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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 March 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF
1934
For the transition period from ________________ to
Commission File Number: 0-19606
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AMERICAN BIOMED, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
Delaware 76-0136574
- ----------------------------------------------------------------------------------------------------------
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
10077 Grogan's Mill Road, Suite 100, The Woodlands, Texas 77380
- ----------------------------------------------------------------------------------------------------------
(address of principal executive offices) (Zip Code)
(281) 367-3895
--------------
(Registrant's telephone number, including area code)
N.A.
----
(Former name, former address and former fiscal year if changed since last report)
</TABLE>
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
March 31, 2000 is 45,144,829.
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AMERICAN BIOMED, INC.
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 5
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
PART II - OTHER INFORMATION
Item 1 Legal Proceedings 8
Item 3 Defaults Upon Senior Securities 8
Item 6 Exhibits and Reports on Form 8-K 9
SIGNATURES 10
INDEX TO EXHIBITS 10
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN BIOMED, INC.
(A Development Stage Enterprise)
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------------- ---------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................................... $ -- $ 12,322
Accounts receivable, trade, net of allowance for doubtful accounts
of $3,100 as of March 31, 2000 and as of December 31, 1999......................... 107,451 119,362
Accounts receivable, other.............................................................. 4,624 4,021
Inventories............................................................................. 395,356 400,797
Other current assets.................................................................... 18,671 32,910
------------ -----------
Total current assets................................................................. 526,102 569,412
Property and equipment, net.................................................................. 68,612 79,942
Patents, net of accumulated amortization of $977,345 and $974,048
on March 31, 2000 and December 31, 1999, respectively................................... 127,371 125,340
Goodwill, net of accumulated amortization of $974,413 and $943,642
on March 31, 2000 and December 31, 1999, respectively................................... 256,423 287,194
Other assets................................................................................. 23,319 23,564
------------ ------------
Total Assets......................................................................... $ 1,001,827 $ 1,085,452
============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Notes payable to stockholders and others................................................ $ 696,184 $ 706,038
Current maturities of long-term debt.................................................... 51,323 54,804
Current maturities of capital lease obligations......................................... 412,346 414,952
Debentures.............................................................................. 1,000,000 700,000
Accounts payable........................................................................ 683,289 749,456
Accrued liabilities..................................................................... 841,975 768,879
------------ ------------
Total current liabilities............................................................ 3,685,117 3,394,129
Capital lease obligations, net of current maturities......................................... -- 179
Deferred revenue............................................................................. 801,890 851,890
------------ ------------
Total liabilities.................................................................... 4,487,007 4,246,198
Commitments and contingencies................................................................ -- --
Stockholders' deficit:
Preferred stock, $.001 par value, 2,560,000 shares authorized, 0 and
23,000 shares issued at March 31, 2000 and December 31, 1999,
respectively............................................................................ -- 23
Common Stock, $.001 par value, 50,000,000 shares authorized,
45,144,829 and 43,054,252 shares issued at March 31, 2000 and
December 31, 1999, respectively......................................................... 45,145 43,054
Additional paid-in capital................................................................... 28,473,028 28,487,818
Deficit accumulated during the developmental stage........................................... (32,003,353) (31,691,641)
------------ ------------
Total stockholders' deficit.......................................................... (3,485,180) (3,160,746)
------------ ------------
Total liabilities and stockholders' deficit.......................................... $ 1,001,827 $ 1,085,452
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
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AMERICAN BIOMED, INC.
(A Development Stage Enterprise)
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
INCEPTION,
THREE MONTHS ENDED SEPTEMBER 4, 1984
MARCH 31, TO MARCH 31,
2000 1999 2000
------------------ ------------------ ------------------
<S> <C> <C> <C>
Sales, net........................................................... $ 64,921 $ 112,691 $ 4,832,261
Cost of sales........................................................ (47,317) (126,671) (4,633,267)
----------- ----------- -------------
Gross profit......................................................... 17,604 (13,980) 198,994
----------- ----------- -------------
Operating expenses:
Selling, general and administrative............................ (309,784) (486,648) (21,520,873)
Research and development....................................... (3,913) (34,213) (8,496,360)
Distributor settlement......................................... -- -- (1,080,915)
----------- ----------- -------------
(313,697) (520,861) (31,098,148)
----------- ----------- -------------
Loss from operations........................................ (296,093) (534,841) (30,899,154)
----------- ----------- -------------
Other income (expense):
Interest income................................................ 10 15 156,467
Interest expense............................................... (78,129) (61,320) (3,398,204)
Other income................................................... 62,500 15,000 2,137,538
----------- ----------- -------------
Other income (expense), net................................. (15,619) (46,305) (1,104,199)
----------- ----------- -------------
Net loss.................................................... (311,712) (581,146) (32,003,353)
Less preferred stock dividends.............................. -- -- (1,353,444)
Net loss available to common
shareholders(1)............................................. $ (311,712) $ (581,146) $ (33,356,797)
=========== =========== =============
Net loss per common share................................... $ (0.01) $ (0.02)
=========== ===========
Weighted average number of common
shares outstanding........................................ 43,062,097 35,358,244
=========== ===========
</TABLE>
(1) Basic and diluted per share net the same.
