-----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, JwRjSrja8eq9Gw6t/CGI14c+VBjZxjKceFOr+ZFc9srrT2EbySarKRhq+9CEfx1a RkK13ohWDcskLt3CfHYulQ== 0000950116-02-002610.txt : 20021114 0000950116-02-002610.hdr.sgml : 20021114 20021114140016 ACCESSION NUMBER: 0000950116-02-002610 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN BIO MEDICA CORP CENTRAL INDEX KEY: 0000896747 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 141702188 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-28666 FILM NUMBER: 02823979 BUSINESS ADDRESS: STREET 1: 122 SMITH ROAD CITY: KINDERHOOK STATE: NY ZIP: 12106 BUSINESS PHONE: 8002271243 MAIL ADDRESS: STREET 1: 122 SMITH ROAD CITY: KINDERHOOK STATE: NY ZIP: 12106 10QSB 1 tenqsb.txt 10QSB SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-QSB [x] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended September 30, 2002. [ ] Transition report under 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 of (I.R.S. Employer incorporation or organization) Identification No.) 122 Smith Road, Kinderhook, New York 12106 ------------------------------------------- (Address of principal executive offices) 800-227-1243 --------------------------- (Issuer's telephone number) 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: 20,609,548 Common Shares as of November 13, 2002 Transitional Small Business Disclosure Format: Yes [ ] No [X] 1 PART I FINANCIAL INFORMATION American Bio Medica Corporation Balance Sheets
September 30, 2002 December 31, (Unaudited) 2001 ----------------- ------------------- Assets ------ Current assets: Cash and cash equivalents $ 439,000 $ 288,000 Accounts receivable, net of allowance for doubtful accounts of $70,000 at September 30, 2002 and December 31, 2001 1,653,000 882,000 Other receivables 46,000 171,000 Inventory 2,078,000 2,087,000 Prepaid expenses and other current assets 63,000 90,000 ---------------- ------------------ Total current assets 4,279,000 3,518,000 Property, plant and equipment, net 1,452,000 1,455,000 Restricted cash 106,000 Other assets 7,000 7,000 ---------------- ------------------ Total Assets $ 5,738,000 $ 5,086,000 ================ ================== Liabilities and Stockholders' Equity ------------------------------------ Current liabilities: Accounts payable $ 807,000 $ 1,064,000 Accrued expenses 551,000 562,000 Customer advance deposits 243,000 Wages payable 271,000 114,000 Current portion of capital lease obligations 16,000 19,000 Current portion of notes payable 35,000 24,000 ---------------- ------------------ Total current liabilities 1,680,000 2,026,000 Long term portion of capital lease obligations 10,000 Long term portion of notes payable 679,000 696,000 Long term portion of unearned grant 50,000 ---------------- ------------------ Total liabilities 2,409,000 2,732,000 ---------------- ------------------ Stockholders' equity: Preferred stock; par value $.01 per share; 5,000,000 shares authorized; none issued and outstanding Common stock; par value $.01 per share; 50,000,000 shares authorized; 20,609,548 shares issued and outstanding at September 30, 2002 and December 31, 2001 207,000 207,000 Additional paid-in capital 17,812,000 17,765,000 Subscription receivable (5,000) Due from officer/director/shareholder (collateralized by 300,000 shares of the Company's common stock) (248,000) (437,000) Treasury stock (32,000) (23,000) Accumulated deficit (14,410,000) (15,154,000) ---------------- ------------------ Total stockholders' equity 3,329,000 2,353,000 ---------------- ------------------ Total liabilities and stockholders' equity $ 5,738,000 $ 5,086,000 ================ ==================
See accompanying notes to financial statements 2 American Bio Medica Corporation Statements of Operations (Unaudited)
For The Nine Months Ended September 30, --------------------------------- 2002 2001 --------------- -------------- Net sales $ 7,904,000 $ 4,899,000 Cost of goods sold 3,252,000 1,860,000 --------------- -------------- Gross profit 4,652,000 3,039,000 --------------- -------------- Operating expenses: Research and development 203,000 351,000 Selling and marketing 1,795,000 1,792,000 General and administrative 1,929,000 2,421,000 --------------- -------------- 3,927,000 4,564,000 --------------- -------------- Operating income/(loss) 725,000 (1,525,000) --------------- -------------- Other income (expense): Loss on disposition of assets (169,000) Other income 1,000 859,000 Interest income 58,000 66,000 Interest expense (40,000) (15,000) --------------- -------------- 19,000 741,000 --------------- -------------- Net income/(loss) attributable to common shareholders $ 744,000 $ (784,000) =============== ============== Basic and diluted income/(loss) per common share $ 0.04 $ (0.04) =============== ============== Weighted average shares outstanding - basic 20,609,548 18,361,614 Dilutive effect of stock options and warrants 495,078 --------------- -------------- Weighted average shares outstanding - fully diluted 21,104,626 18,361,614 =============== ==============
See accompanying notes to financial statements 3 American Bio Medica Corporation Statements of Operations (Unaudited)
