Line of Credit and Debt

6 Months Ended

Jun. 30, 2014

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

Note E – Line of Credit and Debt

Our Line of Credit and Debt consisted of the following as of June 30, 2014 and December 31, 2013:

	June 30, 2014		December 31, 2013
Imperium Line of Credit:
Interest payable in arrears for the preceding calendar month on the first day of each calendar month at a rate of 8% per annum plus “PIK” interest at a 2% per annum. Unused line fee equal to 2% of the maximum amount available under the line, less the aggregate amounts outstanding to Imperium, payable on the first day of each calendar month. Collateral Monitoring Fee of $2,500 due on the first day of each month. Success fee of $175,000 if Imperium terminates due to an event of default, or if we terminate and pre-pay all amounts due to Imperium prior to the stated expiration date of January 16, 2016.	$	914,000	$	1,180,000
First Niagara:
Mortgage payable in equal monthly installments of $13,000 including interest at 8.25% through March 1, 2017 (“Maturity”), collateralized by the building, land and personal property		410,000		452,000
Debenture financing:
$543,000 in principal amount of Series A Debentures; interest at 15% per annum from August 1, 2013 through August 1, 2014, payable quarterly with first payment due November 1, 2013; maturity date of August 1, 2014		543,000		634,000
Bridge Loan with Cantone Asset Management, LLC:
Interest rate of 15% payable upon loan maturity; maturity date of August 1, 2014.		200,000		200,000
Total debt		2,067,000		2,466,000
Less debt discount (Debentures and Line of Credit financings)		(155,000)		(253,000)
Total debt	$	1,912,000	$	2,213,000

Line of Credit with Imperium Commercial Finance, LLC (“Imperium”)

On January 16, 2013 (the “Imperium Closing Date”), we entered into a 3-year Loan and Security Agreement (“LSA”) with Imperium, a new Senior Lender, to refinance our Line of Credit with Medallion Financial Corp (“Medallion”), see below for information on the Medallion Line of Credit.

Under the LSA, Imperium agreed to provide the Company with a revolving loan facility (the “Imperium Line of Credit”), which is secured by a first security interest in all of our receivables, inventory, and intellectual property rights along with a second security interest in our machinery and equipment (together the “Collateral”). The Maximum Funding Amount was originally $1,500,000 but in late July 2013, we were notified that Imperium was reducing the Maximum Funding Amount to $1,100,000 (however, we had to continue to maintain minimum Net Borrowing Availability of $100,000 so in essence the maximum amount available under the Imperium Line of Credit was lowered to $1,000,000). 

Originally, the borrowing base was comprised of: 85% of eligible accounts receivables (excluding, without limitation, receivables remaining unpaid for more than 90 days from invoice date or 60 days from due date, contra receivables, and affiliated receivables), up to the lesser of 60% of eligible finished goods inventory at cost or 75% of appraised net orderly liquidation value of inventory, and a receivable dilution rate of less than 5% (the “Borrowing Base”). 

On March 6, 2014, we were notified that Imperium was amending the Borrowing Base of the Imperium Line of Credit. More specifically, the amount available under the Imperium Line of Credit was capped to the lower of (i) $1,000,000, or (ii) 100% of the eligible outstanding accounts receivable. As of the date of this report, the Borrowing Base of the Imperium Line of Credit is based solely on Eligible Receivables.

In addition to the Imperium Line of Credit, the Imperium facility originally included a discretionary Supplemental Advance of up to $500,000 (the “Imperium Supplemental Advance”). Supplemental advances, once repaid, could not be re-borrowed, and advances were secured with the same Collateral as the Imperium Line of Credit. In late July 2013, we were notified that no further advances would be made under the Imperium Supplemental Advance.

On the Imperium Closing Date, we paid a closing fee of $10,000 to Imperium, and granted Imperium a 7-year warrant to purchase 2,000,000 common shares of the Company at an exercise price of $0.18 (the “Imperium Warrants”). We also paid an early termination fee of $25,000 to Medallion on the Imperium Closing Date. We also paid a finder’s fee of 3% of the gross proceeds from the Imperium financing, or $60,000, to Monarch Capital Group, LLC (Monarch), and issued Monarch a 5-year warrant to purchase 60,000 common shares of the Company at an exercise price of $0.18 (the “Monarch Warrant”).

