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 January 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: 00028666
AMERICAN BIO MEDICA CORPORATION
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(Exact name of small business issuer as specified in its charter)
New York 14-1702188
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(State or other jurisdiction (I.R.S.Employer
incorporation or organization Identification No.)
102 Simons Road Ancramdale, New York 12503
-------------------------------------------
(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:
13,197,872 common shares as of January 31, 1997
150 Convertible Class "A" Preferred Shares as of January 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 January 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 January 31, 1997, and the results of
operations and cash flows for the three and nine month periods ended January 31,
1996 and 1997.
2
<PAGE>
AMERICAN BIO MEDICA CORPORATION
BALANCE SHEET
<TABLE>
<CAPTION>
April 30, January 31,
1996 1997
-------- ---------
Assets
<S> <C> <C>
Current assets
Cash $437,532 $2,302,566
Investments-short term 1,021,867
Accounts receivable 34,500 335,841
Loan receivable 100,000
Inventory 22,301 270,027
Prepaid expenses 4,425
------ ---------
Current assets 494,333 4,034,726
Capital assets-net 20,575 86,019
Other assets
License rights 110,070 56,870
Patent costs 21,000 21,725
------- ------
Total other asset 131,070 78,595
------- ---------
Total assets $645,978 $4,199,340
======== ==========
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued expenses $33,248 $182,537
Convertible debenture payable 132,000
------- -------
Total current liabilities 165,248 182,537
Long term liabilities
Note payable 126,500
-------
Total long term liabilities 126,500
Capital stock
Capital stock-authorized 30,000,000
common shares, par value $.01 each,
at April 30, 1996 and January 31, 1997,
the shares outstanding were 12,089,561
and 13,297,872 respectively. 120,895 132,977
Preferred stock-authorized 5,000,000
preferred shares, par value $.01 each,
at October 31, 1996, the number of shares
outstanding was 150 1
Additional paid in capital 2,635,006 6,606,358
--------- ---------
Deficit accumulated during development stage (2,401,671) (2,722,533)
---------- ----------
Total stockholders' equity 354,230 4,016,803
---------- ----------
Total liabilities and stockholders' equity $645,978 $4,199,340
========== ==========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
AMERICAN BIO MEDICA CORPORATION
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the year For the year
For the nine For the nine
ended ended
months ended months ended
April 30, April 30,
January 31, January 31,
1995 1996
1996 1997
---- ----
---- ----
<S> <C> <C>
<C> <C>
Income $137,891 $158,105
$120,261 $430,501
Less cost of goods sold 45,204 96,444
61,409 150,421
Gross profit 92,687 61,661
58,852 280,080
Operations:
General and administrative 129,719 518,826
292,749 583,569
Depreciation and amortization 75,600 77,600
57,700 72,490
Research and development 135,412 358,844
228,622 74,978
Total expense 340,731 955,270
579,071 731,037
Income (loss) before other income and (248,044) (893,609)
(520,219) (45,095)
expenses
Other income and expenses
Cancellation of debt (Note E)
126,500
Interest income 10,145 356
778 3,593
Interest expense (67,429) (103,205)
(75,385)
Total other income and (57,284) (102,849)
(74,607) 130,093
expenses
Net Profit (Loss) $(305,328) $(996,458)
$(594,826) $(320,862)
from operations
Net income (loss) per share $(.05) $(.02)
$(.02) $(.08)
Number of shares outstanding 13,297,872 13,297,872
13,297,872 13,297,872
