       571,000
Exercise of stock options              1.82        12,750         -           -          -         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                     13,431,364    $13,000   1,375,500    $ 1,000  $ 38,699,000 $(34,568,000) $ 4,145,000
                                              ----------- ----------   ---------   --------  ------------ ------------  -----------
</TABLE>

                                      F-7


<PAGE>   48
              AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARIES
                          (a development stage company)

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                                            Deficit
                                                                                                           Accumulated
                                       Per    Class A Common Stock    Class B Common Stock   Additional   During the
                                      Share   ---------------------   ---------------------    Paid-in     Development
                                      Amount    Shares     Dollars      Shares     Dollars     Capital       Stage         Total
                                     -------- ----------- ----------  ----------   --------  ------------ ------------  -----------
<S>                                   <C>             <C>                      <C>          <C>      <C>      <C>             <C>
Conversion of 8% convertible
  debentures into Class A
  Common Stock                        2.74      2,269,755   $ 2,000           -     $    -   $  5,483,000     $     -   $ 5,485,000
Exercise of stock options             2.53        569,875     1,000           -          -      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                     16,270,994     16,000   1,375,500      1,000    47,793,000  (42,268,000)   5,542,000
                                              ----------- ----------  ----------   --------  ------------ ------------  -----------


Conversion of 7% and 8% convertible
  debentures into Class A
  Common Stock                        2.93      2,995,006      3,000          -          -      7,152,000           -     7,155,000
Sale of Class B Common Stock to
  Chairman for cash                   2.23             -          -      350,000      1,000       778,000           -       779,000
Exercise of stock options             2.00         27,500         -           -          -         55,000           -        55,000
Fair Value for warrants issued                         -          -           -          -        149,000           -       149,000
Class A Common Stock issued           3.12         48,117         -           -          -        150,000           -       150,000
Net (loss) for the period                              -          -           -          -             -    (7,147,000)  (7,147,000)
                                              ----------- ----------  ----------   --------  ------------ ------------  -----------
BALANCE, DECEMBER 31, 1997                     19,341,617     19,000   1,725,500      2,000     56,077,00  (49,415,000    6,683,000
                                              ----------- ----------  ----------   --------  ------------ ------------  -----------


Conversion of 5%, 7% and 8%
  convertible debentures
  into Class A Common Stock           0.32      4,851,618      5,000          -          -      1,442,000           -     1,447,000
Sale of Class B Common Stock to
  Chairman for cash                   0.37             -          -    1,274,500      1,000       465,000           -       466,000
Exercise of stock options             1.75          4,000         -           -          -          7,000           -         7,000
Fair Value for warrants issued                         -          -           -          -        205,000           -       205,000
Class A Common Stock issued           1.06        163,915         -           -          -        174,000           -       174,000
Class A Common Stock issued for
  Stellar                             1.76        398,406      1,000                              699,000           -       700,000
Class A Common Stock issued for
  Private Placement                   0.25     10,800,000     11,000          -          -      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                     35,559,556     36,000   3,000,000      3,000    62,520,000  (56,963,000)   5,596,000
                                              ----------- ----------  ----------   --------  ------------ ------------  -----------

Sale of Class A Common Stock to
  Chairman for cash                   1.13        440,000         -           -          -        495,000           -       495,000
Exercise of stock options             0.61          5,250         -           -          -          3,000           -         3,000
Fair Value for warrants issued                         -          -           -          -        376,000           -       376,000
Class A Common Stock issued           0.50        913,704      1,000          -          -        458,000           -       459,000
Net (loss) for the period                              -          -           -          -             -    (5,351,000)  (5,351,000)
                                              ----------- ----------  ----------   --------  ------------ ------------  -----------
BALANCE, DECEMBER 31, 1999                     36,918,510     37,000   3,000,000      3,000    63,852,000  (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                            0.97      1,278,675      1,000          -          -      1,234,000           -     1,235,000
Fair Value for warrants issued                         -          -           -          -        342,000           -       342,000
Class A Common Stock issued           0.55      2,830,070      3,000          -          -      1,557,000           -     1,560,000
Net (loss) for the period                              -          -           -          -             -    (3,775,000)  (3,775,000)
                                              ----------- ----------  ----------   --------  ------------ ------------  -----------
BALANCE, DECEMBER 31, 2000                     41,027,255    $41,000   3,000,000    $ 3,000  $ 72,935,000 $(68,539,000) $ 4,440,000
                                              ----------- ----------  ----------   --------  ------------ ------------  -----------

</TABLE>

              The accompanying notes are an integral part of these
                            consolidated statements.


                                       F-8




<PAGE>   49

               AMERICAN BIOGENETIC SCIENCES, INC. AND SUBSIDIARIES

                          (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       BUSINESS AND DEVELOPMENT STAGE RISKS:

         American Biogenetic Sciences, Inc. (together with its subsidiaries
(Note 2), the "Company" or "ABS") was incorporated in Delaware on September 1,
1983. The Company was formed to engage in the research, development and
production of bio-pharmaceutical products. As a development stage company, the
Company has not materially commenced its principal operations. Most of its
efforts have been devoted to research and development, acquiring equipment,
recruiting and training personnel, and financial planning. The Company's
research efforts have been focused on the development of products to diagnose,
prevent and treat diseases in humans.

         The Company has had limited product sales to date and has had limited
revenues from collaborative and licensing agreements (Note 10). Since its
inception, the Company has been dependent upon the receipt of capital investment
or other financing to fund its continuing research and commercialization
activities. The Company expects to incur substantial expenditures in research
and product development of ABS205 and MH1 and the Food and Drug Administration
approval process relating to 510(K) applications for its TpP and other
diagnostic tests. Currently product development plans of the Company include
entering into additional collaborative, licensing and co-marketing arrangements
with pharmaceutical and or biotechnology companies to provide additional funding
and clinical expertise to perform tests necessary to obtain regulatory
approvals, provide manufacturing expertise and market the Company's products.
Without such collaborative, licensing or co-marketing arrangements, additional
sources of funding will be required to finance the Company. In addition to the
normal risks associated with a business engaged in research and development of
new products, there can be no assurance that the Company's research and
development will be successfully completed, that any products developed will
obtain the necessary U.S. regulatory approvals (principally from the FDA), that
any approved product will be a commercial success, that adequate product
liability insurance can be obtained or that sufficient capital will be available
when required to permit the Company to realize its plans. In addition, the
Company operates in an environment of rapid changes in technology and in an
industry, which has many competitors who have far more resources available to
them than does the Company. Further, the Company is dependent upon the services
of several key employees and advisors.

