-----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, WSOUqD0UXZfkreRLzoTgtfcT/Qdn2S7Oil23K390j3YID1419g3k04xpji02kMJp dOTCmSiyJXN8n2yIcK4YpQ== 0000950137-99-001933.txt : 19990607 0000950137-99-001933.hdr.sgml : 19990607 ACCESSION NUMBER: 0000950137-99-001933 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990131 FILED AS OF DATE: 19990604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN BIO MEDICA CORP CENTRAL INDEX KEY: 0000896747 STANDARD INDUSTRIAL CLASSIFICATION: MEASURING & CONTROLLING DEVICES, NEC [3829] IRS NUMBER: 141702188 STATE OF INCORPORATION: NY FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: SEC FILE NUMBER: 000-28666 FILM NUMBER: 99640556 BUSINESS ADDRESS: STREET 1: 300 FAIRVIEW AVENUE CITY: HUDSON STATE: NY ZIP: 12534 BUSINESS PHONE: 518822882 MAIL ADDRESS: STREET 1: 300 FAIRVIEW AVENUE CITY: HUDSON STATE: NY ZIP: 12534 10QSB/A 1 FORM 10-QSB AMENDMENT #1 1 U. S. SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-QSB/A-1 [x] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended January 31, 1999. [ ] Transition report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934. For the transition period from to Commission File Number: 0-28666 AMERICAN BIO MEDICA CORPORATION ----------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) New York 14-1702188 ------------------------------------------------------------------- (State or other jurisdiction (I.R.S. Employer incorporation or organization) Identification No.) 300 Fairview Avenue, Hudson, New York 12534 ------------------------------------------- (Address of principal executive offices) 800-227-1243 --------------------------- (Issuer's telephone number) (Not Applicable) ---------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] State the number of shares outstanding of each of the issuer's classes of common equity as of the latest practicable date: 14,875,190 Common Shares as of March 1, 1999 Transitional Small Business Disclosure Format Yes [ ] No [X] 2 PART I FINANCIAL INFORMATION AMERICAN BIO MEDICA CORPORATION BALANCE SHEETS AS OF APRIL 30, 1998 AND JANUARY 31, 1999
JANUARY 31 APRIL 30 1999 1998 (UNAUDITED) ------------- ----------- ASSETS Current Assets Cash and cash equivalents $ 3,239,000 $ 1,172,000 Accounts receivable - net of allowance 712,000 1,204,000 Loan receivable 0 60,000 Inventory 991,000 1,439,000 Prepaid expenses 24,000 224,000 ------------ ------------ Total Current Assets 4,966,000 4,099,000 Property, plant and equipment, net 147,000 302,000 Due from officer 235,000 275,000 Other assets 8,000 14,000 ------------ ------------ Total Assets $ 5,356,000 $ 4,690,000 ============ ============ LIABILITIES AND STOCKHOLDER'S EQUITY Current Liabilities Accounts payable $ 322,000 $ 609,000 Accrued expenses 164,000 463,000 ------------ ------------ Total Current Liabilities 486,000 1,072,000 ------------ ------------ Stockholders Equity: Preferred stock; par value $.01 per share; 5,000,000 shares authorized; 2,500 and 1,500 shares Series D, 8% cumulative, convertible issued and outstanding (face values $2,500,000 and $1,500,000) at April 30, 1998 and January 31, 1999 respectively 0 0 Common stock; par value $.01 per share; 30,000,000 shares authorized; 14,282,989 and 14,875,190 shares issued and outstanding at April 30, 1998 and January 31, 1999 respectively 143,000 149,000 Additional paid-in capital 12,102,000 12,065,000 Subscriptions receivable (9,000) (9,000) Unearned compensation (24,000) (24,000) Accumulated deficit (7,342,000) (8,699,000) ------------ ------------ Total Stockholder's Equity 4,870,000 3,618,000 ------------ ------------ ------------ ------------ Total Liabilities and Stockholders Equity $ 5,356,000 $ 4,690,000 ============ ============
See accompanying notes to financial statements 2 3 AMERICAN BIO MEDICA CORPORATION STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE NINE MONTHS ENDED JANUARY 31, ---------------------------- 1998 (NOTE C) 1999 ------------- ------------ Revenues $ 1,405,000 $ 5,142,000 Cost of sales 664,000 2,319,000 ------------ ------------ Gross profit 741,000 2,823,000 ------------ ------------ Operating expenses Selling, general and administrative expenses 2,032,000 3,374,000 Non-cash compensation charges 722,000 0 Depreciation and amortization 77,000 66,000 Research and development 96,000 266,000 Write-off of bad debts 34,000 0 ------------ ------------ 2,961,000 3,706,000 ------------ ------------ Loss from operations (2,220,000) (883,000) ------------ ------------ Other income and expense 85,000 47,000 Interest income ------------ ------------ 85,000 47,000 ------------ ------------ Net loss $ (2,135,000) $ (836,000) Adjustments: Preferred stock beneficial conversion feature (123,000) Preferred stock dividend including late fee (521,000) ------------ ------------ Net loss attributable to common shareholders $ (2,135,000) $ (1,480,000) ============ ============ Basic and diluted (loss) per common share (Note D) $ (0.16) $ (0.10) Weighted average shares outstanding - basic and diluted 13,737,781 14,454,883 ============ ============