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
AMERICAN BIO MEDICA CORPORATION
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the three For the three
months ended months ended
January 31, January 31,
1996 1997
------------ -------------
<S> <C> <C>
Income $37,845 $381,914
Less cost of goods sold 35,036 124,643
Gross profit 2,809 257,271
Operations:
General and administrative 226,077 247,456
Depreciation and amortization 19,900 49,490
Research and development 130,221 8,228
Total expense 376,198 305,174
Income (loss) before other income and expenses (373,389) (47,903)
Other income and expenses
Cancellation of debt (Note E)
Interest income (422) 2,258
Interest expense (27,819)
Total other income and expenses (28,241) 2,258
Net Profit (Loss) from operations $(401,630) $(45,645)
Net income (loss) per share $(.03) $(.00)
Number of shares outstanding 13,297,872 13,297,872
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
AMERICAN BIO MEDICA CORPORATION
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the year For the year For
the nine For the nine
ended ended
months ended months ended
April 30, April 30,
January 31, January 31,
1995 1996
1996 1997
----------- -----------
- ------------ -------------
<S> <C> <C>
<C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net profit (loss) (305,328) (996,458)
(594,826) (320,862)
Amortization and depreciation 75,600 77,600
57,700 72,490
Consulting fees 306,250
250,000
Compensation agreement 125,000
100,000
Retirement of debt (Note 9)
(126,500)
Adjustments to reconcile net income to
(187,126) (374,872)
net cash
Loan receivable
(100,000)
Accounts receivable (55,234) 38,079
42,521 (301,342)
Inventory (19,420) 5,250
7,688 (247,726)
Prepaid expenses (40,683) 15,089
(2,200) (4,425)
Accounts payable (36,151) (30,828)
39,992 149,289
TOTAL CASH FLOWS FROM OPERATIONS (381,216) (460,018)
(99,125) (879,076)
CASH FLOWS FROM FINANCING ACTIVITIES
Convertible debenture 446,278 693,000
436,750 (132,000)
Notes payable (89,258)
(44,567)
Sale of stock 150,000
3,983,436
Issuance of stock for services 61,006
TOTAL CASH FLOWS FROM FINANCING ACTIVITIES 446,278 814,717
392,183 3,851,436
CASH FLOWS FROM INVESTING ACTIVITIES
Investment short term
(1,021,867)
Patent costs
(2,725)
Capital assets
(82,734)
TOTAL CASH FLOWS FROM INVESTING ACTIVITIES
(1,107,326)
NET INCREASE (DECREASE) IN CASH 65,062 354,699
293,058 1,865,034
CASH BALANCE BEGINNING OF PERIOD 147,895 82,833
82,833 437,532
CASH BALANCE END OF PERIOD 82,833 437,532
375,891 2,302,566
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
AMERICAN BIO MEDICA CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Common Preferred Additional
Retained
Stock Stock Stock paid-in
capital Earnings Total
------ ------ ----------
- --------------- -------- -----
<S> <C> <C> <C> <C>
<C> <C>
4-10-1986(1) 1,600,000 $16,000 $11,727
$27,727
4-11-1986(1) 200,000 2,000
2,000
4-30-1986 Net Loss
(612) (612)
4-30-1986 1,800,000 18,000 11,727
(612) 29,115
7-09-1986(2) 200,000 2,000 42,888
44,888
4-30-1987(3) 360,935 3,609 357,326
360,935
4-30-1987(4) (74,854)
(74,854)
4-30-1987 Net profit
45,981 45,981
4-30-1987 2,360,935 23,609 337,087
45,369 406,065
4-30-1988(5) 67,056
67,056
4-30-1988 Net loss
(417,760) (417,760)
4-30-1988 2,360,935 23,609 404,143
(372,391) 55,361
4-30-1989 25,000 250 6,000
6,250
4-30-1989 Net loss
(51,677) (51,677)
4-30-1989(5) 19,520
19,520
4-30-1989 2,385,935 23,859 429,663
(424,068) 29,454
4-30-1990 Net profit
(13,352) (13,352)
4-30-1990 2,385,935 23,859 429,663
(437,420) 16,102
4-30-1991(9) 742,000 7,420 193,229
200,649
4-30-1991 Net loss
(419,654) (419,654)
4-30-1991 3,127,935 31,279 622,892
(857,074) (202,903)
4-30-1992(6) 474,800 4,748