         As of December 31, 2000, ABS, had working capital of $1,377,000,
compared to a negative working capital of $1,436,000 at December 31, 1999.
Additionally, the Company had cash and cash equivalents of $1,194,000 at
December 31, 2000. As of March 16, 2001 the Company's cash and cash equivalents
had decreased to approximately $506,000. 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 licensing fees and milestone payments, additional
financing or the disposition of 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

                                       F-9
<PAGE>   50

or receipt of additional financing, many of which are outside the control of the
Company, the Company's independent public accountants have qualified their 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 has entered into preliminary discussions with a
number of 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.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

PRINCIPLES OF CONSOLIDATION

         During 1989, the Company formed a subsidiary, American Biogenetic
Sciences (Ireland), Ltd., which is 99% owned by the Company and, to fulfill
legal requirements, 1% owned by an officer of the Company. On April 23, 1998,
the Company acquired all of the capital stock of Stellar Bio Systems, Inc.
("Stellar") (Note 5). The financial statements reflect the accounts of the
Company and these subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation.

CASH EQUIVALENTS

         Cash equivalents include highly liquid investments, which have an
original maturity of less than three months from date of purchase.

CONCENTRATION OF CREDIT RISK

         As of December 31, 2000, the Company had one customer whose balances
exceeded 10% of the accounts receivable balance. This customer accounted for 50%
of the accounts receivable balance. As of December 31, 1999, the Company had two
customers whose balances exceeded 10% of the accounts receivable balance. These
customers accounted for 35% and 24% of the accounts receivable balance,
respectively.

                                      F-10
<PAGE>   51


         During fiscal year 2000, one customer accounted for 44% of the
Company's sales, and a second customer accounted for 17% of the Company's sales.
During fiscal year 1999, one customer accounted for 30% of the Company's sales,
another customer accounted for 20% while a third customer accounted for 11% of
the Company's sales. During fiscal year 1998, one customer accounted for 34% of
the Company's sales, another customer accounted for 17% while a third customer
accounted for 10% of the Company's sales.

INVENTORY

         Inventory is valued at the lower of cost (first-in, first-out) or
market.

LONG-LIVED ASSETS

         In accordance with Statement of Financial Accounting Standards ("SFAS")
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," ABS periodically reviews long-lived assets and
certain identifiable intangibles for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to the fair value of the asset
measured by the future net cash flows (on an undiscounted basis) expected to be
generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized would be measured by the amount by which the
carrying amount of the assets exceeds the underlying fair value of the assets.
ABS has performed a review of its long-lived assets and has determined that no
impairment of the respective carrying values has occurred as of December 31,
2000.

FIXED ASSETS

         Fixed assets are carried at cost less accumulated depreciation and
amortization. Depreciation and amortization is generally provided for by the
straight-line method over the estimated useful lives of the assets. Laboratory
equipment, office equipment and furniture are depreciated over five years.
Leasehold improvements are amortized over the life of the lease, usually five
years.

PATENT COSTS

         Costs of certain patent applications are capitalized. Upon issuance of
a patent, such costs are charged to operations utilizing the straight-line
method over the lesser of the estimated useful life or 17 years. Costs of
unsuccessful patent applications or discontinued projects are charged to
expense.

INTANGIBLE ASSETS

         Intangible assets include goodwill and intellectual know-how relating
to the acquisition of Stellar. Intangible assets are being amortized over a
10-year period.

FAIR VALUE OF FINANCIAL INSTRUMENTS

                                      F-11
<PAGE>   52


         The Company accounts for the fair value of its financial instruments in
accordance with SFAS No. 107, "Disclosures about Fair Value of Financial
Instruments." The carrying value of all financial instruments reflected in the
accompanying balance sheets approximated fair value at December 31, 2000 and
December 31, 1999, respectively.

REVENUE RECOGNITION

         Revenue on product sales is recognized at the time the products are
shipped, the customer accepts delivery and when collectibility is reasonably
assured. Revenue from royalties and license fees are recognized
when earned, provided that no significant performance obligations remain.

RESEARCH AND DEVELOPMENT INCOME AND EXPENSES

         Revenues from collaborative agreements are recognized as the Company
performs research activities under the terms of each agreement, provided that no
further performance obligations remain. Research and development costs are
charged to expense in the year incurred.

STOCK-BASED COMPENSATION

         The Company follows the provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation." This statement establishes financial accounting and
reporting standards for stock-based employee compensation plans. SFAS No. 123
encourages entities to adopt a fair value based method of accounting for stock
compensation plans. However, SFAS No. 123 also permits the Company to continue
to measure compensation costs under pre-existing accounting pronouncements. If
the fair value based method of accounting is not adopted, SFAS No. 123 requires
pro forma disclosures of net loss and net loss per common share in the notes to
consolidated financial statements. The Company has elected to provide the
necessary pro forma disclosures (Note 8).

NET LOSS PER COMMON SHARE

         The Company follows the provisions of SFAS No. 128, "Earnings Per
Share." Basic net loss per common share ("Basic EPS") is computed by dividing
net loss by the weighted average number of common shares outstanding. Diluted
net loss per common share ("Diluted EPS") is computed by dividing net loss by
the weighted average number of common shares and dilutive potential common
shares then outstanding. SFAS No. 128 requires the presentation of both Basic
EPS and Diluted EPS on the face of the consolidated statements of operations.
The impact of the adoption of this statement was not material to all previously
reported EPS amounts. Diluted EPS for 2000, 1999 and 1998 is the same as Basic
EPS because the inclusion of stock options, warrants and convertible debentures
then outstanding would be anti-dilutive. For the purposes of the calculation of
both basic and diluted EPS, Class A and Class B Common Stock have been treated
as one class. The following equity instruments were not included in the diluted
net loss per share calculation as their effect would be anti-dilutive:

<TABLE>
<CAPTION>

                                                                      December 31,
                                                ------------------------------------------------------
                                                    2000                  1999                 1998
                                                ------------          -----------          -----------
<S>                                             <C>                   <C>                  <C>
Stock Options                                      5,179,619            5,905,252            4,398,250
</TABLE>
                                      F-12

<PAGE>   53

<TABLE>
  <S>                                           <C>                   <C>                  <C>
  Conversion of Preferred Series A Stock          7,000,000                   --                   --

  Warrants                                        8,187,814            1,039,295              709,445
                                                ------------          -----------          -----------
                                                 20,367,433            6,944,547            5,107,695
                                                ============          ===========          ===========
</TABLE>

INCOME TAXES

         The Company recognizes deferred tax assets and liabilities for the
estimated future tax effects of events that have been recognized in the
Company's financial statements or tax returns. Under this method, deferred tax
assets and liabilities are determined based on the difference between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect in the years in which the differences are expected to reverse.

USE OF ESTIMATES

         The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

COMPREHENSIVE INCOME

         In fiscal 1999 the Company adopted SFAS No. 130 "Reporting
Comprehensive Income," which establishes new rules for the reporting of
comprehensive income (loss) and its components. The adoption of this statement
had no impact on the Company's net income (loss) or shareholders' equity. For
the fiscal years ended 2000, 1999 and 1998, the Company's operations did not
give rise to items includable in comprehensive income (loss) which were not
already included in net income (loss). Therefore, the Company's comprehensive
income is the same as its net income (loss) for all periods presented.