See accompanying notes to financial statements 3 4 AMERICAN BIO MEDICA CORPORATION STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED JANUARY 31, ----------------------------- 1998 (NOTE C) 1999 ------------- ------------- Revenues $ 380,000 $ 2,061,000 Cost of sales 171,000 1,083,000 ------------ ------------ Gross profit 209,000 978,000 ------------ ------------ Operating expenses Selling, general and administrative expenses 1,053,000 1,345,000 Non-cash compensation charges 54,000 Depreciation and amortization 26,000 22,000 Research and development 96,000 163,000 Write-off of bad debts 17,000 45,000 ------------ ------------ 1,246,000 1,575,000 ------------ ------------ Income (loss) from operations (1,037,000) (597,000) ------------ ------------ Other income and expense Interest income 34,000 30,000 ------------ ------------ 34,000 30,000 ------------ ------------ Net income (loss) $ (1,003,000) $ (567,000) Adjustments: Preferred stock dividend including late fee (262,000) ------------ ------------ Net loss attributable to common shareholders $ (1,003,000) $ (829,000) ============ ============ Basic and diluted (loss) per common share (Note D) $ (0.07) $ (0.06) Weighted average shares outstanding-- basic and diluted 13,737,781 14,454,883 ============ ============
See accompanying notes to financial statements 4 5 AMERICAN BIO MEDICA CORPORATION STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED JANUARY 31, ------------------------------- 1998 (NOTE C) 1999 --------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net profit (loss) $(2,135,000) $ (836,000) Adjustments to reconcile net loss to net cash used in operating activities: Amortization and depreciation 77,000 66,000 Compensatory stock and stock options 722,000 Changes in: Accounts receivable (388,000) (492,000) Loan receivable (17,000) (60,000) Inventory (106,000) (448,000) Prepaid expenses and other current assets (10,000) (200,000) Other assets 50,000 (6,000) Accounts payable and accrued expenses (202,000) 164,000 ----------- ----------- Net cash used in operating activities (2,009,000) (1,812,000) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment (99,000) (221,000) Purchase of investments Loans to officer 102,000 (40,000) ----------- ----------- Net cash provided by (used in) investing activities 3,000 (261,000) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from exercise of warrants and options 1,378,000 6,000 Subscriptions receivable (30,000) ----------- ----------- Net cash provided by financing activities 1,348,000 6,000 ----------- ----------- NET INCREASE (DECREASE) IN CASH AND cash equivalents (658,000) (2,067,000) Cash and cash equivalents - beginning of period 2,816,000 3,239,000 ----------- ----------- CASH AND CASH EQUIVALENTS - END OF PERIOD $ 2,158,000 $ 1,172,000 =========== ===========
See accompanying notes to financial statements 5 6 Notes to Financial Statements January 31, 1999 Note A - Basis of Reporting The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, such statements include all adjustments (consisting of normal recurring items and see Note D) which are considered necessary for a fair presentation of the financial position of American Bio Medica Corporation (the "Company") at January 31, 1999, and the results of its operations, and cash flows for the nine-month period then ended. The results of operations for the nine-month period ended January 31, 1999 are not necessarily indicative of the operating results for the full year. It is suggested that these financial statements be read in conjunction with the financial statements and related disclosures for the year ended April 30, 1998 included in the Company's Form 10-KSB/A-1. Note B - Net Income Per Share of Common Stock In 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings Per Share". Statement No. 128 replaced the calculation of primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share exclude any dilutive effects of