-----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, EoL46qcuWgxiIjDJsUBF64N7SFDCIBZtBuZU/D0Pb/NJM8p0XUD8NBdP2Cw7JsFE ifeQOMfa7etDapgRcH0mdg== 0000896747-97-000009.txt : 19970912 0000896747-97-000009.hdr.sgml : 19970912 ACCESSION NUMBER: 0000896747-97-000009 CONFORMED SUBMISSION TYPE: 10KSB/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970430 FILED AS OF DATE: 19970905 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: 10KSB/A SEC ACT: SEC FILE NUMBER: 000-28666 FILM NUMBER: 97675564 BUSINESS ADDRESS: STREET 1: 102 SIMMONS RD CITY: ANCRAMDALE STATE: NY ZIP: 12503 BUSINESS PHONE: 5183294485 10KSB/A 1 FORM 10KSB SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 2054 - -------------------------------------------------------------------------------- FORM 10KSB-1A [/] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the fiscal year ended April 30, 1997 Commission File Number: 333-16535 AMERICAN BIO MEDICA CORPORATION - -------------------------------------------------------------------------------- (Name of Small Business Issuer in its charter ) New York 22-3378935 - -------------------------------------------------------------------------------- (State or other Jurisdiction (IRS Employer Identification of Incorporation or Organization) Number) 102 Simons Road Ancramdale, New York 12503 - -------------------------------------------------------------------------------- (Address of principal executive Offices) (Zip Code) Issuer's telephone number: (800) 227-1243 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Shares, $.01 par value per share 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. [x] Yes [ ] No Check if disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [x] State issuer's revenues for its most fiscal year $610,876. State the aggregate market value of the voting stock held by non-affiliates computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within the past 60 days. As of July 2, 1997, there were 7,243,925 common shares held by non-affiliates ("Shares") outstanding having an aggregate market value of $28,975,700. Documents incorporated by reference: Proxy Statement for Fiscal 1998 Annual Meeting of Shareholders 2 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA THOMAS P. MONAHAN CERTIFIED PUBLIC ACCOUNTANT 208 LEXINGTON AVENUE PATERSON, NEW JERSEY 07502 (201) 790-8775 To The Board of Directors and Shareholders of American Bio Medica Corporation I have audited the accompanying balance sheet of American Bio Medica Corporation as of April 30, 1997 and the related statements of operations, cash flows and shareholders' equity for the years ended April 30, 1996 and 1997. These financial statements are the responsibility of the Company's Management. My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles and significant estimates made by Management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of American Bio Medica Corporation as of April 30, 1997 and the results of its operations, shareholders equity and cash flows for the years ended April 30, 1996 and 1997 in conformity with generally accepted accounting principles. /s/Thomas P. Monahan Thomas P. Monahan, CPA May 28, 1997 Paterson, New Jersey F-1 AMERICAN BIO MEDICA CORPORATION BALANCE SHEET April 30, April 30, 1996 1997 ---- ---- Assets Current assets Cash $437,532 $1,762,506 Marketable securities, available for sale 1,053,000 Accounts receivable 34,500 337,759 Loan receivable 102,250 Inventory 22,301 668,723 Prepaid expenses 4,425 --------- -------- Current assets 494,333 3,928,663 Capital assets-net 20,575 110,834 Other assets License rights 110,070 38,470 Patent-costs 21,000 28,783 ------- ------ Total other assets 131,070 67,253 ------- ------ Total assets $645,978 $4,106,750 ========= ========== Liabilities and Stockholders' Equity Current liabilities Accounts payable and accrued expenses $33,248 $380,155 Notes payable Convertible debenture payable 132,000 ------- ------- Total current liabilities 165,248 380,155 Long term liabilities Convertible debenture payable Note payable 126,500 ------- Total long term liabilities 126,500 Capital stock Common Shares - authorized 30,000,000 common shares, par value $.01 each, at April 30, 1996 and 1997, the shares outstanding were 11,977,357 and 13,379,507 respectively. 