-----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, BYmCsibls4Cmm0F361sCALAlSomSC4EQjL15yZ7c17xi4eGECpMH+WFsL6GWxRLZ 9j4tO4Ip0N4sbUcb4kbPHw== 0000896747-97-000004.txt : 19970319 0000896747-97-000004.hdr.sgml : 19970319 ACCESSION NUMBER: 0000896747-97-000004 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970131 FILED AS OF DATE: 19970318 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 SEC ACT: 1934 Act SEC FILE NUMBER: 000-28666 FILM NUMBER: 97558754 BUSINESS ADDRESS: STREET 1: 102 SIMMONS RD CITY: ANCRAMDALE STATE: NY ZIP: 12503 BUSINESS PHONE: 5183294485 10QSB 1 QUARTERLY REPORT U. S. SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-QSB [x] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended January 31, 1997. [ ] Transition report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934. For the transition period from ______________ to ________________ Commission File Number: 00028666 AMERICAN BIO MEDICA CORPORATION ----------------------------------------------------------------- (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.) 102 Simons Road Ancramdale, New York 12503 ------------------------------------------- (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: 13,197,872 common shares as of January 31, 1997 150 Convertible Class "A" Preferred Shares as of January 31, 1997 Transitional Small Business Disclosure Format Yes No X PART I FINANCIAL INFORMATION Item 1. Financial Statements The condensed financial statements for the periods ended January 31, 1997 included herein have been prepared by American Bio Medica Corporation, (the "Company") without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the "Commission"). In the opinion of management, the statements include all adjustments necessary to present fairly the financial position of the Company as of January 31, 1997, and the results of operations and cash flows for the three and nine month periods ended January 31, 1996 and 1997. 2 AMERICAN BIO MEDICA CORPORATION BALANCE SHEET
April 30, January 31, 1996 1997 -------- --------- Assets Current assets Cash $437,532 $2,302,566 Investments-short term 1,021,867 Accounts receivable 34,500 335,841 Loan receivable 100,000 Inventory 22,301 270,027 Prepaid expenses 4,425 ------ --------- Current assets 494,333 4,034,726 Capital assets-net 20,575 86,019 Other assets License rights 110,070 56,870 Patent costs 21,000 21,725 ------- ------ Total other asset 131,070 78,595 ------- --------- Total assets $645,978 $4,199,340 ======== ========== Liabilities and Stockholders' Equity Current liabilities Accounts payable and accrued expenses $33,248 $182,537 Convertible debenture payable 132,000 ------- ------- Total current liabilities 165,248 182,537 Long term liabilities Note payable 126,500 ------- Total long term liabilities 126,500 Capital stock Capital stock-authorized 30,000,000 common shares, par value $.01 each, at April 30, 1996 and January 31, 1997, the shares outstanding were 12,089,561 and 13,297,872 respectively. 120,895 132,977 Preferred stock-authorized 5,000,000 preferred shares, par value $.01 each, at October 31, 1996, the number of shares outstanding was 150 1 Additional paid in capital 2,635,006 6,606,358 --------- --------- Deficit accumulated during development stage (2,401,671) (2,722,533) ---------- ---------- Total stockholders' equity 354,230 4,016,803 ---------- ---------- Total liabilities and stockholders' equity $645,978 $4,199,340 ========== ==========
See accompanying notes to financial statements. 3 AMERICAN BIO MEDICA CORPORATION STATEMENT OF OPERATIONS
For the year For the year For the nine For the nine ended ended months ended months ended April 30, April 30, January 31, January 31, 1995 1996 1996 1997 ---- ---- ---- ---- Income $137,891 $158,105 $120,261 $430,501 Less cost of goods sold 45,204 96,444 61,409 150,421 Gross profit 92,687 61,661 58,852 280,080 Operations: General and administrative 129,719 518,826 292,749 583,569 Depreciation and amortization 75,600 77,600 57,700 72,490 Research and development 135,412 358,844 228,622 74,978 Total expense 340,731 955,270 579,071 731,037 Income (loss) before other income and (248,044) (893,609) (520,219) (45,095) expenses Other income and expenses Cancellation of debt (Note E) 126,500 Interest income 10,145 356 778 3,593 Interest expense (67,429) (103,205) (75,385) Total other income and (57,284) (102,849) (74,607) 130,093 expenses Net Profit (Loss) $(305,328) $(996,458) $(594,826) $(320,862) from operations Net income (loss) per share $(.05) $(.02) $(.02) $(.08) Number of shares outstanding 13,297,872 13,297,872 13,297,872 13,297,872
See accompanying notes to financial statements. 4 AMERICAN BIO MEDICA CORPORATION STATEMENT OF OPERATIONS