For The Three Months Ended September 30, ----------------------------------- 2002 2001 ----------------- -------------- Net sales $ 3,032,000 $ 1,537,000 Cost of goods sold 1,132,000 677,000 ----------------- -------------- Gross profit 1,900,000 860,000 ----------------- -------------- Operating expenses: Research and development 34,000 56,000 Selling and marketing 609,000 522,000 General and administrative 817,000 599,000 ----------------- -------------- 1,460,000 1,177,000 ----------------- -------------- Operating income/(loss) 440,000 (317,000) ----------------- -------------- Other income (expense): Gain/(Loss) on disposition of assets 1,000 Other income 1,000 259,000 Interest income 14,000 30,000 Interest expense (17,000) (2,000) ----------------- -------------- (2,000) 288,000 ----------------- -------------- Net income/(loss) attributable to common shareholders $ 438,000 $ (29,000) ================= ============== Basic and diluted income/(loss) per common share $ 0.02 $ 0.00 ================= ============== Weighted average shares outstanding - basic 20,609,548 19,060,341 Dilutive effect of stock options and warrants 495,078 ----------------- -------------- Weighted average shares outstanding - fully diluted 21,104,626 19,060,341 ================= ==============
See accompanying notes to financial statements 4 American Bio Medica Corporation Statements of Cash Flows (Unaudited)
For The Nine Months Ended September, --------------------------------- 2002 2001 --------------- ---------------- Cash flows from operating activities: Net income/(loss) $ 744,000 $ (784,000) Adjustments to reconcile net income/(loss) to net cash provided by (used in) operating activities: Depreciation 112,000 91,000 Non cash compensation expense 27,000 (4,000) Accrued interest, related party (30,000) (43,000) Loss on sale of investments 102,000 Changes in: Accounts receivable (771,000) 354,000 Other receivables 125,000 175,000 Inventory 9,000 (378,000) Prepaid expenses and other current assets 26,000 (77,000) Restricted cash 106,000 Accounts payable (257,000) (1,074,000) Accrued expenses (12,000) (26,000) Wages payable 156,000 97,000 Customer advance deposits (243,000) 243,000 --------------- ---------------- Net cash used in operating activities (8,000) (1,325,000) --------------- ---------------- Cash flows from investing activities: Purchase of property, plant and equipment (109,000) (155,000) Proceeds from sale of investments 18,000 Proceeds from private placement 2,331,000 --------------- ---------------- Net cash provided by/(used in) investing activities (109,000) 2,194,000 --------------- ---------------- Cash flows from financing activities: Proceeds from convertible grant 50,000 Proceeds from sale of treasury stock 235,000 Proceeds from revolving line of credit 20,000 Long term debt payments (17,000) Revolving line of credit payments (8,000) Settlement of registration rights agreement 26,000 Capital lease payments (12,000) (14,000) --------------- ---------------- Net cash provided by financing activities 268,000 12,000 --------------- ---------------- Net increase in cash and cash equivalents 151,000 881,000 Cash and cash equivalents - beginning of period 288,000 91,000 --------------- ---------------- Cash and cash equivalents - end of period $ 439,000 $ 972,000 =============== ================ Supplemental disclosures of cash flow information Cash paid during year for: Interest $ 17,000 $ 2,000
See accompanying notes to financial statements 5 Notes to financial statements (unaudited) September 30, 2002 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-QSB. 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 only of normal recurring items), which are considered necessary for a fair presentation of the financial position of American Bio Medica Corporation (the "Company" or "ABMC") at September 30, 2002, and the results of its operations, and cash flows for the nine-month and three-month periods then ended. The results of operations for the nine-month and three month periods ended September 30, 2002 are not necessarily indicative of the operating results for the full year. These financial statements should be read in conjunction with the Company's audited financial statements and related disclosures for the eight months ended December 31, 2001 included in the Company's Form 10-KSB. During the eight months ended December 31, 2001, the Company sustained a net loss of $1,631,000 including other income of $259,000 resulting from a settlement for outstanding amounts owed to the Company's former legal counsel in its patent litigation and had net cash outflows from operating activities of $1,810,000. During the nine months ended September 30, 2002, the Company had net income of $744,000, and had net cash used in operating activities of $8,000. The Company continued to take steps to improve its financial prospects including penetrating the direct sales market, acquiring the technology and resources necessary to enter the forensic market for testing for abuse of Oxycodone, penetrating the market for the OralStat6 saliva based drug of abuse test and other measures to enhance profit margins. The Company believes that its current cash balances, and cash generated from operations will be sufficient to fund operations for the next twelve months. 