The accompanying notes are an integral part of the financial statements.
4
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AMERICAN BIOMED, INC.
(A Development Stage Enterprise)
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
INCEPTION,
THREE MONTHS ENDED SEPTEMBER 4, 1984
MARCH 31, TO MARCH 31,
2000 1999 2000
---------- ---------- ------------------
<S> <C> <C> <C>
Net cash used by operating activities....................................... (310,630) (340,967) (22,136,246)
Cash flows from investing activities:
Capital expenditures.................................................... -- -- (612,909)
Investment in patents................................................... (5,328) (500) (528,153)
Other investing activities.............................................. -- -- 290,606
--------- -------- ---------
Net cash provided (used) by investing activities...................... (5,328) (500) (850,456)
Cash flows from financing activities:
Proceeds from notes payable to banks.................................... -- -- 2,333,880
Proceeds from notes payable to stockholders............................. -- -- 1,225,921
Proceeds from notes payable to others................................... -- 5,513 6,708,541
Repayments of notes payable to banks.................................... -- -- (2,070,000)
Repayments of notes payable to stockholders............................. -- -- (822,992)
Repayments of notes payable to others................................... (9,854) (69,068) (6,269,391)
Principal payments under capital lease obligations...................... (6,266) (7,103) (792,107)
Proceeds from patent assignment and leaseback........................... -- -- 500,000
Proceeds from sale of debentures........................................ 300,000 400,000 1,640,000
Proceeds from sale of preferred stock................................... -- -- 9,111,502
Proceeds from sale of common stock and exercise of
unregistered warrants................................................. -- -- 9,522,350
Proceeds from the exercise of stock options............................. -- -- 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.......................................................... -- -- (1,107,246)
Other financing activities.............................................. -- -- 245,553
----------- ----------- -------------
Net cash provided by financing activities............................. 283,880 329,342 22,966,946
----------- ----------- -------------
Net increase (decrease) in cash and cash equvalents......................... (32,078) (12,125) (19,756)
Cash and cash equivalents at beginning of period............................ 12,322 36,463 --
----------- ----------- -------------
Cash and Cash equivalents at end of period.................................. $ (19,756) $ 24,338 $ (19,756)
=========== =========== =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements were
prepared in conformity with Securities and Exchange Commission rules and
regulations, but do not include all information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles. The statements include the accounts of American
BioMed, Inc. and its wholly-owned subsidiary, Cathlab Corporation (jointly the
"Company"), after elimination of all material intercompany transactions and
accounts. In management's opinion, these interim statements reflect all normal
recurring adjustments necessary to present fairly the Company's financial
position, operations results, and cash flows for the three-month period shown.
First quarter results are not necessarily indicative of full-year patterns.
To gain a more complete understanding of these interim financial statements,
please read the Company's 1999 Form 10-K.
2. CAPITAL STOCK
During the first three months of 2000, the Company's outstanding common stock
was increased by a total of
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2,090,577 shares. The increase occurred through the conversion of 15,500 Series
D convertible preferred shares and 7,500 Series E convertible shares into
1,617,951 and 472,626 common shares, respectively.
During the first quarter of 2000, the Company issued to New Millenium Capital
Partners, LLC and AJW Partners, LLC $250,000 and $50,000, respectively, of its
13% Secured Convertible Debentures due April 1, 2000 ("2000 Debentures"), to
raise additional working capital. Offering costs of $30,000, excluding legal
fees, were incurred in the transactions. The 2000 Debentures are convertible
into common stock, and the company agreed to register for resale under the
Securities Act of 1933, as amended, the common shares issuable upon conversion.
The number of shares issuable at conversion shall be equal to the outstanding
principal balance, plus accrued and unpaid interest, divided by the lesser of
(a) $.125 or (b) 60% of the average bid price during the 20 trading days
immemdiately prior to the conversion date.