For the three For the three months ended months ended January 31, January 31, 1996 1997 ------------ ------------- Income $37,845 $381,914 Less cost of goods sold 35,036 124,643 Gross profit 2,809 257,271 Operations: General and administrative 226,077 247,456 Depreciation and amortization 19,900 49,490 Research and development 130,221 8,228 Total expense 376,198 305,174 Income (loss) before other income and expenses (373,389) (47,903) Other income and expenses Cancellation of debt (Note E) Interest income (422) 2,258 Interest expense (27,819) Total other income and expenses (28,241) 2,258 Net Profit (Loss) from operations $(401,630) $(45,645) Net income (loss) per share $(.03) $(.00) Number of shares outstanding 13,297,872 13,297,872
See accompanying notes to financial statements. 5 AMERICAN BIO MEDICA CORPORATION STATEMENT OF CASH FLOWS
For the year For the year For the nine For the nine ended ended months ended months ended April 30, April 30, January 31, January 31, 1995 1996 1996 1997 ----------- ----------- - ------------ ------------- CASH FLOWS FROM OPERATING ACTIVITIES Net profit (loss) (305,328) (996,458) (594,826) (320,862) Amortization and depreciation 75,600 77,600 57,700 72,490 Consulting fees 306,250 250,000 Compensation agreement 125,000 100,000 Retirement of debt (Note 9) (126,500) Adjustments to reconcile net income to (187,126) (374,872) net cash Loan receivable (100,000) Accounts receivable (55,234) 38,079 42,521 (301,342) Inventory (19,420) 5,250 7,688 (247,726) Prepaid expenses (40,683) 15,089 (2,200) (4,425) Accounts payable (36,151) (30,828) 39,992 149,289 TOTAL CASH FLOWS FROM OPERATIONS (381,216) (460,018) (99,125) (879,076) CASH FLOWS FROM FINANCING ACTIVITIES Convertible debenture 446,278 693,000 436,750 (132,000) Notes payable (89,258) (44,567) Sale of stock 150,000 3,983,436 Issuance of stock for services 61,006 TOTAL CASH FLOWS FROM FINANCING ACTIVITIES 446,278 814,717 392,183 3,851,436 CASH FLOWS FROM INVESTING ACTIVITIES Investment short term (1,021,867) Patent costs (2,725) Capital assets (82,734) TOTAL CASH FLOWS FROM INVESTING ACTIVITIES (1,107,326) NET INCREASE (DECREASE) IN CASH 65,062 354,699 293,058 1,865,034 CASH BALANCE BEGINNING OF PERIOD 147,895 82,833 82,833 437,532 CASH BALANCE END OF PERIOD 82,833 437,532 375,891 2,302,566
See accompanying notes to financial statements. 6 AMERICAN BIO MEDICA CORPORATION STATEMENT OF STOCKHOLDERS' EQUITY
Common Common Preferred Additional Retained Stock Stock Stock paid-in capital Earnings Total ------ ------ ---------- - --------------- -------- ----- 4-10-1986(1) 1,600,000 $16,000 $11,727 $27,727 4-11-1986(1) 200,000 2,000 2,000 4-30-1986 Net Loss (612) (612) 4-30-1986 1,800,000 18,000 11,727 (612) 29,115 7-09-1986(2) 200,000 2,000 42,888 44,888 4-30-1987(3) 360,935 3,609 357,326 360,935 4-30-1987(4) (74,854) (74,854) 4-30-1987 Net profit 45,981 45,981 4-30-1987 2,360,935 23,609 337,087 45,369 406,065 4-30-1988(5) 67,056 67,056 4-30-1988 Net loss (417,760) (417,760) 4-30-1988 2,360,935 23,609 404,143 (372,391) 55,361 4-30-1989 25,000 250 6,000 6,250 4-30-1989 Net loss (51,677) (51,677) 4-30-1989(5) 19,520 19,520 4-30-1989 2,385,935 23,859 429,663 (424,068) 29,454 4-30-1990 Net profit (13,352) (13,352) 4-30-1990 2,385,935 23,859 429,663 (437,420) 16,102 4-30-1991(9) 742,000 7,420 193,229 200,649 4-30-1991 Net loss (419,654) (419,654) 4-30-1991 3,127,935 31,279 622,892 (857,074) (202,903) 4-30-1992(6) 474,800 4,748 4,748 4-30-1992 Net loss (51,194) (51,194) 4-30-1992 3,602,735 36,027 622,892 (908,268) (249,349)
7 AMERICAN BIO MEDICA CORPORATION STATEMENT OF STOCKHOLDERS' EQUITY
Common Common Preferred Additional Retained Stock Stock Stock paid-in capital Earnings Total --------- ------ --------- - --------------- -------- ------- 4-30-1992 3,602,735 36,027 622,892 (908,268) (249,349) 4-30-1993(12) 1,717,771 17,177 11,833 29,010 4-30-1993(7) 6,029,872 60,299 90,448 150,747 4-30-1993 Net profit (42,374) (42,374) 4-30-1993 11,350,378 113,503 725,173 (950,642) (111,966) 4-30-1994 Net loss (149,243) (149,243) 4-30-1994 11,350,378 113,503 725,173 (1,099,885) (261,209) 10-18-1995(8) (3,000,000) (30,000) 30,000 4-30-1995 (305,328) (305,328) 4-30-1995 8,350,378 83,503 755,173 (1,405,213) (566,537) 11-03-1995 500,000 5,000 120,000 125,000 4-30-1996(10) 1,700,002 17,000 1,258,000 1,275,000 4-30-1996(11) 25,000 250 24,750 25,000 4-30-1996(12) 250,000 2,500 122,500 125,000 4-30-1996(13) 489,181 4,892 56,083 60,975 4-30-1996(14) 125,000 1,250 61,250 62,500 4-30-1996(15) 100,000 1,000 64,000 65,000 4-30-1996(16) 550,000 5,500 173,250 178,750 4-30-1996 Net loss (996,458) (996,458) 4-30-1996 12,089,561 120,895 2,635,006 (2,401,671) 354,230 Unaudited 6-04-1996 11,333 113 8,387 8,500 6-04-1996 25,000 250 24,750 25,000 7-31-1996(10) 176,000 1,760 130,240 132,000 7-31-1996(10) 13,333 133 9,867 10,000 7-31-1996(14) 100,000 1,000 49,000 50,000 7-31-1996(17) 32,000 320 31,680 32,000 7-31-1996(18) 100,000 1,000 99,000 100,000 9-09-1996(17) 18,000 180 17,820 18,000 9-23-1996(19) 1 1,409,999 1,410,000 1-31-1997(20) 732,645 7,326 2,190,609 2,197,935 1-31-1997 Net loss (320,862) (320,862) 1-31-1997 13,297,872 $132,977 $1 $6,606,358 (2,722,533) $4,016,803