DERIVATIVE INSTRUMENTS

         In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities". This
statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. SFAS No. 133, as amended by SFAS No. 137,
is effective for all fiscal years beginning after June 15, 2000 and will not
require retroactive restatement of prior period financial statements. This
statement requires the recognition of all derivative instruments as either
assets or liabilities in the balance sheet measured at fair value. Derivative
instruments will be recognized as gains or losses in the period of change. If
certain conditions are met where the derivative instrument has been designated
as a fair value hedge, the hedge items may also be marked to market through
earnings, thus creating an offset. If the derivative is designed and qualifies
as a cash flow hedge, the changes in fair value of the derivative instrument may
be recorded in comprehensive income. The Company does not presently make use of
derivative instruments. The adoption of SFAS No. 133 on January 1, 2001 was not
material.

                                      F-13
<PAGE>   54


3.     INVENTORIES

       INVENTORIES CONSIST OF THE FOLLOWING:
<TABLE>
<CAPTION>

                                                               December 31,
                                                      ------------------------------
                                                          2000               1999
                                                      -----------         ----------
       <S>                                            <C>                 <C>
       Raw Materials                                     $328,000           $334,000
       Work in Progress                                   132,000             71,000
       Finished Goods                                      71,000            106,000
                                                      -----------         ----------
                                                         $531,000           $511,000
                                                      ===========         -=========
</TABLE>

4.     FIXED ASSETS
       FIXED ASSETS CONSISTS OF THE FOLLOWING:
<TABLE>
<CAPTION>

                                                                December 31,
                                                      ------------------------------
                                                          2000               1999
                                                      -----------        -----------
       <S>                                            <C>                <C>
       Laboratory equipment                            $1,301,000         $1,279,000
       Office equipment and furniture                     523,000            523,000
       Leasehold improvements                             514,000            514,000
       Equipment under capital lease                       87,000                  -
                                                      -----------        -----------
                                                        2,435,000          2,316,000
       Accumulated depreciation and amortization       (1,958,000)        (1,840,000)
                                                      -----------        -----------
                                                         $477,000          $ 476,000
                                                      ===========        ===========
</TABLE>

         Depreciation and amortization of fixed assets was $118,000, $122,000
and $237,000 for the years ended December 31, 2000, 1999 and 1998, respectively.

5.       ACQUISITION

         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, the Company made the
second contingent payment of $20,000 in Class A Common Stock (10,811 shares).
The Acquisition was accounted for by the purchase method. Results of operations
of Stellar have been included in the Company's consolidated financial statements
since the date of acquisition. The excess of the aggregate purchase price over
the fair value of net assets acquired of $791,000 has been allocated to
intangible assets (intellectual know-how of $100,000 and goodwill of $691,000)
and is being amortized over a 10-year period. Any additional future payments
required under the contingent earnout provisions of the purchase agreement will
be accounted for as additional goodwill and will be amortized over the remaining
life of the goodwill. Accumulated amortization of

                                      F-14
<PAGE>   55
intangible assets was approximately $192,000, $114,000 and $41,000 as of
December 31, 2000, 1999 and 1998, respectively.

6.       ACCOUNTS PAYABLE AND ACCRUED EXPENSES

         Accounts payable and accrued expenses consist of the following:

<TABLE>
<CAPTION>
                                                          December 31,
                                               ---------------------------------
                                                 2000                  1999
                                               -----------          ------------
         <S>                                   <C>                  <C>
         Accounts Payable                         $220,000            $1,117,000
         Professional Fees                          77,000                98,000
         Payroll and Related Expenses               71,000               366,000
                                               -----------          ------------
                                                  $368,000            $1,581,000
                                               ===========          ============
</TABLE>

7.       LONG TERM DEBT:

         On May 20, 1998, the Company completed a private placement to three
accredited investors of an aggregate of $4,000,000 of 5% Convertible Debentures
due May 20, 2001, and three series of Warrants to purchase up to an aggregate of
261,288 shares of the Company's Class A Common Stock. Interest on the Debentures
was payable only on maturity, conversion, redemption or when other payment was
made on the Debentures in cash or, if registered for resale under the Securities
Act of 1933, as amended, in shares of the Company's Class A Common Stock valued
at the applicable Debenture conversion price. These debentures were repurchased
on November 11, 1998 (see below).

         The Company also issued to the investors warrants in series entitling
the investors to purchase, at an exercise price of $1.9141 per share, an
aggregate of 261,228 shares of the Company's Class A Common Stock at any time to
and including May 19, 2002. These warrants were cancelled on November 11, 1998
(see below).

         In conjunction with the private placement, the Company incurred both
cash and noncash issuance costs totaling $525,000. These issuance costs were
amortized on a straight-line basis, which is not materially different than the
effective interest rate method, as a component of interest expense through
November 11, 1998. Upon conversion of the Debentures, the related unamortized
deferred financing costs were charged to paid-in capital. The fair value of the
warrants as determined using an option-pricing model of $252,000, was recorded
as additional paid-in capital and included in the $525,000 total issuance costs
related to these Debentures. In addition, the Company recorded additional
paid-in capital and debt discount of $762,000 to reflect the intrinsic value of
the maximum market price conversion discount (16%) related to these Debentures.
The debt discount was amortized and charged to interest expense from May 20,
1998 through November 11, 1998. The unamortized issuance costs and debt discount
were included in the extraordinary charge for early extinguishment discussed
below.

         On November 11, 1998, the Company repurchased the then outstanding
Debentures for a total of $3,852,000 (principal amount of $3,248,000 plus
accrued interest of $79,000 and a $525,000 premium). As a result of the
repurchase the Company has recorded a one-time extraordinary charge to earnings
of $1,140,000 which represents the loss on early extinguishment.

                                      F-15
<PAGE>   56


         For each of the aforementioned debt instruments and warrants, the fair
value of each was estimated on the date of the agreement using an option-pricing
model with the following assumptions: dividend yield of 0%; expected volatility
of 135% in 1998; risk-free interest rate of range 5.7% to 6.5% and expected
lives of 2 to 5 years dependent on the life of the instrument.

NOTES PAYABLE

         Notes payable at December 31, 2000 primarily represents the remaining
balance of an obligation arising from services rendered. Notes payable at
December 31, 1999 primarily represents demand notes payable to the Company's
Chairman.

CAPITAL LEASE OBLIGATION

         During fiscal 2000, the Company entered into lease obligations of
$87,000 for the acquisition of computer equipment, which contains a bargain
purchase option. As a result, the present value of the remaining future minimum
lease payments, with imputed interest rates ranging from approximately 11.7% to
14.6%, are recorded as a capitalized lease asset and related capitalized lease
obligation. Future minimum payments at December 31, 2000 are as follows:

    2001                                                           $ 24,000
    2002                                                             28,500
    2003                                                             28,500
    2004                                                             24,100
    2005                                                              4,100
                                                                   --------
    Total minimum lease payments                                    109,200
    Less amounts representing interest                              (22,200)
                                                                   --------
    Present value of net minimum capital lease payments            $ 87,000
                                                                   ========


8.        STOCKHOLDERS' EQUITY:

DESCRIPTION OF CLASS A AND CLASS B COMMON STOCK

         Holders of Class A Common Stock and Class B Common Stock have equal
rights to receive dividends, equal rights upon liquidation, vote as one class on
all matters requiring stockholder approval, have no preemptive rights, are not
redeemable and do not have cumulative voting rights; however, holders of Class A
Common Stock have one vote for each share held while holders of the Class B
Common Stock have ten votes for each share held on all matters to be voted on by
the stockholders. All Class B Common Stock is owned by the Chairman of the Board
and may be converted into Class A Common Stock on a share-for-share basis at
the option of the holder and generally is automatically converted in the event
of sale or, with certain exceptions, transfer.

