<PAGE> 1
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB/A-1
[x] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the quarterly period ended January 31, 1999.
[ ] 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
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
New York 14-1702188
-------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
300 Fairview Avenue, Hudson, New York 12534
-------------------------------------------
(Address of principal executive offices)
800-227-1243
---------------------------
(Issuer's telephone number)
(Not Applicable)
----------------------------------------------------
(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:
14,875,190 Common Shares as of March 1, 1999
Transitional Small Business Disclosure Format Yes [ ] No [X]
<PAGE> 2
PART I
FINANCIAL INFORMATION
AMERICAN BIO MEDICA CORPORATION
BALANCE SHEETS
AS OF APRIL 30, 1998 AND JANUARY 31, 1999
<TABLE>
<CAPTION>
JANUARY 31
APRIL 30 1999
1998 (UNAUDITED)
------------- -----------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 3,239,000 $ 1,172,000
Accounts receivable - net of allowance 712,000 1,204,000
Loan receivable 0 60,000
Inventory 991,000 1,439,000
Prepaid expenses 24,000 224,000
------------ ------------
Total Current Assets 4,966,000 4,099,000
Property, plant and equipment, net 147,000 302,000
Due from officer 235,000 275,000
Other assets 8,000 14,000
------------ ------------
Total Assets $ 5,356,000 $ 4,690,000
============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable $ 322,000 $ 609,000
Accrued expenses 164,000 463,000
------------ ------------
Total Current Liabilities 486,000 1,072,000
------------ ------------
Stockholders Equity:
Preferred stock; par value $.01 per share;
5,000,000 shares authorized;
2,500 and 1,500 shares Series D, 8% cumulative, convertible issued and
outstanding (face values $2,500,000 and $1,500,000)
at April 30, 1998 and January 31, 1999 respectively 0 0
Common stock; par value $.01 per share;
30,000,000 shares authorized; 14,282,989 and 14,875,190
shares issued and outstanding at
April 30, 1998 and January 31, 1999 respectively 143,000 149,000
Additional paid-in capital 12,102,000 12,065,000
Subscriptions receivable (9,000) (9,000)
Unearned compensation (24,000) (24,000)
Accumulated deficit (7,342,000) (8,699,000)
------------ ------------
Total Stockholder's Equity 4,870,000 3,618,000
------------ ------------
------------ ------------
Total Liabilities and Stockholders Equity $ 5,356,000 $ 4,690,000
============ ============
</TABLE>
See accompanying notes to financial statements
2
<PAGE> 3
AMERICAN BIO MEDICA CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
JANUARY 31,
----------------------------
1998 (NOTE C) 1999
------------- ------------
<S> <C> <C>
Revenues $ 1,405,000 $ 5,142,000
Cost of sales 664,000 2,319,000
------------ ------------
Gross profit 741,000 2,823,000
------------ ------------
Operating expenses
Selling, general and administrative expenses 2,032,000 3,374,000
Non-cash compensation charges 722,000 0
Depreciation and amortization 77,000 66,000
Research and development 96,000 266,000
Write-off of bad debts 34,000 0
------------ ------------
2,961,000 3,706,000
------------ ------------
Loss from operations (2,220,000) (883,000)
------------ ------------
Other income and expense 85,000 47,000
Interest income
------------ ------------
85,000 47,000
------------ ------------
Net loss $ (2,135,000) $ (836,000)
Adjustments:
Preferred stock beneficial conversion feature (123,000)
Preferred stock dividend including late fee (521,000)
------------ ------------
Net loss attributable to common shareholders $ (2,135,000) $ (1,480,000)
============ ============
Basic and diluted (loss)
per common share (Note D) $ (0.16) $ (0.10)
Weighted average shares outstanding -
basic and diluted 13,737,781 14,454,883
============ ============
</TABLE>
See accompanying notes to financial statements
3
<PAGE> 4
AMERICAN BIO MEDICA CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
JANUARY 31,
-----------------------------
1998 (NOTE C) 1999
------------- -------------
<S> <C> <C>
Revenues $ 380,000 $ 2,061,000
Cost of sales 171,000 1,083,000
------------ ------------
Gross profit 209,000 978,000
------------ ------------
Operating expenses
Selling, general and administrative expenses 1,053,000 1,345,000
Non-cash compensation charges 54,000
Depreciation and amortization 26,000 22,000
