SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 2054
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FORM 10KSB-1A
[/] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934. For the fiscal year ended April 30, 1997
Commission File Number: 333-16535
AMERICAN BIO MEDICA CORPORATION
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(Name of Small Business Issuer in its charter )
New York 22-3378935
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(State or other Jurisdiction (IRS Employer Identification
of Incorporation or Organization) Number)
102 Simons Road
Ancramdale, New York 12503
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(Address of principal executive Offices) (Zip Code)
Issuer's telephone number: (800) 227-1243
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Shares, $.01 par value per share
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.
[x] Yes [ ] No
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will 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-KSB
or any amendment to this Form 10-KSB. [x]
State issuer's revenues for its most fiscal year $610,876.
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days.
As of July 2, 1997, there were 7,243,925 common shares held by
non-affiliates ("Shares") outstanding having an aggregate market value of
$28,975,700.
Documents incorporated by reference:
Proxy Statement for Fiscal 1998 Annual Meeting of Shareholders
2
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
THOMAS P. MONAHAN
CERTIFIED PUBLIC ACCOUNTANT
208 LEXINGTON AVENUE
PATERSON, NEW JERSEY 07502
(201) 790-8775
To The Board of Directors and Shareholders
of American Bio Medica Corporation
I have audited the accompanying balance sheet of American Bio Medica
Corporation as of April 30, 1997 and the related statements of operations, cash
flows and shareholders' equity for the years ended April 30, 1996 and 1997.
These financial statements are the responsibility of the Company's Management.
My responsibility is to express an opinion on these financial statements based
on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I 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 and significant estimates made by
Management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of American Bio Medica
Corporation as of April 30, 1997 and the results of its operations, shareholders
equity and cash flows for the years ended April 30, 1996 and 1997 in conformity
with generally accepted accounting principles.
/s/Thomas P. Monahan
Thomas P. Monahan, CPA
May 28, 1997
Paterson, New Jersey
F-1
<PAGE>
AMERICAN BIO MEDICA CORPORATION
BALANCE SHEET
April 30, April 30,
1996 1997
---- ----
Assets
Current assets
Cash $437,532 $1,762,506
Marketable securities,
available for sale 1,053,000
Accounts receivable 34,500 337,759
Loan receivable 102,250
Inventory 22,301 668,723
Prepaid expenses 4,425
--------- --------
Current assets 494,333 3,928,663
Capital assets-net 20,575 110,834
Other assets
License rights 110,070 38,470
Patent-costs 21,000 28,783
------- ------
Total other assets 131,070 67,253
------- ------
Total assets $645,978 $4,106,750
========= ==========
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued expenses $33,248 $380,155
Notes payable
Convertible debenture payable 132,000
------- -------
Total current liabilities 165,248 380,155
Long term liabilities
Convertible debenture payable
Note payable 126,500
-------
Total long term liabilities 126,500
Capital stock
Common Shares - authorized
30,000,000 common shares,
par value $.01 each, at
April 30, 1996 and 1997,
the shares outstanding were 11,977,357
and 13,379,507 respectively. 119,774 133,795
Preferred shares - authorized 5,000,000
preferred shares, par value $.01 each,
at April 30, 1997, the number of shares
outstanding was 90 1
Additional paid in capital 2,636,127 6,499,791
Retained Eaqrnings (2,401,671) (2,906,992)
----------- -----------
Total stockholders' equity 354,230 3,726,595
------- ---------
Total liabilities and stockholders' equity $645,978 $4,106,750
======== ==========
See accompanying notes to financial statements.
F-2
<PAGE>
AMERICAN BIO MEDICA CORPORATION
STATEMENT OF OPERATIONS
For the year For the year
ended ended
April 30, April 30,
1996 1997
------ --------
Income 158,105 $610,876
Less cost of goods sold 96,444 259,862
------- -------
Gross profit 61,661 351,014
Operations:
General and administrative 518,826 867,903
Depreciation and amortization 77,600 96,134
Research and development 358,844 74,978
-------- ------
Total expense 955,270 1,039,015
Income before other income and expenses (893,609) (688,001)
Other income and expenses
Retirement of debt (Note 10) 126,500
Interest income 356 56,180
Interest expense (103,205)
--------- -------
Total other income and expenses (102,849) 182,680
--------- -------
Net Profit (Loss) from operations $(996,458) $(505,321)
========== ==========
Net income (loss) per share $(.08) $(.04)
===== =====
Number of shares outstanding 12,528,266 12,728,180
========== ==========
See accompanying notes to financial statements.
