As
filed with the Securities and Exchange Commission on May 5,2009
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM S-3
Amendment
No. 1 to
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
AMERICAN
BIO MEDICA CORPORATION
(Exact
name of registrant as specified in its charter)
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New
York
(State
or other jurisdiction of incorporation or organization)
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14-1702188
(IRS
Employer Identification No.)
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122
Smith Road
Kinderhook,
New York 12106
(518)
758-8158
(Address,
including zip code, and telephone number, including area code, of registrant’s
principal executive offices)
Melissa
A. Waterhouse
Corporate
Secretary
Vice
President & Chief Compliance Officer
122
Smith Road
Kinderhook,
New York 12106
(518)
758-8158
Copies
to:
Richard
L. Burstein, Esq.
Nolan
& Heller, LP
39
N. Pearl Street
Albany,
New York 12207
(518)
449-3300
(Name,
address, including zip code, and telephone number, including area code of agent
for service)
At
such time or times after the Registration Statement becomes
effective
(Approximate
date of commencement of proposed sale to the public)
If the
only securities being registered on this Form are being offered pursuant to
dividend or interest reinvestment plans, please check the following box.
¨
If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, other
than securities offered only in connection with dividend or interest
reinvestment plans, check the following box.
x
If this
Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering.
¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering.
¨
If this
Form is a registration statement pursuant to General Instruction I.D. or a
post-effective amendment thereto that shall become effective upon filing with
the Commission pursuant to Rule 462(e) under the Securities Act, check the
following box.
¨
If this
Form is a post-effective amendment to a registration statement filed pursuant to
General Instructions I.D. filed to register additional securities or additional
classes of securities pursuant to Rule 413(b) under the Securities Act, check
the following box.
¨
Indicate
by check mark whether the registrant is a large accelerated filed, a
non-accelerated filer, or a smaller reporting company.
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Large
accelerated filer
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¨
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Accelerated
filer
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¨
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Non-accelerated
filer
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¨
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Smaller
reporting company
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x
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The
registrant hereby amends this registration statement on such date or dates as
may be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission acting pursuant to said section 8(a),
may determine.
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PROSPECTUS
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Registration
No. 333-
158582
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AMERICAN
BIO MEDICA CORPORATION
1,075,001
SHARES OF COMMON STOCK
This
prospectus covers a total of up to 1,075,001 shares of American Bio Medica
Corporation (“ABMC” or the “Company”) common stock, par value $.01 per share,
which may be offered from time to time by the selling shareholders named on page
15 of this prospectus. The shares being offered by this prospectus consist of
common stock underlying securities issued in our August 2008 10% Subordinated
Convertible Debentures Series A (as the “Series A Debentures”) private
placement, including:
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·
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up
to 1,000,001 shares issuable upon the conversion of the principal of our
Debentures issued by us to the selling shareholders;
and
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·
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up
to 75,000 shares issuable upon the exercise of private placement agent
warrants (referred to herein as “Warrants”), issued by us to Cantone
Research, Inc. (“CRI”), as placement
agent
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The
Debentures and Warrants are sometimes referred to herein as
Securities.
We are
registering these shares of our common stock for resale by the selling
shareholders named in this prospectus, or their respective successors and
permitted assigns. We will not receive any proceeds from the sale of these
shares by the selling shareholders, but we will receive proceeds from the
exercise of the Warrants, if exercised. These shares are being registered to
permit the selling shareholders to sell shares from time to time, in amounts, at
prices and on terms determined at the time of offering. The selling shareholders
may sell this common stock through ordinary brokerage transactions, directly to
market makers of our shares or through any other means described in the section
entitled “Plan of Distribution” beginning on page 18.
Our
common stock is traded on the NASDAQ Capital Market under the symbol “ABMC.” On
May 4, 2009, the last reported sale price of our common stock was $0.17 per
share .
An
investment in the shares of our common stock being offered by this prospectus
involves a high degree of risk. You should read the “Risk Factors” section
beginning on page 7 before you decide to purchase any shares of our common
stock.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR
ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The
date of this prospectus is May 5, 2009.
TABLE
OF CONTENTS
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PAGE
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Note
On Forward Looking Statements
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4
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Prospectus
Summary
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5
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The
Company
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5
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Market
Overview
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5
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Manufacturing/Property
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7
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The
Offering
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7
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Risk
Factors
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9
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Use
Of Proceeds
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17
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Price
Range of Common Shares & Dividend Policy
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17
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Description
of Securities, Dilution & Securities We May Offer
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18
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Selling
Shareholders
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19
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Plan
Of Distribution
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22
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Transfer
Agent
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24
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Legal
Matters
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24
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Where
You Can Find Additional Information
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24
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Incorporation
Of Certain Documents By Reference
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25
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PARTII
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Item
14. Other Expenses Of Issuance & Distribution
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26
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Item
15. Indemnification Of Directors & Officers
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26
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Item
16. Exhibits
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26
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Item
17. Undertakings
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27
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Signatures
(including power of attorney)
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S-1
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Exhibits
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E-1
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You should rely only upon the
information contained in this prospectus and the registration statement of which
this prospectus is a part. We have not authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not making an offer
to sell these securities in any jurisdiction where the offer or sale is not
permitted. You should assume the information appearing in this prospectus is
accurate only as of the date on the front cover of this prospectus. Our
business, financial condition, results of operations and prospects may have
changed since that date. This prospectus is based on information provided by us
and other sources that we believe are reliable. We have summarized certain
documents and other information in a manner we believe to be accurate, but we
refer you to the actual documents for a more complete understanding of what we
discuss in this prospectus. In making an investment decision, you must rely on
your own examination of our business and the terms of the offering, including
the merits and risks involved.
We obtained statistical data, market
data and other industry data and forecasts used throughout, or incorporated by
reference in, this prospectus from market research, publicly available
information and industry publications. Industry publications generally state
that they obtain their information from sources that they believe to be
reliable, but they do not guarantee the accuracy and completeness of the
information. Similarly, while we believe that the statistical data, industry
data and forecasts and market research are reliable, we have not independently
verified the data, and we do not make any representation as to the accuracy of
the information. We have not sought the consent of the sources to refer to their
reports appearing or incorporated by reference in this prospectus.
This prospectus may contain, or may
incorporate by reference, trademarks, tradenames, service marks and service
names of American Bio Medica Corporation and other companies.
NOTE
ON FORWARD LOOKING STATEMENTS
Except
for the historical information contained in this prospectus, the matters
discussed in this prospectus or otherwise incorporated by reference into this
prospectus are “forward-looking statements” within the meaning of Section 27A of
the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These
statements can be identified by the use of forward-looking terminology such as
“believes,” “expects,” “may,” “will,” “should,” or “anticipates” or the negative
thereof or other variations thereon or comparable terminology, or by discussions
of strategy that involve risks and uncertainties. These statements are only
predictions based on current information and expectations and involve a number
of risks and uncertainties. The underlying information and expectations are
likely to change over time. Actual events or results may differ materially from
those projected in the forward-looking statements due to various factors,
including, but not limited to, those set forth under the caption “Risk Factors”
and elsewhere in this prospectus. Readers are urged to carefully review and
consider the various disclosures made by us in this prospectus that attempt to
advise interested parties of the risks and factors that may affect our business.
Except as required by law, we undertake no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise.
PROSPECTUS
SUMMARY
The
Securities and Exchange Commission, or SEC, allows us to “incorporate by
reference” certain information that we file with it, which means that we can
disclose important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this
prospectus, and information that we file later with the SEC will update
automatically, supplement and/or supersede this information. Any statement
contained in a document incorporated or deemed to be incorporated by reference
in this prospectus shall be deemed to be modified or superseded for purposes of
this prospectus to the extent that a statement contained in this prospectus or
in any other document which also is or is deemed to be incorporated by reference
in this prospectus modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this prospectus. You should read the following summary
together with the more detailed information regarding our company, our common
stock and our financial statements and notes to those statements appearing
elsewhere in this prospectus or incorporated herein by reference.
THE
COMPANY
We
develop, manufacture and sell immunoassay diagnostic test kits, primarily for
immediate, point of collection testing (“POCT”) for drugs of abuse in urine and
oral fluids (saliva). Our drugs of abuse screening products offer employers, law
enforcement, government, health care, laboratory and education professionals,
self-contained, cost effective, user friendly screening devices capable of
accurately identifying drugs of abuse within minutes.
In
addition to the manufacture and sale of drugs of abuse screening products, we
provide contract strip manufacturing services for other POCT diagnostic
companies. While we do not currently derive a significant portion of our
revenues from contract manufacturing, we expect to continue to explore
additional applications for our technology and as a result, contract
manufacturing could become a greater portion of our revenues in the
future.
Our
principal executive offices are located at 122 Smith Road, Kinderhook, New York
12106. Our phone numbers are (800) 227-1243 and (518) 758-8158. Our website
address is www.abmc.com.
MARKET
OVERVIEW
We have a
two-pronged distribution strategy that focuses both on growing business through
our direct sales team and with valued third party distributors. Our direct sales
team consists of highly experienced and well-trained sales professionals with
drugs of abuse testing experience, and our distributors are unaffiliated
entities that resell our POCT devices either as a stand-alone product or as part
of a service they provide to their customers.
We
promote our products through direct mail campaigns, selected advertising,
participation at high profile trade shows, use of key point of collection
advocate consultants and other marketing activities. We expect to continue to
recruit and utilize experienced, valued third party distributors, in addition to
selling directly in our markets and to our key customers.
According
to a BCC Research and Consulting market research report released in July 2008,
the global drugs of abuse (DOA) testing market generated $1.9 billion in 2007.
This is expected to increase to $2.0 billion in 2008 and $2.6 billion in 2014,
for a compound annual growth rate of 4.6%. In addition, according to an industry
report distributed by Espicom Business Intelligence in December 2007, the global
point of care testing (“POC”) market (which includes the POCT market) was
estimated to be worth $11.3 billion in 2007 and is growing at 11% a year. POC
accounts for approximately 34% of the $33.6 billion global in-vitro diagnostic
testing market. Our long-term objective is to provide an extensive product
portfolio to this expanding POCT market. Our markets are divided into the
following segments:
Corporate/Workplace
Corporate/Workplace
testing consists of pre-employment test of job applicants, and random, cause and
post accident testing of an employee. Many employers recognize the financial and
safety benefits of implementing Drug Free Workplace Programs, of which drug
testing is an integral part. Government incentives encourage employers to adopt
Drug Free Workplace Programs. Our direct sales force and our inside sales
representatives sell our products to the Corporate/Workplace market. We also
have a nationwide network of distributors and administrators of workplace drug
testing programs that sell our drugs of abuse product lines in this
market.
Government, Corrections and
Law Enforcement
This
market includes federal, state and county level agencies, including:
correctional facilities, pretrial agencies, probation, drug courts and parole
departments at the federal and state levels and juvenile correctional
facilities. A significant number of individuals on parole or probation, or
within federal, state and local correctional facilities and jails, have one or
more conditions to their sentence required by the court or probation agency
which includes periodic drug testing and substance abuse treatment. Our direct
and inside sales teams sell our drugs of abuse screening products in the
Government, Corrections and Law Enforcement market. This market includes
federal, state and county level agencies, including: correctional facilities,
pretrial agencies, probation, drug courts and parole departments at the federal
and state levels and juvenile correctional facilities. Our direct sales force
sells in this market.
Clinics, Physicians, and
Hospital
This
market includes emergency rooms, physician offices, hospitals and clinics and
rehabilitation facilities associated with hospitals. In August 2008, the Drug
Abuse Warning Network (a public health surveillance system that monitors
drug-related visits to hospital emergency departments and drug-related deaths
investigated by medical examiners and coroners) estimated that in 2006 over 1.7
million emergency department visits were associated with drug misuse or abuse.
To address this issue, drug testing is performed in this market so healthcare
professionals are able to ascertain the drug status of a patient before they
administer pharmaceuticals or treatment. Our direct sales forces
sells into this market and we continue to look for a global, strategic
partner/distributor to sell into this market also.
International
Markets
The
International Market consists of various markets outside of the United States.
Although Corporate/Workplace testing is not as prevalent outside of the United
States as within, the Government/Corrections/Law Enforcement and
Clinical/Physician/Hospital markets are somewhat in concert with their United
States counterparts. One market that is significantly more prevalent outside of
the United States is roadside drug testing. Countries including but not limited
to, France, Australia, Malaysia, New Zealand, Portugal, Finland, Germany,
Norway, Switzerland and Canada, already conduct roadside drug testing, are
currently in a pilot phase of drug testing, or have put laws in place to allow
drug testing. We sell our products primarily through distributors in
the International market.
Rehabilitation
Centers
This
market for our products includes people in treatment for substance
abuse. There is a high frequency of testing in this market. For
example, in many residence programs, patients are tested each time they leave
the facility and each time they return. In outpatient programs, patients are
generally tested on a weekly basis. Our direct sales force and our network of
distributors sell our products in the Rehabilitation Center market.
Educational
Market
According
to the December 2008 University of Michigan Monitoring the Future study, 14.1%
of 8th graders, 26.9% of 10th graders and 36.6% of 12th graders have used an
illicit drug within the 12 months prior to the study. Furthermore, the study
reported that a little less than half of young people have tried an illicit drug
by the time they finish high school. In June 2002, the Supreme Court ruled that
students in extracurricular activities including athletics, band, choir, and
other activities could be drug tested at the start of the school year and
randomly throughout the year. We have not yet focused considerable sales and
marketing efforts in the Educational market therefore sales in this market are
currently minimal. The Company may expand its efforts in the future and derive
more significant sales from this market in the future.
Consumer/Over-the-Counter
As of the
date of this prospectus, our point of collection drug tests are not currently
available for sale in this market, as we have not yet received the necessary
marketing clearance from the Food and Drug Administration
(“FDA”).
Additional
Markets
We
believe that the Department of Transportation (“DOT”) and the federally
regulated markets could be a future market for our products. Presently, the DOT
market is not available to any point of collection drug of abuse testing
device. Federal law requires that anyone with a commercial driver’s
license be randomly tested for use of drugs of abuse and that certified
laboratories be used in these testing situations.
MANUFACTURING/PROPERTY
In
November 2001, we purchased our Kinderhook, New York facility and the
surrounding 107 acres. On March 31, 2003 the Company sold approximately 85 acres
of land at its Kinderhook headquarters for $150,000. The balance of the mortgage
held by First Niagara Financial Group (“FNFG”) on the Kinderhook property was
approximately $739,000 at fiscal year end December 31, 2008. We currently lease
14,400 square feet of space for our R&D and bulk manufacturing facility in
Logan Township, New Jersey. Our facility in Kinderhook, New York houses assembly
and packaging of our products in addition to the company’s administration. We
continue to outsource the printing and manufacture of plastic components used in
our products. We manufacture all of our own individual test strips
and we manufacture test strips for unaffiliated third parties at our New Jersey
facility. We contract with a third party for the manufacture of the Rapid Reader
product.
THE
OFFERING
This is
an offering of: (a) up to 1,075,001 common shares, par value $0.01 a share, of
ABMC, of which 1,000,001 are common shares of ABMC issuable upon conversion of
the Series A Debentures (the “Conversion Shares”) and 75,000 are common shares
issuable upon the exercise of warrants. All of these securities are being
offered by the Selling Shareholders. On August 15, 2008, the Company completed
the Series A Debenture offering and received gross proceeds of $750,000. The
Series A Debentures were sold pursuant to the exemption from registration
afforded by Rule 506 under Regulation D ("Regulation D") as promulgated by the
Commission under the Securities Act and/or Section 4(2) of the Securities
Act.
The
Series A Debentures accrue interest at a rate of 10% per annum (payable by the
Company semi-annually) and mature on August 1, 2012. The payment of principal
and interest on the Series A Debentures is subordinate and junior in right of
payment to all Senior Obligations, as defined under the Series A Debentures.
Holders of the Series A Debentures have the right to convert the Series A
Debentures into shares of the common stock of the Company (“Common Stock”) at a
conversion rate of 666.67 shares per $500 in principal amount of the Series A
Debentures (representing a conversion price of approximately $0.75 per share).
If these rights are exercised with respect to the entire $750,000 in principal
amount of Series A Debentures, a total of 1,000,001 Conversion Shares would be
issuable by the Company. This conversion right can be exercised at any time,
commencing the earlier of (a) 120 days after the date of the Series A
Debentures, or (b) the effective date of a Registration Statement to be filed by
the Company with respect to the Conversion Shares. The Company has the right to
redeem any Series A Debentures that have not been surrendered for conversion at
a price equal to the Series A Debentures’ face value plus $0.05 per underlying
common share, or $525 per $500 in principal amount of the Series A Debentures,
representing an aggregate conversion price of $787,500. This redemption right
can be exercised by the Company at any time within 90 days after any date when
the closing price of the Common Stock has equaled or exceeded $2.00 per share
for a period of 20 consecutive trading days.
As
placement agent, CRI received a Placement Agent fee of $52,500, or 7% of the
gross principal amount of Series A Debentures sold. In addition, the Company
issued CRI total of 75,000 warrants, including a four year warrant to purchase
30,450 shares of the Company’s common stock at an exercise price of $0.37 per
share (the closing price of the Company’s common shares on the Closing Date) and
a four year warrant to purchase 44,550 shares of the Company’s common stock at
an exercise price of $0.40 per share (the closing price of the Company’s common
stock on the Series A Completion Date), (the “Placement Agent Warrants”). All
warrants issued to CRI are immediately exercisable.
RISK
FACTORS
An
investment in our company is extremely risky. You should carefully consider the
following risks, in addition to the other information presented in this
prospectus before deciding to buy or exercise our securities. If any of the
following risks actually materialize, our business and prospects could be
seriously harmed, the price and value of our securities could decline and you
could lose all or part of your investment.
We
have a history of incurring net losses, and our accountants have questioned our
ability to continue as a going concern.
Since the
Company’s inception in 1992 through the fiscal transition period ending December
31, 2001, we incurred net losses. We began earning profits in the fiscal year
ending December 31, 2002 and continued to be profitable through December 31,
2004. However, in the fiscal year ending December 31, 2005, we incurred a net
loss. In the fiscal year ending December 31, 2006, we reported net income of
$196,000. We incurred net losses of $990,000 and $850,000 in fiscal years ended
December 31, 2007 and 2008, respectively. As of December 31, 2008, we have an
accumulated deficit of $15,238,000. We expect to continue to make substantial
expenditures for sales and marketing, product development and other business
purposes. Our ability to achieve profitability in the future will primarily
depend on our ability to increase sales of our products, reduce production and
other costs and successfully introduce new products and enhanced versions of our
existing products into the marketplace. There can be no assurance that we will
be able to increase our revenues at a rate that equals or exceeds expenditures.
In the fiscal year ended December 31, 2008, our sales were negatively impacted
by the global economic crisis, which affected our results of operations. Our
failure to increase sales while maintaining or reducing administrative, research
and development and production costs will result in the Company incurring
additional losses.
The
financial statements as of and for each of the two years in the period ended
December 31, 2008, incorporated in this prospectus by reference from our Annual
Report on Form 10-K for the year ended December 31, 2008, have been audited by
UHY, LLP, our independent registered public accounting firm, as stated in their
report (which report includes an explanatory statement that the Company has
experienced recurring net losses and negative cash flows from operations that
raise substantial doubt about the Company's ability to continue as a going
concern) incorporated herein by reference, and have been so incorporated in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
Our
products are sold in limited markets and the failure of any one of them to
achieve and continue to achieve widespread market acceptance would significantly
harm our results of operation.
We offer
a number of point of collection tests for drugs of abuse that are sold in
limited markets, and we currently derive most of our revenues from sales of our
point of collection tests for drugs of abuse. Based upon actual results in 2008
and given current levels of operating expenses, we must achieve approximately
$3.7 million in quarterly net sales to attain break-even results of operations.
In addition, the markets in which we sell our products are cost competitive. If
we are required to lower our prices to our customers, our revenue levels could
be negatively impacted which would adversely affect our gross profit
margins. If sales of our products do not achieve and maintain this
level of revenue, or maintain certain gross profit margins, our results of
operations would be significantly harmed.
Achieving
continued market acceptance for our drug tests requires substantial marketing
efforts and the expenditure of significant funds to inform potential customers
and distributors of the distinctive characteristics, benefits and advantages of
our test kits. A number of our products have only recently been introduced in
the marketplace (the Rapid STAT and the Rapid TOX Cup were both introduced in
2007). We have no history upon which to base market or customer acceptance of
these products. Introduction of these new products has required, and may
continue to require, substantial marketing efforts and expenditure of
funds.
If
we fail to keep up with technological factors or fail to develop our products we
may be at a competitive disadvantage.
The point
of collection drug testing market is highly competitive. Several companies
produce drug tests that compete directly with our drugs of abuse product line,
including Varian, Inc., Biosite Diagnostics and Medtox Scientific, Inc. in the
urine point of collection testing market and OraSure Technologies, Inc. and
Varian, Inc. in the oral fluid point of collection testing market.
As new technologies
become introduced into the point of collection testing market, we may be
required to commit considerable additional effort, time and resources to enhance
our current product portfolio or develop new products. Our success will depend
upon new products meeting targeted product costs and performance, in addition to
timely introduction into the marketplace. We are subject to all of the risks
inherent in product development, which could cause material delays in
manufacturing.
We
rely on third parties for raw materials used in our drugs of abuse products and
in our contract manufacturing processes.
We
currently have approximately 67 suppliers who provide us with the raw materials
necessary to manufacture our point of collection drug testing strips and our
point of collection tests for drugs of abuse. For most of our raw materials we
have multiple suppliers, but there are a few chemical raw materials for which we
only have one supplier. The loss of one or more of these suppliers,
the non-performance of one or more of their materials or the lack of
availability of raw materials could suspend our manufacturing process related to
our drugs of abuse products. This interruption of the manufacturing process
could impair our ability to fill customers’ orders as they are placed, which
would put the Company at a competitive disadvantage.
Furthermore,
we rely on a number of third parties for supply of the raw materials necessary
to manufacture the test components we supply to other diagnostic companies under
contract manufacturing agreements. For most of these raw materials we have
multiple suppliers, however, there are a few chemical raw materials for which we
only have one supplier. The loss of one or more of these suppliers could suspend
the strip manufacturing process and this interruption could impair our ability
to perform contract manufacturing services.
We
have a significant amount of raw material and “work in process” inventory on
hand that may not be used in the next twelve months if the expected
configuration of sales orders are not received at our projected
levels.
We
currently have approximately $3.1 million in raw material components for the
manufacture of our products at December 31, 2008. The non-chemical raw material
components may be retained and used in production indefinitely and the chemical
raw materials components have lives in excess of 20 years. In addition to the
raw material inventory, we have approximately $2.2 million in manufactured
testing strips, or other “work in process” inventory at December 31, 2008. The
components for much of this “work in process” inventory have lives of 12-24
months. If sales orders received are not for devices that would utilize the raw
material components, or if product developments make the raw materials obsolete,
we may be required to dispose of the unused raw materials. In addition, since
the components for much of the “work in process” inventory have lives of 12-24
months, if sales orders within the next 12-24 months are not for devices that
contain the components of the “work in process” inventory, we may need to
discard the unused “work in process” inventory. Beginning in 2004, we
established a reserve for obsolete or slow moving inventory. In 2008, we
increased this reserve to $308,000. There can be no assurance that this reserve
will be adequate for 2009 and/or that it will not have to be
increased.
We
depend on our R&D team for product development and/or product
enhancement.
Our
R&D team performs product development and/or enhancement. There can be no
assurance that our R&D team can successfully complete the enhancement of our
current products and/or complete the development of new products. Furthermore,
the loss of one or more members of our R&D team could result in the
interruption or termination of new product development and/or current product
enhancement, affecting our ability to provide new or improved products to the
marketplace, which would put the Company at a competitive
disadvantage.
Our
products must be cost competitive and perform to the satisfaction of our
customers.
Cost
competitiveness and satisfactory product performance are essential for success
in the point of collection drug testing market. There can be no assurance that
new products we may develop will meet projected price or performance objectives.
In fact, price competition is increasing in the point of collection testing
markets as additional foreign (i.e. non-U.S. based companies) manufacturers
enter the market. Many foreign manufacturers have lower manufacturing costs and
therefore can offer their products at a lower price than a U.S. manufacturer.
These lower costs include, but are not limited to, costs for labor, materials,
regulatory compliance and insurance.
Due to
the variety and complexity of the environments in which our customers operate,
our products may not operate as expected, unanticipated problems may arise with
respect to the technologies incorporated into our test kits or product defects
affecting product performance may become apparent after commercial introduction
of new test kits we put on the market. In the event that we are required to
remedy defects in any of our products after commercial introduction, the costs
to the Company could be significant. Any of these issues could result in
cancelled orders, delays and increased expenses. In addition, the success of
competing products and technologies, pricing pressures or manufacturing
difficulties could further reduce our profitability and the price of our
securities.
One of
our customers accounted for approximately 11.2% of the total net sales of the
Company for the fiscal year ended December 31, 2008. Although we have entered
into a written purchase agreement with this customer, this customer does not
have any minimum purchase obligations and could stop buying our products with 90
days notice. A reduction, delay or cancellation of orders from this customer or
the loss of this customer could reduce the Company’s revenues and profits. The
Company cannot provide assurance that this customer or any of its current
customers will continue to place orders, that orders by existing customers will
continue at current or historical levels or that the Company will be able to
obtain orders from new customers.
We
face significant competition in the drug testing market and potential
technological obsolescence.