Research and development 96,000 163,000
Write-off of bad debts 17,000 45,000
------------ ------------
1,246,000 1,575,000
------------ ------------
Income (loss) from operations (1,037,000) (597,000)
------------ ------------
Other income and expense
Interest income 34,000 30,000
------------ ------------
34,000 30,000
------------ ------------
Net income (loss) $ (1,003,000) $ (567,000)
Adjustments:
Preferred stock dividend including late fee (262,000)
------------ ------------
Net loss attributable to common shareholders $ (1,003,000) $ (829,000)
============ ============
Basic and diluted (loss)
per common share (Note D) $ (0.07) $ (0.06)
Weighted average shares outstanding--
basic and diluted 13,737,781 14,454,883
============ ============
</TABLE>
See accompanying notes to financial statements
4
<PAGE> 5
AMERICAN BIO MEDICA CORPORATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
JANUARY 31,
-------------------------------
1998 (NOTE C) 1999
--------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net profit (loss) $(2,135,000) $ (836,000)
Adjustments to reconcile net loss
to net cash used in operating activities:
Amortization and depreciation 77,000 66,000
Compensatory stock and stock options 722,000
Changes in:
Accounts receivable (388,000) (492,000)
Loan receivable (17,000) (60,000)
Inventory (106,000) (448,000)
Prepaid expenses and other current assets (10,000) (200,000)
Other assets 50,000 (6,000)
Accounts payable and accrued expenses (202,000) 164,000
----------- -----------
Net cash used in operating activities (2,009,000) (1,812,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (99,000) (221,000)
Purchase of investments
Loans to officer 102,000 (40,000)
----------- -----------
Net cash provided by
(used in) investing activities 3,000 (261,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of warrants and options 1,378,000 6,000
Subscriptions receivable (30,000)
----------- -----------
Net cash provided by financing activities 1,348,000 6,000
----------- -----------
NET INCREASE (DECREASE) IN CASH AND
cash equivalents (658,000) (2,067,000)
Cash and cash equivalents - beginning of period 2,816,000 3,239,000
----------- -----------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 2,158,000 $ 1,172,000
=========== ===========
</TABLE>
See accompanying notes to financial statements
5
<PAGE> 6
Notes to Financial Statements
January 31, 1999
Note A - Basis of Reporting
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, such statements include all adjustments (consisting of normal
recurring items and see Note D) which are considered necessary for a fair
presentation of the financial position of American Bio Medica Corporation (the
"Company") at January 31, 1999, and the results of its operations, and cash
flows for the nine-month period then ended. The results of operations for the
nine-month period ended January 31, 1999 are not necessarily indicative of the
operating results for the full year. It is suggested that these financial
statements be read in conjunction with the financial statements and related
disclosures for the year ended April 30, 1998 included in the Company's Form
10-KSB/A-1.
Note B - Net Income Per Share of Common Stock
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
"Earnings Per Share". Statement No. 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share exclude any dilutive
effects of options, warrants, and convertible securities. Dilutive earnings per
share is very similar to the previously reported fully diluted earnings per
share. The Company adopted Statement No. 128 and has retroactively applied the
effects thereof for all periods presented. The impact on the per share amounts
previously reported was not significant.
When preferred stock is convertible to common stock at a conversion rate
that is the lower of a rate fixed at issuance or a fixed discount from the
common stock market price at the time of conversion, the discounted amount is an
assured incremental yield, the "beneficial conversion feature", to the preferred
shareholders and should be accounted for as an embedded dividend to preferred
shareholders. As such, the loss per common share was adjusted for this feature.
6
<PAGE> 7
Note C - Restatement of Prior Year Quarterly Statements of Operations
The Company is recording adjustments which effect prior interim accounting
periods of the fiscal year ended April 30, 1998 as indicated below.
