-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GIpoeXWOrR+LZwMJEfOPJJf5GeI7GU1ftC9fv10IZQ/BC4xm1LEpHPLB5KPOs7rD vKVG9YTrsko1Hdf9Vcn34g== 0000890566-99-000319.txt : 19990317 0000890566-99-000319.hdr.sgml : 19990317 ACCESSION NUMBER: 0000890566-99-000319 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981031 FILED AS OF DATE: 19990316 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN BIO MEDICA CORP CENTRAL INDEX KEY: 0000896747 STANDARD INDUSTRIAL CLASSIFICATION: MEASURING & CONTROLLING DEVICES, NEC [3829] IRS NUMBER: 141702188 STATE OF INCORPORATION: NY FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: SEC FILE NUMBER: 000-28666 FILM NUMBER: 99566401 BUSINESS ADDRESS: STREET 1: 300 FAIRVIEW AVENUE CITY: HUDSON STATE: NY ZIP: 12534 BUSINESS PHONE: 518822882 MAIL ADDRESS: STREET 1: 300 FAIRVIEW AVENUE CITY: HUDSON STATE: NY ZIP: 12534 10QSB/A 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 October 31, 1998. [ ] 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: 14,728,601 Common Shares as of December 10, 1998 Transitional Small Business Disclosure Format Yes [ ] No [X] PART I FINANCIAL INFORMATION Item 1. Financial Statements The condensed financial statements for the period ended October 31, 1998 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 October 31, 1998 and the results of operations and cash flows for the six month periods ended October 31, 1997 and 1998. 2 AMERICAN BIO MEDICA CORPORATION BALANCE SHEETS AS OF APRIL 30, 1998 AND OCTOBER 31, 1998 APRIL 30 OCTOBER 31, 1998 1998 (UNAUDITED) ------------ ------------ ASSETS Current Assets Cash and cash equivalents .................... $ 3,239,000 $ 1,597,000 Accounts receivable - net of allowance ....... 712,000 1,428,000 Inventory .................................... 991,000 1,778,000 Prepaid expenses ............................. 24,000 384,000 ------------ ------------ Total Current assets ........................ 4,966,000 5,187,000 Property, plant and equipment, net ............. 147,000 320,000 Due from officer ............................... 235,000 254,000 Other assets ................................... 8,000 20,000 ------------ ------------ Total Assets ................................... $ 5,356,000 $ 5,781,000 ============ ============ LIABILITIES AND STOCKHOLDER'S EQUITY Current Liabilities Accounts payable ............................. $ 322,000 $ 1,043,000 Accrued expenses ............................. 164,000 131,000 ------------ ------------ Total current liabilities ..................... 486,000 1,174,000 ------------ ------------ Stockholders equity: Preferred stock; par value $.01 per share; 5,000,000 shares authorized; 2,500 and 2,298 shares Series D, 8% cumulative, convertible issued and Outstanding (face values $2,500,000 and $ 2,298,000) at April 30, 1998 and October 31, 1998 respectively ........... 0 0 Common stock; par value $.01 per share; 30,000,000 shares authorized; 14,282,989 and 14,406,495 Shares issued and outstanding at April 30, 1998 and October 31, 1998 respectively ................................ 143,000 144,000 Additional paid-in capital ..................... 12,102,000 12,206,000 Subscriptions receivable ....................... (9,000) (9,000) Unearned compensation .......................... (24,000) (24,000) Accumulated deficit ............................ (7,342,000) (7,710,000) ------------ ------------ Total stockholder's equity ................... 4,870,000 4,607,000 ------------ ------------ Total Liabilities and Stockholders Equity ...... $ 5,356,000 $ 5,781,000 ============ ============ See accompanying notes to financial statements 2 AMERICAN BIO MEDICA CORPORATION STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED OCTOBER 31, ------------------------------- 1997 (NOTE C) 1998 ------------ ------------ Revenues ................................. $ 1,025,000 $ 3,081,000 Cost of sales ............................ 493,000 1,236,000 ------------ ------------ Gross profit ............................. 532,000 1,845,000 ------------ ------------ Operating expenses Selling, general and administrative expenses .............. 996,000 1,984,000 Non-cash compensation charges .......... 668,000 0 Depreciation and amortization .......... 51,000 43,000 Research & development ................. 0 103,000 ------------ ------------ 1,715,000 2,130,000 ------------ ------------ Income (loss) from operations ............ (1,183,000) (285,000) ------------ ------------ Other income and expense Interest income ........................ 51,000 17,000 ------------ ------------ 51,000 17,000 ------------ ------------ Net (loss) .............................. $ (1,132,000) $ (268,000) Adjustments: Preferred stock beneficial conversion feature ..................... (123,000) Preferred stock dividend ................. (99,000) ------------ ------------ Net loss attributable to common shareholders ............................ $ (1,132,000) $ (490,000) ============ ============ Basic and diluted (loss) per common share ........................ $ (0.08) $ (0.03) Weighted average shares outstanding - basic and diluted ..................... 13,718,265 14,346,669 ============ ============ See accompanying notes to financial statements 4 AMERICAN BIO MEDICA CORPORATION STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE THREE MONTHS ENDED OCTOBER 31, ------------------------------- 1997 (NOTE C) 1998 ------------ ------------ Revenues ................................. $ 359,000 $ 1,773,000 Cost of sales ............................ 124,000 722,000 ------------ ------------ Gross profit ............................. 235,000 1,051,000 ------------ ------------ Operating expenses Selling, general and administrative expenses .............. 548,000 953,000 Non-cash compensation charges .......... 46,000 Depreciation and amortization .......... 26,000 25,000 Research & development ................. 