options, warrants, and convertible securities. Dilutive earnings per share is very similar to the previously reported fully diluted earnings per share. The Company adopted Statement No. 128 and has retroactively applied the effects thereof for all periods presented. The impact on the per share amounts previously reported was not significant. When preferred stock is convertible to common stock at a conversion rate that is the lower of a rate fixed at issuance or a fixed discount from the common stock market price at the time of conversion, the discounted amount is an assured incremental yield, the "beneficial conversion feature", to the preferred shareholders and should be accounted for as an embedded dividend to preferred shareholders. As such, the loss per common share was adjusted for this feature. 6 7 Note C - Restatement of Prior Year Quarterly Statements of Operations The Company is recording adjustments which effect prior interim accounting periods of the fiscal year ended April 30, 1998 as indicated below.
Three Months Ended January 31, 1998 -------------------------------------------- Adjustments --------------------------------------------------------------- As Book Compen- Gross Profit As Reported Sales (1) sation (2) Percentage (3) Other Adjusted --------------------------------------------------------- ------------------------------ Revenues 500,000 (120,000) 380,000 Cost Of Sales 174,000 (18,000) 66,000 (5) (51,000) 171,000 ---------- ---------- Gross Profit 326,000 209,000 ---------- ---------- (5) 51,000 (7) 69,000 (8) 25,000 (9) 17,000 (10) (48,000) Selling, General & (11) 20,000 Administrative Expenses 959,000 54,000 (6) 3,000 1,150,000 Research And Development 48,000 (10) 48,000 96,000 ---------- ---------- Loss from operations (681,000) (1,037,000) ========== ========== Net Loss per share (0.05) (0.07) ========== ==========
Nine Months Ended January 31, 1998 -------------------------------------------- Adjustments --------------------------------------------------------------- As Book Compen- Gross Profit As Reported Sales (1) sation (2) Percentage (3) Other Adjusted --------------------------------------------------------- ------------------------------ Revenues 1,774,000 (296,000) (73,000) 1,405,000 Cost Of Sales 675,000 (45,000) 241,000 (207,000) 664,000 ------------ ---------- Gross Profit 1,099,000 741,000 ------------ ---------- Selling, General & Administrative Expenses 1,798,000 722,000 345,000 2,865,000 Research And Development 48,000 48,000 96,000 ------------ ---------- Loss from operations (747,000) (2,220,000) ============ ========== Net Loss per share (0.05) (0.16) ============ ==========
The following explains the principal adjustments: (1) A revenue recognition adjustment to provide an allowance for book sales which are subject to customer acceptance and its related effect on cost of sales. (2) Adjustments to recognize non-cash employee and consulting compensation charges in the period earned. The expenses represent the issuance of equity instruments at fair value in accordance with employment agreements. (see note K [2]) 7 8 (3) The gross profit percentages have been recalculated to correspond with inventory adjustments, drug test samples and the timing of revenue recognition. (4) Adjustment to reverse consignment sale of drug test kits and related cost of sales. (5) Reclassification of drug test samples from cost of sales to Selling Expense. (6) Other minor adjustments (7) Write-off of investor relations supplies and expense (8) Earned employee bonuses (9) Allocation of bad debt accrual (10) Reclassification of research & development costs (11) Write-off of patent & license costs Note D - Registration Rights Agreement Penalty Pursuant to the Registration Rights Agreement dated April 24, 1998 between CC Investments, LDC and the Company entered into in connection with the issuance by the Company of its Series D Preferred Shares, the Company incurred a late registration penalty amounting to $225,000 in the three months ended January 31, 1999. This penalty, which has not been previously accrued, has been recorded as a preferred stock dividend and resulted in the following adjustments:
FOR THE NINE MONTHS ENDED FOR THE THREE MONTHS ENDED JANUARY 31, 1999 JANUARY 31, 1999 ---------------- ---------------- AS PREVIOUSLY AS AS PREVIOUSLY AS REPORTED ADJUSTED REPORTED ADJUSTED -------- -------- -------- -------- Net loss attributable to common shareholders $ (1,095,000) $ (1,480,000) $ (604,000) $ (829,000) Basis and diluted (loss) per common share $ (0.08) $ (0.10) $ (0.04) $ (0.06)