4,748
4-30-1992 Net loss
(51,194) (51,194)
4-30-1992 3,602,735 36,027 622,892
(908,268) (249,349)
</TABLE>
7
<PAGE>
AMERICAN BIO MEDICA CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Common Preferred Additional
Retained
Stock Stock Stock paid-in
capital Earnings Total
--------- ------ ---------
- --------------- -------- -------
<S> <C> <C> <C> <C>
<C> <C>
4-30-1992 3,602,735 36,027 622,892
(908,268) (249,349)
4-30-1993(12) 1,717,771 17,177 11,833
29,010
4-30-1993(7) 6,029,872 60,299 90,448
150,747
4-30-1993 Net profit
(42,374) (42,374)
4-30-1993 11,350,378 113,503 725,173
(950,642) (111,966)
4-30-1994 Net loss
(149,243) (149,243)
4-30-1994 11,350,378 113,503 725,173
(1,099,885) (261,209)
10-18-1995(8) (3,000,000) (30,000) 30,000
4-30-1995
(305,328) (305,328)
4-30-1995 8,350,378 83,503 755,173
(1,405,213) (566,537)
11-03-1995 500,000 5,000 120,000
125,000
4-30-1996(10) 1,700,002 17,000 1,258,000
1,275,000
4-30-1996(11) 25,000 250 24,750
25,000
4-30-1996(12) 250,000 2,500 122,500
125,000
4-30-1996(13) 489,181 4,892 56,083
60,975
4-30-1996(14) 125,000 1,250 61,250
62,500
4-30-1996(15) 100,000 1,000 64,000
65,000
4-30-1996(16) 550,000 5,500 173,250
178,750
4-30-1996 Net loss
(996,458) (996,458)
4-30-1996 12,089,561 120,895 2,635,006
(2,401,671) 354,230
Unaudited
6-04-1996 11,333 113 8,387
8,500
6-04-1996 25,000 250 24,750
25,000
7-31-1996(10) 176,000 1,760 130,240
132,000
7-31-1996(10) 13,333 133 9,867
10,000
7-31-1996(14) 100,000 1,000 49,000
50,000
7-31-1996(17) 32,000 320 31,680
32,000
7-31-1996(18) 100,000 1,000 99,000
100,000
9-09-1996(17) 18,000 180 17,820
18,000
9-23-1996(19) 1 1,409,999
1,410,000
1-31-1997(20) 732,645 7,326 2,190,609
2,197,935
1-31-1997 Net loss
(320,862) (320,862)
1-31-1997 13,297,872 $132,977 $1 $6,606,358
(2,722,533) $4,016,803
</TABLE>
8
<PAGE>
AMERICAN BIO MEDICA CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
(1) Issuance of common shares for initial capital contribution
(2) Sale of common shares through private placement at $.25 per share
(3) Sale of common shares through unit offering at $1.00 per share plus one
warrant
(4) Write off of related offering expense
(5) Forgiveness of back salary
(6) Sale of common shares at $.01 par value for cash
(7) Common shares issued pursuant to acquisition
(8) Return of common shares by Edmund Jaskiewicz
(9) Issuance of common shares to Jay Bendis pursuant to employment contract
at $.25 per share
(10) Common shares issued for conversion of debt
(11) Common shares issued pursuant to sale of 25,000 Units
(12) Common shares issued for warrant conversion at $.50
(13) Common shares issued in consideration for services at $.125 per share
(14) Common shares issued pursuant to Rule 504 at $.50 per share
(15) Common shares issued under Rule 504 at $.65 per share
(16) Common shares issued pursuant at $.325 per share
(17) Common shares issued upon exercise of "B" Warrants
(18) Common shares issued upon exercise of "A" Warrants
(19) Sale of preferred shares for $1,500,000 less commission of $90,000
(20) Common shares issued pursuant to exercise of nonstatutory stock
options at $3.00
See accompanying notes to financial statements.
9
<PAGE>
AMERICAN BIO MEDICA CORPORATION
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1997
NOTE A--BASIS OF PRESENTATION
In the opinion of the American Bio Medica Corporation (the "Company"), the
accompanying unaudited condensed financial statements contain all adjustments
(consisting of only normal accruals) necessary to present fairly the condensed
balance sheet as of January 31, 1997 and the related statements of operations
and deficit for the nine and three month periods ended January 31, 1996 and
1997.