So long as any obligations are due to Imperium, we must maintain certain minimum EBITDA (Earnings Before Interest, Taxes Depreciation and Amortization) requirements. More specifically, we must have had EBITDA of not less than (a) $25,000 for the Fiscal Quarter ended on or about March 31, 2013, (b) $100,000 for the Fiscal Quarter ended on or about June 30, 2013, (c) $200,000 for the Fiscal Quarter ending on or about September 30, 2013, and (d) $300,000 for the Fiscal Quarter ending on or about December 31, 2013 and for each of the Fiscal Quarters thereafter. We did not comply with the EBITDA covenant in any of the fiscal quarters listed, including the Second Quarter of 2014 (to be measured upon the filing of this Form 10-Q). This does constitute an event of default, and in an event of default, which also includes but is not limited to, our failure to make any payment when due, the interest rate on the Imperium Line of Credit can be increased by 4% for as long as the event of default occurs. Imperium’s other remedies include, but are not limited to, termination or suspension of Imperium’s obligation to make further advances to the Company, declaration of all amounts owed to Imperium due and payable. The increase in interest rate, given our current advances under the Imperium Line of Credit would not be material, however, if Imperium were to suspend or terminate further advances, or declare all amounts due and payable, this would have a material adverse effect on our business and negatively impact our ability to continue operations.

On May 20, 2013, Imperium waived the EBITDA requirement for the quarter ended March 31, 2013, and Imperium was paid $10,000 for costs related to account review. We have had discussions with Imperium about EBITDA non-compliance and any further actions they may take, however, as of the date of this report, although Imperium has not enforced any of its default remedies; no additional formal waivers have been issued.

We incurred $435,000 in costs related to the Imperium Line of Credit, which included the costs noted previously as well as $39,000 to Imperium for their legal fees, $2,000 for the Company’s legal fees, $9,000 in capitalized deferred financing costs and $290,000 as debt discount associated with the warrants issued to Imperium and Monarch. With the exception of the early termination fee of $25,000 paid to Medallion (which was fully recognized in the three months ended March 31, 2013), these costs are being amortized over the term of the facility (3 years). We recognized $34,000 of these costs in the three months ended June 30, 2014 and $68,000 of these costs in the six months ended June 30, 2014. We recognized $59,000 of these costs in the three months ended June 30, 2013, and $143,000 in costs in the six months ended June 30, 2013.

We incurred $52,000 and $56,000 in interest expense in the six months ended June 30, 2014 and June 30, 2013, respectively. We incurred $25,000 and $32,000 in interest expense in the three months ended June 30, 2014 and June 30, 2013, respectively.

As of June 30, 2014, the balance on the Imperium Line of Credit was $714,000, and the balance on the supplemental advance was $200,000, for a total loan balance of $914,000. As of June 30, 2014, additional loan availability on the line of credit was $115,000 and since Imperium suspended further advances under the Supplemental Advance, there was $0 in availability under the Supplemental Advance, for a total Loan Availability of $115,000 at June 30, 2014. The balance on the Imperium Line of Credit was $1,180,000 at December 31, 2013.There was a debt discount recorded in the amount of $145,000 and $193,000 for June 30, 2014 and December 31, 2013, respectively.

The Imperium Line of Credit is used for working capital and general corporate purposes, and the Imperium Supplemental Advance was used for costs associated with obtaining marketing clearance of our oral fluid products and costs associated with other new market opportunities.

Loan and Security Agreement with Medallion

On April 20, 2012 (the “Medallion Closing Date”), we entered into a Loan and Security Agreement (the “Loan Agreement”) with Medallion to refinance its Line of Credit with a former senior lender, Rosenthal and Rosenthal, Inc. (“Rosenthal”).

Under the Loan Agreement, Medallion provided the Company with up to $1,000,000 under a revolving secured line of credit (the “Medallion Line of Credit”), which was secured by a first security interest in all of our receivables, inventory, and intellectual property rights along with a second security interest in our machinery and equipment. The maximum amount available under the Medallion Line of Credit was subject to an Advance Rate that consisted of: 85% of eligible accounts receivable and up to 30% of eligible inventory (not to exceed $150,000). We did incur $8,000 in interest expense in the three and six months ended June 30, 2013. The amount outstanding on the Medallion Line of Credit as of June 30, 2014 was $0 since, all indebtedness due to Medallion was paid in full and Medallion’s security interest in our assets were terminated on January 16, 2013.

First Niagara Bank: Mortgage Consolidation Loan

On March 8, 2013, we entered into a Second Amendment to Loan Agreement (the “Second Mortgage Consolidation Loan Amendment”) with First Niagara Bank (“First Niagara”). The Mortgage Consolidation Loan is secured by our facility in Kinderhook, New York as well as various pieces of machinery and equipment. Under the Second Mortgage Consolidation Loan Amendment, the Mortgage Consolidation Loan was recast into a 4-year fully amortizing note with a one-year term through March 1, 2014. The interest rate was increased from 8.25% to 9.25% and the monthly payment was reduced to $14,115 from $14,437. We were also required to make a principal reduction payment of $25,000 at the time of closing. All other terms of the Mortgage Consolidation Loan remained unchanged, including compliance with a covenant (measured monthly) to maintain a certain level of liquidity (defined as any combination of cash, marketable securities or borrowing availability under one or more credit facilities other than the Mortgage Consolidation Loan).