119,774 133,795 Preferred shares - authorized 5,000,000 preferred shares, par value $.01 each, at April 30, 1997, the number of shares outstanding was 90 1 Additional paid in capital 2,636,127 6,499,791 Retained Eaqrnings (2,401,671) (2,906,992) ----------- ----------- Total stockholders' equity 354,230 3,726,595 ------- --------- Total liabilities and stockholders' equity $645,978 $4,106,750 ======== ========== See accompanying notes to financial statements. F-2 AMERICAN BIO MEDICA CORPORATION STATEMENT OF OPERATIONS For the year For the year ended ended April 30, April 30, 1996 1997 ------ -------- Income 158,105 $610,876 Less cost of goods sold 96,444 259,862 ------- ------- Gross profit 61,661 351,014 Operations: General and administrative 518,826 867,903 Depreciation and amortization 77,600 96,134 Research and development 358,844 74,978 -------- ------ Total expense 955,270 1,039,015 Income before other income and expenses (893,609) (688,001) Other income and expenses Retirement of debt (Note 10) 126,500 Interest income 356 56,180 Interest expense (103,205) --------- ------- Total other income and expenses (102,849) 182,680 --------- ------- Net Profit (Loss) from operations $(996,458) $(505,321) ========== ========== Net income (loss) per share $(.08) $(.04) ===== ===== Number of shares outstanding 12,528,266 12,728,180 ========== ========== See accompanying notes to financial statements. F-3 AMERICAN BIO MEDICA CORPORATION STATEMENT OF CASH FLOWS For the year For the year ended ended April 30, April 30, 1996 1997 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Net profit (loss) $(996,458) $(505,321) Amortization and depreciation 77,600 96,134 Consulting fees 306,250 Compensation agreement 125,000 Retirement of debt (Note 9) (126,500) ---------- --------- (487,608) (535,687) Adjustments to reconcile net income to net cash Loan receivable (102,250) Accounts receivable 38,079 (303,259) Inventory 5,250 (646,422) Prepaid expenses 15,089 (4,425) Accounts payable (30,828) 346,907 -------- ------- TOTAL CASH FLOWS FROM OPERATIONS (460,018) (1,245,136) CASH FLOWS FROM FINANCING ACTIVITIES Convertible debenture 693,000 (132,000) Notes payable (89,289) Sale of stock 150,000 3,877,686 Issuance of stock for services 61,006 ------ --------- TOTAL CASH FLOWS FROM FINANCING ACTIVITIES 814,717 3,745,686 CASH FLOWS FROM INVESTING ACTIVITIES Investment short term (1,053,000) Patent costs (7,783) Capital assets (114,793) --------- TOTAL CASH FLOWS FROM INVESTING ACTIVITIES (1,175,576) NET INCREASE (DECREASE) IN CASH 354,699 1,324,974 CASH BALANCE BEGINNING OF PERIOD 82,833 437,532 ------ ------- CASH BALANCE END OF PERIOD $437,532 $1,762,506 ======== ========== See accompanying notes to financial statements. F-4 AMERICAN BIO MEDICA CORPORATION STATEMENT OF SHAREHOLDERS' EQUITY Additional Common Common Preferred paid in Retained Date Stock Stock Shares capital Earnings Total ---- ------- ------ --------- --------- -------- ----- 04-30-1994 11,238,174 112,382 726,294 (1,099,885) (261,209) 10-18-1995(1)(3,000,000) (30,000) 30,000 04-30-1995 (305,328) (305,328) ----------- -------- ------- ----------- --------- 04-30-1995 8,238,174 82,382 756,294 (1,405,213) (566,537) 11-03-1995 500,000 5,000 120,000 125,000 04-30-1996(2) 1,700,002 17,000 1,258,000 1,275,000 04-30-1996(3) 25,000 250 24,750 25,000 04-30-1996(4) 250,000 2,500 122,500 125,000 04-30-1996(5) 489,181 4,892 56,083 60,975 04-30-1996(6) 125,000 1,250 61,250 62,500 04-30-1996(7) 100,000 1,000 64,000 65,000 04-30-1996(8) 550,000 5,500 173,250 178,750 04-30-1996 Net loss (996,458) (996,458) -------- -------- ---------- ----------- --------- 04-30-1996 11,977,357 $119,774 $2,636,127 $(2,401,671) $354,230 06-04-1996(2) 11,333 113 8,387 8,500 06-04-1996(9) 25,000 250 24,750 25,000 07-31-1996(2) 176,000 1,760 130,240 132,000 07-31-1996(2) 13,333 133 9,867 10,000 07-31-1996(6) 100,000 1,000 49,000 50,000 07-31-1996(9) 32,000 320 31,680 32,000 07-31-1996(10 100,000 1,000 99,000 100,000 09-09-1996(9) 18,000 180 17,820 18,000 09-23-1996(11) $ 1 1,409,999 1,410,000 01-31-1996(12) 697,445 6,975 2,085,211 2,092,186 04-30-1997(13) 229,039 2,290 (2,290) -0- 04-30-1997 Net loss (505,321) (505,321) -------- -------- ---- --------- --------- --------- 04-30-1997 13,379,507 $133,795 $ 1 $6,499,791 $(2,906,992) $3,726,595 ========== ======== ==== ========== ============ ========== (1) Return of common shares by Edmund Jaskiewicz (2) Common shares issued for conversion of debt (3) Common shares issued pursuant to sale of 25,000 Units (4) Common shares issued for Warrant conversion at $.50 (5) Common shares issued in consideration for services under Regulation D at $.125 per share (6) Common shares issued pursuant to Rule 504 at $.50 per share (7) Common shares issued under Rule 504 at $.65 per share (8) Common shares issued pursuant Regulation D at $.325 per share (9) Common shares