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 is no assurance that such financing will be available or that the Company will be able to complete financing on satisfactory terms, if at all. NEW ACCOUNTING STANDARDS In May 2002, the FASB issued Statement No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB 13, and Technical Corrections as of April, 2002." This statement rescinds previously issued pronouncements relating to reporting gains and losses from extinguishments of debt to satisfy sinking-fund requirements, and accounting for intangible assets of motor carriers, amends the pronouncement on accounting for leases, and also amends various other pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. The Company does not believe that this statement will have a material impact on its financial statements. In June 2002, the Financial Accounting Standards Board issued FAS 146, "Accounting for Costs Associated with Exit or Disposal Activities". This Standard addresses the recognition, measurement and reporting costs that are associated with exit or disposal activities. FAS No.146 is effective for exit or disposal activities that are initiated after December 31, 2002. The Company does not expect the adoption of FAS No. 146 to have a material effect on its financial statements. 6 Note B - Net Income or Loss Per Common Share Basic net income or loss per share is calculated by dividing the net income or loss by the weighted average number of outstanding common shares during the period. Diluted net income or loss per share includes the weighted average dilutive effect of stock options and warrants. Note C - Litigation In June 1999, Richard Davidson filed a lawsuit against the Company in New York. Davidson claims that two placement memoranda dated September 15, 1992 and February 5, 1993, obligates the Company to issue him 1,155,601 ABMC common shares. He claims he is entitled to the common shares in consideration of brokering the acquisitions subject to the Share Exchange Agreement with Dr. Robert Friedenberg (Friedenberg also filed suit against the Company and the case was dismissed in September 1999. See Item 3 in the Company's 10KSB for the year ended April 30, 2001 filed with the Securities and Exchange Commission for a discussion of the Friedenberg Share Exchange Agreement). In addition, Davidson is claiming a finder's fee of 5% of the funds raised by the September 1992 private placement. He alleges that a sum of $1 million was raised. He also claims he is entitled to a consulting fee of $24,000. Management denies the claims and is vigorously contesting the suit. A trial date was set for November 2000; however, the Company filed a motion for summary judgment against Davidson and Davidson cross-moved for summary judgment. In July 2001, the Company's motion for summary judgment was denied. In August 2001 the Company filed a Notice of Appeal related to the court's denial of the Company's motion for summary judgment. The Company opposed Davidson's cross motion for summary judgment in September 2001. The Company filed its brief to appeal the denial of the Company's summary judgment motion on March 15, 2002. On October 18, 2002, the Appellate Court heard oral arguments from both the Company and Davidson related to the Company's appeal of the denial of their summary judgment motion. The Court is now considering these arguments and the Company's appeal. A trial date had been set for May 6, 2002 but has since been postponed by the Court. A new trial date has not been set as of the date of this report. On November 8, 2002, the court denied Davidson's cross motion for summary judgment. Management believes based on consultation with counsel, that it has substantial and compelling defenses to Davidson's claims and there is a reasonable chance that the Company would prevail if the matter were to go to trial. Note D - Reclassifications Certain items have been reclassified to conform to the current presentation. 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 AND THREE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 The following discussion of the Company's financial condition and the results of operations should be read in conjunction with the Financial Statements and Notes thereto appearing elsewhere in this document. 7 The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. In order to comply with the terms of the safe harbor, the Company notes that in addition to the description of historical facts contained herein, this report contains certain forward-looking statements that involve risks and uncertainties as detailed herein and from time to time in the Company's other filings with the Securities and Exchange Commission and elsewhere. Such statements are based on management's current expectations and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those, described in the forward-looking statements. These factors include, among others: (a) the Company's fluctuations in sales and operating results; (b) risks associated with international operations; (c) regulatory, competitive and contractual risks; (d) product development risks; (e) the ability to achieve strategic initiatives, including but not limited to the ability to achieve sales growth across the business segments through a combination of enhanced sales force, new products, and customer service; and (f) pending litigation. (see Note C - Litigation in the notes to the financials statements included in Part I of this report). Results of operations for the nine months ended September 30, 2002 as compared to the nine months ended September 30, 2001 Net sales were $7,904,000 for the nine months ended September 30, 2002 as compared to $4,899,000 for the nine months ended September 30, 2001, representing an increase of $3,005,000 or 61.3%. Direct sales have surpassed distributor sales as the most significant component of the Company's net sales, comprising approximately 49.2% of net sales. During the nine months ended September 30, 2002, the Company continued its program to market and distribute its primary product, the Rapid Drug Screen(R). The Company has undertaken an aggressive program aimed at rebuilding relationships with the Company's key distributors, building relationships with new distributors, and has reorganized and expanded the sales group to focus on ABMC's core business, the sale of the Rapid Drug Screen and other drugs of abuse test kits. Management believes sales from its urine based drug test kits and the OralStat6(R) saliva based test will continue to grow as a result of this focus on the core business. Cost of goods sold for the nine months ended September 30, 2002 was $3,252,000 or 41.1% of net sales as compared to $1,860,000 or 38.0% of net sales for the nine months ended September 30, 2001. This increase in percentage is the result of larger volume sales at lower margins. Costs of raw materials, labor and overhead associated with manufacturing have remained relatively consistent during the nine months ended September 30, 2002. While revenues increased 61.3% in the nine months ended September 30, 2002, research and development costs decreased $148,000, or 42.2%, selling and marketing expenses increased $3,000, and general and administrative costs decreased $492,000 or 20.3%. Total operating expenses were $3,927,000 or 49.7% of net revenues for the nine months ended September 30, 2002 compared to $4,564,000 or 93.2% of net revenues for the nine months ended September 30, 2001. Research and development Research and development expenses for the nine months ended September 30, 2002 were $203,000 or 2.6% of net revenues compared to $351,000 or 7.2% of net revenues for the nine months ended September 30, 2001. The nine months ended September 30, 2001 included costs relating to the completion of the Company's joint project with Abbott Laboratories that do not recur in 2002. Included in R&D, in the nine months ended September 30, 2002, is the amortization of the Company's licensing fee relating to the distribution of the OralStat6 saliva based test. Further, R&D expense in the current year is reduced by $35,000 received from a vendor for whom the Company performed R&D services. Management expects increases in R&D as it explores new markets and uses for its immunoassay technology. 8 Selling and marketing Selling and marketing expense increased $3,000 in the nine months ended September 30, 2002. The increase, when compared to the same period a year ago, is primarily due to savings in sales expenses and marketing and promotion costs, offset by increases in sales salaries and commissions and travel relating to the reorganization of the sales force, additional sales personnel and commissions related to increased sales. 2001 sales and marketing included approximately $80,000 in expense for ABMC's attendance at the annual APPA conference, including full-page advertisements in a national publication. Further, in 2001 newly hired Directors of Business Development received sign-on bonuses, which did not recur in 2002. The Company participated in the APPA conference in the current year but costs were significantly less. General and administrative General and administrative expense decreased $492,000 in the first nine months of 2002 compared to the same period in 2001. This is the result of decreases in investor relations costs, legal fees, accounting fees, and office salaries, stemming from controls implemented by management in 2002. Investor relations costs decreased $95,000 in the nine months ended September 30, 2002 compared to the same period in 2001. These costs included two full time positions in addition to travel expenses for two board members representing the Company in 2001. In 2002 one of the two full time investor relations positions is now accounted for as office salaries as a result of a change in responsibilities. Travel is limited to the one individual still included in Investor Relations. Legal fees for the nine months ended September 30, 2002 decreased $382,000 compared to the nine months ended September 30, 2001 primarily due to the settlement of patent litigation in the fourth quarter of the fiscal year ended April 30, 2001. Accounting fees for the nine months ended September 30, 2002 also decreased when compared to the same period a year ago. 2001 included a year-end audit for the twelve months ended April 30, 2001 that did not recur in 2002 as the Company changed its fiscal year end to December 31 at the end of 2001. Office salaries for the nine months ended September 30, 2002 decreased compared to office salaries for the nine months ended September 30, 2001. The nine months ended September 30, 2001 included severance expense of approximately $150,000 that did not recur in 2002. The current year includes additional resources in quality assurance as well as the reclassification of a position from investor relations to office salaries due to a change in that individual's responsibilities. Management believes that the amount of selling and marketing costs and general and administrative costs may increase as the Company creates the necessary infrastructure to achieve the Company's worldwide drug test marketing and sales goals, continues its penetration of the direct sales market and leverages new product initiatives. However, management has implemented initiatives to control the rate of increase of these costs to be more consistent with the expected sales growth rate of the Company. 