8 AMERICAN BIO MEDICA CORPORATION STATEMENT OF STOCKHOLDERS' EQUITY (1) Issuance of common shares for initial capital contribution (2) Sale of common shares through private placement at $.25 per share (3) Sale of common shares through unit offering at $1.00 per share plus one warrant (4) Write off of related offering expense (5) Forgiveness of back salary (6) Sale of common shares at $.01 par value for cash (7) Common shares issued pursuant to acquisition (8) Return of common shares by Edmund Jaskiewicz (9) Issuance of common shares to Jay Bendis pursuant to employment contract at $.25 per share (10) Common shares issued for conversion of debt (11) Common shares issued pursuant to sale of 25,000 Units (12) Common shares issued for warrant conversion at $.50 (13) Common shares issued in consideration for services at $.125 per share (14) Common shares issued pursuant to Rule 504 at $.50 per share (15) Common shares issued under Rule 504 at $.65 per share (16) Common shares issued pursuant at $.325 per share (17) Common shares issued upon exercise of "B" Warrants (18) Common shares issued upon exercise of "A" Warrants (19) Sale of preferred shares for $1,500,000 less commission of $90,000 (20) Common shares issued pursuant to exercise of nonstatutory stock options at $3.00 See accompanying notes to financial statements. 9 AMERICAN BIO MEDICA CORPORATION NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1997 NOTE A--BASIS OF PRESENTATION In the opinion of the American Bio Medica Corporation (the "Company"), the accompanying unaudited condensed financial statements contain all adjustments (consisting of only normal accruals) necessary to present fairly the condensed balance sheet as of January 31, 1997 and the related statements of operations and deficit for the nine and three month periods ended January 31, 1996 and 1997. NOTE B--EARNINGS PER SHARE Earnings per share have been computed on the basis of total number of common shares outstanding. The total number of shares outstanding at January 31, 1997 was 13,297,872. NOTE C--COMMITMENTS ANDCONTINGENT LIABILIES a. Leased Office Space The Company leases 2,200 square feet of office and warehouse space from an unrelated party on a month to month basis at $400 per month. b. Lawsuits 1. In February, 1994, Robert Friedenberg, as owner of two medical technology companies, MDI and Gendex, acquired by the Company, filed suit in the name of these corporations to have the share exchange agreement relating to the acquisition rescinded on the grounds of breach of contract. In order to avoid the imposition of damages against it, the Company filed a cross claim, in July, 1994, against Dr. Friedenberg, seeking enforcement of the share exchange agreement. In November, 1995, after a trial, the court dismissed Dr. Friedenberg's lawsuit and allowed the Company's cross claim to proceed to trial. The Company never issued any common shares to Dr. Friedenberg pursuant to the share exchange agreement and has rescinded the transaction. 2. In June, 1995, the Company filed a lawsuit against Jackson Morris, Dr. Friedenberg's counsel, for the breach of attorney-client relationship and his fiduciary duty and negligence in representing the Company in matters relating to Dr. Friedenberg and in the preparation of the Agreement of Exchange. The Company's lawsuit demands damages in the amount of $1,000,000. NOTE D--PREFERRED SHARES The Company amended its certificate of incorporation authorizing the issuance of 5,000,000 preferred shares $.01 par value each. The board of directors of the Company has the authority, without further action by the holders of the outstanding common shares, to issue preferred shares from time to time in one or more classes or series, to fix the number of shares constituting any class or series and the stated value thereof, if different from the par value, and to fix the terms of any such series or class, including dividend rights, dividend rates, conversion or exchange rights, voting rights, rights and terms of redemption (including sinking fund provisions), the redemption price and the liquidation preference of such class or series. 