On April 28, 2014, we entered into a Third Amendment to Loan Agreement (the “Third Mortgage Consolidation Loan Amendment”) with First Niagara Bank. The Mortgage Consolidation Loan continues to be secured by our facility in Kinderhook, New York as well as various pieces of machinery and equipment. Under the Third Mortgage Consolidation Loan Amendment, the Mortgage Consolidation Loan was recast into a 3-year fully amortizing note through March 1, 2017. The interest rate of the amended facility was decreased from 9.25% to 8.25%, and the monthly payment was reduced from $14,115 to $13,199. We were required to pay First Niagara a renewal fee of 1% of the principal balance as of April 1, 2014, or $4,200. No principal reduction payment was required. All other terms of the Mortgage Consolidation Loan remained unchanged, including compliance with the covenant previously referenced.

The balance on the Mortgage Consolidation Loan was $410,000 at June 30, 2014 and $452,000 at December 31, 2013. Interest expense recognized in the six months ended June 30, 2014 and June 30, 2014 was $17,000 and $25,000, respectively. Interest expense recognized in the three months ended June 30, 2014 and June 30, 2013 was $ 10,000 and $13,000, respectively.

Debenture Financing

In August 2008, we completed an offering of Series A Debentures (“Series A Debentures”) and received gross proceeds of $750,000. The net proceeds of the offering of Series A Debentures were $631,000 after $54,000 of placement agent fees and expenses, legal and accounting fees of $63,000 and $2,000 of state filing fees.

2012 Series A Debenture Extension

The Series A Debentures matured on August 1, 2012. On July 25, 2012, we entered into another Placement Agent Agreement (the “Agent Agreement”) with Cantone. Under the terms of the Agent Agreement, Cantone acted as our exclusive placement agent in connection with an amendment of the Series A Debentures. Under the amendment, the term of Series A Debentures was extended to reflect a due date of August 1, 2013, and the interest rate during the extension period was increased from 10% to 15% per annum, due quarterly in arrears.

As compensation for their placement agent services, Cantone received a cash fee of 5% of the gross amount of existing Series A Debentures, or $37,500. Cantone also received 1% of the gross amount of Series A Debentures, or $7,500, as a non-accountable expense allowance and we reimbursed Cantone $5,000 in legal fees incurred in connection with the amendment of the Series A Debentures. These costs, totaling $50,000 were amortized over the term of the extension (12 months). We amortized $0 of this expense in six months ended June 30, 2014 and $31,000 of this expense in the six months ended June 30, 2013 (of which $6,000 was share-based payment expense). We amortized $0 in expense in the three months ended June 30, 2014 and $15,000 of this expense in the three months ended June 30, 2013 (of which $3,000 was share-based payment expense).

The warrants issued to Cantone (in connection with their services as placement agent in the original Series A Debenture financing) were also amended to reflect a purchase price of $0.17 per share and a new term of three (3) years. We incurred $12,000 in share based payment expense related to this amendment, which was fully expensed in the quarter ended September 30, 2012.

On July 30, 2012, we entered into a Bridge Loan Agreement and Note (the “Bridge Loan”) with Cantone Asset Management, LLC (“CAM”). The Bridge Loan was in the amount of $150,000 and was used to pay $100,000 to those Holders of Series A Debentures that did not wish to amend/extend the Series A Debentures and $50,000 was used to pay placement agent fees and expenses previously indicated. The maturity date of the Bridge Loan was August 1, 2013 bearing simple interest in advance of 15%. In addition to the interest, on August 1, 2012, we issued CAM 88,235 shares of restricted stock of the Company equal to 10% of the gross amount of existing Series A Debentures, or $15,000 using a value of $0.17 per common share.

On July 31, 2012, we entered into an Agreement to the Series A Debenture (the “Series A Debenture Amendment”) with thirty-two of the thirty-seven holders of Series A Debentures (the “Debenture Holders”) (representing $645,000 of Series A Debentures). As previously indicated, the Series A Debenture Amendment extended the due date of the Series A Debentures to August 1, 2013, and increased the interest rate to 15% per annum, payable quarterly in arrears. All other terms of the Series A Debentures remained unchanged. Five of the Debenture Holders (representing $105,000 in Series A Debentures) did not wish to extend the Series A Debentures and we used proceeds of $100,000 from the Bridge Loan and $5,000 paid directly from the Company to pay principal amounts due to these non-extending Debenture Holders.