<TABLE>
<CAPTION>
Three Months Ended
January 31, 1998
--------------------------------------------
Adjustments
---------------------------------------------------------------
As Book Compen- Gross Profit As
Reported Sales (1) sation (2) Percentage (3) Other Adjusted
--------------------------------------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues 500,000 (120,000) 380,000
Cost Of Sales 174,000 (18,000) 66,000 (5) (51,000) 171,000
---------- ----------
Gross Profit 326,000 209,000
---------- ----------
(5) 51,000
(7) 69,000
(8) 25,000
(9) 17,000
(10) (48,000)
Selling, General & (11) 20,000
Administrative Expenses 959,000 54,000 (6) 3,000 1,150,000
Research And Development 48,000 (10) 48,000 96,000
---------- ----------
Loss from operations (681,000) (1,037,000)
========== ==========
Net Loss per share (0.05) (0.07)
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
January 31, 1998
--------------------------------------------
Adjustments
---------------------------------------------------------------
As Book Compen- Gross Profit As
Reported Sales (1) sation (2) Percentage (3) Other Adjusted
--------------------------------------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues 1,774,000 (296,000) (73,000) 1,405,000
Cost Of Sales 675,000 (45,000) 241,000 (207,000) 664,000
------------ ----------
Gross Profit 1,099,000 741,000
------------ ----------
Selling, General &
Administrative Expenses 1,798,000 722,000 345,000 2,865,000
Research And Development 48,000 48,000 96,000
------------ ----------
Loss from operations (747,000) (2,220,000)
============ ==========
Net Loss per share (0.05) (0.16)
============ ==========
</TABLE>
The following explains the principal adjustments:
(1) A revenue recognition adjustment to provide an allowance for book sales
which are subject to customer acceptance and its related effect on cost
of sales.
(2) Adjustments to recognize non-cash employee and consulting compensation
charges in the period earned. The expenses represent the issuance of
equity instruments at fair value in accordance with employment
agreements. (see note K [2])
7
<PAGE> 8
(3) The gross profit percentages have been recalculated to correspond with
inventory adjustments, drug test samples and the timing of revenue
recognition.
(4) Adjustment to reverse consignment sale of drug test kits and related
cost of sales.
(5) Reclassification of drug test samples from cost of sales to Selling
Expense.
(6) Other minor adjustments
(7) Write-off of investor relations supplies and expense
(8) Earned employee bonuses
(9) Allocation of bad debt accrual
(10) Reclassification of research & development costs
(11) Write-off of patent & license costs
Note D - Registration Rights Agreement Penalty
Pursuant to the Registration Rights Agreement dated April 24, 1998 between CC
Investments, LDC and the Company entered into in connection with the issuance by
the Company of its Series D Preferred Shares, the Company incurred a late
registration penalty amounting to $225,000 in the three months ended January 31,
1999. This penalty, which has not been previously accrued, has been recorded as
a preferred stock dividend and resulted in the following adjustments:
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED FOR THE THREE MONTHS ENDED
JANUARY 31, 1999 JANUARY 31, 1999
---------------- ----------------
AS PREVIOUSLY AS AS PREVIOUSLY AS
REPORTED ADJUSTED REPORTED ADJUSTED
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net loss attributable to
common shareholders $ (1,095,000) $ (1,480,000) $ (604,000) $ (829,000)
Basis and diluted
(loss) per common share $ (0.08) $ (0.10) $ (0.04) $ (0.06)
</TABLE>
Note E - Litigation
In February 1994, Robert Friedenberg, as former owner of the two medical
technology companies, MDI and Gendex, acquired by the Company, in the name of
these corporations, filed for a declaratory judgement that a Share Exchange
Agreement had been rescinded. In order to make a claim for damages, the Company
filed a third-party claim against Dr. Friedenberg for breach of the Share
Exchange Agreement and fraud. In November 1995, after a trial, the court denied
Dr. Friedenberg's request for a declaration of rescission and allowed the
Company's third-party claim to proceed to trial. In September, 1996, Dr.
Friedenberg died.
The Company's third-party claim was decided by a jury on May 5, 1997.
The verdict determined that Dr. Friedenberg breached the Share Exchange
Agreement, when he failed to deliver drug screening know how technology to the
Company. The jury also found in favor of the Company on two of the three fraud
claims against Friedenberg and awarded the Company approximately $321,000 in
damages. Friedenberg's estate, just prior to the jury trial, filed a
supplemental claim for the shares of the Company's stock which he would have
received under the Share Exchange Agreement. The trial judge took this
supplemental claim under advisement. The trial judge, on July 17, 1998, ruled
that the estate of Dr. Friedenberg is entitled to 5,907,154 common shares of the
Company. The Company has filed an appeal. Management of the Company in
consultation with counsel is of the opinion that the trial judge's award of the
shares to Dr. Friedenberg's estate will be reversed on appeal.