9 Results of operations for the three months ended September 30, 2002 as compared to the three months ended September 30, 2001 Net sales were $3,032,000 for the three months ended September 30, 2002 as compared to $1,537,000 for the three months ended September 30, 2001, representing an increase of $1,495,000 or 97.3%. During the three months ended September 30, 2002, the Company continued its program to market and distribute its primary product, the Rapid Drug Screen. Cost of goods sold for the three months ended September 30, 2002 was $1,132,000 or 37.3% of net sales as compared to $677,000 or 44.0% of net sales for the three months ended September 30, 2001. The decrease in cost of goods sold is primarily due to approximately $196,000 of inventory adjustments in 2001 that did not recur in 2002. While revenues increased in the three months ended September 30, 2002, research and development costs decreased $22,000, selling and marketing expenses increased $87,000, and general and administrative costs increased $217,000. Total operating expense was $1,460,000 or 48.2% of revenues for the three months ended September 30, 2002 compared to $1,177,000 or 76.6% of revenues for the three months ended September 30, 2001. Research and development Research and development expenses for the three months ended September 30, 2002 decreased compared to the same period a year ago. This decrease was primarily due to the reallocation of R&D resources to inventory production to meet increased sales in the three months ended September 30, 2002 coupled with the non-recurrence of expenses made in 2001 for changes to existing product artwork and the creation of new artwork for the Rapid Tec(TM) product, under development at that time. Management expects increases in R&D as it explores new markets and uses for its immunoassay technology. Selling and marketing Sales and marketing expense increased in the three months ended September 30, 2002 compared to September 30, 2001 primarily due to sales salaries and commissions and increases in sales travel, offset by savings in other selling expenses. Sales salaries and commissions increased due to additional sales personnel in 2002 coupled with commissions related to the growth of sales. General and administrative General and administrative expense increased $218,000 in the three months ended September 30, 2002 compared to the same period in 2001. This is the result of changes in legal fees, building expense, accounting fees, outside service fees, and bad debt expense, as described in the following five paragraphs. Legal fees for the three months ended September 30, 2002 increased compared to the three months ended September 30, 2001. Included in 2001 is the reversal of approximately $250,000 in legal accruals following the settlement of patent litigation in the fourth quarter of the fiscal year ended April 30, 2001. Building expense decreased $35,000 for the three months ended September 30, 2002 compared to the same period in 2001. This is due to savings from rental costs incurred in 2001 offset by depreciation of the facility in Kinderhook resulting from the purchase of the building in December 2001. Accounting fees for the three months ended September 30, 2002 decreased compared to the three months ended September 30, 2001. 2001 included costs for the year-end audit for the twelve months ended April 30, 2001. This did not recur in 2002 due to a change in the company's fiscal year to December 31. Further, the Company engaged new independent auditors in late 2001 resulting in a lower fee structure. 10 Outside service fees increased in the third quarter of 2002 compared to the same period in 2001. This increase is primarily due to the technical support and consulting provided to the Company by a party familiar with the drug testing industry and FDA regulations. The Company began offering technical support in late 2001 and currently offers it's customers this service 24 hours a day. Bad debt expense increased in the three months ended September 30, 2002, compared to the three months ended September 30, 2001. A single account of approximately $50,000 was written off during the third quarter of 2002 after all efforts to collect the amount outstanding were exhausted. Management implemented a focused effort on collection and management of receivables in late 2001. Management believes that the amount of selling and marketing costs and general and administrative costs may increase as the Company creates the necessary infrastructure to achieve the Company's worldwide drug test marketing and sales goals, continues its penetration of the direct sales market and leverages new product initiatives. However, management has implemented initiatives to control the rate of increase of these costs to be more consistent with the expected sales growth rate of the Company. LIQUIDITY AND CAPITAL RESOURCES AS OF SEPTEMBER 30, 2002 The Company's cash requirements depend on numerous factors, including product development activities, ability to penetrate the direct sales market, market acceptance of its new products, and effective management of inventory levels in response to sales forecasts. The Company expects to devote substantial capital resources to continue its product development, expand manufacturing capacity and continue research and development activities. The Company will examine other growth opportunities including strategic alliances and expects such activities will be funded from existing cash and cash equivalents, issuance of additional equity or debt securities or additional borrowings, subject to market and other conditions. The Company believes that its current cash balances, and cash generated from operations will be sufficient to fund operations for the next twelve months. 