We face
competition from other manufacturers of point of collection tests for drugs of
abuse. Manufacturers such as Varian, Inc., Medtox Scientific, Inc., Biosite
Diagnostics and OraSure Technologies, Inc. are better known and some have far
greater financial resources than ABMC. In addition to these manufacturers, there
are a number of smaller privately held companies, as well as foreign
manufacturers, that serve as our competitors. The markets for point of
collection tests for drugs of abuse are highly competitive. Currently, the
pricing of our products is cost competitive, but competing on a cost basis
against foreign manufacturers becomes more difficult as costs to produce our
products in the United States continue to increase. Furthermore, some of our
competitors can devote substantially more resources than we can to business
development and they may adopt more aggressive pricing policies. We expect other
companies to develop technologies or products that will compete with our
products.
Possible
inability to hire and retain qualified personnel.
We will
need additional skilled sales and marketing, technical and production personnel
to grow the business. If we fail to retain our present staff or hire additional
qualified personnel our business could suffer.
We
depend on key personnel to manage our business effectively.
We are
dependent on the expertise and experience of our senior management such as Stan
Cipkowski, Chief Executive Officer, Martin Gould, Chief Scientific Officer and
Todd Bailey, Vice President, Sales & Marketing for our future success. The
loss of Messrs. Cipkowski, Gould and/or Bailey could negatively impact our
business and results of operations. We currently maintain key man insurance for
Messrs. Cipkowski and Gould. Although we have employment agreements in place
with Messrs. Cipkowski and Gould, there can be no assurance that any of our
senior management will continue their employment.
Failure
to effectively manage growth and expansion could adversely affect our business
and operating results.
We may
expand our operations in the future. Any failure to manage our growth
effectively will result in less efficient operations, which could adversely
affect our operating and financial results.
|
|
§
|
To
effectively manage our growth, we must, among other
things:
|
|
|
§
|
accurately
estimate the number of employees we will require and the areas in which
they will be required;
|
|
|
§
|
upgrade
and expand our office infrastructure so that it is appropriate for our
level of activity;
|
|
|
§
|
manage
expansion into additional geographic areas;
and
|
|
|
§
|
improve
and refine our operating and financial
systems
|
We expect
to devote considerable resources and management time to improving our operating
and financial systems to manage our growth. Failure to accomplish any of these
objectives would impede our ability to deliver products and services in a timely
fashion, fulfill existing customer orders and attract and retain new
customers. These impediments would have a material adverse effect on
our financial condition, results of operations and cash flows.
Any
adverse changes in our regulatory framework could negatively impact our
business.
Marketing
clearance from FDA is not currently required for the sale of our products in
non-clinical markets, but is required in the clinical and over-the-counter
(“OTC”) markets. Our point of collection drug tests are 510(k) cleared and have
met FDA requirements for professional use (with the exception of the OralStat
and Rapid STAT which are not 510(k) cleared and are therefore for forensic use
only) and we have been granted a CLIA waiver from FDA related to our Rapid TOX
product line. The Workplace and Government/Corrections/Law Enforcement markets
are currently our primary markets and if any additional FDA clearance is
required to sell in these markets, this additional cost may cause us to raise
the price of our products and make it difficult to compete with other point of
collection products or laboratory based testing, thereby negatively impacting
our revenues. Furthermore, there can be no assurance that if we are required to
apply for additional FDA clearances that they will be granted. If
such clearance(s) is/are not granted, we would be unable to sell our products in
the Workplace and/or Government/Corrections/Law Enforcement markets, and our
revenues would be negatively impacted. Although we are currently unaware of any
changes in regulatory standards related to any of our markets, if regulatory
standards were to change in the future, there can be no assurance that FDA will
grant us the approvals, if and when we apply for them, required to comply with
the changes.
We
rely on intellectual property rights, and we may not be able to obtain patent or
other protection for our technology, products or services.
We rely
on a combination of patent, copyright, trademark and trade secret laws,
confidentiality procedures and contractual provisions to protect our proprietary
technology, products and services. We also believe that factors such as the
technological and creative skills of our personnel, new product developments,
product enhancements and name recognition are essential to establishing and
maintaining our technology leadership position. Our personnel are bound by
non-disclosure agreements. However, in some instances, some courts have not
enforced all aspects of such agreements.
We seek
to protect our proprietary products under trade secret and copyright laws, which
afford only limited protection. We currently have a total of 26 U.S. and foreign
patents related to our POCT products. We have additional patent applications
pending in the United States, and other countries, related to our POCT products.
We have trademark applications pending in the United States. Certain trademarks
have been registered in the United States and in other countries. There can be
no assurance that the additional patents and/or trademarks will be granted or
that, if granted, they will withstand challenge.
Despite
our efforts to protect our proprietary rights, unauthorized parties may attempt
to copy aspects of our products or to obtain information that we regard as
proprietary. We may be required to incur significant costs to protect our
intellectual property rights in the future. In addition, the laws of some
foreign countries do not ensure that our means of protecting our proprietary
rights in the United States or abroad will be adequate. Policing and enforcement
against the unauthorized use of our intellectual property rights could entail
significant expenses and could prove difficult or impossible.
Potential
issuance and exercise of new options and warrants and exercise of outstanding
options and warrants, along with the conversion of outstanding Convertible
Debentures could adversely affect the value of our securities.
The Board
of Directors of the Company has adopted four Non-statutory Stock Option Plans
providing for the granting of options to employees, directors, and consultants,
however, two of those plans, the Fiscal 1997 Plan and the Fiscal 1998 Plan, have
no options available for issuance and there are no options issued and
outstanding under either plan. As of December 31, 2008 there were 990,500
options issued and outstanding under the Fiscal 2000 Plan and 2,771,580 options
issued and outstanding under the Fiscal 2001 Plan, for a total of 3,762,080
options issued and outstanding as of December 31, 2008. All of these options are
fully vested. As of December 31, 2008, there were 9,500 options available for
issuance under the Fiscal 2000 Plan and 945,420 options available for issuance
under the Fiscal 2001 Plan.
On August
15, 2008, the Company completed an offering of Series A Debentures and received
gross proceeds of $750,000 (see Current Report on Form 8-K and amendment on Form
8-K/A-1 filed with the Commission on August 8, 2008 and August 18, 2008
respectively). Holders of the Series A Debentures have a right to convert the
Series A Debentures into shares of Common Stock at a conversion rate of 666.67
shares per $500 in principal amount of the Series A Debentures (representing a
conversion price of approximately $0.75 per share). If these rights are
exercised with respect to the entire $750,000 in principal amount of Series A
Debentures, a total of 1,000,001 Conversion Shares would be issuable by the
Company. This conversion right can be exercised at any time, commencing the
earlier of (a) 120 days after the date of the Series A Debentures, or (b) the
effective date of a Registration Statement to be filed by the Company with
respect to the Conversion Shares. The Company has the right to redeem any Series
A Debentures that have not been surrendered for conversion at a price equal to
the Series A Debentures’ face value plus $0.05 per underlying common share, or
$525 per $500 in principal amount of the Series A Debentures. The Company can
exercise this redemption right at any time within 90 days after any date when
the closing price of the Common Stock has equaled or exceeded $2.00 per share
for a period of 20 consecutive trading days.
As
placement agent, CRI received a placement agent fee, and was also issued a total
of 75,000 Placement Agent Warrants, including a four year warrant to purchase
30,450 shares of Common Stock at an exercise price of $0.37 per share (the
closing price of the Company’s common shares on the Closing Date) and a four
year warrant to purchase 44,550 shares of Common Stock at an exercise price of
$0.40 per share (the closing price of the Company’s common shares on the Series
A Completion Date). All Warrants issued to CRI are immediately
exercisable.
If these
Options, Conversion Shares or Placement Agent Warrants are exercised, the common
shares issued will be freely tradable, increasing the total number of common
shares issued and outstanding. If these shares are offered for sale
in the public market, the sales could adversely affect the prevailing market
price by lowering the bid price of our securities. The exercise of any of these
Options, Debenture Conversion Shares or Placement Agent Warrants could also
materially impair our ability to raise capital through the future sale of equity
securities because issuance of the common shares underlying the Options,
Debenture Conversion Shares or Placement Agent Warrants would cause further
dilution of our securities. In addition, in the event of any change in the
outstanding shares of our common stock by reason of any recapitalization, stock
split, reverse stock split, stock dividend, reorganization consolidation,
combination or exchange of shares, merger or any other changes in our corporate
or capital structure or our common shares, the number and class of shares
covered by the Options and/or the exercise price of the Options may be adjusted
as set forth in their plans.
Substantial
resale of restricted securities may depress the market price of our
securities.
There are
3,993,155 common shares presently issued and outstanding as of the date hereof
that are “restricted securities” as that term is defined under the Securities
Act, and in the future may be sold in compliance with Rule 144 of the Securities
Act, or pursuant to a Registration Statement filed under the Securities Act.
Rule 144 provides that a person holding restricted securities for a period of
one year or more may, in any three month period, sell those securities in
unsolicited brokerage transactions or in transactions with a market maker, in an
amount equal to the greater of one percent of our outstanding common shares or
the average weekly trading volume for the prior four weeks. Sales of
unrestricted shares by affiliates of the Company are also subject to the same
limitation upon the number of shares that may be sold in any three-month period.
Investors should be aware that sales under Rule 144 or 144(k), or pursuant to a
registration statement filed under the Act, may depress the market price of our
securities in any market that may develop for such shares.
We
believe we will need additional funding for our existing and future
operations.
Our
financial statements for the fiscal year ended December 31, 2008 have been
prepared assuming we will continue as a going concern. We do not believe, based
on certain assumptions, including our expectation that the overall global
economic crisis will continue to have a negative impact on our business in 2009,
that our current cash balances, and cash generated from future operations will
be sufficient to fund operations for the next twelve months. Future events,
including the problems, delays, expenses and difficulties which may be
encountered in establishing and maintaining a substantial market for our
products, could make cash on hand insufficient to fund operations. If cash
generated from operations is insufficient to satisfy our working capital and
capital expenditure requirements, we may be required to sell additional equity
or debt securities or obtain additional credit facilities. There can
be no assurance that such financing will be available or that we will be able to
complete financing on satisfactory terms, if at all. Any such equity financing
may result in further dilution to existing shareholders.
Our
ability to retain and attract market makers is important to the continued
trading of our securities.
Our
common shares trade on the NASDAQ Capital Market under the symbol “ABMC”. In the
event that the market makers cease to function as such, public trading of our
securities will be adversely affected or may cease entirely.
If
we fail to meet the continued listing requirements of the NASDAQ Capital Market,
our securities could be delisted.
Our
securities are listed on the NASDAQ Capital Market. The NASDAQ Stock Market
(“NASDAQ”) Marketplace Rules impose requirements for companies listed on the
NASDAQ Capital Market to maintain their listing status, including but not
limited to minimum common share bid price of $1.00, and $2,500,000 in
shareholders' equity or $500,000 in net income in the last fiscal year. As of
the date of this report and for the past twelve months our common shares are
trading and have traded below the minimum bid requirement. In October 2008,
NASDAQ advised us that, because of the extraordinary market conditions, NASDAQ
was suspending enforcement of the bid price and market value requirements
through January 16, 2009. In December 2008, NASDAQ further extended this
suspension until April 20, 2009, and in March 2009, NASDAQ further extended this
suspension until July 19, 2009. Although these suspensions have provided us more
time to regain compliance with the minimum bid price requirement, there can be
no assurance that these suspensions will in fact enable us to regain compliance.
Our continued failure to regain compliance with NASDAQ listing requirements will
more than likely result in delisting of our securities.
Delisting
could reduce the ability of investors to purchase or sell our securities as
quickly and as inexpensively as they have done historically and could subject
transactions in our securities to the penny stock rules. Furthermore, failure to
obtain listing on another market or exchange may make it more difficult for
traders to sell our securities. Broker-dealers may be less willing or able to
sell or make a market in our securities because of the penny stock disclosure
rules. Not maintaining a listing on a major stock market may result in a
decrease in the trading price of our securities due to a decrease in liquidity
and less interest by institutions and individuals in investing in our
securities. Delisting from NASDAQ could also make it more difficult for us to
raise capital in the future.
We
may incur additional significant increased costs as a result of operating as a
public company, and our management will be required to devote substantial time
to new compliance initiatives.
We may
incur significant legal, accounting and other expenses as a result of our
required compliance with certain regulations. More specifically, the
Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"), as well as new rules
subsequently implemented by the SEC, has imposed various new requirements on
public companies. Our management and other personnel will need to devote a
substantial amount of time to these compliance initiatives. Moreover, these
rules and regulations are expected to increase our legal and financial
compliance costs and may make some activities more time-consuming and
costly.
The
Sarbanes-Oxley Act requires, among other things, that we maintain effective
internal controls for financial reporting and disclosure controls and
procedures. In particular, in our fiscal year ended December 31, 2007,
management was required to perform system and process evaluation and testing of
the effectiveness of our internal controls over financial reporting, as required
by Section 404 of the Sarbanes-Oxley Act. Commencing in our fiscal year ending
December 31, 2009, our independent registered public accounting firm will report
on the effectiveness of our internal controls over financial reporting, as
required by Section 404 of the Sarbanes-Oxley Act.
Our
testing, or the subsequent testing by our independent registered public
accounting firm may reveal deficiencies in our internal controls over financial
reporting that are deemed to be material weaknesses. As a result, our compliance
with Section 404 may require that we incur substantial accounting expense and
expend significant management efforts. We currently do not have an internal
audit group, and we may need to hire additional accounting and financial staff
with appropriate public company experience and technical accounting knowledge to
ensure compliance with these regulations.
Moreover,
if we are not able to comply with the requirements of Section 404 in a timely
manner, or if we, or our independent registered public accounting firm
identifies deficiencies in our internal controls over financial reporting that
are deemed to be material weaknesses, the market price of our common shares
could decline, and we could be subject to sanctions or investigations by the SEC
or other regulatory authorities, which would require additional financial and
management resources.
As
of the date of this report, we are not in compliance with certain financial
covenants required by our primary financial institution, First Niagara Financial
Group (“FNFG”), and such non-compliance could cause FNFG to accelerate our
loans.
We
currently have a line of credit, a real estate mortgage and a term note (“Credit
Facilities”) with FNFG (See Note D and Note E to the Company’s financial
statements for the fiscal year ended December 31, 2008, filed with our Annual
Report on Form 10-K). As of March 31, 2008, the Company was not in compliance
with the financial covenants under the line of credit agreement, and on April
30, 2008, the Company was notified by FNFG that the Company was in violation of
the minimum debt service coverage ratio covenant, and that FNFG reserved the
right to declare all obligations of the Company to FNFG immediately due and
payable. On May 22, 2008, the Company and FNFG entered into a forbearance
agreement under which FNFG agreed to forbear, until July 31, 2008, from
exercising its rights and remedies with respect to the Company’s default. On
August 7, 2008, the Company entered into amendments of the Credit Facilities,
which required the Company to sell at least $500,000 in subordinated debentures
by September 1, 2008. On February 4, 2009, we received a letter from FNFG
notifying the Company that an event of default had occurred under our Letter
Agreement and other documents (the “Loan Documents”), related to the Credit
Facilities; more specifically, we failed to comply with the maximum monthly net
loss covenant set forth in the Letter Agreement. Pursuant to the
terms of the Loan Documents, all obligations of the Company to FNFG under the
Loan Documents can be declared by FNFG to be immediately due and payable. The
principal amount totals $1,636,635.97, plus interest and other charges through
February 4, 2009 (collectively, the “Debt”).
The
February 4, 2009 notice also stated that, as an accommodation to the Company,
FNFG decided not to immediately accelerate the Debt, and that they expected to
enter into a Forbearance Agreement with the Company memorializing measures and
conditions required by FNFG. FNFG also notified the Company that they were
reducing the commitment on our line of credit to $650,000 (previously the line
of credit commitment was $750,000), and placing a hold on one of our accounts
held at FNFG, which had a balance of $108,000 as of February 4,
2009.
On March
12, 2009, we entered into a second Forbearance Agreement (the “Agreement”) with
FNFG. The Agreement addresses the Company’s non-compliance with the maximum
monthly net loss and the minimum debt service coverage ratio covenants
(“Existing Defaults”) under the Credit Facilities. Under the terms of the
Agreement, FNFG will forbear from exercising its rights and remedies arising
under the Loan Documents from the Existing Defaults. The Agreement is in effect
until (i) June 1, 2009; or (ii) the date on which FNFG elects to terminate the
Agreement upon the occurrence of an event of default under the Agreement or
under the Loan Documents (other than an Existing Default); or (iii) the date on
which any subsequent amendment to the Agreement becomes effective (the
“Forbearance Period”).
Under the
Agreement, during the Forbearance Period: FNFG will waive any further default
relating to the maximum monthly net loss covenant and minimum debt service
coverage ratio provided the Company shows a net loss no greater than $300,000
for the quarter ending March 31, 2009, and on or before May 1, 2009, the Company
must produce to FNFG a legally binding and executed commitment letter from a
bona-fide third party lender setting forth the terms of a full refinancing of
the Debt to close on or before June 1, 2009.
During
the Forbearance Period, FNFG will continue to place a hold on one of our
accounts, but will release up to $5,000 per month from the account to be used
for the purpose of paying a financial advisory firm engaged by the Company to
find and evaluate alternative funding sources; the financial advisory firm was
referred to the Company by FNFG.
The
maximum available under the line of credit during the Forbearance Period will be
the lesser of $650,000, or the Net Borrowing Capacity. Net Borrowing Capacity is
defined as Gross Borrowing Capacity less the Inventory Value Cap. Gross
Borrowing Capacity is defined as (i) the sum of 80% of eligible accounts
receivable, (ii) 20% of raw material inventory and (iii) 40% of finished goods
inventory. Inventory Value Cap is defined as the lesser of $400,000, or the
combined value of items (ii) and (iii) of Gross Borrowing Capacity. Since
September 2008, the Company’s Net Borrowing Capacity has declined from
$1,195,000 to $795,000 as of the date of this report.
During
the Forbearance Period, interest shall accrue on the line of credit at the rate
of prime plus 4%, an increase from prime plus 1%. Interest accruing on the real
estate mortgage during the Forbearance Period shall remain unchanged at the
fixed rate of 7.5% and interest on the term note shall remain unchanged at the
fixed rate of 7.17%. In the event of default under the Agreement, interest under
the line of credit shall increase to the greater of prime plus 6% or 10%. The
line of credit shall terminate on June 1, 2009.
If we are
unable to maintain compliance with any of the conditions during the Forbearance
Period, or if we are unable to secure a full refinancing of the Debt on or
before June 1, 2009, FNFG will have the right to accelerate the Debt. We could
request an extension of the Forbearance Period, but if FNFG did not agree to an
extension and were to exercise its right to accelerate the Debt, it is likely
that the Company would not have the funds available to pay the Debt. In that
event, FNFG would be entitled to enforce its rights and remedies available under
the Loan Documents, including but not limited to foreclosure of its liens on the
Company’s assets.
USE
OF PROCEEDS
We will
not receive any of the proceeds from the sale of the 1,075,001 shares of Common
Stock underlying the Series A Debentures. If and when all of the Warrants are
exercised, we will receive the proceeds from the sale of 75,000 Warrants. The
selling shareholders are under no obligation to exercise their Warrants. If all
of the Warrants are exercised in full, we will receive approximately $29,086. We
expect to use such proceeds, if any, for working capital and general corporate
purposes.
PRICE
RANGE OF COMMON SHARES AND DIVIDEND POLICY
Our
common stock is traded on the Nasdaq Capital Market under the symbol “ABMC”. The
last reported sale price of our common shares on May 4, 2009 on the Nasdaq
Capital Market was $0.17 per share. The following table sets forth the high and
low sale prices for our common stock for the periods indicated as reported on
the Nasdaq Capital Market.
|
Fiscal year ending December 31,
2008
|
|
High
|
|
|
Low
|
|
|
|
|
|
|
|
|
|
|
Quarter
ending December 31, 2008
|
|
$
|
0.54
|
|
|
$
|
0.08
|
|
|
Quarter
ending September 30, 2008
|
|
$
|
0.95
|
|
|
$
|
0.32
|
|
|
Quarter
ending June 30, 2008
|
|
$
|
0.98
|
|
|
$
|
0.33
|
|
|
Quarter
ending March 31, 2008
|
|
$
|
0.98
|
|
|
$
|
0.46
|
|
|
Fiscal year ending December 31,
2007
|
|
High
|
|
|
Low
|
|
|
|
|
|
|
|
|
|
|
Quarter
ending December 31, 2007
|
|
$
|
1.00
|
|
|
$
|
0.36
|
|
|
Quarter
ending September 30, 2007
|
|
$
|
1.43
|
|
|
$
|
0.94
|
|
|
Quarter
ending June 30, 2007
|
|
$
|
1.31
|
|
|
$
|
0.90
|
|
|
Quarter
ending March 31, 2007
|
|
$
|
1.33
|
|
|
$
|
0.89
|
|
We have
not declared any dividends on our common shares and do not expect to do so in
the foreseeable future. Future earnings, if any, will be retained for use in our
business.
DESCRIPTION
OF SECURITIES, DILUTION AND SECURITIES WE MAY OFFER
General
The
following description of our capital stock (which includes a description of
securities we may offer pursuant to the registration statement of which this
prospectus, as the same may be supplemented, forms a part) does not purport to
be complete and is subject to and qualified in its entirety by our certificate
of incorporation and bylaws and by the applicable provisions of New York
law.
We,
directly or through agents, dealers or underwriters designated from time to
time, may offer, issue and sell, together or separately:
|
|
·
|
up
to $50,000,000 in the aggregate of common
stock
|
|
|
·
|
up
to 5,000,000 in the aggregate of preferred
stock
|
|
|
·
|
secured
or unsecured debt securities consisting of notes, debentures or other
evidences of indebtedness which may be senior debt securities, senior
subordinated debt securities or subordinated debt securities, each of
which may be convertible into equity
securities
|
|
|
·
|
warrants
or options to purchase shares of our common
stock
|
|
|
·
|
units comprised of, or other
combinations of, the foregoing
securities
|
Common
Stock
We are
authorized to issue up to 50,000,000 shares of common stock, $0.01 par value.
For more information about our common stock, please refer to our amended and
restated articles of incorporation and by-laws. As of May 5, 2009, we have
21,744,768 common shares issued and outstanding.
Preferred
Stock
We are
authorized to issue up to 5,000,000 shares of preferred stock. Our Board of
Directors may divide the preferred shares into one or more series and issue such
preferred shares from time to time with such performance, privileges,
limitations, and relative rights as it may determine. As of May 5, 2009, we have
no preferred shares issued and outstanding.
Warrants
We may
issue warrants for the purchase of our common stock, preferred stock or debt
securities or any combination thereof. Warrants may be issued independently or
together with our common stock, preferred stock or debt securities and may be
attached to or separate from any offered securities. As of May 5, 2009, the
Warrants within this Registration Statement (75,000) are the only warrants
issued and outstanding.
Options
We currently have two nonstatutory
Stock Option Plans (the Fiscal 2000 Plan and the Fiscal 2001 Plan) providing for
options grants to employees, directors, and consultants. As of May 5, 2009,
there were 3,762,080 options issued and outstanding under both plans combined,
all of which are currently exercisable, and there were 9,500 options available
for issuance under the Fiscal 2000 Plan and 945,420 options available for
issuance under the Fiscal 2001 Plan.
Debt
Securities
As
used in this prospectus, debt securities means the debentures, notes, bonds and
other evidences of indebtedness that we may issue from time to time. The debt
securities will either be senior debt securities, senior subordinated debt or
subordinated debt securities. We may also issue convertible debt securities. As
of May 5, 2009, the Debentures within this Registration Statement are the only
debt securities issued and outstanding. Unless otherwise specified, the debt
securities will not be listed on any securities exchange. Debt securities may
bear interest at a fixed rate or a variable rate. In addition, we may sell debt
securities bearing no interest or interest at a rate that at the time of
issuance is below the prevailing market rate, or at a discount below their
stated principal amount.
Dilution
As of
May 5, 2009, 21,744,768 common shares were issued and outstanding. If
the Debentures are fully converted to common shares and the Warrants are fully
exercised and converted to common shares, 22,819,773 shares will be issued and
outstanding. If the Debentures are fully converted to common shares and the
Warrants are fully exercised and converted to common shares, and all other
options and warrants outstanding are exercised, 26,581,853 common shares will be
issued and outstanding.
SELLING
SHAREHOLDERS
On behalf
of the selling shareholders named in the table below (including their respective
successors or permitted assigns), who receive any of the shares covered by this
prospectus), we are registering, pursuant to the registration statement of which
this prospectus is a part, 1,075,001 shares of our common stock, 1,000,001 of
which are issuable upon conversion of the principal of the Debentures and 75,000
of which are issuable upon exercise of the Warrants held by the selling
shareholders. The Debentures and Warrants were issued in our August 2008 private
placement and are described in our Current Report on Form 8-K filed with the SEC
on August 8, 2008 and further amended on August 18, 2008, which is incorporated
into this registration statement by reference. We are registering the shares
being offered under this prospectus pursuant to registration rights agreements
that were entered into between us and the selling shareholders in connection
with the private placement, and pursuant to a Debenture Placement Agreement,
dated July 7, 2008 that was entered into between us and the placement agent
(also a selling shareholder) in connection with the private
placement.
We are
registering the shares to permit the selling shareholders to offer these shares
for resale from time to time. The selling shareholders may sell all, some or
none of the shares covered by this prospectus. All information with respect to
beneficial ownership has been furnished to us by the selling shareholders. For
more information, see the section of this prospectus entitled “PLAN OF
DISTRIBUTION.”
