<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT
OF 1934
For the quarterly period ended September 30, 1997
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT
OF 1934
For the transition period from to
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Commission File Number: 0-19606
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AMERICAN BIOMED, INC.
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(Exact name of registrant as specified in its charter)
Delaware 76-0136574
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
10077 Grogan's Mill Road, Suite 100, The Woodlands, Texas 77380
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(address of principal executive offices) (Zip Code)
(281) 367-3895
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(Registrant's telephone number, including area code)
N.A.
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(Former name, former address and former fiscal year if changed
since last report)
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 and 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. X Yes No
----
The total number of shares outstanding of common stock, $.001 par value as of
November 10, 1997 is 17,327,568.
<PAGE> 2
AMERICAN BIOMED, INC. and SUBSIDIARY
Table of Contents
PART I - FINANCIAL INFORMATION
Page
Item 1 - Financial Statements:
Consolidated Condensed Balance Sheets 3
Consolidated Condensed Statements of Operations 4
Consolidated Condensed Statements of Cash Flows 5
Notes to Consolidated Condensed Financial Statements 6
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II - OTHER INFORMATION
Item 1 Legal Proceedings 14
Item 6 Exhibits and Reports on Form 8-K 15
SIGNATURES 16
INDEX TO EXHIBITS 17
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN BIOMED, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 717,785 $1,183,613
Accounts receivable, trade, net of allowance for doubtful accounts
of $57,500 in 1996 142,193 168,359
Accounts receivable, other 22,303 19,848
Inventories 731,151 462,097
Prepaid expenses 184,038 277,195
---------- ----------
Total current assets 1,797,470 2,111,112
---------- ----------
Property and equipment, net 173,374 81,315
Patents, net of accumulated amortization of $880,661 and
$870,014 in 1997 and 1996, respectively 188,343 164,655
Goodwill, net of accumulated amortization of $666,704
and $574,391 in 1997 and 1996, respectively 564,132 656,444
Other assets 38,672 55,625
---------- ----------
Total assets $2,761,991 $3,069,151
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to stockholders and others $ 269,723 $1,278,485
Current maturities of long-term debt 40,846 38,404
Current maturities of capital lease obligations 454,458 266,078
Accounts payable 321,113 301,184
Accrued liabilities 519,606 483,167
---------- ----------
Total current liabilities 1,605,746 2,367,318
Long-term debt, net of current maturities 81,809 110,472
Capital lease obligations, net of current maturities -- 302,766
Deferred revenue 115,000 160,000
Commitments and contingencies:
Stockholders' equity:
Preferred stock, $.001 par value, 2,000,000 shares authorized,
Series A: Convertible preferred stock, 1,390 shares authorized,
issued and outstanding at September 30, 1997 and December 31, 1996, respectively,
$1,000 per share or $1,390,000 aggregate liquidation preference 1 1
Series B: Convertible preferred stock, 2,500 shares authorized, 675 shares and
1,500 shares issued and outstanding at September 30, 1997 and December 31,
1996, respectively, $1,000 per share or $675,000 and $1,500,000 aggregate
liquidation preference respectively, plus an additional 10% per year
from the date of issuance 1 2
Series C: Convertible preferred stock, 125 shares authorized, 122 shares issued and
outstanding at September 30, 1997, $20,000 per share or $2,440,000
aggregate liquidation preference plus an additional 7% per year from the
date of issuance
Common stock, $.001 par value, 50,000,000 shares authorized, 16,914,304 and
13,544,019 shares issued at September 30, 1997 and December 31, 1996, respectively 16,914 13,544
Additional paid-in capital 27,391,636 24,741,670
Deficit accumulated during the development stage (26,197,516) (24,375,022)
Less treasury stock at cost, 68,323 shares (251,600) (251,600)
----------- -----------
Total stockholders' equity 959,436 128,595
----------- -----------
Total liabilities and stockholders' equity $ 2,761,991 $ 3,069,151
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 4
AMERICAN BIOMED, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Inception,
Three Months Ended Nine Months Ended September 4, 1984,
September 30, September 30, To
1997 1996 1997 1996 September 30, 1997