issued upon exercise of "B" Warrants (10) Common shares issued upon exercise of "A" Warrants (11) Shares of preferred stock for $1,500,000 less $90,000 in offering expense (12) Common shares issued upon exercise of warrants (13) Coversion of convertible preferred shares into common See accompanying notes to financial statements. F-5 AMERICAN BIO MEDICA CORPORATION NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED APRIL 30, 1997 Note 1 - Organization of the Company and Issuance of Common Shares a. Creation of the Company American Bio Medica Corporation (the "Company") was formed under the laws of the State of New York on April 10, 1986 under the name, American Micro Media, Inc. The authorized capital was 200 common shares without par value. On May 20, 1986, the Company amended its certificate of incorporation to increase the number of authorized common shares to 20,000,000 shares of $.01 par value per share. On September 12, 1986, the Company amended its certificate of incorporation to remove preemptive rights. On September 28, 1992, the Company amended its certificate of incorporation to increase the aggregate number of authorized common shares to 30,000,000 shares of $.01 par value per share ("Common Shares") and to change its name to American Bio Medica Corporation. In October, 1996, the Company amended its certificate of incorporation authorizing the issuance of 5,000,000 Preferred Shares, ("Preferred Shares"), $.01 par value each. b. Description of the Company From inception until 1991, the Company was involved in marketing educational books and software to schools and municipal libraries and audio-visual educational packages to corporations 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 medical markets. The Company has, however, continued to sell audiovisual packages to libraries. The Company is currently in the business of acquiring, developing and marketing biomedical technologies and products. The Company currently owns two technologies for screening drugs of abuse, a workplace screening test and a preliminary test for use by laboratories. 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 technologies 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 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. The Company also sold 150 convertible Preferred Shares at $10,000 per share for aggregate consideration of $1,500,000 and net proceeds of $1,405,000. As of April 30, 1997, the Company sold 697,445 Common Shares for an aggregate consideration of $2,092,186 through the exercise of nonstatutory stock options. The Company has started commercial production of its drug testing kits and has what managment maintains are adequate resources to adequately fund its operations. c. Issuance of Common Shares On November 5, 1995, the Company entered into a three year employment agreement with Jay Bendis, Vice-President-Marketing. Pursuant to this agreement, the Company is obligated to issue 500,000 Common Shares. 400,000 of such shares are subject to vesting provisions. As of April 30,1996, the Company had borrowed an aggregate of $2,121,000 on a convertible debenture basis, the principal amount of each debentures convertible at the option of the holder into Common Shares at $.75 per share. As of April 30, 1996, the principal amount of all the convertible debentures had been converted into an aggregate of 1,700,002 Common Shares. As of April 30, 1996, the Company sold, through a private placement, 25,000 Units consisting of 25,000 Common Shares, 500,000 "A" Warrants and 50,000 "B" Warrants for an aggregate consideration of $25,000. F-6 AMERICAN BIO MEDICA CORPORATION NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED APRIL 30, 1997 As of April 30, 1996, Unit holders exercised 250,000 "A" Warrants into 250,000 Common Shares at an exercise price of $.50, for an aggregate of $125,000. As of April 30, 1996, the Company issued 489,181 Common Shares in consideration for past services to five individuals in the amount of $60,975 or an average consideration of $.125 per share. As of April 30, 1996, the Company issued to OTC Communications 100,000 Common Shares under Rule 504 ("Rule 504") to the Securities Act of 1933, as amended, (the "Securities Act") as consideration for financial consulting services rendered per contract at a value of $.65 per share. As of April 30, 1996, the Company issued to Riverside Consulting Group, Inc. 25,000 Common Shares under Rule 504 in consideration for financial consulting services of $12,500 at $.50 per share. As of April 30, 1996, the Company issued 100,000 Common Shares to two persons at $.50 per share in consideration for financial consulting services. As of April 30, 1996, the Company approved the issuance to OTC Communications 500,000 Common Shares under Regulation D as consideration for financial consulting services rendered per contract and 50,000 Common Shares for expenses at a value of $178,750 or $.325 per share. 