PRIVATE PLACEMENT

         On October 27, 1998, the Company entered into an agreement to issue an
aggregate of 10,800,000 shares of its Class A Common Stock to a group of
accredited investors at a price of $.25 per share, a price above the market
price of the Company's Class A Common Stock at the time. Of such shares,
4,000,000 shares were purchased by Alfred J. Roach, the Company's Chairman
of the

                                      F-16
<PAGE>   57

Board of Directors and Chief Executive Officer, for an aggregate price of
$1,000,000. The Company has registered the shares issued in the private
placement under the Securities Act of 1933, as amended. The proceeds from this
private placement were used to repurchase the 5% Convertible Debentures (see
Note 7).

         On January 27, 2000, the Company entered into an Exclusive License
Agreement with Abbott Laboratories under which the Company granted to Abbott an
exclusive worldwide license to its ABS-103 compound, related technology and
patent rights. The Exclusive License Agreement gives Abbott the exclusive right
to develop and market the compound, which presently is in the pre-clinical
stage. In consideration for the license grant and in addition to customary
royalties on sales, Abbott paid the Company an initial non-refundable license
fee of $500,000 and agreed to pay additional milestone payments aggregating up
to $17 million depending upon successfully reaching development milestones,
generally by indication. The Company has no obligation to provide any additional
services under this agreement. In connection with the entering into of the
Exclusive License Agreement, the Company and Abbott also entered into a Stock
Purchase Agreement dated January 27, 2000 pursuant to which Abbott purchased
2,782,931 shares (the "Abbott Shares") of the Company's Class A Common Stock for
$1,500,000.

         The Company also entered into a Registration Rights Agreement with
Abbott pursuant to which, among other things, the Company agreed to register the
Abbott Shares under the Securities Act of 1933, as amended upon Abbott's request
at any time after the first anniversary of the sale and to include the Abbott
Shares in any other registration of the Company's securities under the
Securities Act after that date. All expenses of registration of the Abbott
Shares, other than underwriting discounts, selling commissions and fees and
disbursements of counsel for Abbott, are to be borne by the Company.

PREFERRED STOCK

         On December 31, 1999 the Company and Biotechnology Value Fund, L.P.
("BVF") signed a letter agreement, subject to negotiation of definitive
agreements, authorization of preferred stock and certain other matters, for BVF
to invest between $2 and $3 million for the purchase of between 4,000 and 6,000
shares of Series A Convertible Preferred Stock (the "Preferred Stock") and
related Warrants.

         When the Company and BVF began negotiating the definitive agreements
for the sale transaction in January 2000, in order to induce BVF to purchase the
full $3 million, at the suggestion of BVF, the Company's Chairman Mr. Roach
agreed that rather than demand repayment of his demand notes, he would convert
$500,000 of the approximately $776,000 plus accrued interest owed to him into an
additional investment in the Company on terms identical to the terms previously
negotiated with BVF and that the balance of the amount owed him (approximately
$276,000 of principal) could be repaid at the rate of $100,000 of principal and
interest per month until repaid in full. Accordingly, $500,000 of the amount
owed Mr. Roach was converted into 1,000 shares of Preferred Stock and 1,000,000
Warrants.

         The Company entered into a Securities Purchase Agreement dated as of
February 3, 2000 with BVF and Mr. Roach relating to the issuance of the 7,000
shares of Preferred Stock and Warrants for 7,000,000 shares of Class A Common
Stock. On February 7, 2000, BVF loaned $3,000,000 to the Company, equaling the
purchase price for 6,000 shares of Preferred Stock and

                                      F-17
<PAGE>   58

6,000,000 Warrants. On March 3, 2000, after receiving stockholder consent to
the proposed sale, the Company repaid BVF's loan and $500,000 of the Company's
indebtedness to Mr. Roach by issuing 6,000 shares of Preferred Stock and
6,000,000 Warrants to BVF and 1,000 shares of Preferred Stock and 1,000,000
Warrants to Mr. Roach.

         Preferred stock dividend related to warrants of $2,450,000 represents
the noncash fair value of the warrants issued to BVF and Mr. Roach, determined
by using an option-pricing model, in the private placement. The following
assumptions were used for this fair value computation: dividend yield of 0%,
volatility of 106%, risk-free interest rate of 5.01% and expected lives of 5
years.

         The Shares of Preferred Stock: (i) have the right to participate with
dividends declared on the Common Stock, if, as and when declared, on an
as-converted basis; (ii) contain customary anti-dilution adjustments for
mechanical adjustments in the event of stock splits and similar transactions;
(iii) contain restrictions on subsequent issuances of other preferred stock
ranking equal to or superior to the Preferred Stock without the consent of the
holders of a majority of such Preferred Stock; (iv) have a liquidation
preference equal to the original issue price of the Preferred Stock, plus any
accrued and unpaid dividends; (v) will not be entitled to vote except as a
separate class when its rights are affected; and (vi) will be convertible at any
time after the original issue date at the option of the holder. Each share of
Preferred Stock initially will be convertible into 1,000 shares of Class A
Common Stock, or a conversion price of $.50 per share of Class A Common Stock.

         Under the terms of the Registration Agreement the Company has filed a
Form S-3 Registration Statement covering Class A Common Stock issuable upon
conversion of the Preferred Stock and the exercise of the warrants, which went
effective June 2000.

STOCK OPTION PLANS

         The Company's 1986 Stock Option Plan (the "1986 Plan") provided for the
grant of incentive stock options and/or non-qualified options until July 1997 to
purchase up to an aggregate of 4,450,000 shares of Class A Common Stock. Options
were granted at exercise prices not less than the fair market value at the date
of grant and for a term not to exceed ten years from the date of grant; except
that an incentive stock option granted under the 1986 Plan to a stockholder
owning more than 10% of the outstanding Common Stock of the Company could not
have a term which exceeded five years nor have an exercise price of less than
110% of the fair market value of the Class A Common Stock on the date of the
grant. The outstanding options have a vesting period ranging two years to four
years ratably from the date of grant.