-------------------------- ------------------------------- ------------------
<S> <C> <C> <C> <C> <C>
Sales, net $ 107,292 $ 187,761 $ 360,621 $ 417,197 $ 3,675,268
Cost of Sales (62,044) (89,248) (222,062) (295,721) (3,454,968)
---------- ------------- -------------- ------------ ------------
Gross profit 45,248 98,513 138,559 121,476 220,300
Operating expenses:
Selling, general and administrative (532,466) (522,370) (1,427,423) (1,283,258) (16,884,358)
Research and development (127,096) (139,792) (502,058) (492,478) (7,752,051)
Distributor settlement (1,080,915)
---------- ------------- -------------- ------------ ------------
(659,562) (662,162) (1,929,481) (1,775,736) (25,717,324)
---------- ------------- -------------- ------------ ------------
Loss from operations (614,314) (563,649) (1,790,922) (1,654,260) (25,497,024)
---------- ------------- -------------- ------------ ------------
Other income (expense):
Interest income 4,133 2,921 24,505 3,613 134,239
Interest expense (24,110) (85,634) (101,021) (283,318) (2,796,459)
Other income 15,001 (2,630) 44,944 57,577 1,961,728
---------- ------------- -------------- ------------ ------------
Other income (expense), net (4,976) (85,343) (31,572) (222,128) (700,492)
---------- ------------- -------------- ------------ ------------
Net loss (619,290) (648,992) (1,822,494) (1,876,388) (26,197,516)
Less preferred stock dividends (540,556) (1,183,413)
---------- ------------- -------------- ------------ ------------
Net loss available to common shareholders $ (619,290) $ (648,992) $ (1,822,494) $ (2,416,944) $ (27,380,929)
========== ============ ============= ============ =============
Net loss per common share $ (.04) $ (0.05) $ (.12) $ (.23)
========== ============ ============= ============
Weighted average number of common shares
outstanding 15,823,589 12,299,078 14,799,314 10,688,212
========== ============ ============= ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 5
AMERICAN BIOMED, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Inception,
Nine Months Ended September 4, 1984,
September 30, to
1997 1996 September 30, 1997
------------------------------ --------------------
<S> <C> <C> <C>
Net cash used by operating activities $ (1,705,344) $ (1,205,283) $(19,039,463)
Cash flows from investing activities:
Capital expenditures (112,974) (23,615) (548,200)
Investment in patents (34,335) (22,923) (471,323)
Other investing activities 245,080
------------ ------------ ------------
Net cash used by investing activities (147,309) (46,538) (774,443)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from notes payable to banks 2,333,880
Proceeds from notes payable to stockholders 34,750 1,225,921
Proceeds from notes payable to others 58,750 835,576 5,801,087
Repayments of notes payable to banks (5,000) (2,070,000)
Repayments of notes payable to stockholders (123,522) (822,992)
Repayments of notes payable to others (1,093,733) (1,135,002) (5,868,750)
Principal payments under capital lease obligations (114,386) (44,832) (744,553)
Proceeds from patent assignment and leaseback 500,000
Proceeds from equipment assignment and leaseback 305,000
Proceeds from sale of debentures 640,000
Proceeds from sale of preferred stock 2,500,000 1,390,356 8,436,502
Proceeds from sale of common stock and exercise of
unregistered warrants 320,034 492,923 9,054,351
Proceeds from exercise of stock options 3,750 96,000 339,917
Proceeds from issuance of registered stock purchase warrants 100,000
Proceeds from exercise of registered stock purchase warrants 2,801,018
Treasury stock acquired (500,000)
Offering costs (287,590) (172,862) (940,243)
Other financing activities (59,447)
------------ ------------ ------------
Net cash provided by financing activities 1,386,825 1,368,387 20,531,691
------------ ------------ ------------
Net increase in cash and cash equivalents (465,828) 116,566 717,785
Cash and cash equivalents at beginning of period 1,183,613 9,177
------------ ------------ ------------
Cash and cash equivalents at end of period $ 717,785 $ 125,743 $ 717,785
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 6
AMERICAN BIOMED, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with the requirements of Form 10-Q and therefore do
not include all information and footnotes necessary for a fair presentation of
financial position, results of operations and cash flows in conformity with
generally accepted accounting principles. In the opinion of management, the
unaudited consolidated condensed financial statements reflect all adjustments
that are necessary for a fair statement of the results of the periods presented,
and all such adjustments are of a normal recurring nature.