Pending the resolution of the Company's appeal, the trial judge has
ordered that the shares be issued in the name of Dr. Friedenberg's wife and
placed in escrow or that the Company post a bond. The Company has applied for a
stay of this order. If the trial judge's order is not stayed, the issuance of
such shares or the posting of the required bond could have a significant
negative effect on the market price of the shares. Pending the resolution of the
Company's appeal of the trial judge's award of the shares to Dr. Friedenberg's
estate, the Company's ability to raise capital through the future sale of equity
securities may be materially impaired. If the trial judge's award of the shares
is not reversed on appeal, the issuance of such shares would have a significant
negative effect on the market price of the shares.
8
<PAGE> 9
In June 1995, the Company filed against Jacskon Morris, the lawyer who
was in charge of drafting and advising it on the Share Exchange Agreement. Mr.
Morris, who had been recommended to the Company by Dr. Friedenberg, is alleged
by the Company to have breached his fiduciary duty to the Company by later
advising Dr. Friedenberg, individually, on how to rescind the Share Exchange
Agreement. Mr. Morris is also charged with negligence in drafting the Share
Exchange Agreement. The Company's lawsuit demands damages in the amount of
$1,000,000. Mr. Morris has counterclaimed as a party to the Share Exchange
Agreement and seeks common shares. No trial date has been set. The Company is
vigorously contesting the Morris Claim.
9
<PAGE> 10
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 nine months ended January 31, 1999 and 1998
The following discussion of the Company's financial condition and results
of operations should be read in conjunction with the Financial Statements and
Notes thereto appearing elsewhere in this document.
Statements in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere in this document as well as
statements made in press releases and oral statements that may be made by the
Company or by officers, directors or employees of the Company acting on the
Company's behalf that are not statements of historical or current fact
constitute "forward looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other unknown factors that
could cause the actual results of the Company to be materially different from
the historical results or from any future results expressed or implied by such
forward-looking statements. In addition to statements which explicitly describe
such risks and uncertainties, readers are urged to consider statements labeled
with the terms "believes", "belief", "expects", "intends", "anticipates" or
"plans" to be uncertain forward-looking. The forward looking statements
contained herein are also subject generally to other risks and uncertainties
that are described from time to time in the Company's reports and registration
statements filed with the Securities and Exchange Commission.
Year 2000 Issues
The Company has completed its assessment of Year 2000 compliance with respect to
its products that are currently being sold to customers and has concluded that
all significant products are compliant. With respect to third parties, the
Company is in the process of identifying and contacting its significant
suppliers and will shortly begin to contact its major customers to determine the
extent to which the Company may be vulnerable to such third parties' failure to
address their own year 2000 issues. As a result, the Company's assessment will
be substantially dependent on information provided by third parties. The Company
expects to materially complete this assessment process by the end of fiscal
1999. Based upon the Company's current estimates, additional out-of-pocket costs
associated with its Year 2000 compliance are expected to be immaterial. Such
costs do not include internal management time, which is not expected to be
material to the Company's results of operations or financial condition.
Results of operations for the nine months ended January 31, 1999 as
compared to the nine months ended January 31, 1998 as amended.
- --------------------------------------------------------------------------------
The interim Statement of Operations for the nine months ended January
31, 1998 and the fiscal 1998 third quarter have been adjusted. See Note C to the
Financial Statements. The results of operations for the nine months ended
January 31, 1999 and the fiscal 1999 third quarter will be compared with the
adjusted results of operations for the fiscal 1998 third quarter.
During the nine months ended January 31, 1999, the Company continued
its extensive program to market and distribute its primary product, the Rapid
Drug Screen(TM). As a result, revenues from the sale of the test kits were
$4,643,000 for the nine months ended January 31, 1999 as compared to $1,293,000
for the nine months ended January 31, 1998 (as adjusted, see Note C to Notes to
Financial Statements), representing an increase of $3,350,000 or 259.1% over the
preceding year. Cost of goods sold for the nine months ended January 31, 1999
was $2,225,000 or 47.9% of drug test revenues as compared to $577,000 or 44.6%
of drug test revenues for the nine months ended January 31, 1998. To further
reduce this cost, the Company continues to improve its manufacturing processes
and expects further savings during the remainder of the year.
