-----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, UCsqjbxZYijEiHNFwWGv+i05/EOVUrATv20I5+O7327F23dZd6DXiDG1/QbcBxiP fqW275/wmp7TTL+VJVLGJA== 0000896747-96-000009.txt : 19961227 0000896747-96-000009.hdr.sgml : 19961227 ACCESSION NUMBER: 0000896747-96-000009 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961031 FILED AS OF DATE: 19961226 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN BIO MEDICA CORP CENTRAL INDEX KEY: 0000896747 STANDARD INDUSTRIAL CLASSIFICATION: MEASURING & CONTROLLING DEVICES, NEC [3829] STATE OF INCORPORATION: NY FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-28666 FILM NUMBER: 96686037 BUSINESS ADDRESS: STREET 1: 102 SIMMONS RD CITY: ANCRAMDALE STATE: NY ZIP: 12503 BUSINESS PHONE: 5183294485 10QSB/A 1 QUARTERLY REPORT U. S. SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-QSB-1A [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended October 31, 1996. [ ] 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 registrant as specified in its charter New York 14-1702188 - -------------------------------------------------------------------------------- (State of other jurisdiction of (I.R.S. Employer incorporation or organization Identification No.) 102 Simons Road Ancramdale, New York 12503 - -------------------------------------------------------------------------------- Address of principal executive offices) 800-227-1243 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) (Not Applicable) - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report Indicate by check mark, whether the registrant:: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 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 No X Indicate the number of shares outstanding of each of the issuer's classes of stock as of the close of the period covered by this report. Class Number of Shares Outstanding Common Shares 12,565,227 Convertible Class "A" Preferred Shares 150 PART I FINANCIAL INFORMATION Item 1. Financial Statements The condensed financial statements for the periods ended October 31, 1996 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, 1996, and the results of operations and cash flows for the six month periods ended October 31, 1995 and 1996. The Company's results of operations during the six months of the Company's fiscal year are not necessarily indicative of the results to be expected for the full fiscal year. 2 AMERICAN BIO MEDICA CORPORATION (A Development Stage Company) BALANCE SHEET
October 31, 1996 April 30, 1996 (unaudited) -------------- -------------- Assets Current assets Cash $437,532 $188,479 Investments-short term 1,411,866 Accounts receivable 34,500 48,214 Inventory 22,301 51,042 ------ ------ Current assets 494,333 1,699,601 Capital assets-net 20,575 78,073 Other assets License rights 110,070 92,070 Patent-costs 21,000 22,595 ------ ------ Total other assets 131,070 114,665 ------- ------- Total assets $645,978 $1,892,339 ======== ==========
Liabilities and Stockholders' Equity Current liabilities Accounts payable and accrued expenses $33,248 $ 27,827 Notes payable Convertible debenture payable 132,000 ------- ------ Total current liabilities 165,248 27,827 Long term liabilities Convertible debenture payable Note payable 126,500 ------- Total long term liabilities 126,500 Capital stock Capital stock-authorized 30,000,00 Common Shares, par value $.01 each, at April 30, 1995 and 1996 and October 31, 1996, the shares outstanding were 8,350,378, 12,089,561 and 12,565,227 respectively. 120,895 125,651 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 4,415,749 Deficit accumulated during development stage (2,401,671) (2,676,889) ----------- ----------- Total stockholders' equity 354,230 1,864,512 ----------- ----------- Total liabilities and stockholders' equity $645,978 $1,892,339 =========== ===========