Beneficial
ownership is determined in accordance with Rule 13d-3 promulgated by the SEC,
and generally includes voting or investment power with respect to securities. In
computing the number of shares beneficially owned by the holder and the
percentage ownership of the holder, shares of common stock issuable upon
conversion of the Debentures or the Warrants that are currently convertible or
are exercisable or convertible within 60 days after the date of the table are
deemed outstanding.
The
percent of beneficial ownership for the selling shareholders is based on shares
of common stock outstanding as of May 5, 2009. Shares of common stock subject to
warrants, options and other convertible securities that are currently
exercisable or exercisable within 60 days of May 5, 2009, are considered
outstanding and beneficially owned by a selling shareholder who holds those
warrants, options or other convertible securities for the purpose of computing
the percentage ownership of that selling shareholder but are not treated as
outstanding for the purpose of computing the percentage ownership of any other
shareholder.
The
shares of Common Stock being offered under this prospectus may be offered for
sale from time to time during the period the registration statement of which
this prospectus is a part remains effective, by or for the account of the
selling shareholders. After the date of effectiveness of the registration
statement of which this prospectus is a part, the selling shareholders may have
sold or transferred, in transactions covered by this prospectus or in
transactions exempt from the registration requirements of the Securities Act,
some or all of their Common Stock. Information about the selling shareholders
may change over time.
Any
changed information will be set forth in an amendment to the registration
statement or supplement to this prospectus, to the extent required by
law.
The
table below lists the selling shareholders and information regarding their
ownership of common stock as of May 5, 2009:
|
|
|
|
|
|
Principal
|
|
|
|
|
|
Number
of Shares Owned After Offering
(1)
|
|
|
Name
of Selling
Shareholder
|
|
Beneficially
Owned Prior to
Offering
|
|
|
Amount
of
Series
A
Debentures
Owned Prior to
Offering
|
|
|
Shares
to be
sold
pursuant to
this
Prospectus
|
|
|
Number
(1)
|
|
|
Percentage
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anglin,
Monte D & Janet S
|
|
|
0
|
|
|
|
21,000
|
|
|
|
28,000
|
|
|
|
0
|
|
|
|
*
|
|
|
Bluth,
Mordecai
|
|
|
4,000
|
|
|
|
12,750
|
|
|
|
17,000
|
|
|
|
4,000
|
|
|
|
*
|
|
|
Bottelli,
Armando
|
|
|
0
|
|
|
|
21,000
|
|
|
|
28,000
|
|
|
|
0
|
|
|
|
*
|
|
|
Boxer,
Robert
|
|
|
20,000
|
|
|
|
10,500
|
|
|
|
14,000
|
|
|
|
20,000
|
|
|
|
*
|
|
|
Cant,
Geoffrey
|
|
|
3,500
|
|
|
|
15,000
|
|
|
|
20,000
|
|
|
|
3,500
|
|
|
|
*
|
|
|
Cantone
Research, Inc.
|
|
|
75,0000
|
(3)
|
|
|
100,000
|
|
|
|
208,334
|
|
|
|
0
|
|
|
|
*
|
|
|
Daniels,
Peter
|
|
|
10,000
|
|
|
|
30,000
|
|
|
|
40,000
|
|
|
|
10,000
|
|
|
|
*
|
|
|
Embry,
William
|
|
|
0
|
|
|
|
50,000
|
|
|
|
66,667
|
|
|
|
0
|
|
|
|
*
|
|
|
Fish,
Hamilton
|
|
|
5,000
|
|
|
|
10,500
|
|
|
|
14,000
|
|
|
|
5,000
|
|
|
|
*
|
|
|
Fishman,
Joseph
|
|
|
9,000
|
|
|
|
24,000
|
|
|
|
32,000
|
|
|
|
9,000
|
|
|
|
*
|
|
|
Franklin,
Richard
|
|
|
4,600
|
|
|
|
10,500
|
|
|
|
14,000
|
|
|
|
4,600
|
|
|
|
*
|
|
|
Gaur,
Jean
|
|
|
0
|
|
|
|
10,500
|
|
|
|
14,000
|
|
|
|
0
|
|
|
|
*
|
|
|
Gefken,
Henry & Christine
|
|
|
0
|
|
|
|
21,000
|
|
|
|
28,000
|
|
|
|
0
|
|
|
|
*
|
|
|
Ginsberg,
Stanley E & Arlene D
|
|
|
5,000
|
|
|
|
10,500
|
|
|
|
14,000
|
|
|
|
5,000
|
|
|
|
*
|
|
|
Hinkle,
Jeff & Kimberley
|
|
|
5,800
|
|
|
|
21,000
|
|
|
|
28,000
|
|
|
|
5,800
|
|
|
|
*
|
|
|
Landewehr,
Ralph
|
|
|
3,800
|
|
|
|
10,500
|
|
|
|
14,000
|
|
|
|
3,800
|
|
|
|
*
|
|
|
Landewehr,
Rita
|
|
|
0
|
|
|
|
19,500
|
|
|
|
26,000
|
|
|
|
0
|
|
|
|
*
|
|
|
Manning,
Arnold
|
|
|
0
|
|
|
|
10,500
|
|
|
|
14,000
|
|
|
|
0
|
|
|
|
*
|
|
|
Matthes,
Alan & Lori
|
|
|
0
|
|
|
|
15,000
|
|
|
|
20,000
|
|
|
|
0
|
|
|
|
*
|
|
|
Meyer,
Martin & Francine
|
|
|
3,500
|
|
|
|
10,500
|
|
|
|
14,000
|
|
|
|
3,500
|
|
|
|
*
|
|
|
Moose,
Hoy Jr.
|
|
|
0
|
|
|
|
10,500
|
|
|
|
14,000
|
|
|
|
0
|
|
|
|
*
|
|
|
Nedbalek,
Bobby
|
|
|
8,500
|
|
|
|
50,000
|
|
|
|
66,667
|
|
|
|
8,500
|
|
|
|
*
|
|
|
Newman,
Larry & Elsie
|
|
|
0
|
|
|
|
20,250
|
|
|
|
27,000
|
|
|
|
0
|
|
|
|
*
|
|
|
Ragonese,
Patsy III
|
|
|
10,000
|
|
|
|
15,000
|
|
|
|
20,000
|
|
|
|
10,000
|
|
|
|
*
|
|
|
Rahaim,
Thomas Michael
|
|
|
10,000
|
|
|
|
15,000
|
|
|
|
20,000
|
|
|
|
10,000
|
|
|
|
*
|
|
|
Rinehart,
Marlyn W.
|
|
|
7,500
|
|
|
|
20,000
|
|
|
|
93,333
|
|
|
|
7,500
|
|
|
|
*
|
|
|
Seifert,
Robert & Carolyn
|
|
|
0
|
|
|
|
50,000
|
|
|
|
14,000
|
|
|
|
0
|
|
|
|
*
|
|
|
Steinle,
Shelton & Jeanette
|
|
|
0
|
|
|
|
10,500
|
|
|
|
14,000
|
|
|
|
0
|
|
|
|
*
|
|
|
Suntup,
Alan
|
|
|
0
|
|
|
|
10,500
|
|
|
|
14,000
|
|
|
|
0
|
|
|
|
*
|
|
|
Suntup,
Paul
|
|
|
0
|
|
|
|
10,500
|
|
|
|
14,000
|
|
|
|
0
|
|
|
|
*
|
|
|
Telfair,
William B & Carole H
|
|
|
9,200
|
|
|
|
10,500
|
|
|
|
14,000
|
|
|
|
9,200
|
|
|
|
*
|
|
|
Walters,
Jeffrey
|
|
|
10,000
|
|
|
|
10,500
|
|
|
|
26,000
|
|
|
|
10,000
|
|
|
|
*
|
|
|
West,
Pat Sterling & Patricia Key
|
|
|
0
|
|
|
|
19,500
|
|
|
|
14,000
|
|
|
|
0
|
|
|
|
*
|
|
|
Whitman,
Edward
|
|
|
8,000
|
|
|
|
10,500
|
|
|
|
14,000
|
|
|
|
8,000
|
|
|
|
*
|
|
|
Young,
James & June
|
|
|
10,000
|
|
|
|
10,500
|
|
|
|
28,000
|
|
|
|
10,000
|
|
|
|
*
|
|
|
Zito,
Santo & Josephine
|
|
|
14,673
|
|
|
|
21,000
|
|
|
|
28,000
|
|
|
|
14,673
|
|
|
|
*
|
|
|
TOTALS
|
|
|
162,073
|
|
|
|
|
|
|
|
1,075,001
|
|
|
|
162,073
|
|
|
|
*
|
|
|
|
(1)
|
Assumes
that the shareholders dispose of all the shares of common stock covered by
this prospectus and do not acquire or dispose of any additional shares of
common stock. The selling shareholders are not representing, however, that
any of the shares covered by this prospectus will be offered for sale, and
the selling shareholders reserve the right to accept or reject, in whole
or in part, any proposed sale of
shares.
|
|
|
(2)
|
The
percentage of shares of common stock beneficially owned is based on
21,744,768 shares of common stock outstanding on May 5,
2009.
|
|
|
(3)
|
Placement
Agent Warrants immediately
exercisable.
|
* Less
than 1% of the outstanding common shares
NOTE:
Except for being holders of our Securities listed in the table above, none of
the selling shareholders (other than CRI) has had any position, office, or other
material relationship with us in the past three years.
PLAN
OF DISTRIBUTION
The
Selling Shareholders (the “Selling Shareholders”), or their respective
successors or authorized assigns may offer the shares of common stock covered by
this prospectus to the public or otherwise from time to time. We are registering
the Selling Shareholders' resale of these shares of common stock pursuant to
registration rights agreements between the Selling Shareholders and us. Pursuant
to these agreements, we have agreed to keep the registration statement related
to this prospectus effective for until the earliest of (i) the date that is four
(4) years after the date of the Series A Completion Date (ii) the date when the
Selling Shareholders may sell all of the shares of common stock under Rule 144
or (iii) the date no Selling Shareholder any longer owns any of the Conversion
Shares.
Each
Selling Shareholder of the shares of common stock and any of their respective
successors or authorized assigns, may from time to time, sell any or all of
their shares of common stock on the Nasdaq Capital Market or any other stock
exchange, market or trading facility on which the shares are traded or in
private transactions. The registration of these shares of common stock does not
necessarily mean that any of them will be offered or sold by the selling
shareholders. Sales may be at fixed or negotiated prices. A Selling Shareholder
may use any one or more of the following methods when selling
shares:
|
|
•
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
|
|
•
|
block
trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to
facilitate the
transaction;
|
|
|
•
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account;
|
|
|
•
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
|
|
•
|
privately
negotiated transactions;
|
|
|
•
|
settlement
of short sales entered into after the effective date of the registration
statement of which this prospectus is a
part;
|
|
|
•
|
broker-dealers
may agree with the Selling Shareholders to sell a specified number of such
shares at a stipulated price per
share;
|
|
|
•
|
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or
otherwise;
|
|
|
•
|
a
combination of any such methods of sale;
or
|
|
|
•
|
any
other method permitted pursuant to applicable
law.
|
The
Selling Shareholders may also sell shares under Rule 144 under the Securities
Act, if available, rather than under this prospectus.
Broker-dealers
engaged by the Selling Shareholders may arrange for other broker-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the Selling Shareholders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated, but,
except as set forth in a supplement to this prospectus, in the case of an agency
transaction not in excess of a customary and fair brokerage commission in
compliance with NASD Rule 2440; and in the case of a principal transaction a
markup or markdown computed in compliance with NASD IM-2440-1.
In
connection with the sale of the shares of common stock or interests therein, the
Selling Shareholders may enter into hedging transactions with broker-dealers or
other financial institutions, which may in turn engage in short sales of the
shares of common stock in the course of hedging the positions they assume. The
Selling Shareholders may also sell shares of the common stock short and deliver
these securities to close out their short positions, or loan or pledge the
common stock to broker-dealers that in turn may sell these securities. The
Selling Shareholders may also enter into option or other transactions with
broker-dealers or other financial institutions for the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares of common stock offered by this prospectus,
which shares of common stock such broker-dealer or other financial institution
may resell pursuant to this prospectus (as supplemented or amended to reflect
such transaction).
The
Selling Shareholders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be “underwriters” within the meaning of the
Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
We are
bearing all of the costs related to the registration of the shares of common
stock. We have agreed to indemnify the Selling Shareholders against certain
losses, claims, damages and liabilities, including liabilities under the
Securities Act or the Exchange Act.
We will
not receive any of the proceeds from sales of the Conversion Shares by the
Selling Shareholders. We will receive gross proceeds of up to $29,086
if all of the Warrants are exercised.
The
Selling Shareholders will be subject to applicable provisions of the Exchange
Act and the rules and regulations thereunder, which may limit the timing of
purchases and sales of Conversion Shares by the Selling Shareholders or any
other person. We will make copies of this prospectus available to the Selling
Shareholders and have informed them of the need to deliver a copy of this
prospectus to each purchaser at or prior to the time of the sale (including by
compliance with Rule 172 under the Securities Act).
TRANSFER
AGENT
The
transfer agent for our common stock is Registrar and Transfer Company. Their
address is 10 Commerce Drive, Cranford, New Jersey and their phone number is
800-368-5948.
LEGAL
MATTERS
The validity of the shares of common
stock offered by this prospectus has been passed upon for us by Nolan and
Heller, 39 N. Pearl Street, Albany, New York 12207.
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
We have
filed a registration statement with the Securities and Exchange Commission under
the Securities Act with respect to the shares of our Common Stock offered by
this prospectus. This prospectus is part of that registration statement and does
not contain all the information included in the registration statement. For
further information with respect to our common stock and us, you should refer to
the registration statement, its exhibits and the material incorporated by
reference therein. Portions of the exhibits have been omitted as permitted by
the rules and regulations of the Securities and Exchange Commission. Statements
made in this prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete. In each instance, we refer
you to the copy of the contracts or other documents filed as an exhibit to the
registration statement, and these statements are hereby qualified in their
entirety by reference to the contract or document. The registration statement
may be inspected and copied at the public reference facilities maintained by the
Securities and Exchange Commission at Room 1024, Judiciary Plaza, 100 F Street,
N.E., Washington, D.C. 20549 and the Regional Offices at the Commission located
in the Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661, and at 233 Broadway, New York, New York 10279. Copies of those filings
can be obtained from the Commission’s Public Reference Section, Judiciary Plaza,
100 F Fifth Street, N.E., Washington, D.C. 20549 at prescribed rates and may
also be obtained from the web site that the Securities and Exchange Commission
maintains at http://www.sec.gov. You may also call the Commission at
1-800-SEC-0330 for more information. We file annual, quarterly and current
reports and other information with the Securities and Exchange Commission. You
may read and copy any reports, statements or other information on file at the
Commission’s public reference room in Washington, D.C. You can request copies of
those documents upon payment of a duplicating fee, by writing to the Securities
and Exchange Commission.
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
The
Securities and Exchange Commission allows us to incorporate by reference into
this prospectus the information we file with the Securities and Exchange
Commission, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and information we file later with the
Securities and Exchange Commission will automatically update and supersede this
information. We incorporate by reference the documents listed below and any
future filings made by us with the Securities and Exchange Commission under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act until the sale of all of
the shares of common stock that are part of this offering. The documents we are
incorporating by reference are as follows:
• our
Annual Report on Form 10-K for fiscal year ended December 31, 2008 (as filed
with the SEC on March 30, 2009);
|
|
•
|
our
Quarterly Report on Form 10-Q for fiscal quarter ended September 30, 2008
(as filed with the SEC on November 14,
2008);
|
|
|
•
|
our
Quarterly Report on Form 10-Q for fiscal quarter ended June 30, 2008 (as
filed with the SEC on August 14,
2008);
|
• our
Quarterly Report on Form 10-Q for fiscal quarter ended March 31, 2008 (as filed
with the SEC on May 15, 2008);
|
|
•
|
our
Current Reports on Form 8-K as filed with the SEC on February 14, 2008,
May 1, 2008, May 14, 2008, May 28, 2008, August 8, 2008 (as amended in a
Form 8-K/A filed with the SEC on August 18, 2008), October 30, 2008,
December 23, 2008, February 11, 2009, March 18, 2009 (as amended in a Form
8-K/A filed with the SEC on March 25, 2009), and March 27,
2009;
|
|
|
•
|
our
Annual Proxy Statement (Schedule 14(A)) for our Annual Shareholders’
Meeting (as filed with the SEC on April 27,
2009);
|
|
|
•
|
The
description of our common shares in our prospectus included in our
registration statement filed with the Securities and Exchange Commission
on November 21, 1996, on Form 10-SB under the
caption “Description of Securities” on page 18 of the
prospectus and incorporated by reference into any reports filed for the
purpose of updating such
description.
|
|
|
•
|
All
documents that we file with the Securities and Exchange Commission
pursuant to Sections 13(a), 13(c), 14, and 15(d) of the Exchange Act
subsequent to the date of this registration statement and prior to the
filing of a post-effective amendment to this registration statement that
indicates that all securities offered under this prospectus have been
sold, or that deregisters all securities then remaining unsold, will be
deemed to be incorporated in this registration statement by reference and
to be a part hereof from the date of filing of such
documents.
|
Any
statement contained in a document we incorporate by reference will be modified
or superseded for all purposes to the extent that a statement contained in this
prospectus (or in any other document that is subsequently filed with the
Securities and Exchange Commission and incorporated by reference) modifies or is
contrary to that previous statement. Any statement so modified or superseded
will not be deemed a part of this prospectus except as so modified or
superseded.
You may
request a copy of these filings at no cost (other than exhibits unless such
exhibits are specifically incorporated by reference) by writing or telephoning
us at the following address and telephone number:
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American
Bio Medica Corporation
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122
Smith Road
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Kinderhook,
NY 12106
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Attention:
Melissa A. Waterhouse
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518-758-8158
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PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item 14.
Other Expenses Of Issuance And Distribution
The expenses payable by us in
connection with the issuance and distribution of the Securities are estimated as
follows:
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AMOUNT
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SEC
Registration Fee
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$
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10
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Placement
Agent Fees
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$
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67,500
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Legal
Fees and Expenses
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$
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50,000
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Accounting
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$
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3,500
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Miscellaneous
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$
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3,500
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Total:
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$
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124,500
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Item 15.
Indemnification of Directors and Officers
Under the New York Business Corporation
Law (“NYBCL”), a corporation may indemnify any person made, or threatened to be
made, a party to any action or proceeding, except for shareholder derivative
suits, by reason of the fact that he or she was a director or officer of the
corporation, provided such director or officer acted in good faith for a purpose
which he or she reasonably believed to be in the best interests of the
corporation and, in criminal proceedings, in addition, had no reasonable cause
to believe his or her conduct was unlawful. In the case of
shareholder derivative suits, the corporation may indemnify any person by reason
of the fact that he or she was a director or officer of the corporation if he or
she acted in good faith for a purpose which he or she reasonably believed to be
in the best interests of the corporation, except that no indemnification may be
made in respect of (i) a threatened action, or a pending action which is settled
or otherwise disposed of; or (ii) any claim, issue or matter as to which such
person has been adjudged to be liable to the corporation, unless and only to the
extent that the court on which the action was brought, or, if no action was
brought, any court of competent jurisdiction, determines upon application that,
in view of all the circumstances of the case, the person is fairly and
reasonably entitled to indemnity for that portion of the settlement amount and
expenses as the court deems proper.
The indemnification described above
under the NYBCL is not exclusive of other indemnification rights to which a
director or officer may be entitled, whether contained in the certificate of
incorporation or by-laws, or when authorized by (i) such certificate of
incorporation or by-laws; (ii) a resolution of shareholders; (iii) a resolution
of directors; or (iv) an agreement providing for such indemnification, provided
that no indemnification may be made to or on behalf of any director or officer
if a judgment or other final adjudication adverse to the director or officer
establishes that his or her acts were committed in bad faith or were the result
of active and deliberate dishonesty and were material to the cause of action so
adjudicated, or that he or she personally gained in fact a financial profit or
other advantage to which he or she was not legally entitled.
Item 16.
Exhibits
See
Exhibit List on page E-1.
Item 17.
Undertakings
The
undersigned registrant hereby undertakes:
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1.
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To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration
statement:
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i.
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To
include any prospectus required by section 10(a)(3) of the Securities Act
of 1933;
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ii.
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To
reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from
the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than 20% change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the effective
registration statement.
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iii.
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To
include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material
change to such information in the registration
statement;
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Provided
however, that:
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A.
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Paragraphs
(a)(1)(i) and (a)(1)(ii) of this section do not apply if the registration
statement is on Form S-8, and the information required to be included in a
post-effective amendment by those paragraphs is contained in reports filed
with or furnished to the Commission by the registrant pursuant to section
13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement;
and
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B.
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Paragraphs
(a)(1)(i), (a)(1)(ii) and (a)(1)(iii) of this section do not apply if the
registration statement is on Form S-3 or Form F-3 and the information
required to be included in a post-effective amendment by those paragraphs
is contained in reports filed with or furnished to the Commission by the
registrant pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement, or is contained in a form of prospectus filed
pursuant to Rule 424(b) that is part of the registration
statement.
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2.
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That,
for the purpose of determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
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3.
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To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
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4.
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If
the registrant is a foreign private issuer, to file a post-effective
amendment to the registration statement to include any financial
statements required by Item 8.A. of Form 20-F at the start of any delayed
offering or throughout a continuous offering. Financial statements and
information otherwise required by Section 10(a)(3) of the Act need not be
furnished, provided that the registrant includes in the prospectus, by
means of a post-effective amendment, financial statements required
pursuant to this paragraph (a)(4) and other information necessary to
ensure that all other information in the prospectus is at least as current
as the date of those financial statements. Notwithstanding the foregoing,
with respect to registration statements on Form F-3, a post-effective
amendment need not be filed to include financial statements and
information required by Section 10(a)(3) of the Act or Rule 3-19 of this
chapter if such financial statements and information are contained in
periodic reports filed with or furnished to the Commission by the
registrant pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the Form
F-3.
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5.
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That,
for the purpose of determining liability under the Securities Act of 1933
to any purchaser:
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i.
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If
the registrant is relying on Rule 430B (230.430B of this
chapter):
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A.
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Each
prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be
deemed to be part of the registration statement as of the date the filed
prospectus was deemed part of and included in the registration statement;
and
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B.
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Each
prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or
(b)(7) as part of a registration statement in reliance on Rule 430B
relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x)
for the purpose of providing the information required by section 10(a) of
the Securities Act of 1933 shall be deemed to be part of and included in
the registration statement as of the earlier of the date such form of
prospectus is first used after effectiveness or the date of the first
contract of sale of securities in the offering described in the
prospectus. As provided in Rule 430B, for liability purposes of the issuer
and any person that is at that date an underwriter, such date shall be
deemed to be a new effective date of the registration statement relating
to the securities in the registration statement to which that prospectus
relates, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof. Provided, however, that no
statement made in a registration statement or prospectus that is part of
the registration statement or made in a document incorporated or deemed
incorporated by reference into the registration statement or prospectus
that is part of the registration statement will, as to a purchaser with a
time of contract of sale prior to such effective date, supersede or modify
any statement that was made in the registration statement or prospectus
that was part of the registration statement or made in any such document
immediately prior to such effective date;
or
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ii.
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If
the registrant is subject to Rule 430C, each prospectus filed pursuant to
Rule 424(b) as part of a registration statement relating to an offering,
other than registration statements relying on Rule 430B or other than
prospectuses filed in reliance on Rule 430A, shall be deemed to be part of
and included in the registration statement as of the date it is first used
after effectiveness. Provided, however, that no statement made in a
registration statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed incorporated by
reference into the registration statement or prospectus that is part of
the registration statement will, as to a purchaser with a time of contract
of sale prior to such first use, supersede or modify any statement that
was made in the registration statement or prospectus that was part of the
registration statement or made in any such document immediately prior to
such date of first use.
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6.
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That,
for the purpose of determining liability of the registrant under the
Securities Act of 1933 to any purchaser in the initial distribution of the
securities: The undersigned registrant undertakes that in a primary
offering of securities of the undersigned registrant pursuant to this
registration statement, regardless of the underwriting method used to sell
the securities to the purchaser, if the securities are offered or sold to
such purchaser by means of any of the following communications, the
undersigned registrant will be a seller to the purchaser and will be
considered to offer or sell such securities to such
purchaser:
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i.
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Any
preliminary prospectus or prospectus of the undersigned registrant
relating to the offering required to be filed pursuant to Rule
424;
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ii.
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Any
free writing prospectus relating to the offering prepared by or on behalf
of the undersigned registrant or used or referred to by the undersigned
registrant;
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iii.
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The
portion of any other free writing prospectus relating to the offering
containing material information about the undersigned registrant or its
securities provided by or on behalf of the undersigned registrant;
and
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iv.
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Any
other communication that is an offer in the offering made by the
undersigned registrant to the
purchaser.