The unaudited consolidated condensed financial statements include the
accounts of American BioMed, Inc. and its wholly-owned subsidiary, Cathlab
Corporation, (jointly referred to as the "Company") after elimination of all
intercompany transactions and accounts.
These unaudited consolidated condensed financial statements should be read
in connection with the financial statements for the year ended December 31, 1996
included in the Company's Annual Report filed on Form 10-K/A-1. Results for the
period are not necessarily indicative of year-end results.
2. CAPITAL STOCK
During the first quarter of 1997, 762,583 shares of the Company's common
stock were issued in connection with the exercise of warrants. An additional
88,222 shares were issued in payment of debt.
In March 1997, the Company issued options to purchase 5,000 shares of
common stock at $1.50 per share, the fair market value at date of grant, in
connection with the employment of a quality assurance manager who has since been
promoted to plant manager.
Pursuant to Section 4(2) of the Securities Act, in March 1997 the Company
issued 125 shares of its Series C convertible preferred stock, par value $.001
per share (the "Series C Preferred") to Nelson Partners, an unaffiliated
investor, for a total purchase price of $2,500,000 or $20,000 per share. The
proceeds of the sale will be used to fund clinical trials, research and
development projects and general working capital. The Series C Preferred, which
bears no dividends and confers no voting rights, is of equal rank with shares of
the Series A Preferred and the Series B Preferred and senior to the Company's
other equity securities (except with the consent of the majority of the holders
of Series C Preferred). The Series C Preferred is convertible at any time on or
after 120 days after the initial date of issuance at the option of the holder
into a number of shares of common stock (the "Series C Conversion Shares") based
on a formula as defined in the purchase agreement.
The Series C conversion price is the lesser of (i) $1.75 (adjusted if there
is a lock up in effect) or (ii) the average of the closing bid price for the
common stock for the five consecutive trading days immediately preceding the
date the election to convert is made (the "Series C Conversion Price"). The
number of Series C Conversion Shares is subject to adjustment from time to time
upon the occurrence of stock splits, reverse stock splits, and similar events.
On March 1, 2000 any outstanding shares of the Series C Preferred will be
automatically converted based on the Series C Conversion Price then in effect.
Registration rights were conferred upon the Series C Preferred requiring
the Company to file an S-3 Registration Statement ("Registration Statement")
covering the resale of the Series C Conversion Shares on or before the ninetieth
day following the issuance date ("Scheduled Effective Date"). The Registration
Statement became effective July 25, 1997 which was after the Scheduled Effective
Date. As a result 31 shares, 25% of the Series C Preferred shares issued, are
convertible at a reduced conversion percentage.
The Company may at its option at any time after the 180th day and prior to
the 361st day following the issuance of the Series C Preferred, prohibit holders
of the Series C Preferred from exercising any conversion rights granted (the
"Lock-Up") when certain conditions are met. In the event the Company effects a
lock-up, each holder of the Series C Preferred will be entitled to a warrant
(the "Lock-Up Warrant") exercisable for that number of shares of common stock
equal to (1/2) one-half of the number of shares of common stock which would have
been issuable had such holder converted, and on the last day of the lock-up
period will be entitled to an additional Lock-Up Warrant exercisable for that
number of shares of common stock equal to one-half of the number of shares of
common stock which would have been issuable had such holder converted. The
exercise price of the Lock-Up Warrant is the fixed conversion price ($1.75) that
is in effect at the time of issuance of the Lock-Up warrant, but not subject to
any adjustments.