NOTE B--EARNINGS PER SHARE
Earnings per share have been computed on the basis of total number of
common shares outstanding. The total number of shares outstanding at January 31,
1997 was 13,297,872.
NOTE C--COMMITMENTS ANDCONTINGENT LIABILIES
a. Leased Office Space
The Company leases 2,200 square feet of office and warehouse space from an
unrelated party on a month to month basis at $400 per month.
b. Lawsuits
1. In February, 1994, Robert Friedenberg, as owner of two medical
technology companies, MDI and Gendex, acquired by the Company, filed suit in the
name of these corporations to have the share exchange agreement relating to the
acquisition rescinded on the grounds of breach of contract. In order to avoid
the imposition of damages against it, the Company filed a cross claim, in July,
1994, against Dr. Friedenberg, seeking enforcement of the share exchange
agreement. In November, 1995, after a trial, the court dismissed Dr.
Friedenberg's lawsuit and allowed the Company's cross claim to proceed to trial.
The Company never issued any common shares to Dr. Friedenberg pursuant to the
share exchange agreement and has rescinded the transaction.
2. In June, 1995, the Company filed a lawsuit against Jackson Morris, Dr.
Friedenberg's counsel, for the breach of attorney-client relationship and his
fiduciary duty and negligence in representing the Company in matters relating to
Dr. Friedenberg and in the preparation of the Agreement of Exchange. The
Company's lawsuit demands damages in the amount of $1,000,000.
NOTE D--PREFERRED SHARES
The Company 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.
10
<PAGE>
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.
The Company has reserved a maximum of 600,000 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.
NOTE E -- 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 F -- NONSTATUTORY OPTION PLAN
The Company has adopted the Fiscal 1996 Nonstatutory Stock Option Plan.
2,000,000 common shares were reserved under the plan. The plan is administered
by the Company's board of directors.
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.
As of July 31, 1996, the Company had issued 1,500,000 options pursuant to
the plan and had reserved 1,500,000 common shares for the exercise of these
options All options were exercisable for a period of three years at $3.00 per
share.
As of January 31, 1997, 732,645 nonstatutory stock options had been
exercised for an aggregate consideration of $2,197,935.
11
<PAGE>
NOTE G -- 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 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 initial payment, monthly
retainers or expense reimbursement, including communications and mailing for a
period of one year and 550,000 common shares for years 2 and 3 under Regulation
D to the Securities Act of 1933 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, reflecting the receipt of unregistered common shares
and the 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. As of January
31, 1997, certificates representing the 500,000 common shares had been
authorized but not issued. 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.
NOTE H -- ISSUANCE OC COMMON STOCK
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 of common shares at $1.00 through
the exercise of 25,000 "A" Warrants.
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 $10,000 of convertible debentures and
converted them in to 13,333 shares of common stock.
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 of common shares at $1.00
through the exercise of 100,000 "A" Warrants.
As of July 31, 1996, the Company sold $32,000 of common shares at $1.00 per
share through the exercise of 32,000 "B" Warrants.
As of July 31, 1996, the Company issued 50,000 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 $25,000.
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 January 31, 1997, 732,645 nonstatutory options were exercised for an
aggregate consideration of $2,197,935.
12
<PAGE>
NOTE I -- EMPLOYMENT AGREEMENT
a. 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 revenus 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 addition, in consideration of past services valued at $125,000 or $.25
per share, Mr. Bendis 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 $,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;
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.
b. Employment Agreement with Edmund Jaskiewicz
On November 3, 1995, the Company entered into a three year employment
agreement with Jay Bendis, 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.
13
<PAGE>
c. 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 revenus 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.
NOTE J - DEVELOPMENT STAGE
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 technolgies which are, at present,
its core business. The Company has funded these activities through the sale of
convertible debentures which were subsequently converted into common shares and
through warrant and nonstatory stock option exercise. During the quarter ended
January 31, 1997, the Company started commercial production of its drug test
kits and has what managment maintains are adequate resources adequately to fund
its continuing operations.
NOTE K - SUBSEQUENT EVENT
Subsequent to the date of the financial statements, 20 8% Series "A"
Preferred Shares were converted into 75,641 common shares.