F-3
<PAGE>
AMERICAN BIO MEDICA CORPORATION
STATEMENT OF CASH FLOWS
For the year For the year
ended ended
April 30, April 30,
1996 1997
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net profit (loss) $(996,458) $(505,321)
Amortization and depreciation 77,600 96,134
Consulting fees 306,250
Compensation agreement 125,000
Retirement of debt (Note 9) (126,500)
---------- ---------
(487,608) (535,687)
Adjustments to reconcile net income to net cash
Loan receivable (102,250)
Accounts receivable 38,079 (303,259)
Inventory 5,250 (646,422)
Prepaid expenses 15,089 (4,425)
Accounts payable (30,828) 346,907
-------- -------
TOTAL CASH FLOWS FROM OPERATIONS (460,018) (1,245,136)
CASH FLOWS FROM FINANCING ACTIVITIES
Convertible debenture 693,000 (132,000)
Notes payable (89,289)
Sale of stock 150,000 3,877,686
Issuance of stock for services 61,006
------ ---------
TOTAL CASH FLOWS FROM FINANCING ACTIVITIES 814,717 3,745,686
CASH FLOWS FROM INVESTING ACTIVITIES
Investment short term (1,053,000)
Patent costs (7,783)
Capital assets (114,793)
---------
TOTAL CASH FLOWS FROM INVESTING ACTIVITIES (1,175,576)
NET INCREASE (DECREASE) IN CASH 354,699 1,324,974
CASH BALANCE BEGINNING OF PERIOD 82,833 437,532
------ -------
CASH BALANCE END OF PERIOD $437,532 $1,762,506
======== ==========
See accompanying notes to financial statements.
F-4
<PAGE>
AMERICAN BIO MEDICA CORPORATION
STATEMENT OF SHAREHOLDERS' EQUITY
Additional
Common Common Preferred paid in Retained
Date Stock Stock Shares capital Earnings Total
---- ------- ------ --------- --------- -------- -----
04-30-1994 11,238,174 112,382 726,294 (1,099,885) (261,209)
10-18-1995(1)(3,000,000) (30,000) 30,000
04-30-1995 (305,328) (305,328)
----------- -------- ------- ----------- ---------
04-30-1995 8,238,174 82,382 756,294 (1,405,213) (566,537)
11-03-1995 500,000 5,000 120,000 125,000
04-30-1996(2) 1,700,002 17,000 1,258,000 1,275,000
04-30-1996(3) 25,000 250 24,750 25,000
04-30-1996(4) 250,000 2,500 122,500 125,000
04-30-1996(5) 489,181 4,892 56,083 60,975
04-30-1996(6) 125,000 1,250 61,250 62,500
04-30-1996(7) 100,000 1,000 64,000 65,000
04-30-1996(8) 550,000 5,500 173,250 178,750
04-30-1996 Net loss (996,458) (996,458)
-------- -------- ---------- ----------- ---------
04-30-1996 11,977,357 $119,774 $2,636,127 $(2,401,671) $354,230
06-04-1996(2) 11,333 113 8,387 8,500
06-04-1996(9) 25,000 250 24,750 25,000
07-31-1996(2) 176,000 1,760 130,240 132,000
07-31-1996(2) 13,333 133 9,867 10,000
07-31-1996(6) 100,000 1,000 49,000 50,000
07-31-1996(9) 32,000 320 31,680 32,000
07-31-1996(10 100,000 1,000 99,000 100,000
09-09-1996(9) 18,000 180 17,820 18,000
09-23-1996(11) $ 1 1,409,999 1,410,000
01-31-1996(12) 697,445 6,975 2,085,211 2,092,186
04-30-1997(13) 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
========== ======== ==== ========== ============ ==========
(1) Return of common shares by Edmund Jaskiewicz
(2) Common shares issued for conversion of debt
(3) Common shares issued pursuant to sale of 25,000 Units
(4) Common shares issued for Warrant conversion at $.50
(5) Common shares issued in consideration for services under Regulation D at
$.125 per share
(6) Common shares issued pursuant to Rule 504 at $.50 per share
(7) Common shares issued under Rule 504 at $.65 per share
(8) Common shares issued pursuant Regulation D at $.325 per share
(9) Common shares issued upon exercise of "B" Warrants
(10) Common shares issued upon exercise of "A" Warrants
(11) Shares of preferred stock for $1,500,000 less $90,000 in offering
expense
(12) Common shares issued upon exercise of warrants
(13) Coversion of convertible preferred shares into common
See accompanying notes to financial statements.