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The
undersigned registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The
undersigned registrant hereby undertakes to supplement the prospectus, after the
expiration of the subscription period, to set forth the results of the
subscription offer, the transactions by the underwriters during the subscription
period, the amount of unsubscribed securities to be purchased by the
underwriters, and the terms of any subsequent reoffering thereof. If any public
offering by the underwriters is to be made on terms differing from those set
forth on the cover page of the prospectus, a post-effective amendment will be
filed to set forth the terms of such offering.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant certifies that
it has reasonable grounds to believe that it meets all of the requirements for
filing on Form S-3 and has duly caused this amended registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the Town
of Kinderhook and State of New York on May 5, 2009
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AMERICAN
BIO MEDICA CORPORATION
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(Registrant)
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By:
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/s/ Stan
Cipkowski
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Stan
Cipkowski
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Chief
Executive Officer & Director
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(Principal
Executive Officer)
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By:
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/s/ Stefan Parker
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Stefan
Parker
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Chief
Financial Officer, Exec Vice President,
Finance
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(Principal
Financial
Officer)
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POWER
OF ATTORNEY
Each of
the undersigned officers and directors of American Bio Medica Corporation whose
signature appears below hereby appoints Stan Cipkowski and Melissa A. Waterhouse
as true and lawful attorneys-in-fact for the undersigned with full power of
substitution and resubstitution, for him in his name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and any Rule 462(b) Registration
Statement and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agent, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he or she might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agent, or their or his or her substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, this amended registration
statement has been signed by the following persons in the capacities indicated
on May 5, 2009:
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Chief Executive Officer &
Director
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Stan
Cipkowski
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(Principal
Executive Officer)
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/s/ Edmund
Jaskiewicz
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Chairman
and President
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Edmund
Jaskiewicz
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/s/ Stefan Parker
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Chief Financial Officer, Exec Vice President,
Finance
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Stefan
Parker
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(Principal
Financial Officer)
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/s/Richard P. Koskey
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Director
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Richard
P. Koskey
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/s/ Daniel W. Kollin
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Director
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Daniel
W. Kollin
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/s/ Carl A. Florio
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Director
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Carl
A. Florio
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Director
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Jean
Neff
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American
Bio Medica Corporation
Index
to Exhibits
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Number
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Description of
Exhibits
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3.50
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Amended
& Restated Bylaws, filed as the exhibit number listed to the Company’s
Form 10-KSB filed on April 15, 2002 and incorporated herein by
reference
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3.7
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Sixth
Amendment to the Certificate of Incorporation, filed as the exhibit number
listed to the Company’s Form 10-KSB filed on April 15, 2002 and
incorporated herein by reference
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4.9*
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Form
of Debenture Placement Agreement
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4.10*
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Form
of Private Placement Memorandum
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4.11*
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Form
of Security Purchase Agreement
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4.12*
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Form
of Series A Debenture
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4.13*
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Form
of Registration Rights Agreement
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4.14*
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Form
of Placement Agent Warrant Agreement
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5.1*
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Opinion
and Consent of Nolan and Heller, LLP
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23.1*
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Consent
of UHY, LLP
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23.2*
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Consent
of Nolan & Heller, LLP (contained in Exhibit
5.1)
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24.1*
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Powers
of Attorney (included on page
S-1)
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*
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Filed
with this registration
statement.
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EXHIBIT
4.9
FORM OF
DEBENTURE PLACEMENT AGREEMENT
July
7
, 2008
American
Bio Medica Corporation
122 Smith
Road
Kinderhook,
New York 12106
Attention: Chief
Executive Officer
Re:
Placement of Subordinated
Convertible Debentures
Dear
Ladies and Gentlemen:
Cantone Research, Inc. (the "Placement
Agent") offers to enter into this Series A Debenture Placement Agreement (this
"Series A Debenture Placement Agreement") with American Bio Medica Corporation,
a New York corporation ("the Company"), which, upon acceptance of this offer by
the Company, will be binding upon the Company and the Placement
Agent. This offer is made subject to written acceptance hereof by the
Company at or before 6:00 P.M., Eastern Time, on the date hereof, unless
extended by agreement by the parties.
BACKGROUND AND
INTRODUCTION
The Company proposes to issue certain
subordinated convertible debentures (the "Series A Debentures"). The
Series A Debentures, and the terms and conditions relevant thereto, shall be as
more fully described and set forth in Exhibit A, attached hereto and made a part
hereof, or with such changes thereto as shall be agreed upon by the Placement
Agent and the Company. The Company may also wish to issue, within six
months of the date hereof, a second series of subordinated convertible
debentures (the "Series B Debentures"). Except as otherwise
specifically stated herein, this Series A Debenture Placement Agreement relates
only to the Series A Debentures. The Company and the Placement Agent
agree that, if the Company should elect to issue the Series B Debentures, the
Placement Agent will act as placement agent in respect thereof, and the Company
and the Placement Agent will, with respect to such issuance and placement, enter
into a Series B Debenture Placement Agreement, which shall be substantially in
the form of this Series A Debenture Agreement. Provided, however,
that the due diligence fee referred to in Paragraph 9(b) hereof shall constitute
payment of the Placement Agent's due diligence expenses for both of the Series A
Debentures and the Series B Debentures, and no additional due diligence fee
shall be payable with respect to the Series B Debentures.
SECTION
1.
PLACEMENT OF THE
SERIES A DEBENTURES
Based upon the terms and conditions and
upon the representations herein set forth, the Placement Agent hereby agrees to
place, as placement agent for the Company, on a best-efforts basis, not less
than $250,000 nor more than $750,000 in principal amount of the Series A
Debentures. The Company reserves the right to terminate the offering
of the Series A Debentures at any time after the Closing Date (as hereafter
defined) (the "Company's Limitation Right"). The offering of the
Series A Debentures shall commence on the date hereof and shall be complete when
the first of the following shall have occurred: (a) the Placement Agent shall
have notified the Company in writing that (i) it has placed (and to the best of
its knowledge, the Company has accepted the placement of) $750,000 in principal
amount of Series A Debentures, or (ii) after having used its best efforts, it
has placed all of the Series A Debentures that it is able to place with
investors willing to purchase the same; or (b) the Company shall have notified
the Placement Agent in writing that it is exercising the Company's Limitation
Right. The date of such completion is herein called the "Series A
Completion Date".
SECTION
2.
DELIVERY OF THE
SERIES A DEBENTURES, ETC., AND CLOSING
(a)
Delivery of the Series A
Debentures
. At 10:00 a.m. (Eastern Time), or at such other
time, and on such date, as to which the Company and the Placement Agent shall
mutually agree (the "Closing Date"), the Company will duly execute and deliver
to the Placement Agent, at its offices in Tinton Falls, New Jersey, or such
other place as to which the Company and the Placement Agent may mutually agree,
the Series A Debentures, which shall be substantially in the form of Annex I to
the form of Securities Purchase Agreement which is attached hereto and made a
part hereof as Exhibit B, in such authorized denominations, and registered in
such names, as the Placement Agent may request at least two (2) business days
prior to the Closing Date, and duly executed by the Company.
(b)
Delivery of Related
Documents
. Contemporaneously with the delivery of the Series A
Debentures, in accordance with the provisions of Paragraph 2(a), the Company
shall duly execute and deliver to the Placement Agent, at its offices as
aforesaid, the Securities Purchase Agreement, in the form of Exhibit B hereto,
and the Registration Rights Agreement, in the form of Annex II to the Securities
Purchase Agreement, that relate to such Series A Debentures.
(c)
Closing
Date
. The Closing Date shall be that date designated by the
Placement Agent for the delivery by the Company to the Placement Agent of the
executed Series A Debentures and the Private Placement Memoranda referred to in
Section 3 hereof. The Closing Date shall not be more than fourteen
(14) days after the date hereof.
SECTION
3.
PRIVATE PLACEMENT
MEMORANDUM
The Company shall duly execute and deliver to
the Placement Agent, promptly after the acceptance by the Company of this Series
A Debenture Placement Agreement, such number of copies of the Private Placement
Memorandum, dated July 3, 2008, and substantially in the form of Exhibit C,
attached hereto and made a part hereof, as the Placement Agent shall have
reasonably requested. The Company agrees to notify the Placement
Agent of any material changes that become known to the Company prior to the
Closing Date, that relate to the Company and might affect the accuracy and
completeness of the Private Placement Memorandum.
By its acceptance of this Series A
Debenture Placement Agreement, the Company authorizes the use, in connection
with the sale of the Series A Debentures, of copies of the documents referred to
in Paragraphs 2(a) and 2(b), the Private Placement Memorandum, and all other
documents referred to or defined in this Series A Debenture Placement Agreement
or in the Private Placement Memorandum that relate to the Series A Debentures or
the placement thereof (collectively, the "Transaction Documents").
The Company hereby deems the Private
Placement Memorandum final.
SECTION
4.
REPRESENTATIONS AND
AGREEMENTS OF THE PLACEMENT AGENT
The Placement Agent represents to and
agrees with the Company that, as of the date hereof and the Closing
Date:
(a) The Placement
Agent is a corporation duly organized, validly existing and in good standing
under the laws of the State of New Jersey, having all requisite corporate power
and authority to carry on its business as now constituted.
(b) The documents relating
to the placement of the Series A Debentures have been reviewed by the Placement
Agent and contain terms acceptable to, and agreed to by, the Placement
Agent.
(c) The Placement Agent has
the requisite authority to enter into this Series A Debenture Placement
Agreement. This Series A Debenture Placement Agreement has been duly
executed and delivered by the Placement Agent and, assuming the due
authorization, execution and delivery by the other parties hereto, is the
binding and valid obligation of the Placement Agent, enforceable in accordance
with its terms, except that the enforceability hereof may be limited by
applicable bankruptcy, insolvency, moratorium or other similar laws or equitable
principles affecting creditors' rights or remedies generally.
(d) The Placement Agent will
offer the Series A Debentures only pursuant to the Private Placement Memorandum
and will not make any statements in connection with the offering and placement
of the Series A Debentures that are inconsistent with the information contained
in the Private Placement Memorandum.
(e) The Placement Agent will
place the Series A Debentures only with "accredited investors" as that term is
defined in Rule 501(a) of Regulation D, issued under the Securities Act of 1933
("Accredited Investors"). The Placement Agent will place the Series A
Debentures only in states in which the Company has advised the Placement Agent
that the Company has made all filings and has paid all fees required by the
securities laws of such states for such placement.
(f) The Placement Agent will
review the Private Placement Memorandum and make such investigation as may be
appropriate in order to have a reasonable basis for concluding that the Private
Placement Memorandum does not contain any untrue statement of a material fact
and does not omit any material fact necessary in order to make the statements
therein, in light of the circumstances in which they were made, not
misleading.
SECTION
5.
REPRESENTATIONS AND
AGREEMENTS OF THE COMPANY
The Company represents to and agrees
with the Placement Agent that, as of the date hereof and the Closing
Date:
(a)
Existence.
The
Company is a corporation, duly formed and validly existing in good standing
under the laws of the State of New York.
(b)
Authority.
The
Company has the requisite power and authority to execute and deliver this Series
A Debenture Placement Agreement and the other Transaction Documents, and to
enter into and consummate all other transactions contemplated on the Company's
part by this Series A Debenture Placement Agreement and the other Transaction
Documents.
(c)
Due Execution and
Delivery.
This Series A Debenture Placement Agreement has been
duly executed and delivered by the Company and, when executed and delivered by
the Placement Agent, will be a legal, valid and binding agreement of the
Company, enforceable in accordance with its terms, subject as to enforcement of
remedies to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws in effect from time to time affecting the rights of creditors
generally and to the availability of equitable relief and applicable securities
laws. The other Transactions Documents, when executed and delivered
by the Company (and, if applicable by the other parties thereto), will be legal,
valid and binding agreements of the Company, enforceable in accordance with
their respective terms, subject as to enforcement of remedies to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws in effect
from time to time affecting the rights of creditors generally and to the
availability of equitable relief and applicable securities laws.
(d)
No
Conflicts.
The acceptance, execution and delivery of this
Series A Debenture Placement Agreement and the compliance with the provisions
hereof and the other Transaction Documents do not and will not violate or
conflict with any other resolution adopted by the Company and, to the knowledge
of the Company, do not and will not conflict with or violate, or result in or
constitute a breach of or default under, any indenture, mortgage, deed of trust,
guaranty, lease, agreement or other instrument to which the Company is a party
or by which the Company or any of its property is bound, which would have a
materially adverse effect on the transactions contemplated by this Series A
Debenture Placement Agreement or the other Transaction Documents, or, to the
knowledge of the Company, conflict with or violate any provision of any law,
administrative rule or regulation, or any judgment, order or decree to which the
Company or any of its property is subject.
(e)
Litigation.
There
is no claim, action, temporary restraining order, injunction, suit, proceedings,
inquiry or investigation, at law or in equity, before or by any judicial or
administrative court, governmental agency, public board or body, pending or, to
the best of the Company's knowledge, threatened against or affecting, or
involving the Company or its properties or businesses, or any securities of, the
Company nor, to the best of the Company's knowledge, is there any basis
therefor, (i) contesting the existence, status or powers of the Company, or (ii)
seeking to prohibit, restrain or enjoin the sale of the Series A Debentures or
the use of the Private Placement Memorandum, or (iii) challenging the validity
or enforceability of any of the Transaction Documents or contesting the power
and authority of the Company to execute and deliver or to consummate the
transactions contemplated on the Company's part by the Transaction Documents, or
(iv) wherein an unfavorable decision, ruling or finding would adversely affect
the financial condition or the operation of the Company or the transactions
contemplated on the Company's part by this Series A Debenture Placement
Agreement or the Private Placement Memorandum.
(f)
Exemption of the Series A
Debentures from Registration.
The Company will furnish such
information, execute and file such instruments, and take all such other action
(all at its sole cost), as may be necessary or desirable to ensure that
(provided only that the Placement Agent complies with its obligations under
Paragraphs 4(d) and (e) hereof) the Transaction Documents and the placement of
the Series A Debentures are and will continue to be exempt from registration
under the securities laws of the United States and the states in which the
Placement Agent shall place the Series A Debentures, including rules and
regulations promulgated under any thereof.
(g)
Governmental
Filings.
The Company has made all filings with, and has
obtained all approvals and consents from, all federal, state and local
regulatory agencies having jurisdiction to the extent, if any, required by any
provision of law or regulation applicable to the Company to be made or to be
obtained in connection with the execution and delivery of the Transaction
Documents, the performance of the Company's obligations hereunder, or the
placement of the Series A Debentures, and the consummation of the transactions
contemplated on the Company's part hereby.
(h)
Governmental
Approvals.
No approval, permit, consent, authorization or
order of any court or any governmental or public agency, authority or person not
already obtained or effected, is required with respect to the Company in
connection with the performance by the Company of its obligations under the
Transaction Documents, or the placement of the Series A Debentures.
(i) Certificates
and Representations.
Any certificate signed by an authorized
representative of the Company delivered to the Placement Agent at the Closing
shall be deemed a representation and warranty by the Company to such parties as
to the statements made therein. The Company covenants that between
the date hereof and the Closing it will not take any action that will cause the
representations and warranties made herein to be untrue as of the
Closing.
SECTION
6.
INDEMNIFICATION
(a)
Scope of Indemnification by
the Company.
The Company hereby agrees to indemnify, protect,
defend and hold harmless the Placement Agent, each director, officer and
employee thereof, and each person, if any, who controls the Placement Agent
within the meaning of Section 15 of the Securities Act of 1933, as amended, or
Section 20 of the Securities Exchange Act of 1934, as amended (any such person
being herein sometimes called an "Indemnified Party"), against all losses,
claims, damages, liabilities or expenses, whether joint or several, to which any
such Indemnified Party may become subject, under any statute or regulation at
law or in equity or otherwise insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) arise out of or are
based upon any (a) breach of any warranty, representation or agreement of the
Company set forth in this Series A Debenture Placement Agreement, or (b) untrue
statement or alleged untrue statement of a material fact set forth in the
Private Placement Memorandum, or any amendment or supplement thereof, or arise
out of or are based upon (i) the omission or alleged omission to state therein a
material fact required to be stated therein or which is necessary to make the
statements made therein, in light of the circumstances in which they were made,
not misleading in any material respect, and will reimburse any legal or other
expenses reasonably incurred by any such Indemnified Party in connection with
investigating or defending any such loss, claim, damage, liability or
action. Provided, however, that such indemnity shall not extend to
any Indemnified Party if the loss, claim, damage or liability is caused by the
gross negligence or misconduct of the Indemnified Party. This
indemnity agreement shall not be construed as a limitation on any other
liability that the Company may otherwise have to any Indemnified Party, provided
that in no event shall the Company be obligated for double
indemnification.
(b)
Procedure.
An
Indemnified Party shall, promptly after the receipt of notice of the
commencement of any action against such Indemnified Party, in respect of which
indemnification may be sought against the Company, notify the Company in writing
of the commencement thereof. Failure of the Indemnified Party to give
such notice will reduce the liability of the Company by the amount of damages
attributable to the failure of the Indemnified Party to give such notice to the
Company, but the omission to notify the Company of any such action shall not
relieve the Company from any liability that it may have to such Indemnified
Party otherwise than under this section. In case any such action
shall be brought against an Indemnified Party and such Indemnified Party shall
notify the Company of the commencement thereof, the Company may, or if so
requested by such Indemnified Party shall, participate therein or assume the
defense thereof, with counsel satisfactory to such Indemnified Party (it being
understood that, except as hereinafter provided, the Company shall not be liable
for the expenses of more than one separate counsel representing the Indemnified
Parties in such action), and after notice from the Company to such Indemnified
Party of an election so to assume the defense thereof, the Company will not be
liable to such Indemnified Party under this Section for any legal or other
expenses subsequently incurred by such Indemnified Party in connection with the
defense thereof other than reasonable costs of investigation; provided, however,
that unless and until the Company assume the defense of any such action at the
request of such Indemnified Party, the Indemnified Party shall have the right to
participate at its own expense in the defense of any such action. If
the Company shall not have employed counsel to take charge of the defense of any
such action, or if an Indemnified Party shall have reasonably concluded that
there may be defenses available to it or other Indemnified Parties that are
different from or additional to those available to the Company (in which cases
the Company shall not have the right to direct the defense of such action on
behalf of such Indemnified Party) or to other Indemnified Parties, legal and
other expenses, including the expenses of separate counsel incurred by such
Indemnified Party, shall be borne by the Company.
(c)
Placement Agent's
Agreement.
The Placement Agent agrees, at its expense, to
indemnify, promptly defend (by counsel reasonably satisfactory to the Company)
and hold harmless the Company, and its officers, directors, employees and each
person, if any, who has the power, directly or indirectly, to direct or cause
the direction of the management and policies of the Company, from and against
any and all losses, claims, damages, demands, liabilities, costs or expenses,
including reasonable attorneys' fees and expenses, if such losses, claims,
damages, demands, liabilities, costs or expenses arise out of, or are materially
increased by, or would not exist but for, a breach by the Placement Agent of its
duties under, or failure to abide by any of its covenants in, this
Agreement.
SECTION
7.
CONDITIONS OF
PLACEMENT AGENT'S OBLIGATIONS
The Placement Agent has entered into
this Series A Debenture Placement Agreement in reliance upon the representations
and agreements of the Company herein and the performance by the Company of its
obligations hereunder, both as of the date hereof and as of the Closing
Date. The Placement Agent's obligations under this Series A Debenture
Placement Agreement are and shall be subject to the following further
conditions:
(a)
Conditions at or Prior to
Closing.
Receipt by the Placement Agent of the following
documents at or prior to the Closing:
(i) The opinion of counsel
to the Company, dated the Closing Date, in such form, and with respect to such
matters, as is normal and usual in transactions similar in scope and magnitude
to that which is described herein, and with respect to any additional matters as
the Placement Agent may reasonably request;
(ii) A certificate, dated
the Closing Date, signed by an authorized official of the Company, and
satisfactory to the Placement Agent, to the effect that (A) each of the
representations and warranties of the Company contained in this Series A
Debenture Placement Agreement is true, accurate and complete on the Closing Date
as if made on and as of the Closing Date, and (B) each of the agreements of the
Company to be complied with and each of the obligations of the Company to be
performed hereunder or under any other Transaction Document, on or prior to the
Closing Date, have been complied with and performed, and (C) as of the Closing
Date, there has been no material adverse change in the status, business,
condition or prospects (financial or otherwise) of the Company;
(iii) Duly executed
counterparts (or, where applicable, photocopies) of each of the Transaction
Documents;
(iv) Such additional
certificates or other documents as the Placement Agent may reasonably
request.
(b)
Failure to Satisfy
Conditions.
If there shall be a failure to satisfy any of the
conditions to the Placement Agent's obligations contained in this Series A
Debenture Placement Agreement, or if the Placement Agent's obligations shall be
terminated for any reason permitted by this Series A Debenture Placement
Agreement, this Series A Debenture Placement Agreement shall terminate and
neither the Placement Agent or the Company shall have any further obligation
hereunder, except as provided in Section 9 hereof.
SECTION
8.
TERMINATION
The Placement Agent shall have the
right to terminate this Series A Debenture Placement Agreement by notifying the
Company of its election to do so, if at the time of such notification, between
the date hereof and the Closing Date, (i) legislation shall be enacted by the
Congress of the United States or adopted by either House thereof, or a decision
by a court of the United States shall be rendered, or a ruling, regulation or
official statement by or on behalf of any agency of federal government shall be
made, and which in the reasonable opinion of the Placement Agent would
materially adversely affect the a marketability of the Series A Debentures; (ii)
there shall have occurred any new outbreak of hostilities or other unforeseen
national or international calamity or crisis, the effect of such new outbreak,
calamity or crisis on the financial markets of the United States being such in
the reasonable judgment of the Placement Agent as to materially adversely affect
the marketability of the Series A Debentures; (iii) there shall be in force a
general suspension of trading on the New York Stock Exchange or minimum or
maximum prices for trading shall have been fixed and be in force or maximum
ranges for prices for securities shall have been required and be in force on the
New York Stock Exchange, whether by virtue of a determination by that Exchange
or by order of the Securities and Exchange Commission or any other governmental
authority having jurisdiction; a general banking moratorium shall have been
established by federal or New Jersey authorities; any event, not caused by the
Placement Agent, shall have occurred or shall exist which, in the reasonable
opinion of the Placement Agent, makes untrue or incorrect, as of such time, in
any material respect, any material statement or information contained in this
Series A Debenture Placement Agreement or the Private Placement Memorandum, or
makes the Private Placement Memorandum inadequate by reason of the omission of
information which should be reflected therein in order to make the statements
and information contained therein not misleading as of such time; (vi) a stop
order, ruling, regulation or official statement by or on behalf of the
Securities and Exchange Commission shall be issued or made to the effect that
the issuance, offering or sale of the Series A Debentures, or of obligations of
the general character of the Series A Debentures as contemplated hereby, is in
violation of any provision of the 1933 Act, the Securities Exchange Act of 1934,
as amended, or the Trust Indenture Act of 1939, as amended; or (vii) the
Placement Agent shall have learned of any material adverse fact or circumstance
concerning the Company that, in the reasonable judgment of the Placement Agent,
would materially and adversely affect the marketability of the Series A
Debentures.
SECTION
9.
PAYMENT OF
EXPENSES
(a)
Payment by the
Company.
Except as provided in Paragraph (b) below, the
Company shall pay all expenses incident to the sale of the Series A Debentures,
including but without limitation, (i) the cost of the preparation (including
printing, duplicating and distribution) of this Series A Debenture Placement
Agreement, the Transaction Documents, the Private Placement Memorandum and any
amendment or supplement thereto, (ii) the cost of the preparation, printing,
execution, authentication and delivery of the Series A Debentures, (iii) the
cost of preparation of any government registration or filing, and (iv) the fees
of the Placement Agent, Placement Agent's Counsel, the Company's Counsel, and
any other counsel, experts or consultants retained by the Company.
(b)
Limitation on Payment by the
Company
. Payment of the fees and expenses of the Placement
Agent and its counsel will be subject to the limitations of this Paragraph
10(b). The Company has paid the Placement Agent a non-refundable due
diligence fee of $15,000, and has reimbursed the Placement Agent the $5,000.00
that the Placement Agent paid its legal counsel as a retainer. In
addition, the Company will reimburse the Placement Agent for actual
out-of-pocket expenses (not in excess of $5,000.00) and additional (in excess of
$5,000, but not in excess of an additional $5,000) reasonable fees and expenses
of the Placement Agent's legal counsel. As soon as practicable after
the Series A Completion Date, the Placement Agent will provide the Company with
an accounting of its actual out-of-pocket expenses, and its legal counsel will
provide the Company with a statement for any reasonable fees and expenses in
excess of $5,000, and the Company agrees to promptly pay the same.
SECTION
10.
ADDITIONAL AGREEMENTS OF THE
COMPANY.
In consideration of the Placement Agent's entering into this
Agreement, and undertaking its obligations hereunder, the Company agrees with
the Placement Agent as follows:
(a) The Company and the
Placement Agent agree that the Placement Agent shall act as underwriter or
placement agent with respect to the Series B Debentures, if the Company elects
undertake the Series B Debenture offering.
(b) The Company agrees that,
for so long as any of the Series A Debentures or Series B Debentures shall
remain outstanding, it shall not issue any variable priced indebtedness or
variable priced equity linked securities.
(c) The Company will pay the
Placement Agent a placement fee equal to seven percent (7.00%) of the principal
amount of all Series A Debentures placed by the Placement Agent (which placement
was accepted by the Company). Such fee will be earned as and when
each Series A Debenture shall be placed by the Placement Agent (if such
placement was accepted by the Company), and the Company shall pay it no later
than the fifth day of the month next following the month in which such fee was
earned, or the fifth day next following the Series A Completion Date, whichever
shall first occur.
(d) Within thirty (30) days
following the Series A Completion Date, the Company shall issue the Placement
Agent, in respect of each $500.00 in principal amount of Series A Debentures
placed by the Placement Agent (which placement was accepted by the Company),
warrants exercisable within four (4) years of the issuance date thereof, to
purchase 50 shares of the Company's common stock (the
"Warrants"). The exercise price under the Warrants shall be: (i) with
respect to all Series A Debentures placed by the Placement Agent (which
placement was accepted by the Company) on or as of the Closing Date, a price
equal to the publicly traded closing price of the shares of the Company's common
stock on the Closing Date; and (ii) with respect to all Series A Debentures
placed by the Placement Agent (which placement was accepted by the Company) on
or as of any date after the Closing Date through and including the Series A
Completion Date, a price equal to the publicly traded closing price of the
shares of the Company's common stock on the Series A Completion Date . The
Warrants shall be issued pursuant to an agreement substantially in the form of
Exhibit D, attached hereto and made a part hereof.