Note E - Litigation In February 1994, Robert Friedenberg, as former owner of the two medical technology companies, MDI and Gendex, acquired by the Company, in the name of these corporations, filed for a declaratory judgement that a Share Exchange Agreement had been rescinded. In order to make a claim for damages, the Company filed a third-party claim against Dr. Friedenberg for breach of the Share Exchange Agreement and fraud. In November 1995, after a trial, the court denied Dr. Friedenberg's request for a declaration of rescission and allowed the Company's third-party claim to proceed to trial. In September, 1996, Dr. Friedenberg died. The Company's third-party claim was decided by a jury on May 5, 1997. The verdict determined that Dr. Friedenberg breached the Share Exchange Agreement, when he failed to deliver drug screening know how technology to the Company. The jury also found in favor of the Company on two of the three fraud claims against Friedenberg and awarded the Company approximately $321,000 in damages. Friedenberg's estate, just prior to the jury trial, filed a supplemental claim for the shares of the Company's stock which he would have received under the Share Exchange Agreement. The trial judge took this supplemental claim under advisement. The trial judge, on July 17, 1998, ruled that the estate of Dr. Friedenberg is entitled to 5,907,154 common shares of the Company. The Company has filed an appeal. Management of the Company in consultation with counsel is of the opinion that the trial judge's award of the shares to Dr. Friedenberg's estate will be reversed on appeal. Pending the resolution of the Company's appeal, the trial judge has ordered that the shares be issued in the name of Dr. Friedenberg's wife and placed in escrow or that the Company post a bond. The Company has applied for a stay of this order. If the trial judge's order is not stayed, the issuance of such shares or the posting of the required bond could have a significant negative effect on the market price of the shares. Pending the resolution of the Company's appeal of the trial judge's award of the shares to Dr. Friedenberg's estate, the Company's ability to raise capital through the future sale of equity securities may be materially impaired. If the trial judge's award of the shares is not reversed on appeal, the issuance of such shares would have a significant negative effect on the market price of the shares. 8 9 In June 1995, the Company filed against Jacskon Morris, the lawyer who was in charge of drafting and advising it on the Share Exchange Agreement. Mr. Morris, who had been recommended to the Company by Dr. Friedenberg, is alleged by the Company to have breached his fiduciary duty to the Company by later advising Dr. Friedenberg, individually, on how to rescind the Share Exchange Agreement. Mr. Morris is also charged with negligence in drafting the Share Exchange Agreement. The Company's lawsuit demands damages in the amount of $1,000,000. Mr. Morris has counterclaimed as a party to the Share Exchange Agreement and seeks common shares. No trial date has been set. The Company is vigorously contesting the Morris Claim. 9 10 Item 2. Management's Discussion and Analysis or Plan of Operation MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS for the nine months ended January 31, 1999 and 1998 The following discussion of the Company's financial condition and results of operations should be read in conjunction with the Financial Statements and Notes thereto appearing elsewhere in this document. Statements in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this document as well as statements made in press releases and oral statements that may be made by the Company or by officers, directors or employees of the Company acting on the Company's behalf that are not statements of historical or current fact constitute "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other unknown factors that could cause the actual results of the Company to be materially different from the historical results or from any future results expressed or implied by such forward-looking statements. In addition to statements which explicitly describe such risks and uncertainties, readers are urged to consider statements labeled with the terms "believes", "belief", "expects", "intends", "anticipates" or "plans" to be uncertain forward-looking. The forward looking statements contained herein are also subject generally to other risks