F-5
<PAGE>
AMERICAN BIO MEDICA CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED APRIL 30, 1997
Note 1 - Organization of the Company and Issuance of Common Shares
a. Creation of the Company
American Bio Medica Corporation (the "Company") was formed under the laws
of the State of New York on April 10, 1986 under the name, American Micro Media,
Inc. The authorized capital was 200 common shares without par value. On May 20,
1986, the Company amended its certificate of incorporation to increase the
number of authorized common shares to 20,000,000 shares of $.01 par value per
share. On September 12, 1986, the Company amended its certificate of
incorporation to remove preemptive rights. On September 28, 1992, the Company
amended its certificate of incorporation to increase the aggregate number of
authorized common shares to 30,000,000 shares of $.01 par value per share
("Common Shares") and to change its name to American Bio Medica Corporation. In
October, 1996, the Company amended its certificate of incorporation authorizing
the issuance of 5,000,000 Preferred Shares, ("Preferred Shares"), $.01 par value
each.
b. Description of the Company
From inception until 1991, the Company was involved in marketing
educational books and software to schools and municipal libraries and
audio-visual educational packages to corporations throughout the United States.
In 1991, the Company reduced its concentration on this market because of
competition, increasing costs of doing business and slow collections from
municipalities and sought new technologies in emerging medical markets. The
Company has, however, continued to sell audiovisual packages to libraries.
The Company is currently in the business of acquiring, developing and
marketing biomedical technologies and products. The Company currently owns two
technologies for screening drugs of abuse, a workplace screening test and a
preliminary test for use by laboratories.
The Company was considered to be a development stage company with little
operating history subsequent to its reorganization and the commencement of
development of its newly acquired bio-medical technologies which are, at
present, its core business. These activities have been funded through the sale
of convertible debentures aggregating $1,425,500 which were subsequently
converted to Common Shares at $.75 per share, and the receipt of $175,000
through the exercise of 143,000 "A" warrants at $1.00 and 32,000 "B" warrants at
$1.00 per share. The Company also sold 150 convertible Preferred Shares at
$10,000 per share for aggregate consideration of $1,500,000 and net proceeds of
$1,405,000. As of April 30, 1997, the Company sold 697,445 Common Shares for an
aggregate consideration of $2,092,186 through the exercise of nonstatutory stock
options. The Company has started commercial production of its drug testing kits
and has what managment maintains are adequate resources to adequately fund its
operations.
c. Issuance of Common Shares
On November 5, 1995, the Company entered into a three year employment
agreement with Jay Bendis, Vice-President-Marketing. Pursuant to this agreement,
the Company is obligated to issue 500,000 Common Shares. 400,000 of such shares
are subject to vesting provisions.
As of April 30,1996, the Company had borrowed an aggregate of $2,121,000 on
a convertible debenture basis, the principal amount of each debentures
convertible at the option of the holder into Common Shares at $.75 per share. As
of April 30, 1996, the principal amount of all the convertible debentures had
been converted into an aggregate of 1,700,002 Common Shares.
As of April 30, 1996, the Company sold, through a private placement, 25,000
Units consisting of 25,000 Common Shares, 500,000 "A" Warrants and 50,000 "B"
Warrants for an aggregate consideration of $25,000.
F-6
<PAGE>
AMERICAN BIO MEDICA CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED APRIL 30, 1997
As of April 30, 1996, Unit holders exercised 250,000 "A" Warrants into
250,000 Common Shares at an exercise price of $.50, for an aggregate of
$125,000.
As of April 30, 1996, the Company issued 489,181 Common Shares in
consideration for past services to five individuals in the amount of $60,975 or
an average consideration of $.125 per share.
As of April 30, 1996, the Company issued to OTC Communications 100,000
Common Shares under Rule 504 ("Rule 504") to the Securities Act of 1933, as
amended, (the "Securities Act") as consideration for financial consulting
services rendered per contract at a value of $.65 per share.
As of April 30, 1996, the Company issued to Riverside Consulting Group,
Inc. 25,000 Common Shares under Rule 504 in consideration for financial
consulting services of $12,500 at $.50 per share.
As of April 30, 1996, the Company issued 100,000 Common Shares to two
persons at $.50 per share in consideration for financial consulting services.
As of April 30, 1996, the Company approved the issuance to OTC
Communications 500,000 Common Shares under Regulation D as consideration for
financial consulting services rendered per contract and 50,000 Common Shares for
expenses at a value of $178,750 or $.325 per share.
