U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
[x] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended July 31, 1997.
[ ] 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: 0-28666
AMERICAN BIO MEDICA CORPORATION
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(Exact name of small business issuer as specified in its charter)
New York 22-3378935
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(State or other jurisdiction (I.R.S.Employer
incorporation or organization Identification No.)
102 Simons Road Ancramdale, New York 12503
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(Address of principal executive offices)
800-227-1243
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(Issuer's telephone number)
(Not Applicable)
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer
(1) filed all reports required to be filed by Section 13 or 15(d) of the
Exchange Act during the past 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 [ ]
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date:
13,680,627 common shares as of July 31, 1997
20 Convertible "A" Preferred Shares as of July 31, 1997
Transitional Small Business Disclosure Format Yes [ ] No [X]
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
The condensed financial statements for the periods ended July 31, 1997
included herein have been prepared by American Bio Medica Corporation, (the
"Company") without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission (the "Commission"). In the opinion of
management, the statements include all adjustments necessary to present fairly
the financial position of the Company as of July 31, 1997, and the results of
operations and cash flows for the three month periods ended July 31, 1996 and
1997.
2
<PAGE>
AMERICAN BIO MEDICA CORPORATION
BALANCE SHEET
July 31,
April 30, 1997
1997 Unaudited
--------- ---------
Assets
Current assets
Cash $1,762,506 $2,143,974
Marketable securities,
available for sale 1,053,000 -0-
Accounts receivable 337,759 961,288
Loan receivable 102,250 102,250
Inventory 668,723 668,126
Prepaid expenses 4,425 4,424
-------- --------
Current assets 3,928,663 3,880,062
Capital assets-net 110,834 129,266
Other assets
License rights 38,470 21,320
Patent costs 28,783 31,593
------ -------
Total other asset 67,253 52,913
------ ------
Total assets $4,106,750 $4,062,241
========== ==========
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and
accrued expenses $380,155 $213,658
-------- --------
Total current liabilities 380,155 213,658
Capital stock
Common stock-authorized
30,000,000 common
shares, par value $.01
each, at April 30, 1997
and July 31, 1997, the
shares outstanding were
13,379,507 and 13,680,577
respectively. 133,795 136,806
Preferred stock-authorized
5,000,000 preferred
shares, par value $.01 each,
at April 30, 1997 and July
31, 1997, the number of
shares outstanding
was 90 and 20 respectively 1 1
Additional paid in capital 6,499,791 6,496,780
Retained earnings (2,906,992) (2,785,004)
----------- ----------
Total stockholders' equity 3,726,595 3,848,583
----------- ----------
Total liabilities
and stockholders' equity $4,106,750 $4,062,241
========== ==========
See accompanying notes to financial statements.
3
<PAGE>
AMERICAN BIO MEDICA CORPORATION
STATEMENT OF OPERATIONS
For the three For the three
months ended months ended
July 31, July 31,
1996 1997
Unaudited Unaudited
------------- ------------
Revenue $27,444 $816,917
Less cost of
goods sold 6,226 356,782
-------- ---------
Gross profit 21,218 460,135
Operations:
General
administrative 174,947 389,555
Depreciation and
amortization 19,400 24,199
Research and
development 57,258
------ --------
Total expenses 251,605 413,754
Income (loss) from
operations (230,387) 46,381
Other income and
expenses
Retirement of
debt 126,500
Interest income 397 75,607
------- ------
Total other income
and expenses 126,897 75,607
------- ------
Net Profit (Loss)
from operations $(103,490) $121,988
========== ========
Net income (loss)
per share $(.01) $.01
====== ======
Weighted number of
shares outstanding 12,510,894 13,680,627
========== ==========
See accompanying notes to financial statements.
4
<PAGE>
AMERICAN BIO MEDICA CORPORATION
STATEMENT OF CASH FLOWS
For the three For the three
months ended months ended
July 31, July 31,
1996 1997
Unaudited Unaudited
--------- ---------
CASH FLOWS FROM
OPERATING ACTIVITIES
Net profit (loss) $(103,490) $121,988
Compensation 50,000
Retirement of debt (126,500)
Amortization and
depreciation 19,400 24,199
--------- --------
Adjustments to
reconcile net
income to net cash
Accounts receivable 6,562 (623,529)
Inventory (274) 597
Accounts payable
and accrued expenses (10,086) (166,497)
-------- ---------
TOTAL CASH FLOWS
FROM OPERATIONS (164,388) (643,242)
CASH FLOW FROM
FINANCING ACTIVITIES
Sale of common shares 142,000
-------
TOTAL CASH FLOWS FROM
FINANCING ACTIVITIES 142,000
CASH FLOWS FROM
INVESTING ACTIVITIES
Marketable securities 1,053,000
Patent costs (2,810)
Capital assets (14,252) (25,480)
------- ----------
TOTAL CASH FLOWS
FROM INVESTING
ACTIVITIES (14,252) 1,024,710
NET INCREASE (DECREASE) IN CASH (36,640) 381,468
CASH BALANCE BEGINNING OF PERIOD 437,532 1,762,506
-------- ---------
CASH BALANCE END OF PERIOD $400,892 $2,143,974
======== ==========
See accompanying notes to financial statements.