3. 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:
March 31, 2000 December 31, 1999
-------------- -----------------
Raw materials.......................... $ 95,480 $ 95,480
Work in process........................ 110,164 124,762
Finished goods......................... 189,712 180,555
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$ 395,356 $ 400,797
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6
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4. COMMITMENTS AND CONTINGENCIES
In May 1997, an individual who formerly was Chairman, Chief Scientific
Officer, and a director of the Company filed suit against the Company in the
State District Court of Harris County, Texas. The lawsuit claimed oppressive
action toward a minority shareholder, breach of contract, failure of
consideration for the assignment of certain patent rights, wrongful termination,
and unpaid debts and advances. In October 1998, the suit was settled through an
agreed $400,000 judgment, already paid, and for which a release was filed in
April 1999. The Company additionally agreed to a payment of $200,000 to the
plaintiff, due at such time as the OmniFilter patent might be sold, or, if a
licensing agreement was effected, disbursed as 5% of royalties, until a total of
$200,000 was paid. The $200,000 settlement component is secured by the
OmniFilter patent, but with the security interest subordinated to any lender
requesting such patent as collateral. In April 1999, the Company licensed the
OmniFilter for development and marketing. Subsequently, the plaintiff filed
further suit alleging that the Company anticipatorily breached the agreement to
pay licensing revenues. The Company has filed a response denying the claim. As
of September 1999, royalty expense in the amount of $50,000 has been accrued.
In August 1997, an individual who formerly was Chief Financial Officer,
Secretary and Treasurer, and a director of the Company filed suit against the
Company in the State District Court of Harris County, Texas. The lawsuit
alleged breach of contract with respect to a letter agreement executed in
connection with his employment separation and resignation from the Company's
Board and sought monetary damages of approximately $307,000. On August 24, 1998,
the parties reached a settlement through mediation. The Company paid $2,800 in
cash and, at no cost to the plaintiff, issued stock options to purchase 150,000
of the Company's common shares at an exercise price of $0.6875, with a
guaranteed value of $100,000. Additionally, the Company executed an agreed
judgment in the amount of $85,000 at 10% interest, payable November 1, 1999.
The judgment, still outstanding, was later amended to include the guaranteed
value shortage in the amount of $70,173 for a total of $155,173.
In May 1999, the legal firm of Pennie & Edmonds sued the Company claiming
unpaid fees in the amount of $21,424, together with associated costs of $7,140
for representation in the matter. The case currently is pending in the State
District Court in Harris County, Texas.
In February 2000, the Company was sued by Bowne of Dallas, Inc. claiming
$137,122 in unpaid printing charges. The case is pending in the State District
Court of Dallas County, Texas.
From time to time the Company is a party in other litigation arising in the
course of business. Management regularly analyzes current information and, as
necessary, provides accrual for probable liabilities for the eventual
disposition of the matter. In management's opinion, the ultimate outcome of
these matters will not materially affect the Company's financial position,
results of operations or cash flows. See also Part II, Item 1, "Legal
Proceedings."
5. SUBSEQUENT EVENTS
On April 17, 2000, AJW Partners, LLC and New Millenium Capital Partners II,
LLC purchased an aggregate of $250,000 of 2000 Debentures, netting $225,000 in
proceeds. The 2000 Debentures are convertible into common stock, and the
company agreed to register for resale under the Securities Act of 1933, as
amended, the common shares issuable upon conversion. The number of shares
issuable at conversion shall be equal to the outstanding principal balance, plus
accrued and unpaid interest, divided by the lesser of (a) $.10 or (b) 60% of the
average bid price during the 20 trading days immediately prior to the conversion
date.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
During the first quarter of 2000, the Company continued its efforts to raise
capital and began focusing on making a transition from a development-stage
entity to one with material revenues. The Company's March 1999 shift in
7
<PAGE>
producing its silicone catheters and embolectomy devices to MRI, a manufacturing
facility in Tucson, Arizona, under an exclusive licensing agreement, resulted in
production backlogs for the remainder of the year, limiting acceptance of new
orders. Despite increasing output, the backlog continued into the first quarter
of 2000. Quarterly product sales of $64,921, consequently, were 58% of the prior
year's quarterly level. However, the arrangement offers substantial operating
expense reductions, resulting in a 63% year-to-year first quarter reduction in
cost of sales, from $126,671 to $47,317. Thus, the Company realized a $17,604
quarterly gross margin of 27%, in contrast to a 12% gross deficit for the first
quarter of the prior year. Accelerating production will be required to meet
existing shipment backlogs and to sustain customer confidence in placing new
orders.
Selling, general, and administrative expenses of $309,784 included initial
costs of marketing the OmniCath in Europe, for which CE mark approval for
commercialization was received in November 1999. General and administrative
expenses were 38% lower than for the prior year's quarterly level of $426,553.
A 23% reduction in year-to-year quarterly sales and marketing expenses was
primarily a function of pacing sales to manufacturing output, as well as a
reflection of limitations in capital availability for promotional activities.