and uncertainties that are described from time to time in the Company's reports and registration statements filed with the Securities and Exchange Commission. Year 2000 Issues The Company has completed its assessment of Year 2000 compliance with respect to its products that are currently being sold to customers and has concluded that all significant products are compliant. With respect to third parties, the Company is in the process of identifying and contacting its significant suppliers and will shortly begin to contact its major customers to determine the extent to which the Company may be vulnerable to such third parties' failure to address their own year 2000 issues. As a result, the Company's assessment will be substantially dependent on information provided by third parties. The Company expects to materially complete this assessment process by the end of fiscal 1999. Based upon the Company's current estimates, additional out-of-pocket costs associated with its Year 2000 compliance are expected to be immaterial. Such costs do not include internal management time, which is not expected to be material to the Company's results of operations or financial condition. Results of operations for the nine months ended January 31, 1999 as compared to the nine months ended January 31, 1998 as amended. - -------------------------------------------------------------------------------- The interim Statement of Operations for the nine months ended January 31, 1998 and the fiscal 1998 third quarter have been adjusted. See Note C to the Financial Statements. The results of operations for the nine months ended January 31, 1999 and the fiscal 1999 third quarter will be compared with the adjusted results of operations for the fiscal 1998 third quarter. During the nine months ended January 31, 1999, the Company continued its extensive program to market and distribute its primary product, the Rapid Drug Screen(TM). As a result, revenues from the sale of the test kits were $4,643,000 for the nine months ended January 31, 1999 as compared to $1,293,000 for the nine months ended January 31, 1998 (as adjusted, see Note C to Notes to Financial Statements), representing an increase of $3,350,000 or 259.1% over the preceding year. Cost of goods sold for the nine months ended January 31, 1999 was $2,225,000 or 47.9% of drug test revenues as compared to $577,000 or 44.6% of drug test revenues for the nine months ended January 31, 1998. To further reduce this cost, the Company continues to improve its manufacturing processes and expects further savings during the remainder of the year. 10 11 Revenues from book sales were $499,000 for the nine months ended January 31, 1999 as compared to $113,000 for the nine months ended January 31, 1998 representing an increase of $386,000 or 341.6%. It is anticipated that with continuing strong sales in the drug test market, book sales as a percent of overall revenue will continue to decline. Cost of goods sold for the nine months ended January 31, 1999 was $94,000 (18.8% of book sales) as compared to $87,000 (77.0% of book sales) for the nine months ended January 31, 1998. General and administrative costs for the nine months ended January 31, 1999 were $3,374,000, an increase of 66.0% over expenses of $2,032,000 for the nine months ended January 31, 1998. These increased general and administrative costs were undertaken to create the infrastructure necessary to meet the Company's worldwide drug test marketing and production goals. As an outgrowth of increasing drug test sales the Company expects general and administrative costs to continue to increase but at a slower rate. As a percent of sales, this cost decreased 78.9% during the current year and is expected to continue it's decrease with anticipated sales growth. Depreciation and amortization was $66,000 and $77,000 for the nine months ended January 31, 1999 and 1998 respectively. Research and development expense amounted to $266,000 for the nine months ended January 31, 1999. This represents management's continued emphasis on the development of both new products and improved methods to reduce the costs of the drug testing delivery system. Net (loss) from operations amounted to $(836,000) for the nine months ended January 31, 1999 due to increases in selling, general and administrative expenditures related to the expansion of the company's infrastructure. Results of operations for the three months ended January 31, 1999 as compared to the three months ended January 31, 1998 as