SECTION
11.
NOTICES
Any notices or other communication to
be given under this Series A Debenture Placement Agreement may be given by
delivering the same in writing as follows:
|
|
As
to the Company:
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American
Bio Medica Corporation
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122
Smith Road
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Kinderhook,
New York 12106
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Attn:
Chief Compliance
Officer
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As
to the Placement Agent:
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Cantone
Research, Inc.
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766
Shrewsbury Avenue
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Tinton
Falls, New Jersey 07724
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Attention:
Anthony J. Cantone
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or to such different address written
notice of which is given to the other parties hereto.
SECTION
12.
PARTIES IN
INTEREST AND SURVIVAL OF REPRESENTATIONS
(a)
Parties in
Interest.
This Series A Debenture Placement Agreement is made
solely for the benefit of the Company and the Placement Agent (including their
respective successors or assigns), and no other person, partnership, association
or corporation shall acquire or have any right hereunder or by virtue
hereof.
(b)
Survival of
Representations.
All representations and agreements of the
Company in this Series A Debenture Placement Agreement shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of the Placement Agent and all representations and agreements of the
Company and the Placement Agent shall survive the delivery of and payment for
the Series A Debentures.
SECTION
13.
MISCELLANEOUS
(a)
Headings.
The
headings of the sections and paragraphs of this Series A Debenture Placement
Agreement are inserted for convenience only and shall not be deemed to be a part
hereof.
(b)
Governing
Law.
This Series A Debenture Placement Agreement shall be
governed by and construed in accordance with the laws of the State of New
Jersey.
(c)
Counterparts.
This
Series A Debenture Placement Agreement may be executed, accepted and approved in
any number of counterparts, all of which taken together shall constitute one and
the same instrument, and any of the parties hereto may execute and accept or
approve this Series A Debenture Placement Agreement by signing any such
counterpart.
If you agree with the foregoing, please
sign the enclosed counterpart of this Series A Debenture Placement Agreement and
return it to the Placement Agent. This Series A Debenture Placement
Agreement shall become a binding agreement by and among the Company and the
Placement Agent when at least one counterpart of this Series A Debenture
Placement Agreement shall have been signed by or on behalf of each of the
parties hereto.
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Very
truly yours,
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CANTONE
RESEARCH, INC.
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By:
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Anthony
J. Cantone
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President
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Accepted
as of the date first above written:
AMERICAN
BIO MEDICA CORPORATION
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By:
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Stan
Cipkowski
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Chief
Executive Officer
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EXHIBIT
A
TERMS OF
THE DEBENTURE
TERMS OF THE SERIES A
DEBENTURES
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Principal Amount
:
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Up
to $750,000, with a $250,000 required minimum amount.
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Authorized Denominations
:
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$10,000
and integral multiples of $500 in excess thereof.
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Maturity
:
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July
1, 2012, with no prior principal payments.
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Par Amount
:
|
100%
of the principal amount of each Series A Debenture.
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Interest
:
|
10%
simple interest (20%, but not exceeding the highest rate allowable by law,
in event of
default),
payable by the Company to investors every six months in cash, with the
first interest payment expected on or about January 1,
2009.
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Conditions to Pricing
:
|
The
publicly traded price of the shares of the Company's common stock, par
value $0.01 per share (the "Shares"), shall remain below $0.75 per Share
until the Closing Date.
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Subordination
:
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Payment
of the Series A Debentures will be subordinated to not more than
$2,500,000 in principal amount of indebtedness owed to First Niagara
Financial Group.
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Conversion
:
|
Each
$500 in principal amount of the Series A Debentures shall be convertible
into 666.67 Shares at any time until such time as all principal of the
Series A Debenture shall have been paid in full. Provided, however, that,
if the publicly traded price of the Shares should close at an amount in
excess of $0.75 per Share on the Closing Date, then, the conversion price
will be in an amount equal to 125% of such publicly traded closing
price.
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Company Call
:
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Any
time the Shares trade above $2.00 per Share for 20 consecutive trading
days, the Company can call all (but not less than all) of the Series A
Debentures at a redemption price equal $525 per$500 of principal amount of
the Series A Debentures, subject to the individual rights of the
investors, within 60 days of such call, to elect to convert rather than to
be redeemed.
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Registration
:
|
The
Company is expected to register the Shares underlying the Series A
Debentures within eight months of the Series A Completion
Date.
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Participation Rights
:
|
For
as long as any of the Series A Debentures shall remain outstanding, the
holders thereof shall have a right of participation in any new securities
offering (including the Series B Debentures) of the
Company.
|
EXHIBIT
B
FORM OF
SECURITIES PURCHASE AGREEMENT
(FILED
WITH THIS REGISTRATION STATEMENT AS EXHIBIT 4.11)
EXHIBIT
4.10
FORM OF
PRIVATE PLACEMENT MEMORANDUM
Memorandum
No. _________A
CONFIDENTIAL
PRIVATE PLACEMENT OFFERING MEMORANDUM
American
Bio Medica Corporation
$1,500,000
(U.S. Dollars)
$750,000
10% Subordinated Convertible Debentures, Series A due 2012
$750,000
10% Subordinated Convertible Debentures, Series B due Four (4) Years from
Issuance
These subordinated convertible
debentures (“Debentures”) are being offered by American Bio Medica Corporation
(the “Company”) in denominations of $500, or integral multiples thereof, with a
minimum subscription of $10,000 and integral multiples of $500 in excess of
$10,000. Holders of Debentures due 2012 (the “Series A Debentures”) may convert
their Debentures into shares of our common stock at a conversion rate of 666.67
shares per $500 principal amount of Debentures (representing a conversion price
of approximately $0.75 per share); the conversion price for the Debentures due
four years from issuance (the “Series B Debentures”) will be established by the
Company if, as and when the Series B Debentures are offered for sale. The right
of conversion may be exercised at any time after the earlier of (a) one hundred
twenty (120) days after the date hereof or (b) the effective date of a
registration statement filed by the Company with respect to the Debentures. Each
Debenture bears an interest rate of 10% per annum, computed on the basis of a
year of 365 or 366 days, as applicable, for the actual number of days elapsed,
and shall be payable semiannually in arrears, in such coin or currency described
above, on the first business days of January and July of each
year. Cantone Research, Inc., (the “Placement Agent”) will act as the
Company’s placement agent in the offering of the Debentures.
PURCHASE OF THE DEBENTURES IS
SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK (SEE “RISK
FACTORS”).
THE INFORMATION CONTAINED HEREIN HAS
BEEN PREPARED TO ASSIST INTERESTED PARTIES IN MAKING THEIR OWN EVALUATION OF
AMERICAN BIO MEDICA CORPORATION AND DOES NOT PURPORT TO CONTAIN ALL OF THE
INFORMATION THAT A PROSPECTIVE INVESTOR MAY REQUIRE. FOR FURTHER INFORMATION,
PROSPECTIVE INVESTORS ARE ENCOURAGED TO REVIEW AMERICAN BIO MEDICA CORPORATION’S
PERIODIC AND CURRENT REPORTS FILED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION. FURTHERMORE, INTERESTED PARTIES SHOULD CONDUCT THEIR OWN
INVESTIGATION AND ANALYSIS OF AMERICAN BIO MEDICA CORPORATION AND THE DATA SET
FORTH IN THIS CONFIDENTIAL MEMORANDUM AND IN AMERICAN BIO MEDICA CORPORATION’S
FILINGS WITH THE COMMISSION.
THE DEBENTURES ARE NOT RATED, AND NO
APPLICATION WILL BE MADE TO OBTAIN A RATING THEREON. PURCHASE OF THE
DEBENTURES SHOULD ONLY BE MADE BY INVESTORS WHO (A) CAN BEAR THE ECONOMIC RISK
OF THE DEBENTURES, (B) HAVE SUCH KNOWLEDGE AND EXPERIENCE IN BUSINESS AND
FINANCIAL MATTERS AS TO BE CAPABLE OF EVALUATING THE RISKS AND MERITS OF THE
DEBENTURES, (C) ACKNOWLEDGE THAT THE DEBENTURES ARE SUITABLE ONLY FOR INCLUSION
IN A DIVERSIFIED PORTFOLIO OF HIGH YIELD, HIGH RISK SECURITIES, AND (D) HAVE
UNDERTAKEN THE RESPONSIBILITY FOR OBTAINING ALL INFORMATION THAT IS DEEMED
NECESSARY AND DESIRABLE TO FORM A DECISION TO PURCHASE THE
DEBENTURES
THE COMMISSION DOES NOT PASS UPON THE
MERITS OF, OR GIVE ITS APPROVAL TO THE DEBENTURES OFFERED OR THE TERMS OF ANY
OFFERING, NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF ANY MEMORANDUM
OR OTHER SELLING LITERATURE. THE DEBENTURES ARE OFFERED IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.
THE
DEBENTURES ARE OFFERED SUBJECT TO PRIOR SALE WHEN, AS AND IF DELIVERED TO AND
ACCEPTED BY THE COMPANY AND SUBJECT TO APPROVAL OF CERTAIN LEGAL MATTERS BY
COUNSEL AND TO CERTAIN OTHER CONDITIONS. THE COMPANY RESERVES THE RIGHT TO
WITHDRAW, MODIFY OR CANCEL THE OFFERING WITHOUT NOTICE AND TO REJECT
SUBSCRIPTIONS IN WHOLE OR IN PART.
THIS MEMORANDUM IS SUBMITTED IN
CONNECTION WITH THE PRIVATE PLACEMENT OF THE DEBENTURES AND MAY NOT BE
REPRODUCED OR USED FOR ANY OTHER PURPOSE. THOSE PERSONS NOT PURCHASING
DEBENTURES MUST RETURN THE MEMORANDUM TO THE PLACEMENT AGENT.
BECAUSE AN INVESTMENT IN THE OFFERING
INVOLVES A HIGH DEGREE OF RISK, IT IS SUITABLE ONLY FOR THOSE INVESTORS THAT ARE
“ACCREDITED INVESTORS”, AS DEFINED BY RULE 501 OF THE SECURITIES AND EXCHANGE
COMMISSION.
NO OFFERING LITERATURE OR ADVERTISING
IN ANY FORM SHALL BE EMPLOYED IN THE OFFERING EXCEPT TO THE EXTENT AUTHORIZED BY
THE COMPANY. NO PERSON, INCLUDING BUT NOT LIMITED TO THE PLACEMENT AGENT, HAS
BEEN AUTHORIZED TO GIVE INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN
THOSE CONTAINED HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY.
PROSPECTIVE INVESTORS ARE NOT TO
CONSTRUE THE CONTENTS OF THE MEMORANDUM AS EITHER LEGAL, BUSINESS OR TAX ADVICE.
EACH PROSPECTIVE INVESTOR SHOULD CONSULT HIS OR HER PERSONAL COUNSEL, ACCOUNTANT
OR OTHER ADVISORS AS TO LEGAL, TAX, ECONOMIC AND RELATED MATTERS CONCERNING AN
INVESTMENT IN THE COMPANY AND ITS SUITABILITY FOR HIM OR HER.
THE OFFICERS OF THE COMPANY SHALL MAKE
AVAILABLE TO EACH PROSPECTIVE INVESTOR OR HIS REPRESENTATIVE, PRIOR TO THE SALE
OF THE DEBENTURES TO SUCH PROSPECTIVE INVESTOR, THE OPPORTUNITY TO ASK QUESTIONS
OF, AND RECEIVE ANSWERS FROM, THEM AND ANY OTHER PERSON AUTHORIZED TO ACT ON
THEIR BEHALF CONCERNING ANY ASPECT OF THE INVESTMENT. PROSPECTIVE INVESTORS MAY
VERIFY THE ACCURACY OF THE INFORMATION CONTAINED IN THE MEMORANDUM TO THE EXTENT
THAT THE COMPANY POSSESSES SUCH INFORMATION OR CAN ACQUIRE IT WITHOUT
UNREASONABLE EFFORT OR EXPENSE.
SALES OF THE DEBENTURES CAN BE
CONSUMMATED ONLY BY THE COMPANY’S ACCEPTANCE OF OFFERS TO PURCHASE DEBENTURES
THAT ARE TENDERED TO THE COMPANY BY PROSPECTIVE INVESTORS.
NEITHER THE DELIVERY OF THIS MEMORANDUM
NOR ANY SALE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE COMPANY’S AFFAIRS SINCE THE DATE
HEREOF. THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER OR SOLICITATION
BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR
IN WHICH THE PERSON MAKING THE SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE
PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION.
FORWARD
LOOKING STATEMENTS
Except
for the historical information contained in this Confidential Memorandum, the
matters discussed in this Memorandum or otherwise incorporated by reference into
this Memorandum are “forward-looking statements” within the meaning of Section
27A of the Securities Act and Section 21E of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). These statements can be identified by the
use of forward-looking terminology such as “believes,” “expects,” “may,” “will,”
“should,” or “anticipates” or the negative thereof or other variations thereon
or comparable terminology, or by discussions of strategy that involve risks and
uncertainties. The safe harbor provisions of the Exchange Act, the Securities
Act and the Private Securities Litigation Reform Act of 1995, as amended, apply
to forward-looking statements made by the Company. These forward-looking
statements involve risks and uncertainties, including those identified within
the “Risk Factors” section of this Memorandum and elsewhere in, or incorporated
by reference into, this Memorandum. Although our management believes the
expectations reflected in such forward-looking statements are based on
reasonable assumptions, we cannot assure investors that these expectations will
prove correct, and the actual results that we achieve may differ materially from
any forward-looking statements, due to such risks and
uncertainties.
These
forward-looking statements are based on current expectations, and we assume no
obligation to update this information. Readers are urged to carefully review and
consider the various disclosures made by us in this Memorandum that attempt to
advise interested parties of the risks and factors that may affect the Company’s
business. Each prospective investor must make his or her own evaluation of the
merits and risks of a purchase of the Debentures.
All
inquiries regarding us should be made through the contacts listed
below.
For
further information, please call or E-mail:
|
Stan
Cipkowski
|
(800)
227-1243
|
|
American
Bio Medica Corporation
|
scipkowski@abmc.com
|
|
|
|
|
Anthony
J. Cantone
|
(732)
450-3500
|
|
Cantone
Research Inc.
|
ajcantone@cantone.com
|
TABLE
OF CONTENTS
|
|
PAGE
|
|
|
|
|
Summary
of Offering Terms
|
6
|
|
Summary
Fact Sheet
|
9
|
|
General
Summary
|
10
|
|
Risk
Factors
|
11
|
|
Our
Products
|
17
|
|
Contract
Manufacturing
|
18
|
|
Market
Overview
|
19
|
|
Manufacturing/Property
|
20
|
|
Headquarters
and Website
|
20
|
|
Summary
of Historical Financial Data
|
21
|
|
Use
of Proceeds
|
22
|
|
Price
Range of Common Shares
|
22
|
|
Officers
and Senior Management
|
23
|
|
Summary
Compensation of Executive Officers
|
24
|
|
Principal
Stockholders
|
26
|
|
Our
Securities
|
28
|
|
Dilution
|
28
|
|
Plan
of Distribution
|
28
|
|
Financial
Statements with Notes as of March 31, 2008
|
30
|
SUMMARY
OF OFFERING TERMS
|
Issuer:
|
American
Bio Medica Corporation
|
|
|
|
|
Issue/Maturity:
|
Series
A: A minimum of $250,000 and a maximum of $750,000 subordinated
convertible debentures to mature July 1, 2012
|
|
|
|
|
|
Series
B – A minimum of $250,000 and a maximum of $750,000 subordinated
convertible debentures to mature fours years from the date of
issuance
|
|
|
|
|
Investors:
|
Purchasers
must qualify as Accredited Investors
|
|
|
|
|
Closing
Date expected:
|
The
Closing Date of the Series A offering is expected to occur no later than
14 days after the Company and the Placement Agent execute the definitive
Debenture Purchase Agreement relating to the Series A Debentures (the
“DPA”).
|
|
|
|
|
Debenture
price:
|
$10,000
and integral multiples of $500 in excess of $10,000
|
|
|
|
|
Frequency
of Interest:
|
Interest
on the Series A Debentures is payable by the Company to Holders
semiannually in cash, beginning on or about January 1, 2009. Interest on
the Series B Debentures will be payable by the Company to the Holders
semiannually in cash, beginning on or about six months from the date of
issuance.
|
|
|
|
|
Interest
rate:
|
10%
simple interest (20%, but not exceeding the highest rate allowable by law,
in event of default)
|
|
|
|
|
Conversion
rate:
|
Each
$500 in principal amount of the Debentures is convertible into 666.67
shares of common stock representing a conversion price of approximately
$0.75 per share.
|
|
|
|
Adjustment
of
Conversion Price:
|
The conversion price is subject to adjustment in
the event that the closing price of the Company’s Common Stock exceeds
$0.75 per share on the Closing Date, in which case the conversion price
will be an amount equal to one hundred twenty five (125%) percent of such
price
|
|
|
|
|
Registration:
|
The
Company is expected to register the underlying shares within eight months
of the completion of the Series A offering. Such registration would
include a Series B offering if undertaken. Registration shall be subject
to a $250,000 minimum sale under the Series A offering
|
|
|
|
|
Call
provision:
|
Series A Debentures:
If the closing price
of the
Company’s
Common stock exceeds
$2.00 per share for twenty consecutive trading days, the
Series A
Debentures are subject to
redemption by the Company, upon 60 days notice, at a price equal to par
value plus $0.05 per underlying share, or $525
per $500 of principal amount of the
Debentures. Upon such redemption notice, the Debenture Holder
may elect to accept the redemption price or convert to Common
Stock
|
|
|
Series B Debentures: If
the closing price
of the
Company’s
Common Stock exceeds
twice the price per share
established by the
Company for the conversion of the Series B Debentures
for twenty
consecutive trading days
, the Series B
Debentures will be subject to redemption by the Company, upon 60 days
notice, at a price equal to par value plus $0.05 per underlying share, or
$525 per $500 of principal amount of the Debentures.
Upon such
redemption notice, the Debenture Holder may elect to accept the redemption
price or convert to Common Stock
|
|
|
|
|
Future
Offerings:
|
The
Company shall provide reasonable prior written notice to any Debenture
Holder, through the Placement Agent as its agent, of any new offering of
securities undertaken by the Company, and Debenture Holders will have an
opportunity to participate in such offering, if
qualified
|
|
|
|
|
Additional
Covenants:
|
The
Debentures will contain provisions prohibiting the Company from issuing
variable priced debt or variable priced equity linked
Securities
|
|
|
|
|
Documentation
Counsel:
|
To
be selected by the Placement Agent. Reasonable fees to be paid by the
Company
|
|
|
|
|
Placement
agent fee:
|
7%
of the gross principal amount of Debentures places by the Placement Agent
and accepted by the Company. No cash commission shall be paid to the
Placement Agent on subscriptions and monies received from investors as a
result of the Company’s efforts
|
|
|
|
|
|
Placement
agent fee shall be payable within five days of month end in which
Debentures were placed, or upon completion of the initial Series A
offering, if applicable, and upon completion of the Series B “second”
offering, if applicable
|
|
|
|
|
|
The
Placement Agent shall receive warrants to purchase shares of the Company’s
Common Stock as follows:
|
|
|
|
|
|
Within
thirty (30) days following the Series A Completion Date (as defined in the
DPA), the Company shall issue the Placement Agent, in respect of each
$500.00 in principal amount of Series A Debentures placed by the Placement
Agent (which placement was accepted by the Company), warrants exercisable
within four (4) years of the issuance date thereof, to purchase 50 shares
of the Company's common stock (the "Warrants"). The exercise
price under the Warrants shall be: (i) with respect to all Series A
Debentures placed by the Placement Agent (which placement was accepted by
the Company) on or as of the Closing Date (as defined in the DPA), a price
equal to the publicly traded closing price of the shares of the Company's
common stock on the Closing Date; and (ii) with respect to all Series A
Debentures placed by the Placement Agent (which placement was accepted by
the Company) on or as of any date after the Closing Date through and
including the Series A Completion Date, a price equal to the publicly
traded closing price of the shares of the Company's common stock on the
Series A Completion Date
..
|
|
Due
diligence/legal fee:
|
A
due diligence fee of $15,000 and a retainer fee of $5,000 for the
Placement Agent’s counsel has previously been paid by the Company to the
Placement Agent
|
|
|
|
|
|
In
addition, the Company will reimburse the Placement Agent for actual
out-of-pocket expenses (not in excess of $5,000) and additional (in excess
of $5,000, but not in excess of an additional $5,000) reasonable fees and
expenses of the Placement Agent’s legal counsel. As soon as
practicable after the Series A Completion Date, the Placement Agent will
provide the Company with an accounting of its actual out-of-pocket
expenses, and its legal counsel will provide the Company with a statement
for any reasonable fees and expenses in excess of $5,000, and the Company
agrees to promptly pay the same.
|
|
|
|
|
|
If
the Series B placement is completed under this same offering, there shall
be no additional due diligence fees due to the Placement Agent by the
Company
|
SUMMARY
FACT SHEET
(Information
as of July 3, 2008)
|
Recent
Stock Price
|
$0.60 (average closing price)
|
|
52
week range
|
$1.43
- $0.33
|
|
Average
Daily Volume
(1)
|
24,842
|
|
Shares
Outstanding
(2)
|
21,744,768
|
|
Market
Cap
|
approximately
$10.5M
|
|
Net
Sales in FYE 12-31-07
|
$13,872,000
|
|
Net
sales in QE 3-31-08
|
$ 3,299,000
|
|
Stockholders
Equity as of 3-31-08
|
|
|
1)
|
Represents
trading for the period from May 3, 2008 to July 3,
2008.
|
|
2)
|
Excludes
3,768,080 shares of common stock issuable upon the exercise of outstanding
stock options, 150,000 shares of common stock issuable upon the exercise
of outstanding warrants, up to 150,000 shares of common stock issuable
upon the exercise of warrants issued to the Placement Agent in connection
with this Offering and excludes any shares of common stock issuable upon
the conversion of the Debentures issued as a result of this
Offering.
|
GENERAL
SUMMARY
The
following summary is qualified in its entirety by more detailed information and
financial statements appearing elsewhere in this Confidential Memorandum. An
investment in the Debentures offered by this Memorandum involves a high degree
of risk. Investors should carefully consider the information set forth under the
section titled “Risk Factors”. Unless the context otherwise requires, “Us”, “We”
and “Our” refer to American Bio Medica Corporation.
We were
incorporated on April 2, 1986 under the laws of the State of New York under the
name American Micro Media, Inc. On September 9, 1992, we filed an amendment to
our Certificate of Incorporation to change our name to American Bio Medica
Corporation. Our principal business office is located at 122 Smith Road,
Kinderhook, New York, 12106. We also have a research & development
(“R&D”) and production facility located at 603 Heron Drive, Unit #3, Logan
Township, New Jersey, 08085.
We develop, manufacture and sell
immunoassay diagnostic test kits, primarily for immediate, point of collection
testing (“POCT”) for drugs of abuse in urine and oral fluids (saliva). Our drugs
of abuse screening products offer employers, law enforcement, government, health
care, laboratory and education professionals, self-contained, cost effective,
user friendly screening devices capable of accurately identifying drugs of abuse
within minutes.
In
addition to the manufacture and sale of drugs of abuse screening products, we
provide contract strip manufacturing services for other POCT diagnostic
companies. While we do not currently derive a significant portion of our
revenues from contract manufacturing, we expect to continue to explore
additional applications for our technology and as a result, contract
manufacturing could become a greater portion of our revenues in the
future.
In 2007 we reported net sales of
$13,872,000, compared to net sales of $13,838,000 in 2006.
RISK
FACTORS
THE
COMPANY’S SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK.
PROSPECTIVE PURCHASERS OF THE DEBENTURES SHOULD CAREFULLY CONSIDER THE FOLLOWING
RISK FACTORS AS WELL AS OTHER INFORMATION SET FORTH IN THIS MEMORANDUM AND OTHER
INFORMATION CONTAINED IN THE COMPANY’S REPORTS FILED WITH THE
COMMISSION.
WE HAVE A HISTORY OF
INCURRING NET LOSSES.
Since
inception in 1992 through the fiscal transition period ending December 31, 2001,
we incurred net losses. We began earning profits in the fiscal year ending
December 31, 2002 and continued to be profitable through December 31, 2004.
However, in the fiscal year ending December 31, 2005, we incurred a net loss of
$376,000. In the fiscal year ending December 31, 2006, we reported net income of
$196,000, and in the fiscal year ending December 31, 2007, we incurred a net
loss of $990,000. As of December 31, 2007, we have an accumulated deficit of
$14,388,000. We expect to continue to make substantial expenditures for sales
and marketing, product development and other purposes. Our ability to achieve
profitability in the future will primarily depend on our ability to increase
sales of our products, reduce production and other costs and successfully
introduce new products and enhanced versions of our existing products into the
marketplace. There can be no assurance that we will be able to increase our
revenues at a rate that equals or exceeds expenditures. Our failure to do so
will result in our incurring additional losses.