52,000 ------------ ------------ 620,000 1,030,000 ------------ ------------ Income (loss) from operations ............ (385,000) 21,000 ------------ ------------ Other income and expense Interest income (expense) .............. 29,000 (12,000) ------------ ------------ 29,000 (12,000) ------------ ------------ Net income (loss) ........................ $ (356,000) $ 9,000 Adjustments: Preferred stock dividend ............... -- (45,000) ------------ ------------ Net loss attributable to common shareholders ........................... $ (356,000) $ (36,000) ============ ============ Basic and diluted (loss) per common share ...................... $ (0.03) $ (0.00) Weighted average shares outstanding - basic and diluted ....... 13,718,265 14,346,669 ============ ============ See accompanying notes to financial statements 5 AMERICAN BIO MEDICA CORPORATION STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE SIX MONTHS ENDED OCTOBER 31, ---------------------------- 1997(NOTE C) 1998 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) ................................. $(1,132,000) $ (268,000) Adjustments to reconcile net loss to net cash used in operating activities: Amortization and depreciation ............ 51,000 43,000 Issuance of compensating stock/options .......................... 668,000 Changes in: Accounts receivable ..................... (479,000) (716,000) Inventory ............................... (203,000) (787,000) Prepaid expenses and other current assets ................................ (24,000) (360,000) Other assets ............................ 33,000 (12,000) Accounts payable and accrued expenses .............................. (200,000) 588,000 ----------- ----------- Net cash used in operating activities ........................... (1,286,000) (1,520,000) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment ................................ (73,000) (217,000) Purchase of investments .................... (24,000) -- Loans to officer ........................... -- (19,000) ----------- ----------- Net cash used in investing activities ........... (97,000) (236,000) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from exercise of warrants and options ............................... 983,000 105,000 ----------- ----------- Net cash provided by financing activities ............................. 983,000 105,000 ----------- ----------- NET DECREASE IN CASH AND CASH EQUIVALENTS ......................... (400,000) (1,642,000) Cash and cash equivalents - beginning of period .................................. 1,763,000 3,239,000 ----------- ----------- CASH AND CASH EQUIVALENTS - END OF PERIOD ..................................... $ 1,363,000 $ 1,597,000 =========== =========== See accompanying notes to financial statements 6 Notes to Financial Statements October 31, 1998 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 only of normal recurring items) which are considered necessary for a fair presentation of the financial position of American Bio Medica Corporation (the "Company")at October 31, 1998, and the results of its operations, and cash flows for the six-month period then ended. The results of operations for the six-month period ended October 31, 1998 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. 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. 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.
THREE MONTHS ENDED OCTOBER 31,1997 ------------------------------------------------- ADJUSTMENTS -------------------------------------------------------------- AS BOOK GROSS PROFIT AS REPORTED SALES(1) COMPENSATION(2) PERCENTAGE(3) OTHER ADJUSTED ---------- ---------- --------------- ---------------- -------- ---------- Revenues ................ 457,000 (97,000) (4) (1,000) 359,000 (5) (58,000) Cost Of Sales ........... 145,000 (15,000) 58,000 (6) (6,000) 124,000 --------- --------- Gross Profit ............ 312,000 235,000 --------- --------- (5) 58,000 (7) 53,000 (8) 18,000 Selling, General & (6) 17,000 Administrative Expenses 425,000 46,000 (6) 3,000 620,000 --------- --------- Loss from operations .... (113,000) (385,000) ========= ========== Net Loss per share ...... (0.01) (0.03) ========= ========== SIX MONTHS ENDED OCTOBER 31,1997 ------------------------------------------------- ADJUSTMENTS -------------------------------------------------------------- AS BOOK GROSS PROFIT AS REPORTED SALES(1) COMPENSATION(2) PERCENTAGE(3) OTHER ADJUSTED ---------- ---------- --------------- ---------------- -------- ---------- Revenues ................ 1,274,000 (176,000) (73,000) 1,025,000 Cost Of Sales ........... 501,000 (27,000) 175,000 (156,000) 493,000 --------- --------- Gross Profit ............ 773,000 532,000 --------- --------- Selling, General & Administrative Expenses 839,000 668,000 208,000 1,715,000 --------- --------- Income (Loss) from operations ............ (66,000) (1,183,000) ========= ========== Net Income (Loss) per share ................. (0.00) (0.09) ========= ==========
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) 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. Note D - 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. 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. Management's Discussion and Analysis or Plan of Operation MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS for the six months ended October 31, 1998 and 1997 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. 