On June 4, 1996, the Company sold $8,500 of convertible debentures and
converted them into 11,333 Common Shares.
On June 4, 1996, the Company sold 25,000 Common Shares at $1.00 through the
exercise of 25,000 "A" Warrants for an aggregate consideration of $25,000.
As of July 31, 1996, the Company had converted the balance of the
outstanding convertible debentures in the amount of $132,000 into 176,000 Common
Shares at $.75 per share.
As of July 31, 1996, the Company sold an additional convertible debenture
in the amount of $10,000 which was converted into 13,333 Common Shares at $.75
per share.
As of July 31, 1996, the Company sold 100,000 Common Shares at $1.00
through the exercise of 100,000 "A" Warrants for an aggregate consideration of
$100,000.
As of July 31, 1996, the Company sold 32,000 Common Shares at $1.00 per
share through the exercise of 32,000 "B" Warrants for an aggregate consideration
of $32,000.
As of July 31, 1996, the Company issued 100,000 Common Shares pursuant to a
private placement under Rule 504 of the Securities Act of 1933, as amended at
$.50 per share for an aggregate consideration of $50,000.
F-7
<PAGE>
AMERICAN BIO MEDICA CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED APRIL 30, 1997
As of September 30, 1996, the Company sold 18,000 Common Shares at $1.00
per share through the exercise of 18,000 "B" Warrants for an aggregate
consideration of $18,000.
As of April 30, 1997, 697,445 nonstatutory options were exercised for an
aggregate consideration of $2,092,186.
As of April 30, 1997, 60 convertible Preferred Shares had been converted
into 229,039 Common Shares.
Note 2 - Summary of Significant Accounting Policies
a. Basis of Financial Statement Presentation
The financial statements presented consist of the balance sheet dated April
30, 1997 and the related statements of operations, retained earnings and cash
flows for the years ended April 30, 1996 and 1997.
b. Earnings per Share
Earnings per share have been computed on the basis of weighted average
number of Common Shares outstanding. The total number of shares outstanding at
April 30, 1996 and 1997 was 12,528,266 and 12,728,180 respectively.
c. Revenue Recognition
Revenue is recognized when merchandise is shipped or services are rendered.
d. Organization Expense
The cost of organizing the Company was charged to operations on a straight
line basis over a five year period.
F-8
<PAGE>
AMERICAN BIO MEDICA CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED APRIL 30, 1997
e. Cash and Cash Equivalents
Cash and cash equivalents consist of cash and highly liquid investments
with a maturity of three months or less. Excess cash balances are primarily
invested in U.S. treasury bills with lesser amounts invested in high quality
commercial paper and time deposits.
f. Research and Development Expenses
Research and development costs are charged to operations when incurred.
g. Patents and License Agreements
Certain costs incurred to acquire exclusive licenses of patentable
technology are capitalized and amortized over a five year period or the term of
the license, whichever is shorter. The portion of these amounts determined to be
attributable to patents is amortized over their remaining lives and the
remainder is amortized over the estimated period of benefit but not more than 40
years. h. Concentration of Credit Risk
The Company sells its products primarily to United States distributors.
Credit is extended based on an evaluation of the customer's financial condition,
and generally collateral is not required. Credit losses have been minimal and
within Management's expectations.
The Company invests its excess cash in debt instruments of financial
institutions and corporations with strong credit ratings. The Company has
established guidelines relative to diversification and maturities that maintain
safety and liquidity. These guidelines are periodically reviewed and modified to
take advantage of trends in yields and interest rates. The Company has not
experienced any realized losses on its marketable securities.
Note 3 - Marketable Securities, Available for Sale
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 April
30, 1997, the Company had no investments that were classified as trading or
held-to-maturity as defined by the Statement.