2013 Series A Debenture Extension

On October 7, 2013, we entered into a new Placement Agent Agreement (“2013 Agent Agreement”) with Cantone related to the further extension of the Series A Debentures, as amended, due August 1, 2013. Under the terms of the 2013 Agent Agreement, Cantone acted as our exclusive placement agent in connection with another amendment of the Series A Debentures. Under the amendment, the term of Series A Debentures was extended to reflect a due date of either February 1, 2014 or August 1, 2014, at the election of the Series A Debenture Holder. The interest rate during the extension period remains 15% per annum, due quarterly in arrears. All other terms of the Series A Debentures remain the same.

As compensation for their placement agent services, Cantone received 1) a cash fee of 5% ($39,750) of the gross amount ($795,000) of existing Series A Debentures and the CAM note combined, 2) a 3-year warrant to purchase 75,000 common shares at an exercise price of $0.14 (the average closing sale price of our common shares for the 5 days business days ending October 7, 2013), and 3) a non-accountable expense allowance paid with 115,000 restricted shares of our common stock (in lieu of cash). We also paid $4,000 in legal fees incurred by Cantone. These costs are being amortized over the term of the 12-month extension. We amortized $44,000 in costs in the six months ended June 30, 2014 and $0 in costs in the six months ended June 30, 2013 (as we did not enter into this extension until October 2013). We amortized $22,000 in costs in the three months ended June 30, 2014 and $0 in costs in the three months ended June 30, 2013 (as we did not enter into this extension until October 2013).

The fair value of the Cantone warrant is $10,000 and we recognized 100% of this expense on the date of the grant, or $10,000 in the fourth quarter of the year ended December 31, 2013.

On October 7, 2013, we entered into a new Bridge Loan Agreement and Note (the “2013 Bridge Loan”) with CAM. The 2013 Bridge Loan is in the amount of $200,000 and was used to pay off the existing Bridge Loan with CAM ($150,000) and the remaining $50,000 was used to pay placement agent fees and expenses as previously indicated. Net proceeds of $6,250 were remitted to the Company. The 15% interest on the existing Bridge Loan of $150,000 was paid with 225,000 restricted shares of ABMC common stock.

The maturity date of the 2013 Bridge Loan is August 1, 2014, and it bears simple interest in advance of 15% that was paid in the form of 300,000 shares of restricted shares of ABMC common stock. In addition to the interest, as inducement to enter into the 2013 Bridge Loan, we issued 153,486 restricted shares of our common stock, and the we issued CAM a 3-year warrant to purchase 250,000 common shares at an exercise price of $0.14 (the average closing sale price of our common shares for the 5 days business days ending October 7, 2013). The warrants were 100% exercisable on the date of the grant. The fair value of the CAM warrant is $35,000 and we recognized 100% of this expense in the fourth quarter of the year ended December 31, 2013.

On October 7, 2013, we entered into an Agreement to the Series A Debenture (the “2013 Series A Debenture Amendment”) with 30 of the 32 holders of Series A Debentures (the “Debenture Holders”) (representing $634,500 of Series A Debentures). One of the Debenture Holders (representing $10,500 in Series A Debentures) did not wish to extend and we used the net proceeds and cash on hand to pay the principal amount due to this Holder. One of the Debenture Holders transferred their investment to another existing Debenture Holder. As previously indicated, the extension period of either 6 or 12 months was at the election of the Debenture Holder. 27 of the 30 Debenture Holders (representing $543,500 of Series A Debentures) elected to extend for a period of 12 months. The other 3 (representing $91,000 in Series A Debentures) elected to extend for a period of 6 months. The 27 holders that elected to extend for a 12-month period were each issued a warrant to purchase 1 shares of common stock for each $1.00 that was extended. We issued 2-year warrants to purchase 543,500 shares of our common stock at an exercise price of $0.14 (the average closing sale price of our common shares for the 5 days business days ending October 7, 2013). The fair value of the Debenture Holder warrants is $76,000 and we are amortizing this cost over the term of the Series A Debenture extension, or 12 months. We recognized $38,000 of this expense in the six months ended June 30, 2014 and $0 in expense in the six months ended June 30, 2013 (as we did not issue the warrants until October 2013). We recognized $19,000 of this expense in the three months ended June 30, 2014 and $0 in expense in the three months ended June 30, 2013 (as we did not issue the warrants until October 2013). As of June 30, 2014, there was $6,000 in unrecognized expense with 1 months remaining. We recognized $42,000 in interest expense in the six months ended June 30, 2014 and $60,000 in the six months ended June 30, 2013. We recognized $20,000 in interest expense in the three months ended June 30, 2014 and $30,000 in the three months ended June 30, 2013. We had $25,000 in accrued interest expense at June 30, 2014.

On February 7, 2014, we paid $91,000 to the 6-month extension Debenture Holders; therefore as of June 30, 2014, the amount due to Debenture Holders is $543,500. We recorded a debt discount in the amount of $12,000 and $60,000 for June 30, 2014 and December 31, 2013, respectively, related to securities issued in connection with the Series A Debentures.