See accompanying notes to financial statements. 3 AMERICAN BIO MEDICA CORPORATION (A Development Stage Company) STATEMENT OF OPERATIONS
For the six For the six Inception For the For the months ended months ended, April 10, year ended year ended October 31, October 31 1986 to April 30, April 30, 1995 1996 October 31, 1995 1996 (unaudited) (unaudited) 1996 ---- ---- ----------- ----------- ---------- Income $137,891 $158,105 $82,416 $48,587 $5,389,882 Less cost of goods sold 45,204 96,444 26,373 25,778 3,149,900 ------- ------ ------ ------ --------- Gross profit 92,687 61,661 56,043 22,809 2,239,982 Operations: General and administrative 129,719 518,826 66,672 336,113 3,757,056 Depreciation and amortization 75,600 77,600 37,800 23,000 312,664 Research and development 135,412 358,844 98,401 66,750 631,936 ------- ------- ------ ------ - -------- Total expense 340,731 955,270 202,873 425,863 4,701,656 Loss before other income (248,044) (893,609) (146,830) (403,054) (2,461,674) Other income and expenses Retirement of debt (Note 9) 126,500 126,500 Interest income 10,145 356 1,200 1,336 15,356 Interest expense (67,429) (103,205) (47,566) (357,071) ------ ------- ------ ------ ------- Total other income(57,284) (102,849) (46,366) 127,836 (215,215) and expenses ------- --------- -------- --------- ---------- Net Profit (Loss) $(305,328) $(996,458) $(193,196) $(275,218) $(2,676,889) from operations ========= ========= ========== ========== =========== Net income (loss) per share $(0.02) $(0.08) $(0.02) $(0.02) $(0.21) ========= ========= ========== ========== =========== Number of shares outstanding 12,565,227 12,565,227 12,565,227 12,565,227 12,565,227 ========== ========== ========== ========== ==========
See accompanying notes to financial statements. 4 AMERICAN BIO MEDICA CORPORATION (A Development Stage Company) STATEMENT OF CASH FLOWS
For the For the For the For the six months six months Inception year year ended ended April 10, ended ended October October 1986) to April 30, April 30, 31, 1995 1996 October 31, 1995 1996 (unaudited) (unaudited) 1996 ---- ---- ---------- ---------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net profit (loss) $(305,328) $(996,458) $(193,196) $(275,218) $(2,676,889) Amortization and depreciation 75,600 77,600 37,800 23,000 312,664 Consulting fees 306,250 50,000 356,250 Compensation agreement 125,000 125,000 Retirement of debt (Note 9) 126,500 (126,500) Adjustments to reconcile net income to net cash Accounts receivable (55,234) 38,079 3,722 (13,714) (48,214) Inventory (19,420) 5,250 2,923 (28,741) (51,042) Prepaid expenses (40,683) 15,089 7,391 Accounts payable (36,151) (30,828) 5,489 (5,421) 27,827 -------- -------- ----- ------- ------ TOTAL CASH FLOWS FROM OPERATIONS (381,216) (460,018) (135,871) (123,594) (2,080,904) CASH FLOWS FROM FINANCING ACTIVITIES Convertible debenture 446,278 693,000 180,500 (132,000) 1,407,000 Notes payable (89,289) 126,500 Sale of stock 150,000 1,481,903 2,209,819 Issuance of stock for services 61,006 99,253 ------- ------- ------- --------- --------- TOTAL CASH FLOWS FROM FINANCING 446,278 814,717 180,500 1,349,903 3,842,572 ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Patent costs (2,000) (2,000) Investments short term (1,411,866) (1,411,866) Capital assets (61,496) (159,323) -------- --------- TOTAL CASH FLOWS FROM INVESTING (1,475,362) (1,573,189) ACTIVITIES NET INCREASE (DECREASE) IN CASH 65,062 354,699 44,629 (249,053) 188,479 CASH BALANCE BEGINNING OF PERIOD 147,895 82,833 82,833 437,532 -0- ------- ------ ------ ------- ------- CASH BALANCE END OF PERIOD $82,833 $437,532 $38,204 $188,479 $188,479 ======= ======== ======= ======== ======== See accompanying notes to financial statements.