6
<PAGE> 7
AMERICAN BIOMED, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - Continued
(Unaudited)
2. CAPITAL STOCK - Continued
The Company has reserved 7,642,857 shares of common stock for issuance (i)
upon conversion of the Series C Preferred, (ii) upon exercise of the warrants
and (iii) the placement warrants.
During the second quarter of 1997, the Company issued 367,554 shares of
common stock as a result of the conversion of 200 shares of Series B convertible
preferred stock ("the "Series B Preferred"). In addition the Company also issued
75,000 shares of common stock in payment of certain liabilities and services.
Effective May 19, 1997, the Company, upon recommendation by the compensation
committee, granted its president options from the 1996 Incentive Stock Plan to
purchase 900,000 shares of the Company's common stock at $.6875 per share which
was greater than or equal to the fair market value at the date of grant. The
stock options will vest evenly on December 31, 1997, 1998 and 1999.
Due to the conversion of 710 shares of Series B Preferred and 3 shares of
Series C Preferred the Company issued 1,889,519 shares and 127,407 shares of
common stock, respectively, during the third quarter of 1997. In August 1997,
40,000 shares of common stock were issued upon the exercise of a warrant.
7
<PAGE> 8
AMERICAN BIOMED, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - Continued
(Unaudited)
3. SUPPLEMENTAL INFORMATION FOR STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Inception
Nine Months Ended September 4, 1984
September 30, to
1997 1996 September 30, 1997
------------------------------ ------------------
<S> <C> <C> <C>
Interest Paid $ 86,678 $ 342,578 $ 1,233,556
Noncash investing and financing activities:
Equipment acquired through capital lease 266,539
agreements
Equipment and leasehold improvements
acquired through notes payable 35,775
Conversion of accrued interest
payable to principal on notes
payable to stockholders 105,170
Conversion of Series A and Series B
preferred stock to common stock 444
Conversion of 1996 Series B preferred stock
to common stock 910,000 910,000
Conversion of debentures to common stock 640,000
Deferred offering costs incurred in prior
year charged against offering proceeds 41,000
Issuance of common stock in connection
with purchase of assets of VMS, Inc. 124,999
Issuance of common stock in connection
with purchase of assets of Superstat, Inc. 81,819
Conversion of notes payable to common stock 407,360 538,671
Common stock and warrants issued in lieu of
interest expense 57,744 1,387,300
Patent assignment and leaseback 500,000
Issuance of common stock in connection with
Therex settlement 77
Transfer of note receivable from officer 25,000
Writeup of property and equipment on Cathlab
due to sale and leaseback agreement 221,616
Issuance of common stock and warrants
for services 28,280 367,500 1,035,707
Issuance of common stock for certain liabilities 88,861 1,177,421 1,088,560
</TABLE>
8
<PAGE> 9
AMERICAN BIOMED, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - Continued
(Unaudited)
4. INVENTORIES
Inventories are stated at the lower of cost or market value. Cost is
determined using the first-in, first-out (FIFO) method.
Inventories consisted of the following:
<TABLE>
<CAPTION>
September 30 December 31
1997 1996
----------- ----------
<S> <C> <C>
Raw materials..................... $ 308,669 $ 178,762
Work in process................... 232,311 157,114
Finished goods.................... 190,171 126,221
----------- ----------
$ 731,151 $ 462,097
=========== ==========
</TABLE>
5. COMMITMENTS AND CONTINGENCIES
In addition to matters discussed below, the Company is occasionally a
party to litigation arising in the ordinary course of business. Management
regularly analyzes current information and, as necessary, provides accrual for
probable liabilities for the eventual disposition of the matter. In the opinion
of management, the ultimate outcome of these matters will not materially affect
the Company's financial position, results of operations or cash flows.
In May 1997, a former officer and director of the Company filed a
lawsuit alleging oppressive action towards a minority shareholder. The Company
intends to vigorously contest this lawsuit; however, given the early stage of
the litigation, the Company is unable at this time to make a meaningful analysis
of possible or likely damages, if any.