10 The Company sold 150 8% Convertible Series "A" preferred shares for $10,000 per share for an aggregate consideration of $1,500,000 less $90,000 in commissions and $5,000 in offering expenses for a net consideration of $1,405,000. Each preferred share is convertible into common shares pursuant to the following formula: $10,000 divided by the lesser of $6.07 or 75% of the average of the daily closing bid prices for the five consecutive trading days ending on the trading day prior to the day on which preferred shares are converted to common shares. All accrued but unpaid dividends are payable in cash. The Company has registered the common shares underlying the preferred shares with the Securities and Exchange Commission. The Company has reserved a maximum of 600,000 common shares for the conversion of preferred shares. The Company has issued 24,712 common share purchase warrants. The warrants are exercisable at $3,00 per share until January 21, 1998. NOTE E -- SECURED LOAN On March 9, 1990, the Company entered into an security agreement with a finance company to borrow money secured by the Company's receivables evidenced by invoices. At the time, the Company was engaged in selling educational books to municipal school districts and public libraries throughout the United States. The finance company agreed to lend an amount equal to 60% of the net value of all the Company's accounts receivable. Accounts receivable funding ceased as of July 31, 1990. The Company instituted a lawsuit against the finance company on November 26, 1990 for damages due to its failure lend to the 60% credit limit based on its calculations and for forgiveness of the loan based on the finance company's charging, based on its own billings, at an interest rate in excess of the rate of 25% per annum as prescribed in the sections dealing with usury in New York Penal State Law. Although company counsel had opined that the Company would prevail in the action and that all indebtedness incurred in the principal amount $126,500 plus interest and fees would be voided by reason of the finance company's violation of the usury provisions of the Penal Law, by agreement between the Company and the finance company, the lawsuit was withdrawn without prejudice as the Company, at that time, lacked the resources for protracted litigation. In April, 1996, the obligation, if any, to the finance company became barred by New York State's six-year statute of limitations. The Company wrote off the obligation during the second quarter of fiscal 1997. NOTE F -- NONSTATUTORY OPTION PLAN The Company has adopted the Fiscal 1996 Nonstatutory Stock Option Plan. 2,000,000 common shares were reserved under the plan. The plan is administered by the Company's board of directors. Stock options under the plan may be granted to employees, officers, directors, consultants of the Company or any other parties who have made a significant contribution to the business and success of the Company. The exercise price under the plan may be more, equal to or less than the then current market price of the common shares as deemed to be appropriate. As of July 31, 1996, the Company had issued 1,500,000 options pursuant to the plan and had reserved 1,500,000 common shares for the exercise of these options All options were exercisable for a period of three years at $3.00 per share. As of January 31, 1997, 732,645 nonstatutory stock options had been exercised for an aggregate consideration of $2,197,935. 11 NOTE G -- PUBLIC RELATIONS AGREEMENT In February, 1996, the Company entered into an agreement with OTC Communications ("OTC") for financial public relations and communications services to the Company and to serve when requested as the Company's liaison and spokesman to the financial and investment community. In March, 1996, the Company granted to OTC the right to receive 100,000 common shares at a value of $.65 per share for a total consideration of $65,000 in lieu of initial payment, monthly retainers or expense reimbursement, including communications and mailing for a period of one year and 550,000 common shares for years 2 and 3 under Regulation D to the Securities Act of 1933 for a consideration of $.325 per share representing one-half the market price of the common shares at March 14, 1996, the date of the contract, reflecting the receipt of unregistered common shares and the risk of the holding period until they may be sold publicly. Of the 550,000 shares, 50,000 shares were allocated to expense reimbursement and 500,000 shares allocated to public relations consulting. Certificates representing the 100,000 common shares were issued in July, 1996. As of January 31, 1997, certificates representing