F-9
<PAGE>
AMERICAN BIO MEDICA CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED APRIL 30, 1997
Note 4 - Balance Sheet Information
a. Inventory
Inventory has been recorded at the lower of cost or market under the
first-in-first-out method. Inventory components were as follows:
April 30, 1996 April 31, 1997
Books held for resale $22,301 $ 43,527
Workplace drug screening tests:
Raw materials 292,456
Work in process 183,500
Finished Goods 149,239
-------
Total workplace drug screening tests: -0- 625,195
------- -------
Total inventory $22,301 $668,722
b. Property, equipment and leasehold improvements consist of the following:
April 30, 1996 April 30, 1997
Office equipment $32,575 $ 45,702
Manufacturing and warehouse equipment 87,666
------- -------
Total 32,575 133,368
Less accumulated depreciation (12,000) (22,534)
-------- -------
Total $20,575 $110,834
c. Cash, Cash Equivalents and Marketable Securities, Available for Sale
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
========= === === =========
F-10
<PAGE>
AMERICAN BIO MEDICA CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED APRIL 30, 1997
The following is a summary of cash, cash equivalents and available-for-sale
securities by balance sheet classification at April 30, 1996:
Estimated
Gross Gross Fair
Unrealized Unrealized Market
Cost Gains Losses Value
---- ----- ------ -------
Cash $ 437,532 $-0- $-0- $ 437,532
------- --- --- ---------
Total cash and cash
equivalents $ 437,532 $-0- $-0- $ 437,532
======== === === =========
Note 5 - Related Party Transaction
a. Nonstatutory Option Plan
In June, 1996, the Company adopted its 1996 Nonstatutory Stock Option Plan
(the "1996 Plan"). Options to purchase 2,000,000 Common Shares are included in
the 1996 Plan of which 1,500,000 were issued on June 28, 1996 as follows: Stan
Cipkowski, President, 550,000 options; Edmund Jaskiewicz, Executive
Vice-President, 250,000 options; Jay Bendis, Vice-President-Marketing 300,000
options; Henry Wells, Vice-President-Product Development, 150,000 options; Joel
Pensley, Esq. 160,000 options, Michael Roy Fugler, Esq. 40,000 options and two
non-management employees, 25,000 options each.
On April 30, 1997, the Company issued 20,000 options to Jay Bendis, 15,000
options to Joel Pensley, Esq., 5,000 options to Steven Gutstein, Esq., and an
aggregate of 232,000 options to 15 non-management employees.
b. Employment Agreement with Jay Bendis
On November 3, 1995, the Company entered into a three year employment
agreement with Jay Bendis, Vice-President-Marketing and Sales. Under this
agreement, Mr. Bendis received an annual salary of $24,000 per year until April
30, 1996 and presently receives $48,000 per year. When the Company generates an
aggregate of $500,000 gross revenues from the sale of biomedical products, Mr.
Bendis' salary will be increased to $60,000 per year. In addition to his salary,
Mr. Bendis will receive a bonus equal to 2% of the gross revenues of the Company
of $1,000,000 per fiscal year until such annual revenues reach $3,000,000, 1.5%
of gross revenues between $3,000,000 and $5,000,000 per year and 1% thereafter.
In consideration of past services valued at $125,000 or $.25 per share, Mr.
Bendis also received the right to receive 500,000 common shares. Certificates
representing 400,000 Common Shares are being held by the Company and shall not
vest until the happening of the following events:
100,000 shares upon the Company's achieving $1,000,00 in gross revenues
from sales of biomedical products;
100,000 shares upon the Company's achieving $2,000,00 in gross revenues
from sales of biomedical products;
F-11
<PAGE>
AMERICAN BIO MEDICA CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED APRIL 30, 1997
100,000 shares upon the Company's achieving $3,000,00 in gross revenues
from sales of biomedical products;
100,000 shares upon the Company's achieving $4,000,00 in gross revenues
from sales of biomedical products.
Certificates representing shares which have not vested on or before April
30, 1998 (or the end of the next succeeding fiscal year in the event the Company
changes its fiscal year) will be returned to the Company's stock transfer agent
for cancellation. No bonuses will be paid or shares vest subsequent to any
election by Mr. Bendis to terminate agreement or his discharge for cause from
employment by the Company. Mr. Bendis also is entitled to receive health
insurance, participating in stock option or similar plans or other benefits
offered generally to Management employees and reimbursement of out-of-pocket
expenses.
c. Employment Agreement with Edmund Jaskiewicz
On November 3, 1995, the Company entered into a three year employment
agreement with Edmund Jaskiewicz, Executive Vice-President. Under this
agreement, Mr. Jaskiewicz received an annual salary of $24,000 per year until
April 30, 1996 and presently receives $48,000 per year. When the Company
generates an aggregate of $500,000 gross revenues from the sale of biomedical
products, Mr. Jaskiewicz' salary will be increased to $60,000 per year. In
addition, to his salary, Mr. Jaskiewicz will receive a bonus equal to 2% of the
gross revenues of the Company of $1,000,000 per fiscal year until such annual
revenues reach $3,000,000, 1.5% of gross revenues between $3,000,000 and
$5,000,000 per year and 1% thereafter. No bonuses will be paid or shares vest
subsequent to any election by Edmund Jaskiewicz to terminate this agreement or
his discharge for cause from employment by the Company. Mr. Jaskiewicz also is
entitled to receive health insurance, participating in stock option or similar
plans or other benefits offered generally to Management employees and
reimbursement of out-of-pocket expenses.