5 AMERICAN BIO MEDICA CORPORATION (A Development Stage Company) STATEMENT OF STOCKHOLDERS' EQUITY
Deficit accumulated during Additional development Common Common Preferred paid in stage Total Date Stock Stock Stock capital ---- ----- ----- ----- ------- --------- ------ 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 7-9-1986(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 Loss (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 loss (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
6
Deficit accumulated during Additional development Common Common Preferred paid in stage Total Date Stock Stock Stock capital ---- ----- ----- ----- ------- --------- ------ 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 11-3-1995 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 6-4-1996 11,333 113 8,387 8,500 6-4-1996 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 9-9-1996(17) 18,000 180 17,820 18,000 9-23-1996(19) $1 1,409,999 1,410,000 10-31-1996 Net loss (275,218) (275,218) -------- ------- -- --------- --------- --------- 10-31-1996 12,565,227 $125,651 $1 $4,415,749 $2,676,889)$1,864,512 ========== ======== == ======= =========== ==========
7 (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 Unit plus one warrant (4) Write off of related offering expense (5) Forgiveness of salary (6) Sale of Common Shares at $.001 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 Bender 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 under Regulation D 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 Regulation D at $.325 per share (17) Common Shares issued upon exercise of "B" Warrants (18) Common Shares issued upon exercise of "A" Warrants (19) Shares of preferred stock for $1,500,000 less $90,000 in offering expense See accompanying notes to financial statements. 8 AMERICAN BIO MEDICA CORPORATION (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS NOTE A--BASIS OF PRESENTATION In the opinion of 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 October 31, 1996 and the related statements of operations and deficit for the six month periods ended October 31, 1995 and 1996. NOTE B--EARNINGS PER SHARE Earnings per share have been computed on the basis of total number of shares outstanding as of October 31, 1996. The total number of shares outstanding at October 31, 1995 and 1996 was 12,565,227 for each period. NOTE B--COMMITMENTS and CONTINGENT LIABILIES a. Leased Office Space ------------------- The Company leases 2,200 square feet of office and warehouse space from an unrelated party under an oral agreement on a month to month basis at $400 per month. b. Lawsuits ----------- 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 Agreement of Exchange 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 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. A pretrial hearing was held in December, 1996 which set a trial date of April 28, 1997. In September, 1996, Dr. Friedenberg died. The implications of his death vis-a-vis the lawsuit cannot be assessed at this time. 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. The court has set a trial date of September 14, 1998. NOTE C--Preferred Stock The Company amended its certificate of incorporation to authorize the issuance of 5,000,000 preferred shares, $.01 par value each ("Preferred Shares"). 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. 9 AMERICAN BIO MEDICA CORPORATION (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS The Company sold 150 8% Cumulative Convertible Series A Preferred Shares for an aggregate of $1,500,000 ($10,000 per share) less commissions of $90,000 and $5,000 in offering expenses for 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 agreed to register the Common Shares underlying the Preferred Shares on or before March 22, 1997. 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 were originally exercisable at $6.07 per share for a period of two years from the date of an effective registration statement relating to the underlying Common Shares. By agreement between the Company and the warrantholder, the exercise price was reduced to $3.00. 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 on September 21, 1996 and, as a result, the Company is subject to the informational requirements of the Exchange Act and files periodic reports, proxy statements, and other information with the Securities and Exchange Commission. The Company is involved in the preparation of offering documents relating to a registration statement on Form SB-2 the purpose of which is to register 600,000 Common Shares underlying the conversion of the Preferred Shares and 24,712 Common Shares underlying the exercise of the Warrants. NOTE D -- Secured Loan On March 9, 1990, the Company entered into an security agreement with a finance company (the "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. 10 AMERICAN BIO MEDICA CORPORATION (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS The Company instituted a lawsuit against the Finance Company on November 26, 1990 for damages due to its alleged 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 State Penal Law. Although litigation counsel to the Company 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 financial 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 Board of Directors of the Company has elected to write-off the obligation. NOTE E -- Nonstatutory Option Plan The Company has adopted the Fiscal 1996 Nonstatutory Stock Option Plan (the "Plan"). 