the 500,000 common shares had been authorized but not issued. The Company has also issued to OTC 500,000 "A" Options which are exercisable at $1.00 through March 14, 1999 and 500,000 "B" Options, which are exercisable at $2.00 through March 14, 1999. Until a registration statement relating to the common shares underlying the options is effective, certificates representing the shares into which the options are exercised will bear a legend restricting transfer in the absence of an effective registration with the Commission or an exemption therefrom. NOTE H -- ISSUANCE OC COMMON STOCK On June 4, 1996, the Company sold $8,500 of convertible debentures and converted them into 11,333 common shares. On June 4, 1996, the Company sold $25,000 of common shares at $1.00 through the exercise of 25,000 "A" Warrants. As of July 31, 1996, the Company had converted the balance of the outstanding convertible debentures in the amount of $132,000 into 176,000 common shares at $.75 per share. As of July 31, 1996, the Company sold $10,000 of convertible debentures and converted them in to 13,333 shares of common stock. As of July 31, 1996, the Company sold an additional convertible debenture in the amount of $10,000 which was converted into 13,333 common shares at $.75 per share. As of July 31, 1996, the Company sold $100,000 of common shares at $1.00 through the exercise of 100,000 "A" Warrants. As of July 31, 1996, the Company sold $32,000 of common shares at $1.00 per share through the exercise of 32,000 "B" Warrants. As of July 31, 1996, the Company issued 50,000 common shares pursuant to a private placement under Rule 504 of the Securities Act of 1933, as amended at $.50 per share for an aggregate consideration of $25,000. As of September 30, 1996, the Company sold 18,000 common shares at $1.00 per share through the exercise of 18,000 "B" Warrants for an aggregate consideration of $18,000. As of January 31, 1997, 732,645 nonstatutory options were exercised for an aggregate consideration of $2,197,935. 12 NOTE I -- EMPLOYMENT AGREEMENT a. Employment Agreement with Jay Bendis On November 3, 1995, the Company entered into a three year employment agreement with Jay Bendis, Vice-President-Marketing and Sales. Under this agreement, Mr. Bendis received an annual salary of $24,000 per year until April 30, 1996 and presently receives $48,000 per year. When the Company generates an aggregate of $500,000 gross revenues from the sale of biomedical products, Mr. Bendis' salary will be increased to $60,000 per year. In addition, to his salary, Mr. Bendis will receive a bonus equal to 2% of the gross revenus of the Company of $1,000,000 per fiscal year until such annual revenues reach $3,000,000, 1.5% of gross revenues between $3,000,000 and $5,000,000 per year and 1% thereafter. In addition, in consideration of past services valued at $125,000 or $.25 per share, Mr. Bendis received the right to receive 500,000 common shares. Certificates representing 400,000 common shares are being held by the Company and shall not vest until the happening of the following events: 100,000 shares upon the Company's achieving $,000,00 in gross revenues from sales of biomedical products; 100,000 shares upon the Company's achieving $2,000,00 in gross revenues from sales of biomedical products; 100,000 shares upon the Company's achieving $3,000,00 in gross revenues from sales of biomedical products; 100,000 shares upon the Company's achieving $4,000,00 in gross revenues from sales of biomedical products. Certificates representing shares which have not vested on or before April 30, 1998 (or the end of the next succeeding fiscal year in the event the Company changes its fiscal year) will be returned to the Company's stock transfer agent for cancellation. No bonuses will be paid or shares vest subsequent to any election by Mr. Bendis to terminate agreement or his discharge for cause from employment by the Company. Mr. Bendis also is entitled to receive health insurance, participating in stock option or similar plans or other benefits offered generally to management employees and reimbursement of out-of-pocket expenses. b. Employment Agreement with Edmund Jaskiewicz On November 3, 1995, the Company entered into a three year employment agreement with Jay Bendis, Executive Vice-President. Under this agreement, Mr. Jaskiewicz received an annual salary of $24,000 per year until April 30, 1996 and presently receives $48,000 per year. When the Company generates an aggregate of $500,000 gross revenues from the sale of biomedical products, Mr. Jaskiewicz' salary will be increased to $60,000 per year. In addition, to his salary, Mr. Jaskiewicz will receive a bonus equal to 2% of the gross revenues of the Company of $1,000,000 per fiscal year until such annual revenues reach $3,000,000, 1.5% of gross revenues between $3,000,000 and $5,000,000 per year and 1% thereafter. No bonuses will be paid or shares vest subsequent to any election by Edmund Jaskiewicz to terminate this agreement or his discharge for cause from employment by the Company. Mr. Jaskiewicz also is entitled to receive health insurance, participating in stock option or similar plans or other benefits offered generally to management employees and reimbursement of out-of-pocket expenses. 