d. Employment Agreement with Stan Cipkowski
On November 3, 1995, the Company entered into a three year employment
agreement with Stan Cipkowski, President. Under this agreement, Mr. Cipkowski
received an annual salary of $36,000 per year until April 30, 1996 and presently
receives $60,000 per year. When the Company generates an aggregate of $500,000
gross revenues from the sale of biomedical products, Mr. Cipkowski's salary will
be increased to $72,000 per year. In addition, to his salary, Mr. Cipkowski will
receive a bonus equal to 2% of the gross revenues of the Company of $1,000,000
per fiscal year until such annual revenues reach $3,000,000, 1.5% of gross
revenues between $3,000,000 and $5,000,000 per year and 1% thereafter. No
bonuses will be paid or shares vest subsequent to any election by Mr. Cipkowski
to terminate agreement or his discharge for cause from employment by the
Company. Mr. Jaskiewicz also is entitled to receive health insurance,
participating in stock option or similar plans or other benefits offered
generally to Management employees and reimbursement of out-of-pocket expenses.
F-12
<PAGE>
AMERICAN BIO MEDICA CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED APRIL 30, 1997
Note 6 - 12% Convertible Subordinated Debentures
As of April 30,1996, the Company had borrowed an aggregate of $2,121,000 on
a convertible debenture basis, the principal amount of each debentures
convertible at the option of the holder into Common Shares at $.75 per share. As
of April 30, 1996, the principal amount of all the convertible debentures had
been converted into an aggregate of 1,700,002 Common Shares.
As of April 30, 1996, the Company has reserved sufficient authorized but
unissued Common Shares for conversion of the Debentures which shares, upon
issuance and delivery, would be duly and validly issued, fully paid and
nonassessable.
As of July 31, 1996, the Company had converted the balance of the
convertible debentures in the amount of $132,000 into 176,000 Common Shares at
$.75 per share.
As of July 31, 1996, the Company sold an additional convertible debenture
in the amount of $10,000 which was converted into 13,333 Common Shares $.75 per
share.
Note 7 - Preferred Shares
The Company, in October, 1996, amended its certificate of incorporation
authorizing the issuance of 5,000,000 Preferred Shares $.01 par value each. The
board of directors of the Company has the authority, without further action by
the holders of the outstanding Common Shares, to issue Preferred Shares from
time to time in one or more classes or series, to fix the number of shares
constituting any class or series and the stated value thereof, if different from
the par value, and to fix the terms of any such series or class, including
dividend rights, dividend rates, conversion or exchange rights, voting rights,
rights and terms of redemption (including sinking fund provisions), the
redemption price and the liquidation preference of such class or series.
The Company sold 150 8% Convertible Series "A" Preferred Shares for $10,000
per share for an aggregate consideration of $1,500,000 less $90,000 in
commissions and $5,000 in offering expenses for a net consideration of
$1,405,000. Each Preferred Share is convertible into Common Shares pursuant to
the following formula: $10,000 divided by the lesser of $6.07 or 75% of the
average of the daily closing bid prices for the five consecutive trading days
ending on the trading day prior to the day on which Preferred Shares are
converted to Common Shares. All accrued but unpaid dividends are payable in
cash. The Company has registered the Common Shares underlying the Preferred
Shares with the Securities and Exchange Commission.
As of April 30, 1997, 60 convertible Preferred Shares had been converted
into 229,039 Common Shares.
As of April 30, 1997, the Company had reserved a maximum of 500,000 Common
Shares for the conversion of Preferred Shares.
The Company has issued 24,712 Common Share purchase warrants. The Warrants
are exercisable at $3.00 per share until January 21, 1998.
F-13
<PAGE>
AMERICAN BIO MEDICA CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED APRIL 30, 1997
Note 8 - Income Taxes
The Company provides for the tax effects of transactions reported in the
financial statements. The provision if any, consists of taxes currently due plus
deferred taxes related primarily to differences between the basis of assets and
liabilities for financial and income tax reporting. The deferred tax assets and
liabilities, if any, represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. As of April 30, 1996 and April 30, 1997,
the Company had no material current tax liability, deferred tax assets, or
liabilities to impact on the Company's financial position because the deferred
tax asset related to the Company's net operating loss carry forward and was
fully offset by a valuation allowance.