QUALIFIED AUDITORS’
OPINION
The
Company’s financial statements for the fiscal year ended December 31, 2007 have
been prepared assuming the Company will continue as a going concern. However, as
noted in the report of UHY LLP approving these financial statements, in 2007 the
Company suffered a significant net loss, generated negative cash flows from
operations, and at December 31, 2007 was not in compliance with certain
financial covenants required under its line of credit obligation.
In our auditor’s opinion, these
factors raise substantial doubt as to the Company’s ability to continue as a
going concern.
WE MAY
NEED ADDITIONAL FUNDING FOR OUR EXISTING AND FUTURE OPERATIONS
.
On April
30, 2008, our principal lender, First Niagara Financial Group (“FNFG”), gave
notice that the Company was in violation of its minimum debt service ratio
covenant, so that FNFG has the right to declare all obligations of the Company
to FNFG immediately due and payable. The total amount of these
obligations outstanding as of April 30, 2008 was $1,897,347.43. As of
May 22, 2008, the Company has entered into a forbearance agreement with FNFG
that will expire July 31, 2008 (the “Forbearance Agreement”).
Pursuant
to the Forbearance Agreement, FNFG will reduce its total lending commitment on
the Company’s lines of credit from $875,000 to $750,000. The
aggregate outstanding balance on these lines of credit was $723,148.95 as of
April 30, 2008. FNFG’s continued forbearance for the term of the
Forbearance Agreement is contingent upon the Company’s compliance with reduced
minimum net worth and minimum net working capital covenants set froth in the
FNFG loan documents, and is further contingent upon the Company showing a net
loss no greater than $225,000 at April 30, 2008, $200,000 at May 31, 2008 and
$175,000 at June 30, 2008. The Company expects that it will be able
to satisfy these contingencies, and that FNFG will agree to extend its
forbearance upon expiration of the Forbearance Agreement, but there can be no
assurance that the Company’s cash flow from operations will be sufficient for
that purpose. A copy of the Forbearance Agreement is available for
inspection at the office of the Company upon request.
Management
recognizes that cash generated from operations will likely be insufficient to
satisfy the Company’s working capital and capital expenditure requirements, and
that the Company is required to sell additional equity or obtain additional
credit facilities in order to continue as a going concern. The Company believes
that the proceeds of this Debenture Offering, together with its current cash
balances, and cash generated from future operations, will be sufficient to fund
operations for the next twelve months. This estimate is based on certain
assumptions, including that sales of Debentures will yield at least $1,000,000
for working capital. There can be no assurance that the Offering will
be successful, or that unanticipated costs will not be incurred. Future events,
including the problems, delays, expenses and difficulties which may be
encountered in establishing and maintaining a substantial market for our
products, could make cash on hand insufficient to fund
operations.
WE RELY ON A SINGLE CUSTOMER
FOR A SIGNIFICANT PERCENTAGE OF OUR SALES.
One of
our customers accounted for approximately 9.3% of the total sales of the Company
for the fiscal year ended December 31, 2007. Although we have entered into a
written purchase agreement with this customer, this customer does not have any
minimum purchase obligations and could stop buying our products with 90 days
notice. A reduction, delay or cancellation of orders from this customer or the
loss of this customer could reduce the Company’s revenues and profits. The
Company cannot provide assurance that this customer or any of its current
customers will continue to place orders, that orders by existing customers will
continue at current or historical levels or that the Company will be able to
obtain orders from new customers.
ALTHOUGH THE COMPANY WILL
ENTER INTO A REGISTRATION AGREEMENT WITH EACH PURCHASER OF DEBENTURES, THE
SHARES INTO WHICH THE DEBENTURES ARE CONVERTIBLE MAY NEVER BE
REGISTERED.
Pursuant
to the Registration Agreement to be entered into with each purchaser of
Debentures, the Company will undertake to use commercially reasonable efforts to
prepare and file with the SEC, no later than eight (8) months following the
completion of the Series A Debenture Offering, an effective Registration
Statement on Form S-3 registering the Shares for resale by the Holder, subject
to the requirement that the gross proceeds of the Series A Offering exceed
$250,000. There can be no assurance that this threshold can be
met. Furthermore, there can be no assurance, despite the best efforts
of the Company, that the SEC will accept such Registration Statement for filing,
in which case the Shares would be subject to restrictions on sale or transfer,
and could only be sold in compliance with Rule 144 of the Securities
Act.
IF WE FAIL TO MEET THE
CONTINUED LISTING REQUIREMENTS OF THE NASDAQ CAPITAL MARKET, OUR SECURITIES
COULD BE DELISTED.
Our
securities are listed on the NASDAQ Capital Market. The NASDAQ Stock Market's
Marketplace Rules impose requirements for companies listed on the NASDAQ Capital
Market to maintain their listing status, including but not limited to minimum
common share bid price of $1.00, and $2,500,000 in shareholders'
equity or $500,000 in net income in the last fiscal year. As of the date of this
Offering Memorandum our common shares are trading below the minimum bid
requirement and our common shares have traded at levels lower than the minimum
bid requirement within the last twelve months (see Current Report on Form 8-K
filed with the Securities and Exchange Commission (“SEC”) on November 13, 2007).
On May 13, 2008, we received a 180-day extension, or until November 10, 2008,
from NASDAQ to regain compliance with the $1.00 minimum bid price rule.
Continued failure to meet the minimum bid requirements may result in delisting
of the Company’s securities, which, in turn could have an adverse effect on the
marketability of the Debentures and the Shares.
Delisting
could reduce the ability of investors to purchase or sell our securities as
quickly and as inexpensively as they have done historically and could subject
transactions in our securities to the penny stock rules. Furthermore, failure to
obtain listing on another market or exchange may make it more difficult for
traders to sell our securities. Broker-dealers may be less willing or able to
sell or make a market in our securities because of the penny stock disclosure
rules. Not maintaining a listing on a major stock market may result in a
decrease in the trading price of our securities due to a decrease in liquidity
and less interest by institutions and individuals in investing in our
securities. Delisting from the NASDAQ Capital Market would also make it more
difficult for us to raise capital in the future.
OUR PRODUCTS ARE SOLD IN
LIMITED MARKETS AND THE FAILURE OF ANY OF THEM TO ACHIEVE AND CONTINUE TO
ACHIEVE WIDESPREAD MARKET ACCEPTANCE WOULD SIGNIFICANTLY HARM OUR RESULTS OF
OPERATION.
We offer
a number of point of collection tests for drugs of abuse that are sold in
limited markets, and we currently derive most of our revenues from sales of our
point of collection tests for drugs of abuse. Based upon actual results in 2007
and given current levels of operating expenses, we must achieve approximately
$4.1 million in quarterly revenues to attain break-even results of operations.
In addition, the markets in which we sell our products are cost competitive. If
we are required to lower our prices to our customers, our revenue levels could
be negatively impacted which would adversely affect our gross profit
margins. If our products do not achieve and maintain this level of
revenue, or maintain certain gross profit margins, our results of operations
would be significantly harmed.
We began
selling our RDS and Rapid One point of collection tests for drugs of abuse in
1996, later than most of our primary competitors. Achieving continued market
acceptance for our drug tests requires substantial marketing efforts and the
expenditure of significant funds to inform potential customers and distributors
of the distinctive characteristics, benefits and advantages of our test kits. A
number of our products have only recently been introduced in the marketplace,
with our most recent additions being the Rapid TOX introduced in July 2005 and
the OralStat EX, the Rapid STAT and the Rapid TOX Cup all introduced in 2007. We
have no history upon which to base market or customer acceptance of these
products. Introduction of these new products has required, and may continue to
require substantial marketing efforts and costs.
WE RELY ON THIRD PARTIES FOR
RAW MATERIALS USED IN OUR DRUGS OF ABUSE PRODUCTS AND IN OUR CONTRACT
MANUFACTURING PROCESSES
.
We
currently have approximately 85 suppliers who provide us with the raw materials
necessary to manufacture our point of collection drug testing strips and our
point of collection tests for drugs of abuse. For most of our raw materials we
have multiple suppliers, but there are a few chemical raw materials for which we
only have one supplier. The loss of one or more of these suppliers,
the non-performance of one or more of their materials or the lack of
availability of raw materials could suspend our manufacturing process related to
our drugs of abuse products. This interruption of the manufacturing process
could impair our ability to fill customers’ orders as they are placed, which
would put us at a competitive disadvantage.
Furthermore,
we rely on a number of third parties for supply of the raw materials necessary
to manufacture the test components we supply to other diagnostic companies under
contract manufacturing agreements. For most of these raw materials we have
multiple suppliers, however, there are a few chemical raw materials for which we
only have one supplier. The loss of one or more of these suppliers could suspend
the strip manufacturing process and this interruption could impair our ability
to perform contract manufacturing services.
WE HAVE A SIGNIFICANT AMOUNT
OF RAW MATERIAL AND “WORK IN PROCESS” INVENTORY ON HAND THAT MAY NOT BE USED IN
THE NEXT TWELVE MONTHS IF THE EXPECTED CONFIGURATION OF SALES ORDERS IS NOT
RECEIVED AT OUR PROJECTED LEVELS.
At
December 31, 2007 we had approximately $2.3 million in raw material components
for the manufacture of our products. The non-chemical raw material components
may be retained and used in production indefinitely and the chemical raw
materials components have lives in excess of 20 years. In addition to the raw
material inventory, we have approximately $2.5 million in manufactured testing
strips, or other “work in process” inventory at December 31, 2007. The
components of this work in process inventory have lives of 12-24 months. If
sales orders received are not for devices that would utilize the raw material
components, or if product developments make the raw materials obsolete, we may
be required to dispose of the unused raw materials. Beginning in 2004, we
established a reserve for obsolete or slow moving inventory. In late 2005, we
increased this reserve to $250,000. There can be no assurance that
this reserve will be adequate for 2008.
WE FACE
SIGNIFICANT COMPETITION IN THE DRUG TESTING MARKET AND POTENTIAL TECHNOLOGICAL
OBSOLESCENCE.
We face
competition from other manufacturers of point of collection tests for drugs of
abuse. Manufacturers such as Varian, Inc., Medtox Scientific, Inc., Biosite
Diagnostics and OraSure Technologies, Inc. are better known and some have far
greater financial resources than we do. In addition to these competitors there
are a number of smaller privately held companies as well as foreign
manufacturers that compete with us.
WE DEPEND ON KEY PERSONNEL
TO MANAGE OUR BUSINESS EFFECTIVELY.
We are
dependent on the expertise and experience of our senior management such as Stan
Cipkowski, Chief Executive Officer, Martin Gould, Chief Scientific Officer and
Todd Bailey, Vice President, Sales & Marketing for our future success. The
loss of Messrs. Cipkowski, Gould or Bailey could negatively impact our business
and results of operations. We currently maintain key man insurance for Messrs.
Cipkowski and Gould. Although we have employment agreements in place with
Messrs. Cipkowski and Gould there can be no assurance that any of our senior
management will continue their employment.
ANY ADVERSE CHANGES IN OUR
REGULATORY FRAMEWORK COULD NEGATIVELY IMPACT OUR BUSINESS.
Approval
from FDA is not currently required for the sale of our products in non-clinical
markets, but is required in the clinical and over-the-counter (“OTC”) markets.
Although our point of collection drug tests have met FDA requirements for
professional use, we have not obtained OTC clearance or a waiver under the
Clinical Laboratory Improvement Amendments of 1988 (“CLIA“) from FDA. The
workplace and government/corrections/law enforcement markets are currently our
primary markets and if any additional FDA clearance is required to sell in these
markets, this additional cost may cause us to raise the price of our products,
making it difficult to compete with other point of collection products or
laboratory based testing, thereby negatively impacting our revenues.
Furthermore, there can be no assurance that, if we are required to apply for
additional FDA clearances, they will be granted. If such clearances
are not granted, we would be unable to sell our products in the workplace and
government/corrections/law enforcement markets, and our revenues would suffer.
Although we are currently unaware of any changes in regulatory standards related
to any of our markets, if regulatory standards were to change in the future,
there can be no assurance that FDA will grant us the approvals, if and when we
apply for them, required to comply with the changes.
WE RELY ON INTELLECTUAL
PROPERTY RIGHTS, AND WE MAY NOT BE ABLE TO OBTAIN PATENT OR OTHER PROTECTION FOR
OUR TECHNOLOGY, PRODUCTS OR SERVICES.
We rely
on a combination of patent, copyright, trademark and trade secret laws,
confidentiality procedures and contractual provisions to protect our proprietary
technology, products and services. We also believe that factors such as the
technological and creative skills of our personnel, new product developments,
frequent product enhancements and name recognition are essential to establishing
and maintaining our technology leadership position. Our personnel are bound by
non-disclosure agreements. If personnel leave our employment, in some cases we
would be required to protect our intellectual property rights pursuant to common
law theories, which may be less protective than provisions of employment,
non-competition or non-disclosure agreements.
We seek
to protect our proprietary products under trade secret and copyright laws, which
afford only limited protection. We currently have a total of 25 U.S. and foreign
patents relating to the RDS, Rapid One and OralStat products. We have additional
patent applications pending in the United States and other countries, related to
our point of collection drug tests. We have trademark applications pending in
the United States. Certain trademarks have been registered in the United States
and in other countries. There can be no assurance that the additional patents
and/or trademarks will be granted or that, if granted, they will withstand
challenge.
Despite
our efforts to protect our proprietary rights, unauthorized parties may attempt
to copy aspects of our products or to obtain information that we regard as
proprietary. We may be required to incur significant costs to protect our
intellectual property rights in the future. In addition, the laws of some
foreign countries do not ensure that our means of protecting our proprietary
rights in the United States or abroad will be adequate. Policing and enforcement
against the unauthorized use of our intellectual property rights could entail
significant expenses and could prove difficult or impossible.
POTENTIAL ISSUANCE AND
EXERCISE OF NEW OPTIONS AND WARRANTS AND EXERCISE OF OUTSTANDING OPTIONS AND
WARRANTS COULD ADVERSELY AFFECT THE VALUE OF OUR SECURITIES.
As of the
date of this Memorandum, there were 3,768,080 options issued and outstanding
under the Company’s Stock Option Plans. In the fiscal year ended December 31,
2005, the Company’s Board of Directors accelerated the vesting periods of all
outstanding options not yet fully vested to vest 100% on December 14, 2005. As
of December 31, 2007 3,968,080 options were exercisable. As of the date of this
Memorandum, there were 9,500 options available for issuance under the Fiscal
2000 Plan and 739,420 options available for issuance under the Fiscal 2001
Plan.
As of the
date of this Memorandum, there were 150,000 warrants outstanding and
exercisable. On December 2, 2003, we issued a warrant, exercisable during a five
year period beginning December 2, 2003, to purchase 300,000 common shares of our
stock at an exercise price of $1.15 per share to Brean Murray as compensation as
our financial advisor. In June 2004, we amended the December 2, 2003 Financial
Advisory Agreement with Brean Murray and Brean Murray surrendered 150,000 of the
300,000 warrants to purchase common stock (a copy of this amendment was filed as
Exhibit 10.19.1 to the Company’s Form 10QSB for the quarter ended June 30,
2004).
As a
component of the Placement Agent’s compensation for placing the Debentures, the
Company will issue the Placement Agent warrants to purchase shares of our common
stock (exercisable within four years) in a minimum amount of 5,000 of such
shares in the event that subscriptions for only the minimum in principal amount
of Debentures ($250,000) shall be accepted by the Company, up to 150,000 of such
shares if subscriptions for the maximum in principal amount ($1,500,000) of the
Debentures shall be accepted by the Company. The Placement Agent
warrants shall be issued on the Closing Date of the Series A offering and the
Series A Completion Date. The exercise price of these warrants shall be equal to
the price of the Company’s Common Stock on the date of issuance.
If these
options or warrants are exercised, the common shares issued will be freely
tradable, increasing the total number of common shares issued and
outstanding. If these shares are offered for sale in the public
market, the sales could adversely affect the prevailing market price by lowering
the bid price of our securities. The exercise of any of these options or
warrants could also materially impair our ability to raise capital through the
future sale of equity securities because issuance of the common shares
underlying the options and warrants would cause further dilution of our
securities. The options and warrants are subject to or contain certain
anti-dilution protections that may result in the issuance of additional shares
under some circumstances including, but not limited to, declaration of a
dividend in common shares, or a dividend payable in a form other than common
shares in an amount that has a material effect on the price of common shares, a
combination or consolidation of the outstanding common shares, by
reclassification or otherwise, into a lesser number of common shares, a
recapitalization, a spin-off or a similar occurrence, or in the case of the
warrants, a sale of our common shares, or a security convertible into common
shares, for a consideration per share less than the exercise price of the
warrants.
SUBSTANTIAL RESALE OF
RESTRICTED SECURITIES MAY DEPRESS THE MARKET PRICE OF OUR
SECURITIES.
There are
4,018,155 common shares presently issued and outstanding as of the date of this
Memorandum that are “restricted securities” as that term is defined under the
Securities Act of 1933, as amended, (the “Securities Act”) and that in the
future may be sold in compliance with Rule 144 of the Securities Act, or
pursuant to a registration statement filed under the Securities Act. Rule 144
provides that a person holding restricted securities for a period of one year or
more may, in any three month period, sell those securities in unsolicited
brokerage transactions or in transactions with a market maker, in an amount
equal to the greater of one percent of our outstanding common shares or the
average weekly trading volume for the prior four weeks. Sales of unrestricted
shares by affiliates of the Company are also subject to the same limitation upon
the number of shares that may be sold in any three-month period. Investors
should be aware that sales under Rule 144, or pursuant to a registration
statement filed under the Securities Act, may depress the market price of our
Company’s securities in any market that may develop for such
shares.
OUR ABILITY TO RETAIN AND
ATTRACT MARKET MAKERS IS IMPORTANT TO THE CONTINUED TRADING OF OUR
SECURITIES.
Our
common shares trade on the NASDAQ Capital Market under the symbol “ABMC”. In the
event that a sufficient number of NASD broker-dealers are unwilling to make a
market in our common shares, public trading of our securities would be adversely
affected or could cease entirely.
WE MAY INCUR SIGNIFICANT
INCREASED COSTS IN CONNECTION WITH OUR INTERNAL CONTROLS OVER FINANCIAL
REPORTING.
Our
testing, or the subsequent testing by our independent registered public
accounting firm, may reveal deficiencies in our internal controls over financial
reporting that are deemed to be material weaknesses. Our compliance with Section
404 of the Sarbanes-Oxley Act of 2002 may require that we incur substantial
accounting expense and expend significant management efforts. We currently do
not have an internal audit group, and we may need to hire additional accounting
and financial staff with appropriate public company experience and technical
accounting knowledge to ensure compliance with these regulations.
Moreover,
if we are not able to comply with the requirements of Section 404 in a timely
manner, or if we or our independent registered public accounting firm identify
deficiencies in our internal controls over financial reporting that are deemed
to be material weaknesses, the market price of our stock could decline, and we
could be subject to sanctions or investigations by the SEC or other regulatory
authorities, which would require additional financial and management
resources.
OUR
PRODUCTS
Rapid Drug Screen®:
Our primary product line, the Rapid Drug Screen, or RDS® is a patented, rapid,
POCT kit that detects the presence or absence of 2 to 10 drugs of abuse
simultaneously in a single urine specimen. We offer a number of standard
configurations of the RDS and we can also produce, on special order, or if a
market demands, tests that can screen for any quantity (from 2 to 10) or
configuration of classes of drugs.
Rapid One®:
Our
patented Rapid One product line consists of single drug tests, each of which
screens for the presence or absence of a single drug of abuse in a urine
specimen. The Rapid One product line utilizes the same technology as the RDS. It
includes a single dip platform, an identification and date area, and does not
require the use of pipettes or reagents. The Rapid One is designed for those
situations in which the person subject to substance abuse testing is known to
use a specific drug.
Rapid TEC®:
The
patented Rapid TEC contains one or two drug testing strips and each of these
strips includes the chemistry to detect more than one class of drug. The Rapid
TEC is designed for those customers who require a less expensive product but
still need to test for more than one drug of abuse utilizing one urine
sample.
OralStat®:
Our
OralStat is a patent-pending, innovative POCT system for the detection of drugs
of abuse in oral fluids. The technology of OralStat provides test results within
minutes with enhanced sensitivity and detection comparable to laboratory based
oral fluids tests. The test requires no messy saliva collection or handling.
OralStat can simultaneously test for six drugs in each device.
Rapid Reader®:
The
Rapid Reader is a compact, portable device that captures a picture of the test
results on an ABMC drug screen using a high-resolution camera. The Rapid
Reader’s proprietary software analyzes this image and interprets the results.
The information is then sent to a data management system, which enables the user
to interpret, store, transmit and print the drug test results. The Rapid Reader
system can only be used to interpret and record the results of ABMC drug
screens. As of the date of this Memorandum, the Rapid Reader is the only FDA
cleared drug interpretation and data management system on the
market.
RDS InCup®:
The RDS
InCup is an all-inclusive point of collection test for drugs of abuse that
incorporates collection and testing of the sample in a single device. Once the
donor provides a sample, the results are available within a few minutes without
any manipulation of the sample or the device. The Company offers a
number of standard versions of the RDS InCup and we can custom manufacture any
configuration or combination of 2 to 12 drugs per device.
Rapid TOX®:
The Rapid
TOX is a cost effective drug screen in a horizontal cassette platform that
simultaneously detects 2 to 10 drugs of abuse in a single urine specimen. The
Rapid TOX uses the same drug testing strip that is in the Rapid TEC. Rapid TOX
can be used by pipetting (dropping) a urine specimen into a channel in the
cassette, or the cassette can be dipped into a urine specimen.
OralStat EX:
In
February 2007, we launched the OralStat EX is an oral fluid point of collection
test that dramatically improves the limits of detection over other oral fluid
tests on the market and was specifically designed to make both point of
collection testing and confirmation testing simple. The OralStat EX is simple to
perform and the results are ready to read within minutes.
Rapid STAT™:
We
launched the Rapid STAT in October 2007. The Rapid STAT is an oral fluid point
of collection test that combines the incubation benefits of the OralStat with
the Rapid TOX cassette product platform. The Rapid STAT also utilizes the same
sample handling procedure of the OralStat EX, thus maximizing drug recovery and
providing a transport container for confirmation of positive results. The Rapid
STAT provides faster test results, making it ideal for those market
applications, such as roadside testing, in which portability and time is
crucial.
Rapid TOX Cup®:
We
launched the Rapid TOX Cup in October 2007. The Rapid TOX Cup is an
all-inclusive drug testing cup. The Rapid TOX Cup doesn’t require any
manipulation of the device; the donor simply provides a sample in the cup. The
larger cup allows for easier specimen collection. A temperature strip is affixed
to the cup to ensure specimen integrity, with the option to add an adulterant
test strip. Results obtained with the Rapid TOX Cup can also be photocopied for
record keeping purposes. Its fully integrated design permits collection, testing
and shipment for confirmation in one device. In June 2008, we received FDA
510(k) clearance of the Rapid TOX Cup thus allowing the product to be sold in
the clinical markets.
Other
products
In
addition to the products we manufacture, we also distribute a number of point of
collection tests that detect the presence or absence of adulterants, alcohol and
nicotine. These tests are manufactured by unaffiliated third parties. Two of
these products are sold under our own trademarks; the Rapid AlcoTEC™ alcohol
test and the Rapid Check™ test for adulterant. We do not derive a significant
portion of our revenues from the sale of these products.
CONTRACT
MANUFACTURING
We
provide bulk strip contract manufacturing services to a number of non-affiliated
POCT diagnostic companies. Currently we manufacture test components for the
detection of:
|
|
·
|
TB
(Tuberculosis: a highly contagious disease responsible for more deaths
than any other infectious disease according to the World Health
Organization)
|
|
|
·
|
HIV
(Human Immunodeficiency Virus: the virus that causes
AIDS)
|
|
|
·
|
RSV
(Respiratory Syncytial Virus: the most common cause of lower respiratory
tract infections in children
worldwide)
|
|
|
·
|
Fetal
amniotic membrane rupture
|
|
|
·
|
Lactoferin:
a protein with documented anti-viral, anti-microbial, and immune
modulating/enhancing effects
|
|
|
·
|
Fumonisins:
environmental toxins produced by molds that grow on agricultural
commodities in the field or during
storage
|
|
|
·
|
Aflatoxins:
potent toxic, carcinogenic, mutagenic, immunosuppressive agents, produced
as secondary metabolites on a variety of food
products
|
|
|
·
|
DON
(deoxynivalenol): a type B trichothecene (a biological toxin) that occurs
in grains such as wheat, barley, oats, rye, and maize, rice, sorghum. DON
poisonings occur both in humans and farm
animals
|
|
|
·
|
Ige
(Immunoglobulin E): One of five classes of immunoglobulins made by humans
that seems to protect against invading
parasites
|
We do not
currently derive a significant portion of our revenues from contract
manufacturing.
MARKET
OVERVIEW
According
to an industry report distributed by Life Science Intelligence in 2007, the
global POCT market will experience dramatic growth from $10.3 billion in 2005 to
$18.7 billion by 2011. Our long-term objective is to provide an extensive
product portfolio to this expanding POCT market. Our markets is divided into the
following segments:
Corporate/Workplace
Our
direct sales force and our inside sales representatives sell our products to the
Corporate/Workplace market. We also have a nationwide network of distributors
and administrators of workplace drug testing programs that sell our drugs of
abuse product lines in this market.
Government, Corrections and
Law Enforcement
Our
direct and inside sales teams sell our drugs of abuse screening products in the
Government, Corrections and Law Enforcement market. This market includes
federal, state and county level agencies, including: correctional facilities,
pretrial agencies, probation, drug courts and parole departments at the federal
and state levels and juvenile correctional facilities.