9 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 six months ended October 31, 1998 as compared to the six months ended October 31, 1997 as amended. - -------------------------------------------------------------------------------- The interim Statement of Operations for the six months ended October 31, 1998 and the fiscal 1998 second quarter have been adjusted. See Note C to the Financial Statements. The results of operations for the six months ended October 31, 1998 and the fiscal 1999 second quarter will be compared with the adjusted results of operations for the fiscal 1998 second quarter. During the six months ended October 31, 1998, the Company continued its extensive program to market and distribute its primary product, the Rapid Drug Test kit. As a result, revenues from the sale of the test kits were $2,732,000 for the six months ended October 31, 1998 as compared to $937,000 for the six months ended October 31, 1997 (as adjusted, see Note C to Notes to Financial Statements), representing an increase of $1,795,000 or 191.6% over the preceding year. Cost of goods sold for the six months ended October 31, 1998 was $1,170,000 or 42.9% of drug test revenues as compared to $440,000 or 47.0% of drug test revenues for the six months ended October 31, 1997. To further reduce this cost, the Company has undertaken to improve its manufacturing processes and expects further savings throughout the year. Revenues from book sales were $349,000 for the six months ended October 31, 1998 as compared to $88,000 for the six months ended October 31, 1997 (as adjusted, see Note C to the Financial Statements) representing an increase of $261,000 or 296.6%. 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 six months ended October 31, 1998 was $66,000 (19.0% of book sales)as compared to $54,000 (61.4% of book sales)for the six months ended October 31, 1997. General and administrative costs for the six months ended October 31, 1998 10 were $1,984,000, an increase of 99.2% over expenses of $996,000 for the six months ended October 31, 1997. 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 32.8% during the current year and is expected to continue it's decrease with anticipated sales growth. Depreciation and amortization was $43,000 and $51,000 for the six months ended October 31, 1998 and 1997 respectively. Research and development expense amounted to $103,000 for the six months ended October 31, 1998. 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 $(268,000) for the six months ended October 31, 1998 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 October 31, 1998 as compared to the three months ended October 31, 1997 as amended. - -------------------------------------------------------------------------------- Revenues from the sale of the test kits were $1,567,000 for the three months ended October 31, 1998 as compared to $301,000 for the three months ended October 31, 1997 (as adjusted, see Note C to Notes to Financial Statements), representing an increase of $1,266,000 or 420.6% over the preceding year. Cost of goods sold for the three months ended October 31, 1998 amounted to $683,000 or 43.6% of drug test revenues as compared to $94,000 or 31.2% of drug test revenues for the three months ended October 31, 1997. Revenues from book sales were $206,000 for the three months ended October 31, 1998 as compared to $58,000 for the three months ended October 31, 1997 representing an increase of $148,000 or 255.2%. Cost of goods sold for the three months ended October 31, 1998 amounted to $39,000 (18.9% of book sales) as compared to $30,000 (51.7% of book sales) for the three months ended October 31, 1997. General and administrative costs for the three months ended October 31, 1998 Amounted to $953,000, an increase of 73.9% over expenses of $548,000 for the three months ended October 31, 1997. As a percent of sales, this cost decreased 98.8% during the current year and is expected to continue it's decrease with anticipated sales growth. Depreciation and amortization was $25,000 and $26,000 for the three months ended October 31, 1998 and 1997 respectively. Research and development expense amounted to $52,000 for the three months ended October 31, 1998, continuing management's emphasis on the development of both new products and improved methods of production. Net income from operations amounted to $9,000 for the three months ended October 31, 1998 as compared to a net (loss) of $(356,000) for the three months ended October 31, 1997. Liquidity and capital resources as of the end of the six months ended October 31, 1998. - -------------------------------------------------------------------------------- The Company's cash and cash equivalents amounted to $1,597,000 for the six months ended October 31, 1998 representing a decrease of $1,642,000 or 50.7% over $3,239,000 for the year ended April 30, 1998. Working capital decreased $467,000 or 10.4% over $4,480,000 recorded for the year ended April 30, 1998. The decrease in working capital resulted from a decrease in cash and accounts payable offset by increases in accounts receivable, inventories, and prepaid expenses. As a result of strong six month sales of drug test kits, accounts receivable increased $716,000 or 100.6% to $1,428,000 for the six months ended October 31, 1998 compared to $712,000 for the year ended April 30, 1998. 11 Due to increased sales and to obtain favorable prices on bulk purchases, inventories rose 79.4% to $1,778,000 for the six months ended October 31, 1998 or $787,000 above $991,000 reported as of the six months ended October 31,1997. Prepaid expenses primarily for future trade shows and conferences rose $360,000 to $384,000 for the six months ended October 31, 1998. Accounts payable and accrued expenses increased $688,000 for the six months ended October 31, 1998 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 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 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: March 10, 1999 14 EX-27 2
5 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. 6-MOS APR-30-1999 OCT-31-1998 1,597,000 0 1,488,000 60,000 1,778,000 5,187,000 410,000 90,000 5,781,000 1,174,000 0 0 0 144,000 4,463,000 5,781,000 3,081,000 3,081,000 1,236,000 2,113,000 0 0 0 (268,000) 0 (268,000) 0 0 0 (268,000) (0.03) (0.03)
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