2,000,000 Common Shares were reserved under the Plan. The Plan is administered by the Board of Directors. The Company has scheduled a special meeting of shareholders to ratify the action of the 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 October 31, 1995, the Company had issued 1,500,000 options pursuant to the 1996 Nonstatutory Option Plan. All options are exercisable for a period of three years at $3.00 per share. In November, 1996, the Company issued 131,000 Nonstatutory Options exercisable at $3.00 for a period of three years. The Company has reserved 1,631,000 Common Shares for the exercise of these options. NOTE F -- 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 under Regulation D to the Securities Act at a value of $.65 per share for a total consideration of $65,000 in lieu of an initial payment, monthly retainers or expense reimbursement, including communications and mailing, for a period of one year. The Company granted OTC the right to receive 550,000 Common Shares for the second and third years at a consideration of $.325 per share representing 1/2 the market price of the Common Shares at the date of the Contract, March 14, 1996 of which 50,000 shares were allocated to expense reimbursement and 500,000 shares allocated to public relations consulting. The Company agreed to value the 550,000 shares at 1/2 market price in consideration of OTC receiving unregistered Common Shares and the risk of the holding period until they may be sold publicly. Certificates representing the 100,000 Common Shares were issued in July, 1996. As at October 31, 1996, certificates representing the 550,000 Common Shares had been authorized but not issued. 11 AMERICAN BIO MEDICA CORPORATION (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS The Company has also issued to OTC 500,000 Class "A" Options which are exercisable at $1.00 through March 14, 1999 and 500,000 Class "B" Options, which are exercisable at $2.00 through March 14, 1999. Until a registration statement relating to the Common Shares underlying exercise of 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 G -- Sale of Common Shares On June 4, 1996, the Company sold $8,500 of convertible debentures which were converted 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, holders had converted the balance of the outstanding convertible debentures in the aggregate principal 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 which were converted into 13,333 Common Shares. As of July 31, 1996, the Company sold an additional convertible debenture in the principal 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. 12 AMERICAN BIO MEDICA CORPORATION (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS NOTE H -- Employment Agreements 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 a salary of $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 above $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 500,000 Common Shares. Certificates representing 400,000 Common Shares are being held by the Company and shall not vest until the happening of the following events: 100,000 shares upon the Company's achieving $1,000,00 in gross revenues from sales of biomedical products; 100,000 shares upon the Company's achieving $2,000,00 in gross revenues from sales of biomedical products; 100,000 shares upon the Company's achieving $3,000,00 in gross revenues from sales of biomedical products; and 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 his employment agreement or subsequent to his discharge for cause from employment by the Company. Mr. Bendis also is entitled to receive health insurance, to participate in stock option or similar plans or other benefits offered generally to management employees and to have out-of-pocket expenses reimbursed. 13 AMERICAN BIO MEDICA CORPORATION (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS b. Employment Agreement with Edmund Jaskiewicz On November 3, 1995, the Company entered into a three year employment agreement with Edmund Jaskiewicz, Executive Vice-President. Under this agreement, Mr. Jaskiewicz received an annual salary of $24,000 per year until April 30, 1996 and presently receives $48,000 per year. When the Company generates an aggregate of $500,000 gross revenues from the sale of biomedical products, Mr. Jaskiewicz's 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 above $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 his employment agreement or subsequent to his discharge for cause from employment by the Company. Mr. Jaskiewicz also is entitled to receive health insurance, to participate in stock option or similar plans or other benefits offered generally to management employees and to have out-of-pocket expenses reimbursed. 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 revenues of the Company above $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 his employment agreement or subsequent to his discharge for cause from employment by the Company. Mr. Cipkowski also is entitled to receive health insurance, to participate in stock option or similar plans or other benefits offered generally to management employees and to have out-of-pocket expenses reimbursed. 