In August 1997, a former officer and director of the Company filed a
lawsuit alleging breach of contract and is seeking specific performance and
monetary damages. The Company intends to vigorously contest this lawsuit;
however, given the early stage of the litigation, the Company is unable at this
time to make a meaningful analysis of possible or likely damages, if any.
In September 1997, a former distributor filed a lawsuit alleging the
letter agreement terminating their distribution agreement was breached by the
Company due to the non-issuance of options to purchase 437,500 shares of common
stock at $0.40 per share. These options have been properly reserved for, but
have not been issued.
The Company has resolved the litigation regarding the December 1995
American Arbitration Association award to a consultant of $50,000 plus interest
at prime plus three percent from May 1, 1995. The award and related interest
were paid in full July 1, 1997.
Other litigation referred to in the Company's report on Form 10-K was
resolved during the year ended December 31, 1996.
6. RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
("SFAS 128"). SFAS 128 specifies the computation, presentation and disclosure
requirements for earnings per share. SFAS 128 is effective for financial
statements issued for periods ending after December 15, 1997, including interim
periods. The Company has not yet determined the impact that the adoption of SFAS
128 will have on its disclosure of earnings per share.
The Company has adopted Financial Accounting Standards Board ("FASB" )
Statement of Financial Accounting Standards No. 129, "Disclosure of Information
about Capital Structure" (SFAS 129"). SFAS 129 requires all entities, public and
nonpublic that have issued securities which provide evidence of debt or
ownership or a related right to adequately disclose within the financial
statement, information regarding the Company's capital structure and is
effective for financial statements issued for periods ending after December 15,
1997.
9
<PAGE> 10
AMERICAN BIOMED, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - Continued
(Unaudited)
6. RECENT ACCOUNTING PRONOUNCEMENTS - Continued
The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS
130"). SFAS 130 established standards for reporting and presentation of
comprehensive income and its components in a financial statement that is
presented with the same prominence as other financial statements. It requires
the items of other comprehensive income be classified by their nature and the
accumulated balance of other comprehensive income be displayed separately from
retained earnings and additional paid-in capital in the equity section. SFAS 130
is effective for fiscal years beginning after December 15, 1997 and application
is to be adopted at the beginning of the fiscal year. The Company has not yet
determined the impact that the adoption of SFAS 130 will have on its
presentation of financial information.
The Financial Accounting Standards Board ("FASB") has issued Statement
of Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information ("SFAS 131") which is effective for fiscal
years beginning after December 15, 1997. SFAS 131 establishes standards
requiring public business enterprises to report information about operation
segments in annual financial statements on the basis that is used internally for
evaluating segment performance and allocating resources, and requires selected
information be reported in interim financial reports. It also establishes
standards for related disclosures about products and services, geographic areas,
and major customers. The Company has not yet determined the impact that the
adoption of SFAS 131 will have on its financial statement disclosures.
10
<PAGE> 11
AMERICAN BIOMED, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company is in the development stage and has had limited operating
revenues since its inception on September 4, 1984. From September 4, 1984
through September 30, 1997, the Company had an accumulated deficit of
$27,380,929.
During the nine months ended September 30, 1997, the Company's sales
decreased 13.6% to $360,621 compared with sales of $417,197 for the same period
in 1996. Year to date foreign export sales increased 22.3% while domestic sales
decreased 56.2%. Third quarter foreign export sales and domestic sales decreased
31.8% and 54.5%, respectively. Other revenues for services and projects
increased to $37,863 from $3,890. The Company added several new international
distributors in 1996. The products registered in these international markets
resulted in increased foreign export sales. The decrease in domestic sales is
due to the ineffectiveness of the Company's principal domestic distributor and
to the decrease in government orders caused by a change in their purchasing
methodology. Overall sales were down due to the ineffectiveness of the Company's
sales team. Corrective action was taken and new sales staff was added in
October. As a result, sales for the fourth quarter of 1997 already exceed the
third quarter sales of $107,292.