Rehabilitation
Centers
Our
direct sales team and our network of distributors sell our products in the
Rehabilitation Center market. This market for our products includes people in
treatment for substance abuse. There is a high frequency of testing
in this market. For example, in many residence programs, patients are tested
each time they leave the facility and each time they return. In outpatient
programs, patients are generally tested on a weekly basis.
International
Markets
We sell
our products primarily through distributors in the International market. We have
entered into distribution agreements (exclusive and non-exclusive) with
companies in several countries and are pursuing a course of multinational
distribution of our products through both clinical and non-clinical distribution
companies.
Clinics, Physicians, and
Hospitals
The
Clinic, Physician and Hospital market includes emergency rooms, physician
offices, hospitals and clinics and rehabilitation facilities associated with
hospitals. Our products are ideal for this market as they provide accurate
results when time is critical. In August 2006, we announced that we entered into
a non-exclusive Supply Agreement with Nanogen (NASDAQ:NGEN) under which Nanogen
will market our point of collection drug tests, under their own brand name, to
customers in hospital-related markets. In October 2007, we shipped our first
order of product to Nanogen and they launched the product in November 2007. As
of the date of this Memorandum, it is too early to predict the impact that sales
of this product will have on our sales in the Clinic, Physician and Hospital
market.
Educational
Market
We
believe our products could be an integral part of helping schools implement
testing programs due to their ease of use and immediate, accurate results. We
have not yet focused considerable sales and marketing efforts in the Educational
market therefore sales in this market are currently minimal. The Company may
expand its efforts in the future and derive more significant sales from this
market in the future.
Consumer/Over-the-Counter
As of the
date of this Memorandum, our point of collection drug tests are not currently
available for sale in this market, as we have not yet received the necessary
marketing clearance from the Food and Drug Administration (“FDA”).
Additional
Markets
We
believe that the Department of Transportation (“DOT”) and the federally
regulated markets could be a future market for our products. Presently, the DOT
market is not available to any point of collection drug of abuse testing
device. Federal law requires that anyone with a commercial driver’s
license be randomly tested for use of drugs of abuse and that certified
laboratories be used in these testing situations.
MANUFACTURING/PROPERTY
In
November 2001, we purchased our Kinderhook, New York facility and the
surrounding 107 acres. On March 31, 2003 the Company sold approximately 85 acres
of land at its Kinderhook headquarters for $150,000. We currently have a
mortgage in the amount of $775,000 with First Niagara Financial Group (“FNFG”).
We currently lease 14,400 square feet of space for our New Jersey facility. Our
facility in Kinderhook, New York houses assembly and packaging of our products
in addition to the company’s administration. We continue to outsource the
printing and manufacture of plastic components used in our
products. We manufacture all of our own individual test strips and we
manufacture test strips for unaffiliated third parties at our R&D and bulk
manufacturing facility in Logan Township, New Jersey. We contract with a third
party for the manufacture of the Rapid Reader product.
HEADQUARTERS
AND WEBSITE
Our headquarters are located at 122
Smith Road, Kinderhook, New York 12106. Our phone numbers are (800) 227-1243 and
(518) 758-8158. Our website is
www.abmc.com
. The information on our
website is not a part of these offering materials.
SUMMARY
OF HISTORICAL FINANCIAL DATA
Statements
of Operations
|
|
|
For the year ended December
31,
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Sales
|
|
$
|
13,872,000
|
|
|
$
|
13,838,000
|
|
|
$
|
13,015,000
|
|
|
Cost
of Goods
|
|
|
8,141,000
|
|
|
|
7,035,000
|
|
|
|
6,970,000
|
|
|
Gross
Profit
|
|
|
5,731,000
|
|
|
|
6,803,000
|
|
|
|
6,045,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and Development
|
|
|
669,000
|
|
|
|
606,000
|
|
|
|
683,000
|
|
|
Selling
and Marketing
|
|
|
3,091,000
|
|
|
|
3,325,000
|
|
|
|
3,345,000
|
|
|
General
and Administrative
|
|
|
2,827,000
|
|
|
|
2,621,000
|
|
|
|
2,357,000
|
|
|
Total
Operating Expenses
|
|
|
6,587,000
|
|
|
|
6,552,000
|
|
|
|
6,385,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Income/(Loss)
|
|
|
(856,000
|
)
|
|
|
251,000
|
|
|
|
(340,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Income/(Expense)
|
|
|
(131,000
|
)
|
|
|
(50,000
|
)
|
|
|
(35,000
|
)
|
|
Income/(Loss)
Before Tax
|
|
|
(987,000
|
)
|
|
|
201,000
|
|
|
|
(375,000
|
)
|
|
Income
Tax
|
|
|
(3,000
|
)
|
|
|
(5,000
|
)
|
|
|
(1,000
|
)
|
|
Net
Income/(Loss) After Tax
|
|
$
|
(990,000
|
)
|
|
$
|
196,000
|
|
|
$
|
(376,000
|
)
|
|
Basic
and Diluted Income/(Loss) per share
|
|
$
|
(0.05
|
)
|
|
$
|
0.01
|
|
|
$
|
(0.02
|
)
|
|
Weighted
Average Shares Outstanding-basic
|
|
|
21,737,000
|
|
|
|
21,484,000
|
|
|
|
21,310,000
|
|
|
Dilutive
Effect of Options & Warrants
|
|
|
|
|
|
|
89,000
|
|
|
|
122,000
|
|
|
Weighted
Average Shares Outstanding-diluted
|
|
|
21,737,000
|
|
|
|
21,573,000
|
|
|
|
21,432,000
|
|
Balance
Sheets
|
|
|
March
31, 2008
(unaudited)
|
|
|
December
31,
2007
|
|
|
|
|
|
|
|
|
|
|
Cash
and Cash Equivalents
|
|
$
|
377,000
|
|
|
$
|
336,000
|
|
|
Working
Capital
|
|
$
|
3,875,000
|
|
|
$
|
4,017,000
|
|
|
Total
Assets
|
|
$
|
9,320,000
|
|
|
$
|
9,150,000
|
|
|
Total
Liabilities
|
|
$
|
4,423,000
|
|
|
$
|
4,054,000
|
|
|
Stockholders’
Equity
|
|
$
|
4,897,000
|
|
|
$
|
5,096,000
|
|
USE
OF PROCEEDS
The net
proceeds to the Company, if the Series A Debentures are fully subscribed, are
expected to be approximately $650,000, after deducting the Placement Agent fee
of $52,500 (7% of the gross proceeds) and estimated offering expenses. If the
Series B offering is completed and fully subscribed, the net additional proceeds
to the Company are expected to be approximately $650,000, after deducting the
Placement Agent fee of $52,500 and estimated offering expenses. We intend to use
the net proceeds from both the Series A Debentures and Series B Debentures (if
offered) for working capital. We reserve the right to change the use of proceeds
if unanticipated developments in our business, or changes in economic,
regulatory or competitive conditions make shifts in the allocation of net
proceeds necessary or desirable.
PRICE
RANGE OF COMMON SHARES
Our
common shares trade on the National Association of Securities Dealers Automated
Quotation System Capital Market (NASDAQ Capital Market) under the symbol
ABMC.
From
January 1, 2006 through August 21, 2006 our common stock purchase warrants
(“warrants”) traded on the NASDAQ Capital Market under the symbol ABMCW. The
common stock purchase warrants expired on August 22, 2006 and ceased
trading.
The
following table sets forth the high and low sale prices of our securities as
reported by the NASDAQ Capital Market for the periods indicated.
Common
Shares
|
Fiscal year ending December 31,
2007
|
|
High
|
|
|
Low
|
|
|
|
|
|
|
|
|
|
|
Quarter
ending December 31, 2007
|
|
$
|
1.00
|
|
|
$
|
0.36
|
|
|
Quarter
ending September 30, 2007
|
|
$
|
1.43
|
|
|
$
|
0.94
|
|
|
Quarter
ending June 30, 2007
|
|
$
|
1.31
|
|
|
$
|
0.90
|
|
|
Quarter
ending March 31, 2007
|
|
$
|
1.33
|
|
|
$
|
0.89
|
|
|
Fiscal year ending December 31,
2006
|
|
High
|
|
|
Low
|
|
|
|
|
|
|
|
|
|
|
Quarter
ending December 31, 2006
|
|
$
|
0.99
|
|
|
$
|
0.87
|
|
|
Quarter
ending September 30, 2006
|
|
$
|
1.03
|
|
|
$
|
0.85
|
|
|
Quarter
ending June 30, 2006
|
|
$
|
1.17
|
|
|
$
|
0.87
|
|
|
Quarter
ending March 31, 2006
|
|
$
|
1.15
|
|
|
$
|
0.87
|
|
|
Fiscal quarter ending March 31,
2008
|
|
High
|
|
|
Low
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
ending March 31, 2008
|
|
$
|
0.98
|
|
|
$
|
0.46
|
|
Warrants
|
Fiscal year ending December 31,
2006
|
|
High
|
|
|
Low
|
|
|
|
|
|
|
|
|
|
|
Quarter
ending December 31, 2006
|
|
NA
|
|
|
NA
|
|
|
Quarter
ending September 30, 2006
(1)
|
|
$
|
0.17
|
|
|
$
|
0.01
|
|
|
Quarter
ending June 30, 2006
|
|
$
|
1.00
|
|
|
$
|
0.03
|
|
|
Quarter
ending March 31, 2006
|
|
$
|
0.40
|
|
|
$
|
0.03
|
|
(1)
Notes
trading July 1, 2006 through August 21, 2006. Common stock purchase warrants
that had been trading expired on August 22, 2006. Actual last date of trading
due to expiration was August 17, 2006.
OFFICERS
AND SENIOR MANAGEMENT
|
Name
|
|
Age
|
|
Position(s) held
|
|
Since
|
|
Stan
Cipkowski
|
|
60
|
|
Chief
Executive Officer/Director
|
|
1986
|
|
Edmund
M. Jaskiewicz
|
|
84
|
|
President
|
|
1992
|
|
Martin
R. Gould
|
|
56
|
|
CSO,
Exec Vice Pres., Technology
|
|
1998
|
|
Stefan
Parker
|
|
39
|
|
CFO,
Exec. Vice Pres. Finance, Treasurer
|
|
2007
|
|
Douglas
Casterlin
|
|
61
|
|
Exec.
Vice President, Operations
|
|
2008
|
|
Todd
Bailey
|
|
37
|
|
Vice
President, Sales & Marketing
|
|
2001
|
|
Melissa
A. Waterhouse
|
|
37
|
|
VP,
Chief Compliance Officer, Corp Secretary
|
|
1997
|
Stan
Cipkowski founded our predecessor in 1982. He has been a member of our Board of
Directors since our incorporation in April 1986 and was Chief Executive Officer
until January 2001. He was re-appointed Chief Executive Officer in
September 2004 and continues to serve in that capacity. From January 2001
through July 2003, Mr. Cipkowski served as an Executive Vice President of the
Company. Mr. Cipkowski remained an employee of the Company after his resignation
as Executive Vice President before re-assuming the position of Chief Executive
Officer in September 2004. He reorganized the Company as American Bio Medica
Corporation in 1992 and is the inventor of the Rapid Drug Screen®. Mr. Cipkowski
attended Mater Christi Seminary and St. Louis University from 1965 to
1969.
Edmund M.
Jaskiewicz has been one of our directors since 1992 and served as our Chairman
of the Board of Directors from 1992 until 1999. He was appointed
President in September 2003 and was re-appointed Chairman of the Board in
September 2004 and continues to serve in that capacity. Mr. Jaskiewicz is a
lawyer-engineer. He has practiced international patent and corporate
law as a sole practitioner since 1963. He received his J.D. in 1952 from George
Washington University Law School and his B.S. in Engineering from the University
of Connecticut in 1947.
Martin R.
Gould joined us in 1998. He was appointed our Executive Vice President,
Technology in 2003 and currently also services as our Chief Science Officer.
Prior to becoming our CSO, he was our Vice President of Technology. Mr. Gould is
a biomedical scientist with more than 35 years of experience in the diagnostic
and chemical fields. He has an extensive background in research and development,
manufacturing, quality control/assurance, as well as business development and
sales and marketing. Mr. Gould served as Vice President and General Manager of
Neogen Corp. (NASDAQ:NEOG) until 1997. Mr. Gould received a Masters in
Biomedical Science and Biomedical Engineering from Drexel University in 1982,
and a BS degree from Delaware Valley College in 1973.
Stefan
Parker joined us in March 2005 as our Controller. Upon the resignation of our
former Chief Financial Officer, he was appointed interim CFO in July 2007 and
appointed CFO and EVP Finance in August 2007. Prior to joining the Company, Mr.
Parker spent four years with Mechanical Technology, Inc. as Accounting Manager.
Mr. Parker obtained his bachelors degree in finance from Siena
College.
Douglas
Casterlin joined us in April 2008. From September 2004 until April 2008, Mr.
Casterlin was employed by Beacon Group SW, Inc as its Vice President, Business
Operations. Prior to his position at Beacon Group SW, Inc., Mr. Casterlin served
as the Company’s Executive Vice President, Operations from May 1997 to January
2004. Mr. Casterlin studied Engineering at Lehigh University from 1965 to 1966
and received his B.A. degree in Psychology in 1973 from the State University of
New York at New Paltz.
Todd
Bailey joined us in April 2001 as a Director of Business Development and
subsequently was promoted to Director of National Accounts. In September 2003,
he was appointed Vice President of Sales & Marketing. Prior to joining us,
Mr. Bailey was Substance Abuse Account Manager for Roche Diagnostics Corporation
where he was responsible for territory sales of point-of-collection tests for
drugs of abuse to Fortune 500 manufacturers and state agencies. Mr. Bailey
received a B.S. in communications from St. Cloud University in
1994.
Melissa
A. Waterhouse joined us in 1997. Since that time she has held various management
positions in Investor Relations, Marketing and Public Relations. She was
appointed our Corporate Secretary in September 2003. She currently serves as
Vice President and Chief Compliance Officer.
SUMMARY
COMPENSATION OF EXECUTIVE OFFICERS
The
following table sets forth for fiscal years ended December 31, 2007 and December
31, 2006, the compensation paid by the Company to its Chief Executive Officer,
Chief Financial Officer, former Chief Financial Officer, and Chief Science
Officer/Executive Vice President, Technology.
SUMMARY
COMPENSATION TABLE
(1)
|
Name
and principal position
|
|
Year
|
|
Salary
($)
|
|
|
Bonus
|
|
|
Option
Awards
($)
|
|
|
All
Other
Compensation
($)
|
|
|
Total
($)
|
|
|
Stan
Cipkowski
|
|
12/31/07
|
|
$
|
205,900
|
(2)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
23,000
|
(3)
|
|
$
|
228,900
|
|
|
Chief
Executive Officer
|
|
12/31/06
|
|
$
|
197,600
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
23,400
|
(4)
|
|
$
|
221,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Keith
E. Palmer
(5)
|
|
12/31/07
|
|
$
|
86,700
|
(6)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
12,300
|
(7)
|
|
$
|
99,000
|
|
|
Chief
Financial Officer
|
|
12/31/06
|
|
$
|
142,800
|
(8)
|
|
$
|
0
|
|
|
$
|
60,800
|
(9)
|
|
$
|
21,000
|
(10)
|
|
$
|
224,600
|
|
|
Exec
VP Finance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Martin
R. Gould
|
|
12/31/07
|
|
$
|
148,000
|
(11)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
10,900
|
(12)
|
|
$
|
158,900
|
|
|
Chief
Science Officer
|
|
12/31/06
|
|
$
|
130,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
11,500
|
(13)
|
|
$
|
141,500
|
|
|
Exec
VP Technology
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stefan
Parker
(14)
|
|
12/31/07
|
|
$
|
98,000
|
(15)
|
|
$
|
10,000
|
(16)
|
|
$
|
0
|
|
|
$
|
10,300
|
(17)
|
|
$
|
118,300
|
|
|
Chief
Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exec
VP Finance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas
Casterlin
|
|
12/31/07
|
(18)
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
1)
|
There
were no amounts paid to the named executive officers related to Stock
Awards, Non-Equity Incentive Plan Compensation or Nonqualified Deferred
Compensation Earnings, therefore these portions of the table have been
omitted.
|
|
2)
|
Pursuant
to his employment agreement, Mr. Cipkowski’s annual salary for the fiscal
year ended December 31, 2007 was
$205,900.
|
|
3)
|
Includes:
car allowance of $9,400, $11,500 for health insurance premiums, and $1,000
for a club membership paid by the Company. Also included is $1,100 for
premiums, paid by the Company for Mr. Cipkowski’s benefit, for long-term
disability and life insurance, both of which are provided to all employees
of the Company.
|
|
4)
|
Includes:
car allowance of $9,100, $12,000 for health insurance premiums, and $1,000
for a club membership paid by company. Also included is $1,300 for
premiums, paid by the Company for Mr. Cipkowski’s benefit, for long-term
disability and life insurance, both of which are provided to all employees
of the Company.
|
|
5)
|
Mr.
Palmer resigned as Chief Financial Officer and Executive Vice President,
Finance of the Company effective July 9,
2007.
|
|
6)
|
Pursuant
to his employment agreement, Mr. Palmer’s salary for the fiscal year ended
December 31, 2007 was $149,000.
|
|
7)
|
Includes:
car allowance of $5,100 and $6,600 for health and dental insurance
premiums. Also included is $600 for premiums, paid by the Company for Mr.
Palmer’s benefit, for long-term disability and life insurance, both of
which are provided to all employees of the
Company.
|
|
8)
|
Pursuant
to his employment agreement, Mr. Palmer’s annual salary for the fiscal
year ended December 31, 2007 was
$143,000.
|
|
9)
|
Mr.
Palmer’s option grants representing 41,500 (issued April 25, 2001) and
30,500 (issued April 30, 2001), both with exercise prices of $0.94,
naturally expired on April 25, 2006 and April 30, 2006
respectively. Mr. Palmer was issued a new grant representing
72,000 common shares on June 13, 2006 at an exercise price of $1.05. This
grant vested 100% on June 13, 2007.
|
|
10)
|
Includes:
car allowance of $8,400 and $11,500 for health and dental insurance
premiums paid by the Company. Also includes $1,100 for premiums, paid by
the Company, for Mr. Palmer’s benefit, for long-term disability and life
insurance, both of which are provided to all employees of the
Company.
|
|
11)
|
Pursuant
to this employment agreement, Mr. Gould’s annual salary for the fiscal
year ended December 31, 2007 was
$149,000.
|
|
12)
|
Includes:
car allowance of $9,900. Also includes $1,000 for premiums, paid by the
Company, for long-term disability and life insurance, both of which are
provided to all employees of the
Company.
|
|
13)
|
Includes:
car allowance of $10,500 and $1,000 for premiums, paid by the Company, for
Mr. Gould’s benefit, for long-term disability and life insurance, both of
which are provided to all employees of the
Company.
|
|
14)
|
Mr.
Parker was appointed interim Chief Financial Officer effective July 9,
2007, and appointed Chief Financial Officer and Executive Vice President,
Finance effective August 22, 2007.
|
|
15)
|
Upon
Mr. Parker’s appointment as interim Chief Financial Officer, he received
an annual salary of $110,000 and annual car allowance of $10,000 paid
monthly. Pursuant to his employment agreement, Mr. Parker’s annual salary
for fiscal year ended December 31, 2007 was
$120,000.
|
|
16)
|
Mr.
Parker received this bonus upon the timely filing of the Company’s
Quarterly Report on Form 10-QSB for the fiscal quarter ending June 30,
2007.
|
|
17)
|
Includes:
car allowance of $4,200 and $5,400 for health insurance premiums. Also
included is $700 for premiums, paid by the Company for Mr. Parker’s
benefit, for long-term disability and life insurance, both of which are
provided to all employees of the
Company.
|
|
18)
|
Mr.
Casterlin was appointed as Executive Vice President, Operations effective
April 28, 2008. He receives an annual salary of $149,000 and an annual car
allowance of $10,000 paid monthly.
|
PRINCIPAL
STOCKHOLDERS
The
following table sets forth, as of April 21, 2008, the beneficial ownership of
the Company's common shares by each of our executive officers and directors and
each shareholder, known to management of the Company, to beneficially own more
than five percent (5%) of the outstanding common shares.
|
Title
of Class
|
|
Name
and Address
of
Beneficial Owner
|
|
Amount
and Nature
of
Beneficial Ownership *
|
|
|
Percent
of Class
|
|
|
Common
|
|
Stan
Cipkowski
C/O
122 Smith Road
Kinderhook,
NY 12106
|
|
|
2,331,500
|
(1)
|
|
|
10.3
|
%
|
|
Common
|
|
Edmund
M. Jaskiewicz
C/O
122 Smith Road
Kinderhook,
NY 12106
|
|
|
2,068,155
|
(2)
|
|
|
9.5
|
%
|
|
Common
|
|
Martin
R. Gould
C/O
122 Smith Road
Kinderhook,
NY 12106
|
|
|
365,000
|
(3)
|
|
|
1.7
|
%
|
|
Common
|
|
Richard
P. Koskey
C/O
122 Smith Road
Kinderhook,
NY 12106
|
|
|
118,750
|
(4)
|
|
|
**
|
|
|
Common
|
|
Daniel
W. Kollin
C/O
122 Smith Road
Kinderhook,
NY 12106
|
|
|
75,750
|
(5)
|
|
|
**
|
|
|
Common
|
|
Anthony
G. Costantino
C/O
122 Smith Road
Kinderhook,
NY 12106
|
|
|
62,000
|
(6)
|
|
|
**
|
|
|
Common
|
|
Carl
A. Florio
C/O
122 Smith Road
Kinderhook,
NY 12106
|
|
|
61,830
|
(7)
|
|
|
**
|
|
|
Common
|
|
Stefan
Parker
C/O
122 Smith Road
Kinderhook,
New York 12106
|
|
|
25,000
|
(8)
|
|
|
**
|
|
|
Common
|
|
Jean
Neff
C/O
122 Smith Road
Kinderhook,
NY 12106
|
|
|
0
|
|
|
|
0
|
%
|
|
Common
|
|
Marathon
Capital Management
4 N
Park Drive, Suite 106
Hunt
Valley, MD 21030
|
|
|
1,539,229
|
|
|
|
7.1
|
%
|
|
Common
|
|
Directors
and Executive Officers
as
a group (9 persons)
|
|
|
5,107,985
|
(9)
|
|
|
21.8
|
%
|
Unless
otherwise noted, the number of shares noted for each individual is based upon
information obtained from their Section 16(a) or Rule 13d filings with the
United States Securities and Exchange Commission.
|
**
|
Less
than one percent (1%).
|
|
(1)
|
Includes
838,500 common shares subject to stock options exercisable within 60 days
of April 21, 2008.
|
|
(2)
|
Includes
151,500 common shares subject to stock options exercisable within 60 days
of April 21, 2008.
|
|
(3)
|
Includes
360,000 common shares subject to stock options exercisable within 60 days
of April 21, 2008.
|
|
(4)
|
Includes
98,750 common shares subject to stock options exercisable within 60 days
of April 21, 2008.
|
|
(5)
|
Includes
75,750 common shares subject to stock options exercisable within 60 days
of April 21, 2008.
|
|
(6)
|
Includes
62,000 common shares subject to stock options exercisable within 60 days
of April 21, 2008.
|
|
(7)
|
Includes
49,830 common shares subject to stock options exercisable within 60 days
of April 21, 2008.
|
|
(8)
|
Includes
25,000 common shares subject to stock options exercisable within 60 days
of April 21, 2008.
|
|
(9)
|
Includes
an aggregate of 1,661,330 common shares subject to stock options
exercisable within 60 days of April 21,
2008.
|
OUR
SECURITIES
Common & Preferred
Shares
: The Company’s authorized capital stock consists of 50,000,000
common shares, $0.01 par value each, of which 21,744,768 are issued and
outstanding as of the date of this Memorandum, and 5,000,000 preferred shares,
$0.01 par value each, of which 0 are issued and outstanding as of the date of
this Memorandum.
Warrants:
On December 2,
2003, we issued a warrant, exercisable during a five year period beginning
December 2, 2003, to purchase 300,000 common shares of our stock at an exercise
price of $1.15 per share to Brean Murray as compensation as our financial
advisor. In June 2004, we amended the December 2, 2003 Financial Advisory
Agreement with Brean Murray and Brean Murray surrendered 150,000 of the 300,000
warrants to purchase common stock (a copy of this amendment was filed as Exhibit
10.19.1 to the Company’s Form 10QSB for the quarter ended June 30, 2004). As of
the date of this Memorandum, there are 150,000 warrants
outstanding.
Options:
The Company
currently has two nonstatutory Stock Option Plans providing for options grants
to employees, directors, and consultants. As of the date of this Memorandum,
there were 3,768,080 options issued and outstanding under both plans combined,
all of which are currently exercisable. As of December 31, 2007, there were
9,500 options available for issuance under the Fiscal 2000 Plan and 739,420
options available for issuance under the Fiscal 2001 Plan.
DILUTION
As of the date of this Memorandum,
21,744,768 common shares were issued and outstanding. If the Series A
Debentures are fully subscribed and the maximum number of Placement Agent
warrants are issued and thereafter converted to common shares, 22,569,768 shares
will be issued and outstanding. If the Series B Debentures are offered and fully
subscribed and the maximum number of Placement Agent warrants are issued and
thereafter converted to common shares, 23,394,768 shares will be issued and
outstanding. If both the Series A Debentures and the Series B Debentures are
fully subscribed and the maximum number of Placement Agent warrants are issued
and thereafter converted and all other options and warrants outstanding are
exercised, 27,312,848 common shares will be issued and outstanding.