14 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (April 10, 1986) to October 31, 1996 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 has been a development stage enterprise since its date of business reformulation in September, 1992 when the Company entered the biotechnology field through the acquisition of technologies of three companies. Subsequently, the acquisition of two of these companies was rescinded. With the technology gained through the acquisition of Protein Resources, Inc., the development of proprietary drug testing technology, and the employment of medical and marketing specialists in the field of drug testing, the Company has developed products, field and market tested these products, applied for patents and copyrights and has begun initial shipments of product. These activities have been funded through the sale of convertible debentures aggregating $1,407,000. As of October 31, 1996, all of the convertible debentures had been converted to Common Shares at $.75 per share. The Company has not as yet generated sufficient revenues during its limited operating history to meet its ongoing operating expenses. The Company sold additional convertible debentures for $18,500 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. As of September 30, 1996, the Company also sold 150 shares of convertible preferred shares at $10,000 per share for an aggregate consideration of $1,500,000 and net proceeds of $1,405,000. The Company is using the proceeds from the sale of the preferred shares to expand its marketing campaign and increase production of its workplace drug testing kits. Results of Operations for the six months ended October 31, 1996 as compared to the six months ended October 31, 1995. - -------------------------------------------------------------------------------- Revenues from the book segment of the business were $82,416 for the year six months ended October 31, 1995 as compared to $17,123 for the six months ended October 31, 1996 representing a decrease of $65,293 or 79.2%. This decrease in book sales is directly attributable to the Company's reorganization of its telemarketing activities. Costs of goods sold for the six months ended October 31, 1995 were $26,373 as compared to $5,565 for the six months ended October 31, 1996 representing a cost of goods sold percentage of 32.0 % for the six months ended October 31, 1995 as compared to 32.5% for the six months ended October 31, 1996. Revenues from the initial sales of drug testing kits were $31,464 for the six months ended October 31, 1996. Costs of goods sold for the six months ended October 31, 1996 was $20,213 or 64.2%. This high level of costs of materials is the result of initial shipments of drug testing kits manufactured in small lots of materials and supplies. General and administrative costs for the six months ended October 31, 1996 were $336,113, an increase of 504% over expenses of $66,672 for the six months ended October 31, 1995. These increased costs are the result of increased labor costs for office personnel and consulting expenses of $75,000. Research and development expenses of $66,750 for the six months ended October 31, 1996 decreased by $31,651 or 32.2% less than the amount expended of $98,401 for the six months ended October 31, 1995. This decrease in expenses is the result of gradual completion of development of the products drug testing delivery system, experimentation and improvement of active ingredient test chemicals, laboratory and field trial testing. 15 Liquidity And Capital Resources As Of The End Of Fiscal Period Ending October 31, 1996. - -------------------------------------------------------------------------------- The Company's cash balance was $188,479 with and additional $1,411,866 in treasury bills and certificates of deposit invested for six months; and working capital was $1,671,774 as at October 31, 1996. These balances are the result of the sale and conversion of convertible debentures for $18,50, the receipt of $175,000 through the exercise of 143,000 "A" warrants at $1.00 and 32,000 "B" warrants at $1.00 per share and the sale of 150 convertible preferred shares at $10,000 per share for an aggregate gross proceeds of $1,500,000 and net proceeds of $1,405,000. The Company has expended $631,936 to date for the research and development of its biomedical products. Management believes that the present cash balance will pay the ongoing cost of entering the workplace drug testing business. Management believes that until profitable operations are achieved, the Company must expend resources (albeit on a decreasing basis) on research and development, design and marketing of its workplace drug test kit. 16 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 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 agreed to register the Common Shares underlying the preferred shares within 180 days of the date of purchase, September 23, 1996. 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. 17 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 on September 21, 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 is involved in the preparation of a registration statement on Form SB-2 the purpose of which is to register 600,000 Common Shares underlying the conversion of the Preferred Shares and 24,712 Common Shares underlying the exercise of the Warrants. 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 a resolution of the Board of Directors which authorized 5,000,000 Preferred Shares, $.01 par value per share. 18 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) s/Stan Cipkowski ----------------------- Stan Cipkowski, President and Principal Executive Officer and Principal Financial Officer Dated: December 20, 1996 EX-27 2 FINANCIAL DATA SCHEDULE WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 This schedule contains summary financial information extracted from financial statements for the six month period ended October 31, 1996 and is qualified in its entirety by reference to such financial statements. 6-MOS APR-30-1997 OCT-31-1996 188,479 1,411,866 48,214 0 51,042 1,699,601 78,073 23,000 [OTHER-ASSETS] 114,665 1,892,339 27,827 0 0 1 125,651 4,415,749 1,892,339 48,587 48,587 25,778 425,863 127,836 0 0 0 0 (403,054) 0 0 0 (275,218) (.02) (.02)
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