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 is no assurance that such financing will be available or that the Company will be able to complete financing on satisfactory terms, if at all. The Company has working capital of $2,599,000 at September 30, 2002 as compared to working capital of $1,492,000 at December 31, 2001. The Company has historically satisfied its net working capital requirements through cash generated by proceeds from private placements of equity securities with institutional investors. The Company has never paid any dividends on its Common Shares. The Company anticipates that all future earnings, if any, will be retained for use in the Company's business and it does not anticipate paying any cash dividends. At September 30, 2002 and 2001, the Company had cash and cash equivalents of $439,000 and $972,000, respectively. In addition the Company has a $40,000 revolving line of credit bearing an interest rate of prime plus 1.75% secured by its accounts receivable. At September 30, 2002, the Company had an outstanding balance on this line of credit of approximately $12,000. The Company's primary short-term capital and working capital needs are to increase and improve its manufacturing and production capabilities, establish adequate inventory levels to support expected sales, continue to support its research and development programs, seek new distribution opportunities and focus sales efforts on high potential sectors of the drugs of abuse testing market. 11 DISCLOSURE CONTROLS AND PROCEDURES Controls and Procedures On November 1, 2002, the Company's CEO and CFO reviewed the Company's disclosure controls and procedures. Based on this evaluation, the Company, including the CEO and CFO, have concluded that the Company's disclosure controls and procedures are adequate to ensure the clarity and material completeness of the Company's disclosure in its periodic reports required to be filed with the SEC. Additionally, based upon this most recent evaluation, we have concluded that there were no significant changes in internal controls or other factors that could significantly affect the internal controls of the company subsequent to the date of evaluation. 12 PART II OTHER INFORMATION Item 1. Legal Proceedings: See Note C - Litigation in the Notes to Financial Statements included in this report for a description of pending legal proceedings in which the Company is a party. 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 Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 99.1 Certification of the Chairman of the Board and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99.2 Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K On October 24, 2002, the Company filed a Form 8-K related to the resignation of Robert L. Aromando Jr. from its Board of Directors. 13 SIGNATURES In accordance with the requirements of the Exchange Act, 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/Keith E. Palmer ------------------------------------------- EVP of Finance, Chief Financial Officer and Treasurer (Principal Accounting Officer and duly authorized Officer) Dated: November 13, 2002 14 CERTIFICATIONS - -------------- I, Gerald A. Moore, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of American Bio Medica Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 13, 2002 /s/ Gerald A. Moore --------------------------- Gerald A. Moore Chairman, CEO and President 15 CERTIFICATIONS - -------------- I, Keith E. Palmer, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of American Bio Medica Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 13, 2002 /s/ Keith E. Palmer --------------------------- Keith E. Palmer Chairman, CEO and President 16 EX-99 3 ex99-1.txt EXHIBIT 99.1 EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of American Bio Medica Corporation (the "Company") on Form 10-QSB for the period ending September 30, 2002 as filed with the Securities and Exchange Commission on November 14, 2002 (the "Report"), I, Gerald A. Moore, Chairman of the Board and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Gerald A. Moore -------------------------- Gerald A. Moore Chairman of the Board and Chief Executive Officer November 13, 2002 EX-99 4 ex99-2.txt EXHIBIT 99.2 EXHIBIT 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of American Bio Medica Corporation (the "Company") on Form 10-QSB for the period ending September 30, 2002 as filed with the Securities and Exchange Commission on November 14, 2002 (the "Report"), I, Keith E. Palmer, Chief Financial Officer and Vice President of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Keith E. Palmer ----------------------------- Keith E. Palmer Chief Financial Officer and Vice President November 13, 2002 -----END PRIVACY-ENHANCED MESSAGE-----