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 Common Shares at $1.00 through the exercise of 25,000 "A" Warrants for an aggregate consideration of $25,000. 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 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 Common Shares at $1.00 through the exercise of 100,000 "A" Warrants for an aggregate consideration of $100,000. As of July 31, 1996, the Company sold 32,000 Common Shares at $1.00 per share through the exercise of 32,000 "B" Warrants for an aggregate consideration of $32,000. As of July 31, 1996, the Company issued 100,000 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 $50,000. F-7 AMERICAN BIO MEDICA CORPORATION NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED APRIL 30, 1997 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 April 30, 1997, 697,445 nonstatutory options were exercised for an aggregate consideration of $2,092,186. As of April 30, 1997, 60 convertible Preferred Shares had been converted into 229,039 Common Shares. Note 2 - Summary of Significant Accounting Policies a. Basis of Financial Statement Presentation The financial statements presented consist of the balance sheet dated April 30, 1997 and the related statements of operations, retained earnings and cash flows for the years ended April 30, 1996 and 1997. b. Earnings per Share Earnings per share have been computed on the basis of weighted average number of Common Shares outstanding. The total number of shares outstanding at April 30, 1996 and 1997 was 12,528,266 and 12,728,180 respectively. c. Revenue Recognition Revenue is recognized when merchandise is shipped or services are rendered. d. Organization Expense The cost of organizing the Company was charged to operations on a straight line basis over a five year period. F-8 AMERICAN BIO MEDICA CORPORATION NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED APRIL 30, 1997 e. Cash and Cash Equivalents Cash and cash equivalents consist of cash and highly liquid investments with a maturity of three months or less. Excess cash balances are primarily invested in U.S. treasury bills with lesser amounts invested in high quality commercial paper and time deposits. f. Research and Development Expenses Research and development costs are charged to operations when incurred. g. Patents and License Agreements Certain costs incurred to acquire exclusive licenses of patentable technology are capitalized and amortized over a five year period or the term of the license, whichever is shorter. The portion of these amounts determined to be attributable to patents is amortized over their remaining lives and the remainder is amortized over the estimated period of benefit but not more than 40 years. h. Concentration of Credit Risk The Company sells its products primarily to United States distributors. Credit is extended based on an evaluation of the customer's financial condition, and generally collateral is not required. Credit losses have been minimal and within Management's expectations. The Company invests its excess cash in debt instruments of financial institutions and corporations with strong credit ratings. The Company has established guidelines relative to diversification and maturities that maintain safety and liquidity. These guidelines are periodically reviewed and modified to take advantage of trends in yields and interest rates. The Company has not experienced any realized losses on its marketable securities. Note 3 - Marketable Securities, Available for Sale The Company adopted Financial Accounting Standards Board ("FASB") Statement No. 115, "Accounting for Certain Investments in Debt and Equity Securities", which requires that investments in equity securities that have readily determinable fair values and investments in debt securities be classified in three categories: held-to-maturity, trading and available-for-sale. Based on the nature of the assets held by the Company and Management's investment strategy, the Company's investments have been classified as available-for-sale. Management determines the appropriate classification of debt securities at the time of purchase and reevaluates such designation as of each balance sheet date. Securities classified