Cost of sales represented 61.6% and 70.9% of sales for the nine months
ended September 30, 1997 and 1996, respectively. The lower percentage in 1997 is
due to productivity improvements initiated during the second quarter 1997. The
Company focused on building inventory during the second and third quarter of
1997 in anticipation of Original Equipment Manufacturing Orders ("OEM"). As a
result, inventory has increased approximately $269,000 since December 31, 1996.
Although there can be no assurances, the Company expects the OEM contracts to
begin in the fourth quarter.
Selling, general and administrative expenses increased 11.2% to
$1,427,423 during the first nine months of 1997, compared to $1,283,258 for the
same period in 1996. The third quarter of 1997 reflects an increase of only 1.9%
when compared to the third quarter 1996. Because the Vice President of Sales and
Marketing was not hired until the second quarter of 1996, sales and marketing
expenses for the nine months increased 4.3% to $117,334 in 1997 from $112,481 in
1996. This quarter reflects a decrease in selling expense of $28,817 or 45.9%
compared to the third quarter 1996. Other salaries and payroll-related expenses
increased approximately $48,000 and $131,000 for the quarter and nine months due
to the hiring of two additional corporate personnel, as well as salary and
benefit increases. Legal and accounting expenses decreased 60.9% and 15.2%
during the quarter and nine months of 1997 compared to the same periods in 1996.
Insurance costs increased approximately $12,000 or 72.4% for the quarter and
approximately $18,000 or 35.9% for the nine months ended September 30, 1997 as
compared to 1996 primarily due to the addition of product liability insurance in
the third quarter 1997. The Company began the ISO 9001 certification process in
the fourth quarter of 1996 and the CE Mark certification process in the second
quarter 1997. The Company will continue to incur costs until ISO 9001
certification is received. The Company was recommended for ISO 9001
certification in August 1997. Expenses related to the ISO 9001 and CE Mark
certification process for the first nine months of 1997 were approximately
$34,000.
Research and development expenses totaled $502,058 during the first
nine months of 1997, an increase of 1.9% from the 1996 nine months total of
$492,478. This is due to the Company initiating research and development on a
new line of 100%-silicone balloon catheters for thrombectomy and thrombolysis,
which will expand the Company's existing product lines. Clinical trials have
begun on these products. In addition, the Company is focusing on completing the
OmniCath(R) clinical trials. During the second quarter of 1997, the Company
expanded the number of sites authorized to conduct the trials to eight sites.
Interest expense decreased 64.3% to $101,021 for the first nine months
of 1997, compared to $283,318 for the first nine months of 1996 due to the
decrease of over $1 million in notes payable and capital lease obligations.
11
<PAGE> 12
AMERICAN BIOMED, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its research and development activities to
date principally through private sales of common and preferred stock, an initial
public offering of common stock, and sales of products and engineering services.
The Company expects to incur research and development expenditures as it designs
and develops products related to its core technology. The Company anticipates
that operating expenses will continue to increase during 1997 and subsequent
years due to the continuation of clinical trials and will continue to be
significant through the FDA approval process. These costs will include, among
other things, hiring additional personnel to direct and carry out all operations
related to the clinical trials, paying for hospital and procedural costs,
upgrading operating equipment and other costs related to the manufacture of
products in sufficient quantities to meet the Company's research and development
needs. In addition, the Company anticipates that the administrative costs
associated with this effort will be significant. The amounts and timing of
expenditures will depend on the progress of ongoing research and clinical
development and product launch costs.
During the first nine months of 1997, the Company created a quality
assurance department, hired a manufacturing manager and made initial cash
outlays for automated manufacturing equipment to increase productivity and
manufacturing efficiencies. In addition, some changes were made to production
sequences and intensive cross training of employees was established. As a
result, the Company's production capacity has increased by over 200%. Resources
are also being expended on product development and clinical programs to further
the advancement of the Company's core product technologies. The Company raised
additional equity capital of $2.5 million via private placements and continues
to negotiate debt to equity instruments to improve the Company's financial
position and cash flows. As a result, the Company had working capital as of
September 30, 1997 of $191,724, an improvement of $447,930 as compared to
December 31, 1996.