amended. - -------------------------------------------------------------------------------- Revenues from the sale of the Rapid Drug Screen were $1,912,000 for the three months ended January 31, 1999 as compared to $355,000 for the three months ended January 31, 1998 (as adjusted, see Note C to Notes to Financial Statements), representing an increase of $1,557,000 or 438.6% over the preceding year. Cost of goods sold for the three months ended January 31, 1999 amounted to $1,055,000 or 55.2% of drug screen revenues as compared to $138,000 or 38.9% of drug screen revenues for the three months ended January 31, 1998. Revenues from book sales were $149,000 for the three months ended January 31, 1999 as compared to $25,000 for the three months ended January 31, 1998 representing an increase of $124,000 or 496.0%. Cost of goods sold for the three months ended January 31, 1999 amounted to $28,000 (18.8% of book sales) as compared to $33,000 (132.0% of book sales) for the three months ended January 31, 1998. General and administrative costs for the three months ended January 31, 1999 Amounted to $1,345,000, an increase of 27.8% over expenses of $1,053,000 for the three months ended January 31, 1998. As a percent of sales, this cost decreased 211.5% during the current year and is expected to continue it's decrease with anticipated sales growth. Depreciation and amortization was $22,000 and $26,000 for the three months ended January 31, 1999 and 1998 respectively. Research and development expense amounted to $163,000 for the three months ended January 31, 1999, continuing management's emphasis on the development of both new products and improved methods of production. Net (loss) from operations amounted to $(567,000) for the three months ended January 31, 1999 as compared to a net (loss) of $(1,003,000) for the three months ended January 31, 1998. 11 12 Liquidity and capital resources as of the end of the nine months ended January 31, 1999. - -------------------------------------------------------------------------------- The Company's cash and cash equivalents amounted to $1,172,000 at January 31, 1999 representing a decrease of $2,067,000 or 63.8% over $3,239,000 for the year ended April 30, 1998. Working capital decreased $1,453,000 or 32.4% over $4,480,000 recorded for the year ended April 30, 1998. The decrease in working capital resulted from an increase in accounts payable and accrued expenses offset by increases in accounts and loan receivables, inventories, and prepaid expenses. As a result of strong nine month sales of the Rapid Drug Screen, accounts receivable increased $492,000 or 69.3% to $1,204,000 for the nine months ended January 31, 1999 compared to $712,000 for the year ended April 30, 1998. Due to increased sales and to obtain favorable prices on bulk purchases, inventories rose 45.2% to $1,439,000 for the nine months ended January 31, 1999 or $448,000 above $991,000 reported as of the nine months ended January 31, 1998. Prepaid expenses primarily for future trade shows and conferences rose $200,000 to $224,000 for the nine months ended January 31, 1999. Accounts payable and accrued expenses increased $201,000 for the nine months ended January 31, 1999 due primarily to increased inventory requirements. The Company's primary short-term needs are to increase its manufacturing capabilities, increase inventory levels and continue to support its research and development programs. The Company currently plans to expend approximately $2.0 million for the expansion and development of its manufacturing facilities in addition to its marketing and general administrative programs. The Company expects its capital requirements to increase over the next several years as it expands its research and development efforts, new product development, sales and administration infrastructure, manufacturing capabilities and facilities. The Company's future liquidity and capital funding requirements will depend on numerous factors, including the extent to which the Company's products under development are successfully developed and gain market acceptance, the timing of regulatory actions regarding the Company's potential products, the costs and timing of expansion of sales, marketing and manufacturing activities, facilities expansion needs, procurement and enforcement of patents important to the Company's business, results of clinical investigations and competition. The Company believes that its available cash and cash from operations will be sufficient to satisfy its funding needs for