as available-for-sale are carried at estimated fair value, as determined by quoted market prices, with unrealized gains and losses, net of tax, reported in a separate component of stockholders' equity. At April 30, 1997, the Company had no investments that were classified as trading or held-to-maturity as defined by the Statement. F-9 AMERICAN BIO MEDICA CORPORATION NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED APRIL 30, 1997 Note 4 - Balance Sheet Information a. Inventory Inventory has been recorded at the lower of cost or market under the first-in-first-out method. Inventory components were as follows: April 30, 1996 April 31, 1997 Books held for resale $22,301 $ 43,527 Workplace drug screening tests: Raw materials 292,456 Work in process 183,500 Finished Goods 149,239 ------- Total workplace drug screening tests: -0- 625,195 ------- ------- Total inventory $22,301 $668,722 b. Property, equipment and leasehold improvements consist of the following: April 30, 1996 April 30, 1997 Office equipment $32,575 $ 45,702 Manufacturing and warehouse equipment 87,666 ------- ------- Total 32,575 133,368 Less accumulated depreciation (12,000) (22,534) -------- ------- Total $20,575 $110,834 c. Cash, Cash Equivalents and Marketable Securities, Available for Sale The following is a summary of cash, cash equivalents and available-for-sale securities by balance sheet classification at April 30, 1997: Estimated Gross Gross Fair Unrealized Unrealized Market Cost Gains Losses Value ---- ----- ------ ------ Cash $ 99,039 $-0- $-0- $ 99,039 Certificates of deposit 90 days and less 1,663,467 -0- -0- 1,663,467 ----------- ---- ---- ----------- Total cash and cash equivalents $ 1,762,506 $-0- $-0- $1,762,506 ========== === === ========= Marketable Securities Due in one year or less-Certificates of Deposit $1,053,000 $-0- $-0- $1,053,000 ========= === === ========= F-10 AMERICAN BIO MEDICA CORPORATION NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED APRIL 30, 1997 The following is a summary of cash, cash equivalents and available-for-sale securities by balance sheet classification at April 30, 1996: Estimated Gross Gross Fair Unrealized Unrealized Market Cost Gains Losses Value ---- ----- ------ ------- Cash $ 437,532 $-0- $-0- $ 437,532 ------- --- --- --------- Total cash and cash equivalents $ 437,532 $-0- $-0- $ 437,532 ======== === === ========= Note 5 - Related Party Transaction a. Nonstatutory Option Plan In June, 1996, the Company adopted its 1996 Nonstatutory Stock Option Plan (the "1996 Plan"). Options to purchase 2,000,000 Common Shares are included in the 1996 Plan of which 1,500,000 were issued on June 28, 1996 as follows: Stan Cipkowski, President, 550,000 options; Edmund Jaskiewicz, Executive Vice-President, 250,000 options; Jay Bendis, Vice-President-Marketing 300,000 options; Henry Wells, Vice-President-Product Development, 150,000 options; Joel Pensley, Esq. 160,000 options, Michael Roy Fugler, Esq. 40,000 options and two non-management employees, 25,000 options each. On April 30, 1997, the Company issued 20,000 options to Jay Bendis, 15,000 options to Joel Pensley, Esq., 5,000 options to Steven Gutstein, Esq., and an aggregate of 232,000 options to 15 non-management employees. b. 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 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. In consideration of past services valued at $125,000 or $.25 per share, Mr. Bendis also 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 $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; F-11 AMERICAN BIO MEDICA CORPORATION NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED APRIL 30, 1997 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. c. 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' 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. d. 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 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. F-12 AMERICAN BIO MEDICA CORPORATION NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED APRIL 30, 1997 Note 6 - 12% Convertible Subordinated Debentures As of April 30,1996, the Company had borrowed an aggregate of $2,121,000 on a convertible debenture basis, the principal amount of each debentures convertible at the option of the holder into Common Shares at $.75 per share. As of April 30, 1996, the principal amount of all the convertible debentures had been converted into an aggregate of 1,700,002 Common Shares. As of April 30, 1996, the Company has reserved sufficient authorized but unissued Common Shares for conversion of the Debentures which shares, upon issuance and delivery, would be duly and validly issued, fully paid and nonassessable. As of July 31, 1996, the Company had converted the balance of the 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 an additional convertible debenture in the amount of $10,000 which was converted into 13,333 Common Shares $.75 per share. Note 7 - Preferred Shares The Company, in October, 1996, 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. 