10
<PAGE> 11
Revenues from book sales were $499,000 for the nine months ended
January 31, 1999 as compared to $113,000 for the nine months ended January 31,
1998 representing an increase of $386,000 or 341.6%. It is anticipated that with
continuing strong sales in the drug test market, book sales as a percent of
overall revenue will continue to decline. Cost of goods sold for the nine months
ended January 31, 1999 was $94,000 (18.8% of book sales) as compared to $87,000
(77.0% of book sales) for the nine months ended January 31, 1998.
General and administrative costs for the nine months ended January 31,
1999 were $3,374,000, an increase of 66.0% over expenses of $2,032,000 for the
nine months ended January 31, 1998. These increased general and administrative
costs were undertaken to create the infrastructure necessary to meet the
Company's worldwide drug test marketing and production goals. As an outgrowth of
increasing drug test sales the Company expects general and administrative costs
to continue to increase but at a slower rate. As a percent of sales, this cost
decreased 78.9% during the current year and is expected to continue it's
decrease with anticipated sales growth.
Depreciation and amortization was $66,000 and $77,000 for the nine
months ended January 31, 1999 and 1998 respectively.
Research and development expense amounted to $266,000 for the nine
months ended January 31, 1999. This represents management's continued emphasis
on the development of both new products and improved methods to reduce the costs
of the drug testing delivery system.
Net (loss) from operations amounted to $(836,000) for the nine months
ended January 31, 1999 due to increases in selling, general and administrative
expenditures related to the expansion of the company's infrastructure.
Results of operations for the three months ended January 31, 1999 as compared to
the three months ended January 31, 1998 as amended.
- --------------------------------------------------------------------------------
Revenues from the sale of the Rapid Drug Screen were $1,912,000 for the
three months ended January 31, 1999 as compared to $355,000 for the three months
ended January 31, 1998 (as adjusted, see Note C to Notes to Financial
Statements), representing an increase of $1,557,000 or 438.6% over the preceding
year. Cost of goods sold for the three months ended January 31, 1999 amounted to
$1,055,000 or 55.2% of drug screen revenues as compared to $138,000 or 38.9% of
drug screen revenues for the three months ended January 31, 1998.
Revenues from book sales were $149,000 for the three months ended
January 31, 1999 as compared to $25,000 for the three months ended January 31,
1998 representing an increase of $124,000 or 496.0%. Cost of goods sold for the
three months ended January 31, 1999 amounted to $28,000 (18.8% of book sales) as
compared to $33,000 (132.0% of book sales) for the three months ended January
31, 1998.
General and administrative costs for the three months ended January 31,
1999 Amounted to $1,345,000, an increase of 27.8% over expenses of $1,053,000
for the three months ended January 31, 1998. As a percent of sales, this cost
decreased 211.5% during the current year and is expected to continue it's
decrease with anticipated sales growth.
Depreciation and amortization was $22,000 and $26,000 for the three
months ended January 31, 1999 and 1998 respectively.
Research and development expense amounted to $163,000 for the three
months ended January 31, 1999, continuing management's emphasis on the
development of both new products and improved methods of production.
Net (loss) from operations amounted to $(567,000) for the three months
ended January 31, 1999 as compared to a net (loss) of $(1,003,000) for the three
months ended January 31, 1998.
11
<PAGE> 12
Liquidity and capital resources as of the end of the nine months ended
January 31, 1999.
- --------------------------------------------------------------------------------
The Company's cash and cash equivalents amounted to $1,172,000 at
January 31, 1999 representing a decrease of $2,067,000 or 63.8% over $3,239,000
for the year ended April 30, 1998. Working capital decreased $1,453,000 or 32.4%
over $4,480,000 recorded for the year ended April 30, 1998.
The decrease in working capital resulted from an increase in accounts
payable and accrued expenses offset by increases in accounts and loan
receivables, inventories, and prepaid expenses.
As a result of strong nine month sales of the Rapid Drug Screen,
accounts receivable increased $492,000 or 69.3% to $1,204,000 for the nine
months ended January 31, 1999 compared to $712,000 for the year ended April 30,
1998.
Due to increased sales and to obtain favorable prices on bulk
purchases, inventories rose 45.2% to $1,439,000 for the nine months ended
January 31, 1999 or $448,000 above $991,000 reported as of the nine months ended
January 31, 1998.
Prepaid expenses primarily for future trade shows and conferences rose
$200,000 to $224,000 for the nine months ended January 31, 1999.