5
<PAGE>
AMERICAN BIO MEDICA CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
Additional
Common Common Preferred paid-in Retained
Stock Stock Stock capital Earnings Total
---------- ------- --------- ---------- ---------- --------
04-30-1996 11,977,357 119,774 2,636,127 (2,401,671) 354,230
06-04-1996 11,333 113 8,387 8,500
06-04-1996 25,000 250 24,750 25,000
07-31-1996(1) 176,000 1,760 130,240 132,000
07-31-1996(1) 13,333 133 9,867 10,000
07-31-1996(2) 100,000 1,000 49,000 50,000
07-31-1996(3) 32,000 320 31,680 32,000
07-31-1996(4) 100,000 1,000 99,000 100,000
09-09-1996(3) 18,000 180 17,820 18,000
09-23-1996(5) 1 1,409,999 1,410,000
01-31-1997(6) 697,445 6,975 2,085,211 2,092,186
04-30-1997(7) 229,039 2,290 (2,290) -0-
04-30-1997 Net loss (505,321) (505,321)
--------- -------- -- ---------- ----------- ---------
04-30-1997 13,379,507 133,795 $1 $6,499,791 $(2,906,992) $3,726,595
Unaudited
07-31-1997(7) 301,120 3,011 (3,011)
07-31-1997 Net profit
121,988 121,988
---------- ------- --- --------- ------------ --------
07-31-1997 13,680,627 $136,806 $1 $6,496,780 $2,785,004 $3,848,583
========== ======= == ========= ========== ==========
6
<PAGE>
AMERICAN BIO MEDICA CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
(1) Common Shares issued for conversion of debt
(2) Common Shares issued pursuant to Rule 504 at $.50 per share
(3) Common Shares issued upon exercise of "B" Warrants
(4) Common Shares issued upon exercise of "A" Warrants
(5) Sale of Preferred Shares for $1,500,000 less commissions of $90,000
(6) Common Shares issued upon exercise of warrants
(7) Conversion of Preferred Shares into Common Shares
7
<PAGE>
AMERICAN BIO MEDICA CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JULY 31, 1997
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements of American Bio Medica,
Corporation, (the "Company"), reflect all adjustments which are, in the opinion
of management, necessary to a fair statement of the results of the interim
periods presented. All such adjustments are of a normal recurring nature. The
financial statements should be read in conjunction with the notes to financial
statements contained in the Company's Annual Report on Form 10KSB for the year
ended April 30, 1997.
2. INVENTORIES.
Inventory has been recorded at the lower of cost or market under the
first-in-first-out method. Inventory components were as follows:
April 31, 1997 July 31, 1997
-------------- -------------
Books held for resale $ 43,528 $48,116
Workplace drug screening tests:
Raw materials 292,456 305,102
Work in process 183,500 110,876
Finished Goods 149,239 204,032
--------- ---------
Total workplace drug screening tests: $ 625,195 $620,010
--------- ---------
Total inventory $668,723 $668,126
3. NET INCOME PER SHARE
Primary earnings per share are based on the weighted average number of
common and dilutive common equivalent shares outstanding during each quarter.
The weighted average shares for computing primary earnings per share were
12,510,894 and 13,680,627 for the quarters ended July 31, 1996 and
1997,respectively
4. ACCOUNTING FOR INCOME TAXES
The Company follows Statement of Financial Accounting Standards (SFAS) No.
109, "Accounting for Income Taxes," which requires an asset and liability
approach of accounting for income taxes. Deferred tax assets and liabilities are
computed annually for differences between financial statement basis and tax
basis of assets, liabilities and available general business tax credit
carry-forwards. A valuation allowance is established when necessary to reduce
deferred tax assets to the amount expected to be realized.
5. MARKETABLE SECURITIES
The Company adopted Financial Accounting Standards Board ("FASB") Statement
No. 115, "Accounting for Certain Investments in Debt and Equity Securities",
which requires that investments in equity securities that have readily
determinable fair values and investments in debt securities be classified in
three categories: held-to-maturity, trading and available-for-sale. Based on the
nature of the assets held by the Company and Management's investment strategy,
the Company's investments have been classified as available-for-sale. Management
determines the appropriate classification of debt securities at the time of
purchase and reevaluates such designation as of each balance sheet date.