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. As of April 30, 1997, 60 convertible Preferred Shares had been converted into 229,039 Common Shares. As of April 30, 1997, the Company had reserved a maximum of 500,000 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. F-13 AMERICAN BIO MEDICA CORPORATION NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED APRIL 30, 1997 Note 8 - Income Taxes The Company provides for the tax effects of transactions reported in the financial statements. The provision if any, consists of taxes currently due plus deferred taxes related primarily to differences between the basis of assets and liabilities for financial and income tax reporting. The deferred tax assets and liabilities, if any, represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. As of April 30, 1996 and April 30, 1997, the Company had no material current tax liability, deferred tax assets, or liabilities to impact on the Company's financial position because the deferred tax asset related to the Company's net operating loss carry forward and was fully offset by a valuation allowance. At April 30, 1997, the Company has net operating loss carry forwards for income tax purposes of $2,906,992. This carry forward is available to offset future taxable income, if any, and expires in the year 2010. The Company's utilization of this carry forward against future taxable income may become subject to an annual limitation in the event that there is a cumulative change in ownership of the Company of more than 50%. The components of the net deferred tax asset as of April 30, 1997 were as follows: Deferred tax asset: Net operating loss carry forward $ 988,377 Valuation allowance $ (988,377) ------- Net deferred tax asset $ -0- The Company recognized no income tax benefit from the loss generated in the year ended April 30, 1997. SFAS No. 109 requires that a valuation allowance be provided if it is more likely than not that some portion or all of a deferred tax asset will not be realized. The Company's ability to realize benefit of its deferred tax asset will depend on the generation of future taxable income. Because the Company has yet to recognize significant revenue from the sale of its products, the Company believes that a full valuation allowance should be provided. Note 9 - Commitments and Contingencies a. 12% Convertible Subordinated Debentures The Company is obligated to convert the outstanding Debentures at the option of the holders into Common Shares at a ratio one share for each $.75 principal amount of each Debenture so converted. At April 30, 1996, the Company had reserved 176,000 Common Shares for conversion of the aggregate principal amount of $132,000 of the Debentures which had not been converted as of April 30, 1996. As of July 31, 1996, the Company had converted the balance of the 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 an additional convertible debenture in the amount of $10,000 and was converted into 13,333 Common Shares at $.75 per share. F-14 AMERICAN BIO MEDICA CORPORATION NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED APRIL 30, 1997 b. Lawsuits In February, 1994, Robert Friedenberg, former stockholder of two medical technology companies, MDI and Gendex, acquired by the Company, filed suit in the name of the two subsidiaries to have the Share Exchange Agreement under which the companies were acquired rescinded on the grounds of breach of contract. The Company filed a third party claim in July, 1994, against Dr. Friedenberg, seeking enforcement of the Share Exchange Agreement. In November, 1995, after a bifurcated trial, the court dismissed Dr. Friedenberg's lawsuit brought in the name of MDI and Gendex) and allowed the Company's third party claim to proceed to trial. In September, 1996, Dr. Friedenberg died. Trial on the third party claim was decided by a jury on May 5, 1997. The verdict determined that Dr. Friedenberg (represented by his estate) breached various contracts by failing to deliver certain technology to the Company. The jury also found in favor of the Company on two of the three fraud claims against