The net cash used by operating activities of $1,705,344 was
approximately $500,000 greater than during the same period in 1996. During the
first nine months of 1997 the cash flow was favorably impacted by the
negotiations of debt to equity conversions and issuance of stock for services of
approximately $117,000. Financing activities provided cash of approximately $1.4
million. Warrants and options to purchase common stock were exercised, providing
the Company with approximately $324,000. The sale of Series C Preferred provided
approximately $2.2 million, net of offering costs. In addition, the Company
repaid the 30-day note of $1 million due in January 1997.
At September 30, 1997, the Company had cash and cash equivalents of
$717,785 compared to $1,183,613 at December 31, 1996. The Company anticipates
that cash from current cash balances will be adequate to meet the Company's cash
requirements through the next three to five months. As a part of its effort to
meet such requirements, management has undertaken to identify healthcare
companies with similar technologies or companies seeking new proprietary
products to strengthen their existing market position. This strategy is directed
toward the formation of strategic alliances, joint venture arrangements,
licensing and distribution agreements, and research and development agreements.
The Company will need to raise substantial funds for future operations
and is actively seeking such funding through possible collaborative
arrangements, public or private financings, including equity financings, and
other arrangements. The Company expects that additional expenditures will be
required if additional product candidates enter clinical trials, such as
expenditures for laboratory space, scientific and administrative personnel, and
additional manufacturing costs. There can be no assurance that the Company will
be able to obtain additional financings on acceptable terms or in time to fund
any necessary or desirable expenditures. In the event such financings are not
obtained, the Company's research and development projects and its operations
will be significantly delayed or scaled back, which could have a material
adverse effect on the Company results of operations.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
("SFAS 128"). SFAS 128 specifies the computation, presentation and disclosure
requirements for earnings per share. SFAS 128 is effective for financial
statements issued for periods ending after December 15, 1997, including interim
periods. The Company has not yet determined the impact that the adoption of SFAS
128 will have on its disclosure of earnings per share.
12
<PAGE> 13
AMERICAN BIOMED, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
The Company has adopted Financial Accounting Standards Board ("FASB" )
Statement of Financial Accounting Standards No. 129, "Disclosure of Information
about Capital Structure" (SFAS 129"). SFAS 129 requires all entities, public and
nonpublic that have issued securities which provide evidence of debt or
ownership or a related right to adequately disclose within the financial
statement, information regarding the Company's capital structure and is
effective for financial statements issued for periods ending after December 15,
1997.
The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS
130"). SFAS 130 established standards for reporting and display of comprehensive
income and its components in a financial statement that is displayed with the
same prominence as other financial statements. It requires the items of other
comprehensive income be classified by their nature and the accumulated balance
of other comprehensive income be displayed separately from retained earnings and
additional paid-in capital in the equity section. SFAS 130 is effective for
fiscal years beginning after December 15, 1997 and application is to be adopted
at the beginning of the fiscal year. The Company has not yet determined the
impact that the adoption of SFAS 130 will have on its presentation of financial
information.
The Financial Accounting Standards Board ("FASB") has issued Statement
of Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information ("SFAS 131") which is effective for fiscal
years beginning after December 15, 1997. SFAS 131 establishes standards
requiring public business enterprises to report information about operation
segments in annual financial statements on the basis that is used internally for
evaluating segment performance and allocating resources, and requires selected
information be reported in interim financial reports. It also establishes
standards for related disclosures about products and services, geographic areas,
and major customers. The Company has not yet determined the impact that the
adoption of SFAS 131 will have on its financial statement disclosures.
13
<PAGE> 14
AMERICAN BIOMED, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In addition to matters discussed below, the Company is occasionally a
party to litigation arising in the ordinary course of business. Management
regularly analyzes current information and, as necessary, provides accrual for
probable liabilities for the eventual disposition of the matter. In the opinion
of management, the ultimate outcome of these matters will not materially affect
the Company's financial position, results of operations or cash flows.