         Changes in outstanding options and options available for grant under
the 1986 Plan, expressed in number of shares, are as follows:

                                      F-18
<PAGE>   59

<TABLE>
<CAPTION>
                                                         For the Years Ended
                                 -------------------------------------------------------------------
                                      December 31, 2000                     December 31, 1999
                                 ----------------------------        -------------------------------
                                  Shares        Weighted Avg.          Shares          Weighted Avg.
                                  Under             Option             Under               Option
                                  Option            Price              Option              Price
                                 --------       -------------        -----------       -------------
<S>                               <C>            <C>                 <C>               <C>
Options outstanding,
beginning of year                2,476,250          $4.20             2,790,500            $4.11
Exercised                         (147,250)         $1.87                    --              --
Cancelled                          (11,000)         $2.32              (272,250)           $3.65
Expired                           (135,000)         $1.93               (42,000)           $2.00
Options outstanding,
end of year                      2,183,000          $4.50             2,476,250            $4.20
Options exercisable,
end of year                      2,183,000          $4.50             2,453,250            $4.21
Options available
for grant, end of year                  --                                   --
</TABLE>


                                      F-19
<PAGE>   60


         The Company's 1993 Non-Employee Director Stock Option Plan (the "1993
Plan") provides for the issuance of stock options for up to 500,000 shares of
Class A Common Stock to outside directors of the Company. Options to purchase
10,000 shares of Class A Common Stock are automatically granted immediately
following each Annual Meeting of the Company to each outside director elected at
the Annual Meeting. The option exercise price is 100% of the fair market value
of the Class A Common Stock on the date of grant and the option may be exercised
during a period of five years from the date of grant at the rate of 25% each
year on a cumulative basis, commencing one year from the date of grant.

              Changes in outstanding options and options available for grant
under the 1993 Plan, expressed in number of shares, are as follows:

<TABLE>
<CAPTION>
                                                         For the Years Ended
                                 -------------------------------------------------------------------
                                      December 31, 2000                     December 31, 1999
                                 ----------------------------        -------------------------------
                                  Shares        Weighted Avg.          Shares          Weighted Avg.
                                  Under             Option             Under               Option
                                  Option            Price              Option              Price
                                 --------       -------------        -----------       -------------
<S>                               <C>            <C>                 <C>               <C>
Options outstanding,
  beginning of year               140,000            $2.63              120,000            $3.27
Granted                            30,000            $1.53               40,000            $1.09
Exercised                         (15,000)           $1.88                   --               --
Cancelled                          (7,500)           $4.58                   --               --
Expired                                --               --              (20,000)           $3.38
Options outstanding,
  end of year                     147,500            $2.39              140,000            $2.63
Options exercisable,
end of year                        97,500            $2.94               57,500            $3.76
Options available
  for grant, end of year          325,000                               347,500

</TABLE>

                                      F-20
<PAGE>   61

         The Company's 1996 Stock Option Plan, as amended (the "1996 Plan"),
which replaced the 1986 plan, provides for the grant of incentive stock options
and/or non-qualified options to employees, officers and consultants of the
Company to purchase up to an aggregate of 4,000,000 shares of Class A Common
Stock. Options may be granted at exercise prices not less than the fair market
value at the date of grant and may be exercisable for a period not to exceed ten
years from the date of grant; except that the term of an incentive stock option
granted under the 1996 Plan to a stockholder owning more than 10% of the
outstanding Common Stock of the Company must not exceed five years nor have an
exercise price of less than 110% of the fair market value of the Class A Common
Stock on the date of the grant. The majority of options outstanding are
exercisable 25% each year on a cumulative basis, commencing one year from the
date of grant.

         Changes in outstanding options and options available for grant under
the 1996 Plan, expressed in number of shares, are as follows:

<TABLE>
<CAPTION>
                                                            For the Years Ended
                                         -------------------------------------------------------
                                             December 31, 2000             December 31, 1999
                                         -------------------------     -------------------------
                                          Shares     Weighted Avg.      Shares     Weighted Avg.
                                          Under          Option         Under          Option
                                          Option         Price          Option         Price
                                         ---------   -------------     ---------   -------------
<S>                                      <C>              <C>          <C>             <C>
Options outstanding,
beginning of year                        3,289,002        $1.05        1,487,750       $1.99
Granted                                    792,500        $0.47        2,255,000       $0.70
Exercised                               (1,062,594)       $0.77           (5,250)      $.061
Cancelled                                 (169,789)       $0.92         (448,498)      $2.40
Options outstanding,
end of year                              2,849,119        $1.00        3,289,002       $1.05
Options exercisable,
end of year                              1,991,744        $1.17        1,250,382       $1.75
Options available
for grant, end of year                      83,037                       705,748
</TABLE>


         The Company's 2000 Stock Option Plan, (the "2000 Plan"), which is in
addition to the 1996 plan, provides for the grant of incentive stock options
and/or non-qualified options to employees, officers and consultants of the
Company to purchase up to an aggregate of 3,000,000 shares of Class A Common
Stock. Options may be granted at exercise prices not less than the fair market
value at the date of grant and may be exercisable for a period not to exceed ten
years from the date of grant; except that the term of an incentive stock option
granted under the 2000 Plan to a stockholder owning more than 10% of the
outstanding Common Stock of the Company must not exceed five years nor have an
exercise price of less than 110% of the fair market value of the Class A Common

                                      F-21
<PAGE>   62

Stock on the date of the grant. There were no options granted under this plan in
fiscal year 2000.

         The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." Accordingly, no compensation cost has
been recognized for the stock option plans. Had compensation cost for the
Company's stock option plans been determined based on the fair value at the
grant date for options granted in 2000, 1999 and 1998 in accordance with the
provisions of SFAS No. 123, the Company's net loss and loss per share would have
been increased to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                      2000              1999              1998
                                                   -----------       -----------       -----------
<S>                                                <C>               <C>               <C>
  Net loss -- as reported                          ($6,225,000)      ($5,351,000)      ($7,548,000)

  Net loss -- pro forma                            ($6,881,000)      ($6,130,000)      ($8,243,000)

  Basic and diluted loss per share -- as
  reported                                           ($.14)            ($.14)            ($.29)

  Basic and diluted loss per share -- pro
  forma                                              ($.16)            ($.16)            ($.32)
                                                   -----------       -----------       -----------

</TABLE>
         The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 2000, 1999 and 1998: dividend yield of 0%;
expected volatility of 170% in 2000, 106% in 1999 and 135% in 1998; risk-free
interest rate of range 4.4% to 6.8% and expected lives of seven years.

         The weighted average fair value of all three option plans for options
granted were $.49, $.59 and $.50 in 2000, 1999 and 1998, respectively. The
following table sets forth additional SFAS No. 123 disclosure information as to
options outstanding for all three plans at December 31, 2000:
<TABLE>
<CAPTION>
                                                                       Weighted Average
   Shares      Exercisable         Exercise        Weighted Average       Remaining
Outstanding      Shares          Price Range       Exercise Price      Contractual Life
-----------    -----------    ----------------    ----------------    ----------------
<S>            <C>            <C>        <C>           <C>                  <C>
  1,433,750      809,375      $0.25      $0.38         $0.30                8.7
    196,125      116,125      $0.40      $0.66         $0.53                5.9
    807,994      694,244      $1.00      $1.50         $1.05                7.1
    442,550      370,050      $1.52      $2.25         $1.83                4.9
    361,450      355,950      $2.38      $3.50         $3.37                6.0
  1,864,250    1,853,000      $3.66      $5.50         $4.90                1.4
     72,500       72,500      $5.75      $7.75         $6.32                2.9
      1,000        1,000           $10.00             $10.00                1.2
  ---------    ---------
  5,179,619    4,272,244


</TABLE>


                                      F-22
<PAGE>   63

OTHER OPTIONS GRANTED

         The Company entered into a consulting agreement with an unaffiliated
third party to assist in the strategic planning and implementation of the
Company's licensing, collaborative and co-marketing plans, which expired
February 29, 1996. Pursuant to the agreement, the Company granted an option to
purchase 50,000 shares of Class A Common Stock on or before February 28, 2000 at
$2.25 per share. The Company also granted performance options to purchase 50,000
shares of Class A Common Stock at $2.25 for licensing or collaborative
agreements entered into which met certain criteria. These options are
exercisable for five years from the date of grant. During 2000, the consultant
exercised their option to purchase 50,000 shares of Class A Common Stock at
$2.25 and the balance of 50,000 shares expired.