Dr. Friedenberg and awarded the Company approximately $350,000 in damages. The trial judge, who is bound by the jury verdict against Friedenberg, will decide Dr. Friedenberg's Estate's pending claim to shares of Company common stock. The Company has refused to issue them to him. In June, 1995, the Company filed a lawsuit against Jackson Morris, Esq. for the breach of attorney-client relationship and of his fiduciary duty to the Company for subsequently providing legal services to Dr. Friedenberg in his dispute with the Company. The Company's lawsuit demands damages in the amount of $1,000,000. Mr. Morris has counterclaimed for Common Shares. The court has set a trial date of September 14, 1998. c. 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, under Regulation D to the Securities Act of 1933, 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 an initial payment, monthly retainers or expense reimbursement, including communications and mailing for a period of one year. 550,000 Common Shares were granted for years 2 and 3 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. This valuation reflects the receipt of unregistered Common Shares and the market 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. 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. d. 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. F-15 AMERICAN BIO MEDICA CORPORATION NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED APRIL 30, 1997 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. The Company issued 1,500,000 options on June 28, 1996 as follows: Stan Cipkowski, President, 550,000 options; Edmund Jaskiewicz, Executive Vice-President, 250,000 options; Jay Bendis, Vice-President-Marketing 300,000 options; Henry Wells, Vice-President-Product Development, 150,000 options; Joel Pensley, Esq. 160,000 options, Michael Roy Fugler, Esq. 40,000 options and two non-Management employees, 25,000 options each. On April 30, 1997, the Company issued 20,000 options to Jay Bendis, 15,000 options to Joel Pensley, Esq., 5,000 options to Steven Gutstein, Esq. and 232,000 options to 15 non-Management employees. . As of April 30, 1997, 697,445 nonstatutory stock options had been exercised for an aggregate consideration of $2,092,186. e. Leased Office Space The Company leases 4,000 square feet of office and warehouse space in two locations from unrelated parties on a month to month basis at an aggregate rent of $1,000 per month. Note 10 - 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 11 - Business and Credit Concentrations The amount reported in the financial statements for cash represents fair market value. Because the difference between cost and the lower of cost or market is immaterial, no adjustment has been recognized and investments are recorded at cost. F-16 AMERICAN BIO MEDICA CORPORATION NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED APRIL 30, 1997 Note 12 - Development Stage Company 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 technologies which are, at present, its core business. The Company started commercial production of its drug test kits and has what managment maintains are adequate resources to adequately fund its continuing operations. The Company is no longer considered to be a development stage Company. Note 13 - Subsequent Events Subsequent to April 30, 1997, 70 8% Series "A" Preferred Shares were converted into 301,120 Common Shares. F-17 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this first amendment to the Form 10KSB for the period ended April 30, 1997 to be signed on its behalf by the undersigned thereunto duly authorized. AMERICAN BIO MEDICA CORPORATION August 28, 1997 By: /s/ Stan Cipkowski Stan Cipkowski Chief Executive Officer (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. August 28, 1997 /s/ Stan Cipkowski Stan Cipkowski President, Treasurer and a Director (Chief Executive Officer and (Principal Financial and Accounting Officer) /s/ Edmund Jaskiewicz Edmund Jaskiewicz Chairman of the Board of Directors Executive Vice-President and Secretary /s/ Jay Bendis Jay Bendis Vice-President Marketing and a Director Jaspar R. Clay, Jr. Director John F. Murray Director EX-27 2 FDS 10KSB 04-30-97
5 Financial Data Schedule for 10KSB - 04-30-97 for American Bio Medica Corporation 12-MOS APR-30-1997 MAY-1-1996 APR-30-1997 1,762,506 1,053,000 337,759 0 668,723 3,928,663 133,368 (22,534) 4,106,750 380,155 0 0 1 133,795 3,592,799 4,106,750 610,876 610,876 259,862 1,039,015 182,680 (505,321) 0 (505,321) 0 (505,321) 0 0 0 (505,321) (.04) (.04)
-----END PRIVACY-ENHANCED MESSAGE-----