Securities classified as available-for-sale are carried at estimated fair
value, as determined by quoted market prices, with unrealized gains and losses,
net of tax, reported in a separate component of stockholders' equity. At July
31, 1997, the Company had no investments that were classified as trading or
held-to-maturity as defined by the Statement.
8
<PAGE>
The following is a summary of cash, cash equivalents and available-for-sale
securities by balance sheet classification at April 30, 1997:
Estimated
Gross Gross Fair
Unrealized Unrealized Market
Cost Gains Losses Value
---- ----- ------ ------
Cash $ 99,039 $-0- $-0- $ 99,039
Certificates of deposit
90 days and less 1,663,467 -0- -0- 1,663,467
----------- ---- ---- -----------
Total cash and cash
equivalents $ 1,762,506 $-0- $-0- $1,762,506
========== === === =========
Marketable Securities
Due in one year or
less Certificates of
Deposit $1,053,000 $-0- $-0- $1,053,000
========= === === =========
The following is a summary of cash, cash equivalents and available-for-sale
securities by balance sheet classification at July 31, 1997:
Estimated
Gross Gross Fair
Unrealized Unrealized Market
Cost Gains Losses Value
---- ----- ------ --------
Cash $ 79,700 $-0- $-0- $ 79,700
Certificates of deposit
90 days and less 2,063,274 -0- -0- 2,063,274
---------- --- ----- -----------
Total cash and cash
equivalents $ 2,142,974 $-0- $-0- $2,142,974
========== === === =========
6. SUBSEQUENT EVENTS
As of August 28, 1997, the remaining 20 Preferred Series "A" Shares had
been converted into 102,914 Common Shares.
9
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
for the three months ended July 31, 1996 and 1997
-------------------------------------------------
Except for the description of historical facts contained herein, this Form
10Q-SB contains certain forward looking statements that involve risks and
uncertainties as detailed herein and from time to time in the Company's filings
with the Securities and Exchange Commission and elsewhere. Such statements are
based on management's current expectations and are subject to a number of
factors and uncertainties which could cause actual results to differ materially
from those described in the forward-looking statements. These factors include,
among others, the Company's fluctuations in sales and operating results, risks
associated with international operations and regulatory, competitive and
contractual risks and product development.
Results of operations for the three months ended July 31, 1997 as compared
to the three months ended July 31, 1996.
- --------------------------------------------------------------------------------
Revenues from the book segment of the business were $110,368 for the three
months ended July 31, 1997 as compared to $27,444 for the three months ended
July 31, 1996, representing a increase of $82,924 or 302.2%. This increase in
book sales is directly attributable to the Company's reorganization of its
telemarketing activities and a bulk inventory purchase. Costs of goods sold for
the three months ended July 31, 1997, were $27,671 as compared to $6,226 for the
three months ended July 31, 1996 representing a cost of goods sold percentage of
25% for the three months ended July 31, 1997 as compared to 22.7% for the three
months ended July 31, 1996. The cost of goods sold percentage during the first
quarter of fiscal 1998 remains approximately consistent with the percentage
during the first quarter of fiscal 1997.
Revenues from the sales of drug testing kits were $705,262 for the three
months ended July 31, 1997. Costs of goods sold for the three months ended July
31, 1997 was $329,111 or 46.7%. No sales of drug testing kits were made in the
first quarter of fiscal 1997.
General and administrative costs for the three months ended July 31, 1997
were $413,754, an increase of 60.8% over expenses of $251,605 for the three
months ended July 31, 1996. These increased costs are the result of hiring
additional employees in sales, marketing, accounting and executive positions.
For the three months ended July 31, 1997, office personnel costs were $171,349,
legal and professional expenses, $20,808, office expense, $12,782, marketing
expense, $186,011, product development, $18,662 and rent, $4,142. Research and
development expense was $-0- for the three months ended July 31, 1997 compared
to $57,258 during the three months ended July 31, 1996. This decrease in
research and development is the result of the completion of development of the
existing drug testing delivery system.
Liquidity and capital resources as of the end of the three months ended
July 31, 1997.
- --------------------------------------------------------------------------------
The Company's cash balance was $2,143,974 and working capital was
$3,666,404 as at July 31, 1997. Cash generated from financing activities was
utilized for the purchase of machinery and equipment for $25,480 and additional
patent costs of $2,810.
The Company's primary short-term needs for capital, which are subject to
change, are for expansion of its manufacturing to adequately deliver new
products and an increase in inventory levels to fill larger anticipated orders.
10
<PAGE>
Management believes that the present cash balance will pay the ongoing cost
of the biomedical business. The Company has established commercial production of
its drug testing kits and no longer considers itself to be a development stage
company.