         The Company has granted an investor relations consultant a warrant to
purchase 50,000 shares of Class A Common Stock on or before November 14, 2000 at
$3.50 per share pursuant to an agreement dated November 27, 1995. This warrant
expired on November 14, 2000.

         The Company entered into an agreement with an unaffiliated third party
dated October 6, 1995 to assist with the marketing of the Company's products and
intellectual property, which agreement has expired. Pursuant to this agreement,
the Company granted performance options to purchase 25,000 shares of Class A
Common Stock and issued 5,000 shares for services rendered under the agreement.
Options were granted for 12,500 shares at $3.00 per share and 12,500 shares at
$5.50 per share. These options are exercisable for five years from the date of
grant. These options expired on February 28, 2001.

         The Company entered into an agreement with an unaffiliated third party
to render financial consulting advice, dated August 13, 1998 and amended on
October 1, 1998. Pursuant to this agreement, the Company granted performance
options to purchase up to 400,000 shares of Class A Common Stock. Options were
granted for 150,000 shares at $.75 per share, 150,000 shares at $1.00 per share
and 100,000 shares at $1.50 per share. The options are exercisable for four
years from the agreement date. The fair value of these options as determined
using an option-pricing model was $124,000, which is being recorded as a noncash
charge over the vesting/service period of the options. The following assumptions
were used for this fair value computation: dividend yield of 0%, volatility of
135%, risk-free interest rate of 4.26% and expected lives of 4 years. The charge
was $81,000 in 1999 and $43,000 in 1998.

         The Company has granted an investor relations consultant a warrant to
purchase up to 300,000 shares of Class A Common Stock on or before January 19,
2004 at $1.00 per share pursuant to an agreement dated January 20, 1999. The
warrant may be exercised in increments of 50,000 share amounts only if certain
milestones are met during the period ending June 30, 2000. The consultant has
earned 250,000 shares under this agreement and the balance of 50,000 shares were
cancelled. The fair value of these warrants as determined using an
option-pricing model was $264,000 which was recorded as a noncash charge over
the one year service period (fiscal year 1999). The following assumptions were
used for this fair value computation: dividend yield of 0%, volatility of 149%,
risk-free interest rate of 4.6% and expected lives of 4 years.

                                      F-23
<PAGE>   64

         The Company has granted an investor relations consultant a warrant to
purchase up to 300,000 shares of Class A Common Stock on or before March 14,
2002 at $3.00 per share pursuant to an agreement dated March 15, 2000. The
warrant may be exercised in increments of 50,000 share amounts only if certain
milestones are met during the period ending September 14, 2001. As of December
31, 2000, the consultant has earned 50,000 shares. The fair value of these
warrants as determined using an option-pricing model was $342,000 which was
recorded as a noncash charge over the one year service period (March 2000 to
February 2001). The following assumptions were used for this fair value
computation: dividend yield of 0%, volatility of 105%, risk-free interest rate
of 6.5% and expected lives of 2 years.

9.       FEDERAL INCOME TAXES:

         At December 31, 2000, the Company had net operating loss carryforwards
of approximately $63,000,000 for income tax purposes. The net operating loss
carryforwards will expire in varying amounts through 2020. In addition, the
Company has approximately $1,300,000 of available research and development tax
credits to offset future taxes. These credits expire through 2020. In accordance
with SFAS No. 109 "Accounting for Income Taxes," the Company has recorded a
valuation allowance of $64,300,000 to fully reserve for the deferred tax benefit
attributable to its net operating loss and tax credit carryforwards due to the
uncertainty as to their ultimate realizability.

         In accordance with certain provisions of the Tax Reform Act of 1986, a
change in ownership of a corporation of greater than 50 percentage points within
a three-year period places an annual limitation on the corporation's ability to
utilize its existing net operating loss carryforwards, investment tax and
research and development credit carryforwards (collectively "tax attributes").
Such a change in ownership was deemed to have occurred in connection with the
Company's 1990 initial public offering, at which time the Company's tax
attributes amounted to approximately $4.9 million. The annual limitation of the
utilization of such tax attributes is approximately $560,000. To the extent the
annual limitation is not utilized, it may be carried forward for utilization in
future years. At December 31, 2000, $4,900,000 of net operating losses is no
longer subject to this limitation.

10.      VARIOUS AGREEMENTS

AGREEMENTS WITH BOSTON UNIVERSITY

         On December 1, 1996, the Company entered into a Sublease Agreement and,
effective January 1, 1997, an Agreement for Services with Boston University.
These two agreements provided for the Company's use of approximately 7,700
square feet of space for laboratories and for its antigen-free technology at a
total annual payment of $275,000. The agreements had an initial term of three
years. In connection with this lease agreement, the Company may, at its option,
pay a portion of the annual lease obligation with Class A Common Stock plus a
warrant to purchase shares of Class A Common Stock. The number of shares are
computed using the average market price of the Company's Class A Common Stock
during the ten days prior to issuance. The warrant shares


                                      F-24
<PAGE>   65

are to be exercisable at a price equal to the closing price of the underlying
Class A Common Stock on the date the warrant is issued and for a period of four
years from the date of issuance. During 1997, the Company issued 48,117 shares
of Class A Common Stock and warrants to purchase 48,117 shares of Class A Common
Stock with the exercise price ranging from $2.13 to $4.75. During 1998, the
Company issued 129,847 shares of Class A Common Stock and warrants to purchase
129,847 shares of Class A Common Stock with the exercise price ranging from $.63
to $2.19. During 1999, the Company issued 29,850 shares of Class A Common Stock
and warrants to purchase 29,850 shares of Class A Common Stock with the exercise
price of $1.28. The fair values of the warrants were calculated using an
option-pricing model at the date of issue and recorded a charge to operations of
$32,000 in 1999, $99,000 in 1998 and $93,000 in 1997. In the fourth quarter of
1998, the Company implemented a consolidation of its research and development
facilities. In 1998, the Company recorded a $252,000 reserve for consolidating
facilities which included severance costs, lease termination, and the write-down
of leasehold improvements. The Boston facilities were closed in June 1999 and
consolidated at the Stellar facilities in Columbia, Maryland.