During the first quarter of 2000, research and development expenses were
limited to $3,913, a decrease of almost 90% from the prior year's level. The
change partly reflects the April 1999 licensing of the Company's OmniFilter
technology, to be used in carotid angioplasty procedures. Though resulting in a
shift of developmental costs to IntraTherapeutics, Inc., under the arrangement
the Company will be eligible for worldwide royalties upon commercialization of
the product. The Company anticipates future increased research and development
expenses for clinical trials prerequisite to United States market approval for
the OmniCath, contingent on availability of capital.
Interest expense for the quarter increased 21% to $78,129, compared with
$61,320 for the first three months of 1999. The change reflects increased
borrowing and debt and litigation settlements.
Other income of $62,500 represents an increase of 317% from the comparable
quarterly period in 1999. The preponderance of the difference is comprised of
licensing fees under the company's manufacturing licensing agreement with MRI.
In association with the above-discussed changes, during the quarter, the
Company's net loss declined to $311,712 from a loss of $581,146 during the
comparable period in 1999. The change reflects a reduction of over 46%.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000, the Company had a working capital deficiency of
$32,003,353, compared to $31,691,641 at December 31, 1999. Net cash used in
operating activities of $310,630 was 9% less than during the same period of
1999. Financing activities provided cash of $283,880 and was favorably impacted
by issuance of the 2000 Debentures.
On April 1, 2000 the company became in default under its 2000 Debentures.
Upon the default date the aggregate face value liability was $1,000,000.
The Company requires significant additional funds to move from a development-
stage to a fully-operating entity. Uses of funds for such a transition would
include effecting sales and marketing arrangements, extending manufacturing and
distribution activities, and undertaking research and development for
commercializing the OmniCath for peripheral and A-V fistula use. The Company
actively is seeking additional financing through private debt or equity
arrangements. In the event such funding is not secured, research and
development projects and operating activities would be delayed or curtailed and
would have a material adverse effect on the Company's performance. To continue
as a going concern, the company must attract additional capital to redeem the
2000 Debentures or otherwise cure the default and, ultimately, must achieve
profitable operations.
PART II OTHER INFORMATION
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ITEM 1. LEGAL PROCEEDINGS
In March 2000, Prudential Residential Securities, Limited Partnership, d/b/a
Prudential Relocation filed a lawsuit against the Company in the State District
Court of Harris County. The suit seeks payment of $58,207.41 for services
provided, plus interest and costs of the suit. Prudential Relocation's fees
were incurred during 1997 and 1998 in conjunction with sale of the residence of
the Company's former President & Chief Executive Officer, Steven B. Rash.
8
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Additional pending legal matters are described in Note 5 to the Consolidated
Condensed Financial Statements, "Commitments and Contingencies.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
On April 1, 2000 the Company became in default under its 2000 Debentures.
Under such a default, the Company must pay 120% of the principal amounts owing,
as well as accrued unpaid interest. Upon the default date, the aggregate face
value liability for the 2000 Debentures was $1,000,000. The Company is
pursuing financing arrangements that would enable it to address its obligations
under the 2000 Debentures. However, there can be no assurance that such
discussions will eventuate in proceeds satisfactory to cure the default events,
and a failure to do so would have a material adverse effect on the Company's
liquidity and capability to continue as a going concern.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following documents are filed as exhibits to this Report.
--------
27.1 Financial Data Schedule
(b) Reports on Form 8-K
On March 21, 2000, the Company filed a Form 8-K reporting resignation of a
Director on the Company's Board and appointment of a new Chairman & Interim
Chief Executive Officer and a new President to replace the individual formerly
serving as Chairman, President, and Chief Executive Officer.
9
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SIGNATURES
Pursuant to requirements of the Securities and Exchange Act of 1934, the
Registrant has caused this Report to be signed on its behalf by the duly
authorized undersigned individuals.
AMERICAN BIOMED, INC.
Date: May 12, 2000 /s/ Justine B. Corday
-------------------------------
Justine B. Corday
Chairman &
Interim Chief Executive Officer
INDEX TO EXHIBITS
The following documents are filed as part of this Report:
Exhibit
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27.1 Financial Data Schedule
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 110,551
<ALLOWANCES> 3,100
<INVENTORY> 395,356
<CURRENT-ASSETS> 526,102
<PP&E> 674,082
<DEPRECIATION> 605,470
<TOTAL-ASSETS> 1,001,827
<CURRENT-LIABILITIES> 3,685,117
<BONDS> 0
0
0
<COMMON> 45,145
<OTHER-SE> (3,440,035)
<TOTAL-LIABILITY-AND-EQUITY> 1,001,827
<SALES> 64,921
<TOTAL-REVENUES> 64,921
<CGS> 47,317
<TOTAL-COSTS> 47,317
<OTHER-EXPENSES> 313,697
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 78,129
<INCOME-PRETAX> (311,712)
<INCOME-TAX> 0
<INCOME-CONTINUING> (311,712)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (311,712)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