In May 1997, a former officer and director of the Company filed a
lawsuit alleging oppressive action towards a minority shareholder. The Company
intends to vigorously contest this lawsuit; however, given the early stage of
the litigation, the Company is unable at this time to make a meaningful analysis
of possible or likely damages, if any.
In August 1997, a former officer and director of the Company filed a
lawsuit alleging breach of contract and is seeking specific performance and
monetary damages. The Company intends to vigorously contest this lawsuit;
however, given the early stage of the litigation, the Company is unable at this
time to make a meaningful analysis of possible or likely damages, if any.
In September 1997, a former distributor filed a lawsuit alleging the
letter agreement terminating their distribution agreement was breached by the
Company due to the non-issuance of options to purchase 437,500 shares of common
stock at $0.40 per share. These options have been properly reserved for, but
have not been issued.
The Company has resolved the litigation regarding the December 1995
American Arbitration Association award to a consultant of $50,000 plus interest
at prime plus three percent from May 1, 1995. The award and related interest
were paid in full July 1, 1997.
Other litigation referred to in the Company's report on Form 10-K was
resolved during the year ended December 31, 1996.
14
<PAGE> 15
AMERICAN BIOMED, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following documents are filed as exhibits to this Report.
11.1 Computation of Loss Per Common Share
27.1 Financial Data Schedule
REPORTS ON FORM 8-K
None
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN BIOMED, INC.
Date: ,1997 /s/ Steven B. Rash
--------------------- ------------------------------
Steven B. Rash
President and
Chief Executive Officer
Date: , 1997 /s/ Colene F. Blankinship
--------------------- ------------------------------
Colene F. Blankinship, CPA
Controller
Chief Accounting Officer
16
<PAGE> 17
INDEX TO EXHIBITS
The following documents are filed as part of this Report:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
11.1 Computation of Income (Loss) Per Common Share
27.1 Financial Data Schedule
</TABLE>
17
<PAGE> 1
EXHIBIT 11.1
AMERICAN BIOMED, INC. AND SUBSIDIARY
COMPUTATION OF LOSS PER COMMON SHARE
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Computation of loss per common share:
Net Loss $ (619,290) $ (648,992) $ (1,822,494) $ (1,876,388)
Less preferred stock dividends (540,556)
------------ ----------- ------------ ------------
Net loss available to common shareholders $ (619,290) $ (648,992) $ (1,822,494) $ (2,416,944)
============ =========== ============ ============
Weighted average number of common
shares outstanding 15,823,589 12,299,078 14,799,314 10,688,212
============ =========== ============ ============
Loss per common share $ (.04) $ (.05) $ (.12) $ (.23)
============ =========== ============ ============
Computation of loss per common share
assuming full dilution (A):
Weighted average number of shares
Outstanding 15,823,589 12,299,078 14,799,314 10,688,212
============ =========== ============ ============
Loss per common share assuming full
Dilution $ (.04) $ (.05) $ (.12) $ (.23)
============ =========== ============ ============
</TABLE>
- -------------------
(A) This calculation is submitted in accordance with Securities and
Exchange Act of 1934 Release No. 9083 although it is contrary to APB Opinion 15
because it does not result in any dilution.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 717,785
<SECURITIES> 0
<RECEIVABLES> 142,193
<ALLOWANCES> 0
<INVENTORY> 731,151
<CURRENT-ASSETS> 1,797,470
<PP&E> 831,940
<DEPRECIATION> 658,566
<TOTAL-ASSETS> 2,761,991
<CURRENT-LIABILITIES> 1,605,746
<BONDS> 0
0
2
<COMMON> 16,914
<OTHER-SE> 942,520
<TOTAL-LIABILITY-AND-EQUITY> 2,761,991
<SALES> 360,621
<TOTAL-REVENUES> 360,621
<CGS> 222,062
<TOTAL-COSTS> 222,062
<OTHER-EXPENSES> 1,929,481
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 101,021
<INCOME-PRETAX> (1,822,494)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,822,494)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,822,494)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> (.12)
</TABLE>