13 c. Employment Agreement with Stan Cipkowski On November 3, 1995, the Company entered into a three year employment agreement with Stan Cipkowski, President. Under this agreement, Mr. Cipkowski received an annual salary of $36,000 per year until April 30, 1996 and presently receives $60,000 per year. When the Company generates an aggregate of $500,000 gross revenues from the sale of biomedical products, Mr. Cipkowski's salary will be increased to $72,000 per year. In addition, to his salary, Mr. Cipkowski will receive a bonus equal to 2% of the gross revenus of the Company of $1,000,000 per fiscal year until such annual revenues reach $3,000,000, 1.5% of gross revenues between $3,000,000 and $5,000,000 per year and 1% thereafter. No bonuses will be paid or shares vest subsequent to any election by Mr. Cipkowski to terminate agreement or his discharge for cause from employment by the Company. Mr. Jaskiewicz also is entitled to receive health insurance, participating in stock option or similar plans or other benefits offered generally to management employees and reimbursement of out-of-pocket expenses. NOTE J - DEVELOPMENT STAGE The Company was considered to be a development stage company with little operating history subsequent to its reorganization and the commencement of development of its newly acquired bio-medical technolgies which are, at present, its core business. The Company has funded these activities through the sale of convertible debentures which were subsequently converted into common shares and through warrant and nonstatory stock option exercise. During the quarter ended January 31, 1997, the Company started commercial production of its drug test kits and has what managment maintains are adequate resources adequately to fund its continuing operations. NOTE K - SUBSEQUENT EVENT Subsequent to the date of the financial statements, 20 8% Series "A" Preferred Shares were converted into 75,641 common shares. Item 2. Management's Discussion and Analysis or Plan of Operation Development Stage Activities - -------------------------------------------------------------------------------- Until 1991, the Company was involved in marketing educational books and software to schools and municipal libraries and audiovisual educational packages throughout the United States. In 1991, the Company reduced its concentration on this market because of competition, increasing costs of doing business and slow collections from municipalities and sought new technologies in emerging markets. The Company has continued one small segment of its original business, that of selling audiovisual packages to libraries. The Company was considered to be a development stage company with little operating history subsequent to its reorganization and the commencement of development of its newly acquired bio-medical technolgies which are, at present, its core business. These activities have been funded through the sale of convertible debentures aggregating $1,425,500 which were subsequently converted to common shares at $.75 per share, and received $175,000 through the exercise of 143,000 "A" warrants at $1.00 and 32,000 "B" warrants at $1.00 per share. The Company also sold 150 convertible preferred shares at $10,000 per share for an aggregate consideration of $1,500,000 and net proceeds of $1,405,000. As of January 31, 1997, the Company sold 732,645 common shares for an aggregate consideration of $2,197,935 through the exercise of nonstatutory stock options. As of January 31, 1997, the Company has started commercial production of its drug testing kits and has what managment maintains are adequate resources to adequately fund its operations. 