UNIVERSITY OF NOTRE DAME AGREEMENT

         On December 1, 1983, the Company entered into a lease agreement with
the University of Notre Dame ("Notre Dame Agreement") which was amended and
extended until November 30, 1993, at which time it was terminated. On December
1, 1993, the Company entered into a lease with Notre Dame ("Notre Dame Lease")
for substantially the same premises occupied by the Company under the Notre Dame
Agreement for a term ending August 31, 1995. Notre Dame extended the rental of a
portion of the space through August 31, 1996. In February 1996, the Company
entered into a lease in South Bend, Indiana for approximately 5,200 square feet
with an annual base rent of $52,200. This lease commenced on April 1, 1996 for
an initial five-year term with three one-year renewal options. In September
1996, the Company entered into a second lease for a three year term in South
Bend, Indiana for approximately 3,000 square feet with an annual base rent of
$30,400. In 1997, the Company moved its research and development activities from
South Bend, Indiana to Boston, Massachusetts. The Company closed both facilities
and has terminated both leases.

         Under the Notre Dame Agreement, the Company was required to pay Notre
Dame for the direct and indirect payroll cost of substantially all of the
Company's research and development personnel, purchases of laboratory supplies,
items of equipment or other costs associated with the research projects.

         Notre Dame has granted the Company all rights, title and interest in
and to any inventions, patents and patent applications for research projects
funded by the Company. Inventors of any processes or technology which receive
Company support have assigned his or her interest in the product, patent or
patent applications to the Company. The Company did not incur costs under the
Notre Dame Agreement during the three years ended December 31, 2000, and
incurred $6,150,000 for the period from inception (September 1, 1983) through
December 31, 1996.

         The Company has agreed to pay Notre Dame a royalty of 5% of the net
income the Company achieves from sales of products resulting from
Company-sponsored research activities at Notre Dame. Royalty payments shall
continue for a ten-year period from the date of the first commercial sale of a
product, regardless of the continuation of the Notre Dame Agreement.

                                      F-25
<PAGE>   66

EMPLOYMENT AGREEMENTS

         The Executive Vice-President is a party to an employment agreement with
the Company ending September 30, 2001. The aggregate annual minimum compensation
under this agreement as of December 31, 2000 was approximately $90,000. This
officer also is party to a confidentiality agreement with the Company requiring
them to maintain certain information in confidence during and subsequent to the
employment with the Company.

SCIENTIFIC ADVISORY COMMITTEE AGREEMENTS

         The Company has entered into advisory board agreements with certain
research scientists with respect to specific projects in which the Company has
an interest. The payments to the advisors for informal meetings and other
consultations as a group were approximately $37,000, $65,000 and $115,000 for
the three years ended December 31, 2000, 1999 and 1998, respectively. Generally,
members of the Company's Scientific Advisory Committee are employed by or have
consulting agreements with third parties, the businesses of which may conflict
or compete with the Company and any inventions discovered by such individuals
will not become the property of the Company.

         As part of its development stage activities, the Company enters into
various agreements that provide for the expenditure of funds for research and
development activities and typically provide for the payment of royalties
(between 2% to 8% of net sales) by the Company if any products are successfully
developed and marketed as a result of the work being performed under the
agreement. The following is a summary of significant agreements the Company has
entered into:

LICENSE AGREEMENTS

         On January 24, 1992, the Company entered into an exclusive, 15 year
license agreement with Yamanouchi Pharmaceutical Co., Ltd. ("Yamanouchi"), a
Japanese pharmaceutical company. Under this agreement, Yamanouchi may
manufacture, use or market diagnostic assays that contain the Company's
monoclonal antibody, 45-J, in Japan and Taiwan. Yamanouchi paid a
non-refundable, initial sign-up payment to the Company of $900,000 (net of
Japanese taxes). The agreement provides that Yamanouchi is to pay the Company a
fixed percentage over the Company's manufacturing costs of the 45-J antibody
supplied to Yamanouchi. On an ongoing basis, Yamanouchi is to pay the Company
royalties at the rate of 10% of all net sales of diagnostic assays sold by
Yamanouchi or its affiliates during each calendar year of the agreement term.
Additionally, Yamanouchi is to pay the Company 50% of any initial fees,
royalties or other consideration received with respect to any sublicense granted
by Yamanouchi. To date, Yamanouchi has not made any sales.

         On December 10, 1992, the Company entered into an agreement (as
amended) with University College Dublin, Ireland granting the Company an
exclusive license for drugs/compounds to halt the onset and/or progression of
neurodegenerative diseases, in general, and Alzheimer's disease, in particular.
The agreement's term is the duration of any patents that may be granted to the
university with a minimum of 10 years. Pursuant to the agreement, the Company is
to pay the university a royalty of 5% of net income relating to product sales.
The Company expensed $82,000



                                      F-26
<PAGE>   67

in 2000, $18,000 in 1999 and $5,000 in 1998 for certain research expenses,
supplies and equipment under this agreement.

         On August 10, 1993, the Company entered into a five-year collaboration
agreement with the Free University of Berlin to develop therapeutic compounds.
The Company also acquired a series of anticonvulsant compounds. Pursuant to the
agreement, the Company is to pay a royalty of 5% of the net product sales. The
agreement lasts the life of the patent or a minimum of 10 years. The Company
expensed $72,000 in 2000, $75,000 in 1999 and $103,000 in 1998 for research
expenses and supplies under this agreement.

         In October 1995, ABS entered into a license and collaboration agreement
with F. Hoffmann-La Roche, Ltd. ("Hoffmann-La Roche") for the co-development and
marketing of the Company's TpP test for the detection of active thrombosis
(blood clot formation). The agreement grants Hoffmann-La Roche a worldwide
license to market the TpP test in a latex based particle agglutination format.
Under the agreement, the Company received a $60,000 non-refundable development
payment, to adapt the TpP test in the latex based particle agglutination format
to Hoffmann-La Roche's automated diagnostic systems. The Company is also to
receive milestone payments upon achievement of certain commercialization goals.
The TpP test is to be manufactured by the Company for use on Hoffmann-La Roche's
instruments. ABS is to receive a percentage of Hoffmann-La Roche's net selling
price for the Company's manufacturing of the TpP test plus a 5% royalty on net
sales made by Hoffmann-La Roche. Under the agreement, the TpP test is also to be
sold by ABS and Hoffmann-La Roche to other diagnostic companies using similar
particle agglutination technology. On these sales, gross profit is to be shared
equally between the Company and Hoffmann-La Roche. To date, ABS has not received
any milestone or royalty payments.

         In December 1995, ABS entered into a license agreement with Abbott
Laboratories ("Abbott") for the marketing of the Company's TpP assay. The
license agreement grants Abbott a worldwide license to market the TpP test for
Abbott's immunoassay formats. The Company received a $100,000 non-refundable
up-front payment and is to receive milestone payments upon achievement of
certain development and commercialization goals. The Company is to receive a 5%
royalty on net sales made by Abbott. In addition, the reagent for the TpP test
is to be manufactured by the Company for use by Abbott. To date, ABS has not
received any milestone or royalty payments.