Income tax: As of July 31, 1997, the Company has a tax loss carry-forward
of $2,785,004. The Company's ability to utilize its tax credit carry-forwards in
future years will be subject to an annual limitation pursuant to the "Change in
Ownership Rules" under Section 382 of the Internal Revenue Code of 1986, as
amended. However, any annual limitation is not expected to have a material
adverse effect on the Company's ability to utilize its tax credit
carry-forwards.
The Company currently plans to expend approximately $2.0 million for the
expansion and development of its manufacturing, marketing and general
administrative capabilities in connection with the fulfillment of the Company's
marketing program and the anticipated launch of the Company's products currently
under development. Additionally, the Company utilizes cash generated from
operating activities to meet its capital requirements.
The Company expects its capital requirements to increase over the next
several years as it commences new research and development efforts, undertakes
new product development, increases sales and administration infrastructure and
embarks on developing in-house manufacturing capabilities and facilities. The
Company's future liquidity and capital funding requirements will depend on
numerous factors, including the extent to which the Company's products under
development are successfully developed and gain market acceptance, the timing of
regulatory actions regarding the Company's potential products, the costs and
timing of expansion of sales, marketing and manufacturing activities, facilities
expansion needs, procurement and enforcement of patents important to the
Company's business, results of clinical investigations and competition.
The Company believes that its available cash and cash from operations will
be sufficient to satisfy its funding needs for at least the next 36 months.
Thereafter, if cash generated from operations is insufficient to satisfy the
Company's working capital and capital expenditure requirements, the Company may
be required to sell additional equity or debt securities or obtain additional
credit facilities. There can be no assurance that such financing, if required,
will be available on satisfactory terms, if at all.
11
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
In February, 1994, Robert Friedenberg, former stockholder of two medical
technology companies, MDI and Gendex, acquired by the Company, filed suit in the
name of the two companies to have an agreement whereby the Company purchased
those companies (the "Share Exchange Agreement") for its Common Shares rescinded
on the grounds of breach of contract. The Company filed a third party claim in
July, 1994, against Dr. Friedenberg, seeking enforcement of the Share Exchange
Agreement. In November, 1995, after a bifurcated trial, the court dismissed Dr.
Friedenberg's (in the name of MDI and Gendex) lawsuit and allowed the Company's
third party claim to proceed to trial. In September, 1996, Dr. Friedenberg died.
Trial on the third party claim was decided by a jury on May 5, 1997. The
verdict determined that Dr. Friedenberg (represented by his estate) breached
various contracts by failing to deliver certain technologies to the Company. The
jury also found in favor of the Company on two of the three fraud claims against
Dr. Friedenberg and awarded the Company approximately $350,000 in damages. The
trial judge, who is bound by the jury verdict against Friedenberg, will decide
Dr. Friedenberg's estate's pending claim to the Company's Common Shares. The
Company has refused to issue any shares to him or to his estate.
In June, 1995, the Company filed a lawsuit against Jackson Morris, Esq. for
breach of the attorney-client relationship and of his fiduciary duty to the
Company for subsequently providing legal services to Dr. Friedenberg in his
dispute with the Company. The Company's lawsuit demands damages in the amount of
$1,000,000. Mr. Morris has counterclaimed for Common Shares. The court has set a
trial date of September 14, 1998.
Item 2. Changes in Securities
As of July 31, 1997, 130 of 150 Preferred Series "A" Shares had been
converted into Common Shares. As of August 28, 1997, all the Preferred Series
"A" Shares had been converted into Common Shares.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security-Holders
None.
12
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN BIO MEDICA CORPORATION
(Registrant)
By: s/Stan Cipkowski
------------------
Stan Cipkowski,
President and Principal
Executive Officer and
Principal Financial Officer
Dated: August 28, 1997
13
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
financial statements for the nine month period ended January 31, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-END> Jul-31-1997
<CASH> 2,143,974
<SECURITIES> 0
<RECEIVABLES> 961,288
<ALLOWANCES> 0
<INVENTORY> 668,126
<CURRENT-ASSETS> 3,880,062
<PP&E> 171,200
<DEPRECIATION> (41,934)
<TOTAL-ASSETS> 4,062,241
<CURRENT-LIABILITIES> 213,658
<BONDS> 0
0
1
<COMMON> 136,806
<OTHER-SE> 3,711,782
<TOTAL-LIABILITY-AND-EQUITY> 3,848,583
<SALES> 816,917
<TOTAL-REVENUES> 816,917
<CGS> 356,782
<TOTAL-COSTS> 413,754
<OTHER-EXPENSES> 75,607
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 121,988
<INCOME-TAX> 0
<INCOME-CONTINUING> 121,988
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 121,988
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