Accounts payable and accrued expenses increased $201,000 for the nine
months ended January 31, 1999 due primarily to increased inventory requirements.
The Company's primary short-term needs are to increase its
manufacturing capabilities, increase inventory levels and continue to support
its research and development programs. The Company currently plans to expend
approximately $2.0 million for the expansion and development of its
manufacturing facilities in addition to its marketing and general administrative
programs.
The Company expects its capital requirements to increase over the next
several years as it expands its research and development efforts, new product
development, sales and administration infrastructure, 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 12 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.
12
<PAGE> 13
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
In February 1994, Robert Friedenberg, as former owner of the two medical
technology companies, MDI and Gendex, acquired by the Company, in the name of
these corporations, filed for a declaratory judgement that a Share Exchange
Agreement had been rescinded. In order to make a claim for damages, the Company
filed a third-party claim against Dr. Friedenberg for breach of the Share
Exchange Agreement and fraud. In November 1995, after a trial, the court denied
Dr. Friedenberg's request for a declaration of rescission and allowed the
Company's third-party claim to proceed to trial. In September, 1996, Dr.
Friedenberg died.
The Company's third-party claim was decided by a jury on May 5, 1997.
The verdict determined that Dr. Friedenberg breached the Share Exchange
Agreement, when he failed to deliver drug screening know how technology to the
Company. The jury also found in favor of the Company on two of the three fraud
claims against Friedenberg and awarded the Company approximately $321,000 in
damages. Friedenberg's estate, just prior to the jury trial, filed a
supplemental claim for the shares of the Company's stock which he would have
received under the Share Exchange Agreement. The trial judge took this
supplemental claim under advisement. The trial judge, on July 17, 1998, ruled
that the estate of Dr. Friedenberg is entitled to 5,907,154 common shares of the
Company. The Company has filed an appeal. Management of the Company in
consultation with counsel is of the opinion that the trial judge's award of the
shares to Dr. Friedenberg's estate will be reversed on appeal.
Pending the resolution of the Company's appeal, the trial judge has
ordered that the shares be issued in the name of Dr. Friedenberg's wife and
placed in escrow or that the Company post a bond. The Company has applied for a
stay of this order. If the trial judge's order is not stayed, the issuance of
such shares or the posting of the required bond could have a significant
negative effect on the market price of the shares. Pending the resolution of the
Company's appeal of the trial judge's award of the shares to Dr. Friedenberg's
estate, the Company's ability to raise capital through the future sale of equity
securities may be materially impaired. If the trial judge's award of the shares
is not reversed on appeal, the issuance of such shares would have a significant
negative effect on the market price of the shares.
In June 1995, the Company filed against Jacskon Morris, the lawyer who
was in charge of drafting and advising it on the Share Exchange Agreement. Mr.
Morris, who had been recommended to the Company by Dr. Friedenberg, is alleged
by the Company to have breached his fiduciary duty to the Company by later
advising Dr. Friedenberg, individually, on how to rescind the Share Exchange
Agreement. Mr. Morris is also charged with negligence in drafting the Share
Exchange Agreement. The Company's lawsuit demands damages in the amount of
$1,000,000. Mr. Morris has counterclaimed as a party to the Share Exchange
Agreement and seeks common shares. No trial date has been set. The Company is
vigorously contesting the Morris Claim.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security-Holders
None.
13
<PAGE> 14
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
By: /s/John F. Murray
---------------------------------------
John F. Murray,
Treasurer and Principal
Financial Officer
Dated: June 4, 1999
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE SIX MONTH PERIOD ENDED OCTOBER 31, 1998 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-END> JAN-31-1999
<CASH> 1,172,000
<SECURITIES> 0
<RECEIVABLES> 1,264,000
<ALLOWANCES> 60,000
<INVENTORY> 1,439,000
<CURRENT-ASSETS> 4,099,000
<PP&E> 409,000
<DEPRECIATION> 107,000
<TOTAL-ASSETS> 4,690,000
<CURRENT-LIABILITIES> 1,072,000
<BONDS> 0
0
0
<COMMON> 149,000
<OTHER-SE> 3,469,000
<TOTAL-LIABILITY-AND-EQUITY> 4,690,000
<SALES> 5,142,000
<TOTAL-REVENUES> 5,142,000
<CGS> 2,319,000
<TOTAL-COSTS> 3,659,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (836,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (836,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (836,000)
<EPS-BASIC> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