14 Results of Operations for the Nine Months Ended January 31, 1997 as Compared to the Nine Months Ended January 31, 1996. - -------------------------------------------------------------------------------- Revenues from the book segment of the business were $ 237,538 for the nine months ended January 31, 1997 as compared to $120,261 for the nine months ended Januray 31, 1996 representing a increase of $117,277 or 197%. This increase in book sales is directly attributable to the Company's reorganization of its telemarketing activities and a bulk inventory purchase at significant savings. Costs of goods sold for the nine months ended January 31, 1997 were $87,820 as compared to $61,409 for the nine months ended January 31, 1996 representing a cost of goods sold percentage of 36.9 % for the nine months ended January 31, 1997 as compared to 51.1% for the nine months ended January 31, 1996. This cost reduction is the result of the purchase of a significant book inventory at a greatly reduced cost. Revenues from the initial sales of drug testing kits were $192,963 for the nine months ended January 31, 1997. Costs of goods sold for the nine months ended January 31, 1997 was $62,601 or 32.4%. This cost represents a reduction of 31.8% from the cost ratio as of October 31, 1996 due to the purchasing raw material in commercial amounts. General and administrative costs for the nine months ended January 31, 1997 were $583,569, an increase of 99.3% over expenses of $292.749 for the nine months ended January 31, 1996. These increased costs are the result of labor costs for executive and office personnel of $255,849, legal and professional expenses of $37,292, office expense of $137,391, marketing expense of $145,604, product development of $49,887 and rent of $7,433. Research and development expense of $74,978 for the nine months ended January 31, 1997 was $153,644 less than the $228,622 expended during the nine months ended January 31, 1996. This decrease in research and development is the result of gradual completion of development of the drug testing delivery system. Results of Operations for the Three Months Ended January 31, 1997 as Compared to the Three Months Ended January 31, 1996. - -------------------------------------------------------------------------------- Revenues from the book segment of the business were $188,951 for the three months ended January 31, 1997 as compared to $37,845 for the three months ended January 31, 1996 representing a increase of $151,106 or 399%. This increase in book sales is directly attributable to the Company's reorganization of its telemarketing activities and a bulk inventory purchase at significant savings. Costs of goods sold for the three months ended January 31, 1997 were $62,042 as compared to $35,036 for the three months ended January 31, 1996 representing a cost of goods sold percentage of 32.8 % for the three months ended January 31, 1997 as compared to 92.6% for the three months ended January 31, 1996. This cost reduction is the result of the purchase of a significant book inventory at a greatly reduced cost. Revenues from sales of drug testing kits were $192,963 for the three months ended January 31, 1997 compared to $-0- for the same period in fiscal 1996. Costs of goods sold for the three months ended January 31, 1997 was $62,601 or 32.4%. General and administrative costs for the three months ended January 31, 1997 were $247,456, an increase of 1% over expenses of $226,077 for the three months ended January 31, 1996. The increase of $21,379 is the result of labor costs for executive and office personnel. Research and development expense of $8,228 for the three months ended January 31, 1997 was $121,993 less than the $130,221 expended during the three months ended January 31, 1996. This decrease in research and development is the result of gradual completion of research leading to the development of the drug testing delivery system. 15 Liquidity And Capital Resources As Of The End Of Fiscal Period Ending October 31, 1996. - -------------------------------------------------------------------------------- The Company's cash balance was $2,302,566 with $1,021,867 in treasury bills and certificates of deposit invested for six months and working capital was $3,852,189 as at January 31, 1997. These balances are the result of the sale and conversion of convertible debentures in the principal amount of $18,500 and $175,000 through the exercise of 143,000 "A" warrants and 32,000 "B" warrants at $1.00 per share. The Company also sold 150 convertible preferred shares at $10,000 per share for an aggregate consideration of $1,500,000. Finally, as of January 31, 1997, the Company sold 732,645 common shares for an aggregate consideration of $2,197,935 through the exercise of nonstatutory stock options. Management believes that the present cash balance will pay the ongoing cost of the biomedical business. As of January 31, 1997, the Company has started commercial production of its drug testing kits and no longer considers itself to be a development stage company. 16 PART II OTHER INFORMATION Item 1. Legal Proceedings. 