         On January 27, 2000, the Company entered into an Exclusive License
Agreement with Abbott under which the Company granted to Abbott an exclusive
worldwide license to its ABS-103 compound, related technology and patent rights.
The Company also entered into a Registration Rights Agreement with Abbott. (See
Note 8 for details regarding this agreement.)


                                      F-27
<PAGE>   68
11.      COMMITMENTS AND CONTINGENCIES

LEASES

         ABS leases 6,000 square feet of office space in New York under a lease
expiring July 2001 (with an annual base rent of $41,000), which it intends to
renew. ABS' subsidiary, Stellar, has a lease covering 16,000 square feet in
Maryland, with an annual base rent of $184,000 and a term ending March 31, 2006.

LITIGATION

         From time to time we are a party to certain claims and legal
proceedings in the ordinary course of business, none of which, in our opinion,
would have a material adverse effect on our financial position or results of
operations.



                                      F-28
<PAGE>   69






                           Commission File No. 0-19041



                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549



                                    EXHIBITS

                                       TO

                                    FORM 10-K



                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000



                       AMERICAN BIOGENETIC SCIENCES, INC.



<PAGE>   70


<TABLE>
<CAPTION>

Exhibit No.          Description
-----------          -----------
<S>                  <C>
3.1                  Restated Certificate of Incorporation of ABS, as filed with
                     the Secretary of State of Delaware on July 30, 1996 and
                     amended through March 3, 2000. Incorporated herein by
                     reference to Exhibit 3.1 to ABS' Form 10-K for the fiscal
                     year ended December 31, 1999, File No. 0-19041.

3.2                  Amended and Restated By-Laws of ABS.  Incorporated herein
                     by reference to Exhibit 4.02 to ABS' Registration Statement
                     on Form S-8, File No. 333-09473.

4.1                  Form of Purchase and Investment Agreement executed by ABS
                     and several investors on October 27, 1998. Incorporated
                     herein by reference to Exhibit 99 to ABS' Registration
                     Statement on Form S-3, file number 333-69735, filed with
                     the Commission on December 24, 1998.

4.2                  Form of Warrant issued to several individuals under ABS'
                     Financial Advisory Agreement with M.H. Meyerson & Co.,
                     Inc., dated as of August 13, 1998 and schedule of holders
                     thereof. Incorporated herein by reference to Exhibit 4.1(e)
                     to ABS' Form 10-K for the fiscal year ended December 31,
                     1998, File No. 0-19041.

4.3(a)               Stock Purchase Agreement, dated as of January 27, 2000,
                     between ABS and Abbott Laboratories. Incorporated herein by
                     reference to Exhibit 99.1 to ABS' Current Report on Form
                     8-K dated January 27, 2000 (date of earliest event
                     reported), File No. 0-19041.

4.3(b)               Registration Rights Agreement, dated as of January 27,
                     2000, between ABS and Abbott Laboratories. Incorporated
                     herein by reference to Exhibit 4.1 to ABS' Current Report
                     on Form 8-K dated January 27, 2000 (date of earliest event
                     reported), File No. 0-19041.

4.4(a)               Securities Purchase Agreement, dated as of February 3,
                     2000, among ABS and Biotechnology Value Fund, L.P.,
                     Biotechnology Value Fund II, L.P., Investment 10 L.L.C. and
                     Alfred J. Roach. Incorporated herein by reference to
                     Exhibit 4.4(a) to ABS' Form 10-K for the fiscal year ended
                     December 31, 1999, File No. 0-19041.

4.4(b)               Registration Agreement, dated as of March 3, 2000, among
                     ABS and Biotechnology Value Fund, L.P., Biotechnology Value
                     Fund II, L.P., Investment 10 L.L.C. and Alfred J. Roach.
                     Incorporated herein by reference to Exhibit 4.4(b) to ABS'
                     Form 10-K, for the fiscal year ended December 31, 1999,
                     File No. 0-19041.

4.4(c)               Form of Warrant issued to Redington, Inc. (one of three
                     Warrants substantially identical except for the date and
                     price information. Incorporated herein by


</TABLE>



<PAGE>   71

<TABLE>
<CAPTION>

Exhibit No.          Description
-----------          -----------
<S>                  <C>
                     reference to Exhibit 4 to ABS' Registration Statement on
                     Form S-3, file number 333-36116, filed with the Commission
                     on May 2, 2000.

10.1(a)+             Employment Agreement dated October 1, 1996 between ABS and
                     Ellena M. Byrne. Incorporated herein by reference to
                     Exhibit 10.1(b) to ABS' Form 10-K/A, dated April 30, 1997,
                     File No. 0-19041.

10.1(b)+             Employment Agreement dated November 2, 1998 between ABS and
                     Mr. John S. North. Incorporated herein by reference to
                     Exhibit 10.1(b) to ABS' Form 10-K for the fiscal year ended
                     December 31, 1998, File No. 0-19041.

10.1(c)+*            Memorandum of Understanding dated January 4, 2001 between
                     ABS and Mr. John S. North.

10.2(a)+             ABS' Stock Option Plan, as amended. Incorporated herein by
                     reference to Exhibit 28.1 to ABS' Registration Statement on
                     Form S-8, File No. 33-51240.

10.2(b)+             ABS' 1993 Non-Employee Director Stock Option Plan.
                     Incorporated herein by reference to Exhibit 99.01 to ABS'
                     Registration Statement on Form S-8, File No. 33-65416.

10.2(c)+             ABS' 1996 Stock Option Plan, as amended. Incorporated
                     herein by reference to Exhibit 10.2(c) to Form 10-K for the
                     fiscal year ended December 31, 1999, File No. 0-19041.

10.2(d)+             ABS' 2000 Stock Option Plan. Incorporated herein by
                     reference to Exhibit 99.01 to ABS' Registration Statement
                     on Form S-8, File No. 33-45644.

10.3                 Exclusive License Agreement dated January 24, 1992 between
                     ABS and Yamanouchi Pharmaceutical Co., Ltd. Incorporated
                     herein by reference to Exhibit 10.29 to ABS' Current Report
                     on Form 8-K dated January 24, 1992, File No. 0- 19041.

10.4                 Warrant dated October 25, 1995 issued to Swartz
                     Investments, Inc. Incorporated herein by reference to
                     Exhibit 10.13 to ABS' Current Report on Form 8-K dated
                     October 12, 1995, File No. 0-19041.

10.5                 Exclusive License Agreement, dated as of January 27, 2000,
                     between ABS and Abbott Laboratories. Incorporated herein by
                     reference to Exhibit 10.1 to ABS' Current Report on Form
                     8-K dated January 27, 2000, File No. 0-19041.

21                   List of Subsidiaries. Incorporated herein by reference to
                     Exhibit 21 to ABS' Form 10-K for the fiscal year ended
                     December 31, 1998, File No. 0-19041.

23*                  Consent of Independent Public Accountants.

</TABLE>


<PAGE>   72

*Filed herewith. All other exhibits are incorporated by reference to the
document following the description thereof.
+Management contract or compensatory plan.