Item 2. Management's Discussion and Analysis or Plan of Operation
Development Stage Activities
- --------------------------------------------------------------------------------
Until 1991, the Company was involved in marketing educational books and
software to schools and municipal libraries and audiovisual educational packages
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 markets.
The Company has continued one small segment of its original business, that of
selling audiovisual packages to libraries.
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 technolgies 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 received $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 an
aggregate consideration of $1,500,000 and net proceeds of $1,405,000. As of
January 31, 1997, the Company sold 732,645 common shares for an aggregate
consideration of $2,197,935 through the exercise of nonstatutory stock options.
As of January 31, 1997, the Company has started commercial production of its
drug testing kits and has what managment maintains are adequate resources to
adequately fund its operations.
14
<PAGE>
Results of Operations for the Nine Months Ended January 31, 1997 as
Compared to the Nine Months Ended January 31, 1996.
- --------------------------------------------------------------------------------
Revenues from the book segment of the business were $ 237,538 for the nine
months ended January 31, 1997 as compared to $120,261 for the nine months ended
Januray 31, 1996 representing a increase of $117,277 or 197%. This increase in
book sales is directly attributable to the Company's reorganization of its
telemarketing activities and a bulk inventory purchase at significant savings.
Costs of goods sold for the nine months ended January 31, 1997 were $87,820 as
compared to $61,409 for the nine months ended January 31, 1996 representing a
cost of goods sold percentage of 36.9 % for the nine months ended January 31,
1997 as compared to 51.1% for the nine months ended January 31, 1996. This cost
reduction is the result of the purchase of a significant book inventory at a
greatly reduced cost.
Revenues from the initial sales of drug testing kits were $192,963 for the
nine months ended January 31, 1997. Costs of goods sold for the nine months
ended January 31, 1997 was $62,601 or 32.4%. This cost represents a reduction of
31.8% from the cost ratio as of October 31, 1996 due to the purchasing raw
material in commercial amounts.
General and administrative costs for the nine months ended January 31, 1997
were $583,569, an increase of 99.3% over expenses of $292.749 for the nine
months ended January 31, 1996. These increased costs are the result of labor
costs for executive and office personnel of $255,849, legal and professional
expenses of $37,292, office expense of $137,391, marketing expense of $145,604,
product development of $49,887 and rent of $7,433. Research and development
expense of $74,978 for the nine months ended January 31, 1997 was $153,644 less
than the $228,622 expended during the nine months ended January 31, 1996. This
decrease in research and development is the result of gradual completion of
development of the drug testing delivery system.
Results of Operations for the Three Months Ended January 31, 1997 as
Compared to the Three Months Ended January 31, 1996.
- --------------------------------------------------------------------------------
Revenues from the book segment of the business were $188,951 for the three
months ended January 31, 1997 as compared to $37,845 for the three months ended
January 31, 1996 representing a increase of $151,106 or 399%. This increase in
book sales is directly attributable to the Company's reorganization of its
telemarketing activities and a bulk inventory purchase at significant savings.
Costs of goods sold for the three months ended January 31, 1997 were $62,042 as
compared to $35,036 for the three months ended January 31, 1996 representing a
cost of goods sold percentage of 32.8 % for the three months ended January 31,
1997 as compared to 92.6% for the three months ended January 31, 1996. This cost
reduction is the result of the purchase of a significant book inventory at a
greatly reduced cost.
Revenues from sales of drug testing kits were $192,963 for the three months
ended January 31, 1997 compared to $-0- for the same period in fiscal 1996.
Costs of goods sold for the three months ended January 31, 1997 was $62,601 or
32.4%.
General and administrative costs for the three months ended January 31,
1997 were $247,456, an increase of 1% over expenses of $226,077 for the three
months ended January 31, 1996. The increase of $21,379 is the result of labor
costs for executive and office personnel. Research and development expense of
$8,228 for the three months ended January 31, 1997 was $121,993 less than the
$130,221 expended during the three months ended January 31, 1996. This decrease
in research and development is the result of gradual completion of research
leading to the development of the drug testing delivery system.