At April 30, 1997, the Company has net operating loss carry forwards for
income tax purposes of $2,906,992. This carry forward is available to offset
future taxable income, if any, and expires in the year 2010. The Company's
utilization of this carry forward against future taxable income may become
subject to an annual limitation in the event that there is a cumulative change
in ownership of the Company of more than 50%.
The components of the net deferred tax asset as of April 30, 1997 were as
follows:
Deferred tax asset:
Net operating loss carry forward $ 988,377
Valuation allowance $ (988,377)
-------
Net deferred tax asset $ -0-
The Company recognized no income tax benefit from the loss generated in the
year ended April 30, 1997. SFAS No. 109 requires that a valuation allowance be
provided if it is more likely than not that some portion or all of a deferred
tax asset will not be realized. The Company's ability to realize benefit of its
deferred tax asset will depend on the generation of future taxable income.
Because the Company has yet to recognize significant revenue from the sale of
its products, the Company believes that a full valuation allowance should be
provided.
Note 9 - Commitments and Contingencies
a. 12% Convertible Subordinated Debentures
The Company is obligated to convert the outstanding Debentures at the
option of the holders into Common Shares at a ratio one share for each $.75
principal amount of each Debenture so converted. At April 30, 1996, the Company
had reserved 176,000 Common Shares for conversion of the aggregate principal
amount of $132,000 of the Debentures which had not been converted as of April
30, 1996.
As of July 31, 1996, the Company had converted the balance of the
convertible debentures in the amount of $132,000 into 176,000 Common Shares at
$.75 per share.
As of July 31, 1996, the Company sold an additional convertible debenture
in the amount of $10,000 and was converted into 13,333 Common Shares at $.75 per
share.
F-14
<PAGE>
AMERICAN BIO MEDICA CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED APRIL 30, 1997
b. Lawsuits
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 subsidiaries to have the Share Exchange Agreement under which
the companies were acquired 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 lawsuit brought in the
name of MDI and Gendex) 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 technology 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 shares of Company common stock. The
Company has refused to issue them to him.
In June, 1995, the Company filed a lawsuit against Jackson Morris, Esq. for
the breach of 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.
c. Public Relations Agreement
In February, 1996, the Company entered into an agreement with OTC
Communications ("OTC") for financial public relations and communications
services to the Company and to serve when requested as the Company's liaison and
spokesman to the financial and investment community. In March, 1996, the Company
granted, under Regulation D to the Securities Act of 1933, to OTC the right to
receive 100,000 Common Shares at a value of $.65 per share for a total
consideration of $65,000 in lieu of an initial payment, monthly retainers or
expense reimbursement, including communications and mailing for a period of one
year. 550,000 Common Shares were granted for years 2 and 3 for a consideration
of $.325 per share representing one-half the market price of the Common Shares
at March 14, 1996, the date of the contract. This valuation reflects the receipt
of unregistered Common Shares and the market risk of the holding period until
they may be sold publicly. Of the 550,000 shares, 50,000 shares were allocated
to expense reimbursement and 500,000 shares allocated to public relations
consulting. Certificates representing the 100,000 Common Shares were issued in
July, 1996. The Company has also issued to OTC 500,000 "A" Options which are
exercisable at $1.00 through March 14, 1999 and 500,000 "B" Options, which are
exercisable at $2.00 through March 14, 1999. Until a registration statement
relating to the Common Shares underlying the options is effective, certificates
representing the shares into which the options are exercised will bear a legend
restricting transfer in the absence of an effective registration with the
Commission or an exemption therefrom.
d. Nonstatutory Option Plan
The Company has adopted the Fiscal 1996 Nonstatutory Stock Option Plan (the
"Plan"). 2,000,000 Common Shares were reserved under the Plan. The Plan is
administered by the Board of Directors.
F-15
<PAGE>
AMERICAN BIO MEDICA CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED APRIL 30, 1997
Stock options under the Plan may be granted to employees, officers,
directors, consultants of the Company or any other parties who have made a
significant contribution to the business and success of the Company. The
exercise price under the Plan may be more, equal to or less than the then
current market price of the Common Shares as deemed to be appropriate.
The Company issued 1,500,000 options on June 28, 1996 as follows: Stan
Cipkowski, President, 550,000 options; Edmund Jaskiewicz, Executive
Vice-President, 250,000 options; Jay Bendis, Vice-President-Marketing 300,000
options; Henry Wells, Vice-President-Product Development, 150,000 options; Joel
Pensley, Esq. 160,000 options, Michael Roy Fugler, Esq. 40,000 options and two
non-Management employees, 25,000 options each.