1. In February, 1994, Robert Friedenberg, as owner of the two medical technology companies, MDI and Gendex, acquired by the Company, in the name of these corporations, filed suit to have the Share Exchange Agreement rescinded on the grounds of breach of contract. In order to avoid the imposition of damages against it, the Company filed cross claim, in July, 1994, against Dr. Friedenberg, seeking enforcement of the Agreement of Exchange. In November, 1995, after a trial, the court dismissed Dr. Friedenberg's lawsuit and allowed the Company's cross claim to proceed to trial. The Company never issued any common shares to Dr. Friedenberg pursuant to the Share Exchange Agreement and has rescinded the transaction. 2. In June, 1995, the Company filed a lawsuit against Jackson Morris, Dr. Friedenberg's counsel, for the breach of attorney-client relationship and his fiduciary duty and negligence in representing the Company in matters relating to Dr. Friedenberg and in the preparation of the Share Exchange Agreement. The Company's lawsuit demands damages in the amount of $1,000,000. Item 2. Changes in Securities The Company amended its certificate of incorporation authorizing the issuance of 5,000,000 shares of preferred stock, $.01 par value each. The board of directors of the Company has the authority, without further action by the holders of the outstanding common shares, to issue preferred shares from time to time in one or more classes or series, to fix the number of shares constituting any class or series and the stated value thereof, if different from the par value, and to fix the terms of any such series or class, including dividend rights, dividend rates, conversion or exchange rights, voting rights, rights and terms of redemption (including sinking fund provisions), the redemption price and the liquidation preference of such class or series. The Company sold 150 convertible preferred shares at $10,000 per share for an aggregate consideration of $1,500,000 less $90,000 in commissions and $5,000 in offering expenses for a net consideration of $1,405,000. Each preferred share is convertible into common shares pursuant to the following formula: $10,000 divided by the lesser of $6.07 or 75% of the average of the daily closing bid prices for the five consecutive trading days ending on the trading day prior to the day on which Preferred Shares are converted to common shares. All accrued but unpaid dividends are payable in cash. The Company has registered the common shares underlying the preferred shares with the Securities and Exchange Commission. The Company has reserved a maximum of 600,000 common shares for the conversion of preferred shares. The Company has issued 24,712 common share purchase warrants. The warrants are exercisable at $3.00 per share for a period of two years from the date of an effective registration statement relating to the underlying common shares. On July 23, 1996, the Company filed a registration statement on Form 10-SB pursuant to the Securities Exchange Act of 1934 ("Exchange Act"). That registration statement became effective in September, 1996 and, as a result, the Company is subject to the informational requirements of said act and files reports, proxy statements, and other information with the Securities and Exchange Commission. The Company's registration statement on Form SB-2 the purpose of which was to register 600,000 common shares underlying the conversion of the preferred shares and 24,712 common shares underlying the exercise of the Warrants was declared effective in January, 1997. Item 3. Defaults upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security-Holders Holders of a majority of the issued and outstanding common shares approved an amendment to the Company's certificate of incorporation which authorized 5,000,000 preferred shares, $.01 par value per share and ratified the adoption of the Company's 1996 Nonstatutory Option Plan. 17 SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMERICAN BIO MEDICA CORPORATION (Registrant) By: s/Stan Cipkowski ------------------ Stan Cipkowski, President and Principal Executive Officer and Principal Financial Officer Dated: March 12, 1997 18 EX-27 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from financial statements for the nine month period ended January 31, 1997 and is qualified in its entirety by reference to such financial statements. 6-MOS APR-30-1997 Jan-31-1997 2,302,566 1,021,867 435,841 0 270,027 4,039,151 103,309 17,290 4,199,340 182,537 0 0 1 6,739,336 (2,722,534) 4,199,340 430,501 430,501 150,421 280,080 806,391 0 0 0 0 (526,311) 0 205,447 0 (320,863) (.02) (.02)
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