15
<PAGE>
Liquidity And Capital Resources As Of The End Of Fiscal Period Ending
October 31, 1996.
- --------------------------------------------------------------------------------
The Company's cash balance was $2,302,566 with $1,021,867 in treasury bills
and certificates of deposit invested for six months and working capital was
$3,852,189 as at January 31, 1997. These balances are the result of the sale and
conversion of convertible debentures in the principal amount of $18,500 and
$175,000 through the exercise of 143,000 "A" warrants and 32,000 "B" warrants at
$1.00 per share. The Company also sold 150 convertible preferred shares at
$10,000 per share for an aggregate consideration of $1,500,000. Finally, as of
January 31, 1997, the Company sold 732,645 common shares for an aggregate
consideration of $2,197,935 through the exercise of nonstatutory stock options.
Management believes that the present cash balance will pay the ongoing cost
of the biomedical business. As of January 31, 1997, the Company has started
commercial production of its drug testing kits and no longer considers itself to
be a development stage company.
16
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
1. In February, 1994, Robert Friedenberg, as owner of the two medical
technology companies, MDI and Gendex, acquired by the Company, in the name of
these corporations, filed suit to have the Share Exchange Agreement rescinded on
the grounds of breach of contract. In order to avoid the imposition of damages
against it, the Company filed cross claim, in July, 1994, against Dr.
Friedenberg, seeking enforcement of the Agreement of Exchange. In November,
1995, after a trial, the court dismissed Dr. Friedenberg's lawsuit and allowed
the Company's cross claim to proceed to trial. The Company never issued any
common shares to Dr. Friedenberg pursuant to the Share Exchange Agreement and
has rescinded the transaction.
2. In June, 1995, the Company filed a lawsuit against Jackson Morris, Dr.
Friedenberg's counsel, for the breach of attorney-client relationship and his
fiduciary duty and negligence in representing the Company in matters relating to
Dr. Friedenberg and in the preparation of the Share Exchange Agreement. The
Company's lawsuit demands damages in the amount of $1,000,000.
Item 2. Changes in Securities
The Company amended its certificate of incorporation authorizing the
issuance of 5,000,000 shares of preferred stock, $.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 convertible preferred shares at $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.
The Company has reserved a maximum of 600,000 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 for a period of two years from the date of an
effective registration statement relating to the underlying common shares.
On July 23, 1996, the Company filed a registration statement on Form 10-SB
pursuant to the Securities Exchange Act of 1934 ("Exchange Act"). That
registration statement became effective in September, 1996 and, as a result, the
Company is subject to the informational requirements of said act and files
reports, proxy statements, and other information with the Securities and
Exchange Commission.
The Company's registration statement on Form SB-2 the purpose of which was
to register 600,000 common shares underlying the conversion of the preferred
shares and 24,712 common shares underlying the exercise of the Warrants was
declared effective in January, 1997.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security-Holders
Holders of a majority of the issued and outstanding common shares approved
an amendment to the Company's certificate of incorporation which authorized
5,000,000 preferred shares, $.01 par value per share and ratified the adoption
of the Company's 1996 Nonstatutory Option Plan.
17
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant 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: March 12, 1997
18
<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> 6-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-END> Jan-31-1997
<CASH> 2,302,566
<SECURITIES> 1,021,867
<RECEIVABLES> 435,841
<ALLOWANCES> 0
<INVENTORY> 270,027
<CURRENT-ASSETS> 4,039,151
<PP&E> 103,309
<DEPRECIATION> 17,290
<TOTAL-ASSETS> 4,199,340
<CURRENT-LIABILITIES> 182,537
<BONDS> 0
0
1
<COMMON> 6,739,336
<OTHER-SE> (2,722,534)
<TOTAL-LIABILITY-AND-EQUITY> 4,199,340
<SALES> 430,501
<TOTAL-REVENUES> 430,501
<CGS> 150,421
<TOTAL-COSTS> 280,080
<OTHER-EXPENSES> 806,391
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (526,311)
<DISCONTINUED> 0
<EXTRAORDINARY> 205,447
<CHANGES> 0
<NET-INCOME> (320,863)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
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