at least the next 12 months. Thereafter, if cash generated from operations is insufficient to satisfy the Company's working capital and capital expenditure requirements, the Company may be required to sell additional equity or debt securities or obtain additional credit facilities. There can be no assurance that such financing, if required, will be available on satisfactory terms, if at all. 12 13 PART II OTHER INFORMATION Item 1. Legal Proceedings. In February 1994, Robert Friedenberg, as former owner of the two medical technology companies, MDI and Gendex, acquired by the Company, in the name of these corporations, filed for a declaratory judgement that a Share Exchange Agreement had been rescinded. In order to make a claim for damages, the Company filed a third-party claim against Dr. Friedenberg for breach of the Share Exchange Agreement and fraud. In November 1995, after a trial, the court denied Dr. Friedenberg's request for a declaration of rescission and allowed the Company's third-party claim to proceed to trial. In September, 1996, Dr. Friedenberg died. The Company's third-party claim was decided by a jury on May 5, 1997. The verdict determined that Dr. Friedenberg breached the Share Exchange Agreement, when he failed to deliver drug screening know how technology to the Company. The jury also found in favor of the Company on two of the three fraud claims against Friedenberg and awarded the Company approximately $321,000 in damages. Friedenberg's estate, just prior to the jury trial, filed a supplemental claim for the shares of the Company's stock which he would have received under the Share Exchange Agreement. The trial judge took this supplemental claim under advisement. The trial judge, on July 17, 1998, ruled that the estate of Dr. Friedenberg is entitled to 5,907,154 common shares of the Company. The Company has filed an appeal. Management of the Company in consultation with counsel is of the opinion that the trial judge's award of the shares to Dr. Friedenberg's estate will be reversed on appeal. Pending the resolution of the Company's appeal, the trial judge has ordered that the shares be issued in the name of Dr. Friedenberg's wife and placed in escrow or that the Company post a bond. The Company has applied for a stay of this order. If the trial judge's order is not stayed, the issuance of such shares or the posting of the required bond could have a significant negative effect on the market price of the shares. Pending the resolution of the Company's appeal of the trial judge's award of the shares to Dr. Friedenberg's estate, the Company's ability to raise capital through the future sale of equity securities may be materially impaired. If the trial judge's award of the shares is not reversed on appeal, the issuance of such shares would have a significant negative effect on the market price of the shares. In June 1995, the Company filed against Jacskon Morris, the lawyer who was in charge of drafting and advising it on the Share Exchange Agreement. Mr. Morris, who had been recommended to the Company by Dr. Friedenberg, is alleged by the Company to have breached his fiduciary duty to the Company by later advising Dr. Friedenberg, individually, on how to rescind the Share Exchange Agreement. Mr. Morris is also charged with negligence in drafting the Share Exchange Agreement. The Company's lawsuit demands damages in the amount of $1,000,000. Mr. Morris has counterclaimed as a party to the Share Exchange Agreement and seeks common shares. No trial date has been set. The Company is vigorously contesting the Morris Claim. Item 2. Changes in Securities None. Item 3. Defaults upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security-Holders None. 13 14 SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMERICAN BIO MEDICA CORPORATION (Registrant) By: /s/Stan Cipkowski --------------------------------------- Stan Cipkowski, President and Principal Executive Officer By: /s/John F. Murray --------------------------------------- John F. Murray, Treasurer and Principal Financial Officer Dated: June 4, 1999 14 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS FOR THE SIX MONTH PERIOD ENDED OCTOBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS APR-30-1999 JAN-31-1999 1,172,000 0 1,264,000 60,000 1,439,000 4,099,000 409,000 107,000 4,690,000 1,072,000 0 0 0 149,000 3,469,000 4,690,000 5,142,000 5,142,000 2,319,000 3,659,000 0 0 0 (836,000) 0 (836,000) 0 0 0 (836,000) (0.10) (0.10)
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