On April 30, 1997, the Company issued 20,000 options to Jay Bendis, 15,000
options to Joel Pensley, Esq., 5,000 options to Steven Gutstein, Esq. and
232,000 options to 15 non-Management employees. .
As of April 30, 1997, 697,445 nonstatutory stock options had been exercised
for an aggregate consideration of $2,092,186.
e. Leased Office Space
The Company leases 4,000 square feet of office and warehouse space in two
locations from unrelated parties on a month to month basis at an aggregate rent
of $1,000 per month.
Note 10 - Secured Loan
On March 9, 1990, the Company entered into an security agreement with a
finance company to borrow money secured by the Company's receivables evidenced
by invoices. At the time, the Company was engaged in selling educational books
to municipal school districts and public libraries throughout the United States.
The finance company agreed to lend an amount equal to 60% of the net value of
all the Company's accounts receivable. Accounts receivable funding ceased as of
July 31, 1990.
The Company instituted a lawsuit against the finance company on November
26, 1990 for damages due to its failure lend to the 60% credit limit based on
its calculations and for forgiveness of the loan based on the finance company's
charging, based on its own billings, at an interest rate in excess of the rate
of 25% per annum as prescribed in the sections dealing with usury in New York
Penal State Law. Although company counsel had opined that the Company would
prevail in the action and that all indebtedness incurred in the principal amount
$126,500 plus interest and fees would be voided by reason of the finance
company's violation of the usury provisions of the Penal Law, by agreement
between the Company and the finance company, the lawsuit was withdrawn without
prejudice as the Company, at that time, lacked the resources for protracted
litigation. In April, 1996, the obligation, if any, to the finance company
became barred by New York State's six-year statute of limitations. The Company
wrote off the obligation during the second quarter of fiscal 1997.
Note 11 - Business and Credit Concentrations
The amount reported in the financial statements for cash represents fair
market value. Because the difference between cost and the lower of cost or
market is immaterial, no adjustment has been recognized and investments are
recorded at cost.
F-16
<PAGE>
AMERICAN BIO MEDICA CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED APRIL 30, 1997
Note 12 - Development Stage Company
The Company was considered to be a development stage company with little
operating history subsequent to its reorganization and the commencement of
development of its newly acquired bio-medical technologies which are, at
present, its core business. The Company started commercial production of its
drug test kits and has what managment maintains are adequate resources to
adequately fund its continuing operations. The Company is no longer considered
to be a development stage Company.
Note 13 - Subsequent Events
Subsequent to April 30, 1997, 70 8% Series "A" Preferred Shares were
converted into 301,120 Common Shares.
F-17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this first amendment to the
Form 10KSB for the period ended April 30, 1997 to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN BIO MEDICA CORPORATION
August 28, 1997 By: /s/ Stan Cipkowski
Stan Cipkowski
Chief Executive Officer
(Principal Executive 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.
August 28, 1997 /s/ Stan Cipkowski
Stan Cipkowski
President, Treasurer and
a Director
(Chief Executive Officer and
(Principal Financial and Accounting Officer)
/s/ Edmund Jaskiewicz
Edmund Jaskiewicz
Chairman of the Board of Directors
Executive Vice-President and Secretary
/s/ Jay Bendis
Jay Bendis
Vice-President Marketing and a
Director
Jaspar R. Clay, Jr.
Director
John F. Murray
Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Financial Data Schedule for 10KSB - 04-30-97 for American Bio Medica
Corporation
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-1-1996
<PERIOD-END> APR-30-1997
<CASH> 1,762,506
<SECURITIES> 1,053,000
<RECEIVABLES> 337,759
<ALLOWANCES> 0
<INVENTORY> 668,723
<CURRENT-ASSETS> 3,928,663
<PP&E> 133,368
<DEPRECIATION> (22,534)
<TOTAL-ASSETS> 4,106,750
<CURRENT-LIABILITIES> 380,155
<BONDS> 0
0
1
<COMMON> 133,795
<OTHER-SE> 3,592,799
<TOTAL-LIABILITY-AND-EQUITY> 4,106,750
<SALES> 610,876
<TOTAL-REVENUES> 610,876
<CGS> 259,862
<TOTAL-COSTS> 1,039,015
<OTHER-EXPENSES> 182,680
<LOSS-PROVISION> (505,321)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (505,321)
<INCOME-TAX> 0
<INCOME-CONTINUING> (505,321)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (505,321)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