PLAN
OF DISTRIBUTION
The Company has retained Cantone
Research, Inc. (the “Placement Agent”) to act as its agent in connection with
arranging the private placement of the Debentures offered hereby.
The Placement Agent will offer Series A
Debentures up to $750,000 in principal amount, for which it will receive a
commission of 7% of the aggregate gross proceeds of the sales of Series A
Debentures. If the Series B offering is undertaken, the Placement Agent will
offer the remaining $750,000 principal amount of Debentures for which it will
receive a further commission of 7% of the aggregate gross proceeds on the sales
of Series B Debentures.
In
addition, the Company will issue the Placement Agent warrants to purchase shares
of our common stock (exercisable within four years) in a minimum amount of
25,000 of such shares in the event that subscriptions for only the minimum in
principal amount of Debentures ($250,000) shall be accepted by the Company, up
to 150,000 of such shares if subscriptions for the maximum in principal amount
($1,500,000) of the Debentures shall be accepted by the Company. The
Placement Agent warrants shall be issued on the Closing Date of the Series A
offering and the Series A Completion Date. The exercise price of this warrants
shall be equal to the price of the Company’s Common Stock on the date of
issuance. The Placement Agent warrants shall be issued on the Closing Date of
the Series B offering and the Series B Completion Date. The exercise price of
this warrants shall be equal to the price of the Company’s Common Stock on the
date of issuance.
The Company has also agreed to
reimburse the Placement Agent for reasonable out-of-pocket expenses incurred in
connection with this Offering. Such expenses shall not exceed $5,000. The
Company has also paid the Placement Agent $15,000 for due diligence fees
associated with this offering and has reimbursed the Placement Agent an
additional $5,000 for legal fees.
The Series A Debentures are expected to
be offered until approximately July 28, 2008; however, the Company and the
Placement Agent reserve the right to extend the offering period upon mutual
consent.
FINANCIAL
STATEMENTS
(unaudited)
American
Bio Medica Corporation
Balance
Sheets
|
|
|
March
31,
|
|
|
December
31,
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
377,000
|
|
|
$
|
336,000
|
|
|
Accounts
receivable - net of allowance for doubtful accounts of $105,000 at both
March 31, 2008 and December 31, 2007
|
|
|
1,508,000
|
|
|
|
1,365,000
|
|
|
Inventory
– net of reserve for slow moving and obsolete inventory of $250,000 at
both March 31, 2008 and December 31, 2007
|
|
|
5,073,000
|
|
|
|
4,994,000
|
|
|
Prepaid
and other current assets
|
|
|
177,000
|
|
|
|
181,000
|
|
|
Total
current assets
|
|
|
7,135,000
|
|
|
|
6,876,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment, net
|
|
|
2,178,000
|
|
|
|
2,267,000
|
|
|
Other
assets
|
|
|
7,000
|
|
|
|
7,000
|
|
|
Total
assets
|
|
$
|
9,320,000
|
|
|
$
|
9,150,000
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
1,639,000
|
|
|
$
|
1,403,000
|
|
|
Accrued
expenses
|
|
|
425,000
|
|
|
|
220,000
|
|
|
Wages
payable
|
|
|
340,000
|
|
|
|
332,000
|
|
|
Patent
sublicense current
|
|
|
|
|
|
|
50,000
|
|
|
Line
of credit
|
|
|
723,000
|
|
|
|
723,000
|
|
|
Current
portion of long term debt
|
|
|
123,000
|
|
|
|
121,000
|
|
|
Current
portion of unearned grant
|
|
|
10,000
|
|
|
|
10,000
|
|
|
Total
current liabilities
|
|
|
3,260,000
|
|
|
|
2,859,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
liabilities
|
|
|
48,000
|
|
|
|
48,000
|
|
|
Long-term
debt
|
|
|
1,075,000
|
|
|
|
1,107,000
|
|
|
Unearned
grant
|
|
|
40,000
|
|
|
|
40,000
|
|
|
Total
liabilities
|
|
|
4,423,000
|
|
|
|
4,054,000
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS
AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
Preferred
stock; par value $.01 per share; 5,000,000 shares authorized, none issued
and outstanding at March 31, 2008 and December 31, 2007
|
|
|
|
|
|
|
|
|
|
Common
stock; par value $.01 per share; 50,000,000 shares authorized; 21,744,768
issued and outstanding at both March 31, 2008 and December 31,
2007
|
|
|
217,000
|
|
|
|
217,000
|
|
|
Additional
paid-in capital
|
|
|
19,267,000
|
|
|
|
19,267,000
|
|
|
Accumulated
deficit
|
|
|
(14,587,000
|
)
|
|
|
(14,388,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total
stockholders’ equity
|
|
|
4,897,000
|
|
|
|
5,096,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
9,320,000
|
|
|
$
|
9,150,000
|
|
The
accompanying notes are an integral part of the financial statements
American
Bio Medica Corporation
Statements
of Operations
(Unaudited)
|
|
|
For
The Three Months Ended
|
|
|
|
|
March
31
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
3,299,000
|
|
|
$
|
3,175,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of goods sold
|
|
|
1,872,000
|
|
|
|
1,916,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
1,427,000
|
|
|
|
1,259,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
138,000
|
|
|
|
169,000
|
|
|
Selling
and marketing
|
|
|
768,000
|
|
|
|
692,000
|
|
|
General
and administrative
|
|
|
683,000
|
|
|
|
672,000
|
|
|
|
|
|
1,589,000
|
|
|
|
1,533,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
loss
|
|
|
(162,000
|
)
|
|
|
(274,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
1,000
|
|
|
|
4,000
|
|
|
Interest
expense
|
|
|
(34,000
|
)
|
|
|
(27,000
|
)
|
|
Other
expense
|
|
|
(4,000
|
)
|
|
|
|
|
|
|
|
|
(37,000
|
)
|
|
|
(23,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Loss
before tax
|
|
|
(199,000
|
)
|
|
|
(297,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss after tax
|
|
$
|
(199,000
|
)
|
|
$
|
(297,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted loss per common share
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares outstanding – basic & diluted
|
|
|
21,744,768
|
|
|
|
21,719,768
|
|
The
accompanying notes are an integral part of the financial statements
American
Bio Medica Corporation
Statements
of Cash Flows
(Unaudited)
|
|
|
For
The Three Months Ended
|
|
|
|
|
March
31,
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(199,000
|
)
|
|
$
|
(297,000
|
)
|
|
Adjustments
to reconcile net loss to net cash provided by / (used in) operating
activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
92,000
|
|
|
|
117,000
|
|
|
Loss
on disposal of fixed assets
|
|
|
4,000
|
|
|
|
|
|
|
Non-cash
compensation expense
|
|
|
|
|
|
|
16,000
|
|
|
Changes
in:
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(143,000
|
)
|
|
|
(12,000
|
)
|
|
Inventory
|
|
|
(79,000
|
)
|
|
|
(253,000
|
)
|
|
Prepaid
and other current assets
|
|
|
4,000
|
|
|
|
(62,000
|
)
|
|
Accounts
payable
|
|
|
236,000
|
|
|
|
79,000
|
|
|
Accrued
expenses
|
|
|
205,000
|
|
|
|
(199,000
|
)
|
|
Other
liabilities
|
|
|
(50,000
|
)
|
|
|
|
|
|
Wages
payable
|
|
|
8,000
|
|
|
|
(2,000
|
)
|
|
Net
cash provided by / (used in) operating activities
|
|
|
78,000
|
|
|
|
(613,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Purchase
of property, plant and equipment
|
|
|
(7,000
|
)
|
|
|
(460,000
|
)
|
|
Net
cash used in investing activities
|
|
|
(7,000
|
)
|
|
|
(460,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Debt
payments
|
|
|
(30,000
|
)
|
|
|
(20,000
|
)
|
|
Proceeds
from debt financing
|
|
|
|
|
|
|
539,000
|
|
|
Proceeds
from line of credit
|
|
|
|
|
|
|
500,000
|
|
|
Line
of credit payments
|
|
|
|
|
|
|
(120,000
|
)
|
|
Net
cash (used in) / provided by financing activities
|
|
|
(30,000
|
)
|
|
|
899,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase / (decrease) in cash and cash equivalents
|
|
|
41,000
|
|
|
|
(174,000
|
)
|
|
Cash
and cash equivalents - beginning of period
|
|
|
336,000
|
|
|
|
641,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents - end of period
|
|
$
|
377,000
|
|
|
$
|
467,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information
|
|
|
|
|
|
|
|
|
|
Cash
paid during period for interest
|
|
$
|
34,000
|
|
|
$
|
27,000
|
|
The
accompanying notes are an integral part of the financial statements
Notes to
financial statements (unaudited)
March 31,
2008
Note A -
Basis of Reporting
The
accompanying unaudited financial statements of American Bio Medica Corporation
(the “Company”) have been prepared in accordance with generally accepted
accounting principles in the United States of America for interim financial
information and in accordance with the instructions to Form 10-Q and Regulation
S-X. Accordingly, they do not include all information and footnotes required by
generally accepted accounting principles for complete financial statement
presentation. In the opinion of management, the financial statements include all
normal, recurring adjustments, which are considered necessary for a fair
presentation of the financial position of the Company at March 31, 2008, and the
results of its operations for the three month periods ended March 31, 2008 and
March 31, 2007, and cash flows for the three-month periods ended March 31, 2008
and 2007.
Operating
results for the three months ended March 31, 2008 are not necessarily indicative
of results that may be expected for the year ending December 31, 2008. Amounts
at December 31, 2007 are derived from the Company’s audited financial
statements. For further information, refer to the audited financial statements
and notes thereto included in the Company’s Annual Report on Form 10-KSB for the
fiscal year ended December 31, 2007.
During
the three months ended March 31, 2008, there were no significant changes to the
Company's critical accounting policies, which are included in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 2007.
The
preparation of these financial statements requires the Company to make estimates
and judgments that affect the reported amounts of assets, liabilities, revenues
and expenses, and related disclosure of contingent assets and liabilities. On an
on-going basis, the Company evaluates its estimates, including those related to
product returns, bad debts, inventories, income taxes, warranty obligations, and
contingencies and litigation. The Company bases its estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
These
unaudited financial statements have been prepared assuming that the Company will
continue as a going concern and, accordingly, do not include any adjustments
that might result from the outcome of this uncertainty. The Company's
independent registered public accounting firm's report of the financial
statements included in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 2007, contained an explanatory paragraph regarding the
Company's ability to continue as a going concern.
Note B –
Net Income/(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.
Potential
common shares outstanding as of March 31, 2008 and 2007:
|
|
|
March
31,
2008
|
|
|
March
31,
2007
|
|
|
Warrants
|
|
|
150,000
|
|
|
|
150,000
|
|
|
Options
|
|
|
3,768,080
|
|
|
|
3,993,080
|
|
For the
three months ended March 31, 2008 and March 31, 2007, the number of securities
not included in the diluted EPS because the effect would have been anti-dilutive
were 3,918,080 and 4,143,080 respectively.
Note C –
Litigation
The Company has been named in legal
proceedings in connection with matters that arose during the normal course of
its business, and that in the Company’s opinion are not
material. While the ultimate result of any litigation cannot be
determined, it is management’s opinion, based upon consultation with counsel,
that it has adequately provided for losses that may be incurred related to these
claims. If the Company is unsuccessful in defending any or all of
these claims, resulting financial losses could have an adverse effect on the
financial position, results of operations and cash flows of the
Company.
Note D –
Reclassifications
Certain items have been reclassified to
conform to the current presentation.
Note E –
Lines of Credit and Long Term Debt
On November 6, 2006, the Company
obtained a real estate mortgage related to its facility in Kinderhook, New York.
The loan through First Niagara Financial Group (“FNFG”) is in the amount of
$775,000 and has a term of ten (10) years with a twenty (20) year amortization.
The interest rate is fixed at 7.50% for the first five (5) years. Beginning with
year six (6) and through the end of the loan term, the rate changes to 2% above
the Federal Home Loan Bank of New York five (5) year term, fifteen (15) year
Amortization Advances Rate. The loan is collateralized by the Company's facility
in Kinderhook, New York and its personal property. The amount
outstanding on this mortgage at March 31, 2008, was $753,000.
The
Company has a line of credit with FNFG. The maximum amount available under this
line of credit is $875,000. The maximum available line of $875,000 is not to
exceed 70% of accounts receivable less than 60 days. The purpose of
the line of credit is to provide working capital. The interest rate is .25%
above the FNFG prime rate. The Company is required to maintain certain financial
covenants such as net worth (stockholders’ equity) greater than $5 million and
working capital greater than $4 million. Further, the Company is
required to maintain a minimum Debt Service Coverage Ratio of not less than
1.2:1.0 measured at each fiscal year end beginning December 31,
2006. Debt Service Coverage Ratio is defined as Net Operating Income
divided by annual principal and interest payments on all loans relating to
subject property. . There is no requirement for annual repayment of all
principal on this line of credit; it is payable on demand. The amount
outstanding on this line of credit at March 31, 2008 was $690,000.
The Company obtained an additional line
of credit from FNFG for $75,000 during the first quarter of 2006. The line of
credit is to be used exclusively for payments on a sublicense agreement entered
into during the first quarter of 2006. The interest rate is .50% above the FNFG
prime rate and principal may be repaid at any time and borrowed again as needed.
There is no requirement for annual repayment of all principal on this line of
credit. The amount outstanding on this line of credit at March 31, 2008 was
$33,000.
On
January 22, 2007, the Company entered into a Term Note (the “Note”) with FNFG in
the amount of $539,000. The term of the Note is five (5) years with a fixed
interest rate of 7.17%. The Company’s monthly payment is $10,714 and payments
commenced on February 1, 2007, with the final payment being due on January 1,
2012. The Company has the option of prepaying the Note in full or in part at any
time during the term without penalty. There were no closing costs associated
with this Note. The loan is secured by Company assets now owned or to
be acquired. The proceeds received were used for the purchase of three (3)
pieces of automation equipment to enhance the Company's manufacturing process in
its New Jersey facility. The amount outstanding on this Note at March 31, 2008
was $430,000.
At March
31, 2008, the Company is not in compliance with the financial covenants under
the line of credit agreement. On April 30, 2008, the Company was notified by
FNFG that the Company was in violation of the minimum debt service coverage
ratio covenant, and that FNFG has the right to declare all obligations of the
Company to FNFG immediately due and payable. The total amount of
these obligations outstanding as of April 30, 2008 was
$1,897,347.43. The Company has requested, and FNFG is willing to
forbear, until May 21, 2008, from exercising its rights and remedies with
respect to the Company’s default. On or before May 21, 2008, the Company expects
to enter into a forbearance agreement with FNFG that would expire July 31,
2008.
On May 8,
2007, the Company purchased a copier through an equipment lease with RICOH in
the amount of $17,000. The term of the lease is five (5) years with
an interest rate of 14.11%. The amount outstanding on this lease at
March 31, 2008 was $15,000.
Note F
–Sublicense Agreement
On
February 28, 2006, the Company entered into a non-exclusive Sublicense Agreement
(the “Agreement”) with an unaffiliated third party related to certain patents
allowing us to expand our contract manufacturing operations. Under this
Sublicense Agreement, the Company must pay a non-refundable fee of $175,000 over
the course of 2 years, of which $75,000 was paid in the first quarter of 2006
and $50,000 was paid in the first quarter of 2007. The remaining
$50,000 was paid in the first quarter of 2008. The Company is also required to
pay royalties for products it manufactures that fall within the scope of these
patents. The Company was not obligated to pay any royalties in 2006 or 2007.
Beginning with the year ended December 31, 2007, the Company is obligated to pay
a $20,000 annual minimum royalty (“MAR”) that can be applied against royalties
on sales of products that fall within the scope of the sublicensed patents in
the fiscal year ending December 31, 2008. The first MAR payment was made in
January 2008 and there were not any sales of products made in the three months
ended March 31, 2008 that would be applied against the MAR.
Note G –
Integrated Biotechnology Agreement
In March
2006, the Company entered into a royalty agreement with Integrated Biotechnology
Corporation (“IBC”). IBC is the owner of the RSV (Respiratory Syncytial Virus)
test that the Company manufactures for one of IBC’s distributors. The agreement
was entered into to address amounts that IBC owed to the Company at the end of
fiscal year 2005, and to streamline the order and fulfillment process of IBC’s
RSV product. All outstanding amounts due to the Company were satisfied by the
end of the third quarter of 2007. The Company continues to work directly with
IBC’s distributor under the agreement and pay a 20% royalty of total sales to
IBC. During the first quarter of 2008, IBC earned royalties in the amount of
$20,000.
Note
H – Stock Option Grants
In June 2006, the Company’s Board of
Directors granted a stock option to purchase 72,000 shares of the Company’s
common stock to the Company’s then Chief Financial Officer, and an option to
purchase 3,000 shares of the Company’s common stock to an employee in the
Company’s R&D division. Both option grants have exercise prices of $1.05
(the closing price of the Company’s common shares on the date of grant) and
vested 100% on the one-year anniversary of the date of the grant (although the
options granted to the former Chief Financial Officer expired in January 2008).
In accordance with FAS 123(R), the Company recognized $63,347 in non-cash
compensation expense related to these grants from June 2006 through May
2007. Included in the three months ended March 31, 2007 is $16,000 of
this non-cash compensation expense.
Note I –
Employment Agreements
The Company has entered into employment
agreements with its Chief Executive Officer Stan Cipkowski, Chief Science
Officer Martin R. Gould and Chief Financial Officer Stefan Parker providing for
aggregate annual salaries of $475,000. The agreement with Chief
Executive Officer Cipkowski provides for a $206,000 annual salary, is for a term
of one year and automatically renews unless either party gives advance notice of
60 days. The agreement with Chief Science Officer Gould provides for
a $149,000 annual salary, is for a term of one year and automatically renews
unless either party gives advance notice of 60 days. The agreement with Chief
Financial Officer Parker provides for a $120,000 annual salary, is for a term of
one year and automatically renews unless either party gave advance notice of 60
days. Effective April 28, 2008, the Company entered into an employment agreement
with Douglas Casterlin who was appointed to Executive Vice President,
Operations. The agreement provides for a $149,000 annual salary, is for a term
of one year and automatically renews unless either party gives advance notice of
60 days. Copies of Cipkowski and Gould’s employment agreements were filed as
exhibits to its Quarterly Report on Form 10-QSB filed with the Securities and
Exchange Commission (the “Commission”) on August 13, 2007. A copy of Parker’s
employment agreement was filed as an exhibit to the Company’s Current Report on
Form 8K filed with the Commission on August 24, 2007. A copy of Casterlin’s
employment agreement was filed as an exhibit to the Company’s Current Report on
Form 8-K filed with the Commission on May 1, 2008
|
AMERICAN
BIO MEDICA CORPORATION
|
|
|
|
|
|
|
|
|
Stan
Cipkowski
|
|
|
Chief
Executive Officer
|
|
EXHIBIT
4.11
FORM OF
SECURITY PURCHASE AGREEMENT
THIS
SECURITIES PURCHASE AGREEMENT, dated as of the date of acceptance set forth
below, is entered into by and between AMERICAN BIO MEDICA CORPORATION, a New
York corporation, with headquarters located at 122 Smith Road, Kinderhook, New
York 12106 (the "Company"), and the undersigned (the "Buyer").
WITNESSETH:
WHEREAS,
the Company and the Buyer are executing and delivering this Agreement in
accordance with and in reliance upon the exemption from securities registration
afforded by Rule 506 under Regulation D ("Regulation D") as promulgated by the
United States Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "1933 Act"), and/or Section 4(2) of the
1933 Act; and
WHEREAS,
the Company has delivered to Buyer and Buyer acknowledges receipt of a copy of
the Confidential Private Placement Offering Memorandum, dated July 7, 2008,
bearing identification number ___________ (together with all exhibits and any
amendments or supplements thereto, the “Disclosure Document”); and
WHEREAS,
the Buyer wishes to purchase, upon the terms and subject to the conditions of
this Agreement, 10% Subordinated Convertible Debentures Series A of the Company
(the "Debentures"), which will be convertible into shares of Common Stock, $0.01
par value per share of the Company (the "Common Stock"), upon the terms and
subject to the conditions of such Debentures (the Common Stock and the
Debentures sometimes referred to herein as the "Securities"), and subject to
acceptance of this Agreement by the Company;
NOW
THEREFORE, in consideration of the premises and the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
1. DEFINITIONS
Capitalized
terms used herein shall have the same meanings as are ascribed to such terms in
the Disclosure Document unless otherwise defined herein.
2. AGREEMENT
TO PURCHASE; PURCHASE PRICE.
a. Purchase.
The undersigned hereby agrees to purchase from the Company Series A Debentures,
in the principal amount set forth on the signature page of this Agreement,
having the terms and conditions and being in the form attached hereto as Annex
I, out of a total offering of up to $1,500,000 of the Series A & Series B
Debentures. The purchase price for the Series A Debentures (the “Purchase
Price”) shall be as set forth on the signature page hereto and shall be payable
in United States Dollars.
b. Form
of Payment. The Buyer shall pay the purchase price for the Debentures by
delivering immediately available good funds in United States Dollars to Cantone
Research, Inc. (the “Placement Agent”) in an amount equal to the principal
amount of Debentures being so purchased. Promptly following payment by the Buyer
to the Placement Agent of the purchase price of the Debentures, the Placement
Agent shall deliver the Debentures duly executed on behalf of the Company to the
Buyer.
c. Closing
Date. The Closing Date shall be that date designated by the Placement Agent for
the delivery by the Company to the Placement Agent of the executed Series A
Debentures and the Private Placement Memoranda. The Closing Date shall not be
more than fourteen (14) days after the date of the Series A Debenture Placement
Agreement.
d. Series
A Completion Date. The Series A Completion Date shall be that date on which the
Placement Agent shall have notified the Company in writing that (i) it has
placed (and to the best of its knowledge, the Company has accepted the placement
of) $750,000 in principal amount of Series A Debentures, or (ii) after having
used its best efforts, it has placed all of the Series A Debentures that it is
able to place with investors willing to purchase the same; or (b) the Company
shall have notified the Placement Agent in writing that it is exercising the
Company's Limitation Right (as defined in the Series A Debenture Placement
Agreement).
e. The
Buyer understands that the funds which accompany this Purchase Agreement will be
held in escrow by the Placement Agent, in accordance with Securities and
Exchange Commission Rule 15c2-4, and will be returned promptly, together with
any net interest earned and received thereon, in the event that at least
$250,000 in principal amount of Debentures are not subscribed for and accepted
and the payments therefore are not received by July 28, 2008, unless such date
is extended by mutual agreement of the Company and the Placement
Agent.
3. BUYER
REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION; INDEPENDENT
INVESTIGATION.
The Buyer
represents and warrants to, and covenants and agrees with, the Company as
follows:
a. Without
limiting Buyer's right to sell the Common Stock pursuant to the Registration
Statement (as defined below), the Buyer is purchasing the Debentures and will be
acquiring the shares of Common Stock issuable upon conversion of the Debentures
(the “Shares”) for its own account for investment only and not with a view
towards the public sale or distribution thereof and not with a view to or for
sale in connection with any distribution thereof;
b. The
Buyer is (i) an "accredited investor" as that term is defined in Rule 501(a) of
Regulation D issued under the 1933 Act and (ii) experienced in making
investments of the kind described in this Agreement and the related documents,
(iii) able to understand and appreciate the risks of such investments, and, by
reason of the business and financial experience of its officers (if an entity)
and professional advisors (who are not affiliated with or compensated in any way
by the Company or any of its affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement, and
the related documents, and (iv) able to afford the entire loss of its investment
in the Securities;
c. All
subsequent offers and sales of the Debentures and the Shares by the Buyer shall
be made pursuant to registration of the Shares under the 1933 Act or pursuant to
an exemption from registration;
d. The
Buyer understands that the Debentures are being offered and sold, and the Shares
are being offered, to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying upon the truth and accuracy of, and the Buyer's
compliance with, the representations, warranties, agreements, acknowledgements
and understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Debentures and to receive an offer of the Shares;
e. The
Buyer and its advisors, if any, have been furnished with all materials relating
to the business, finances and operations of the Company and materials relating
to the offer and sale of the Debenture and the offer of the Shares, which have
been requested by the Buyer. The Buyer and its advisors, if any, have been
afforded the opportunity to ask questions of the Company and have received
complete and satisfactory answers to any such inquiries. Without limiting the
generality of the foregoing, the Buyer has also had the opportunity to obtain
and to review the Company's SEC Documents (as defined in Paragraph 4.g
below).
f. The
Buyer understands that its investment in the Securities involves a high degree
of risk;
g. The
Buyer understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation or
endorsement of the Securities;
h. This
Agreement has been duly and validly authorized, executed and delivered on behalf
of the Buyer and is a valid and binding agreement of the Buyer enforceable in
accordance with its terms, subject as to enforceability to general principles of
equity and to bankruptcy, insolvency, moratorium and other similar laws
affecting the enforcement of creditors' rights generally.
i. Neither
the Buyer, nor any affiliate of the Buyer, will enter into, any put option,
short position, or other similar position with respect to the Debentures or the
Shares.
j. Notwithstanding
the provisions hereof or of the Debentures, in no event, unless otherwise
provided herein, shall the holder be entitled to convert any Debenture to the
extent that, after such conversion, the sum of (1) the number of shares of
Common Stock beneficially owned by the Buyer and its affiliates (other than
shares of Common Stock which may be deemed beneficially owned through the
ownership of the unconverted portion of the Debenture), and (2) the number of
shares of Common Stock issuable upon the conversion of the Debenture with
respect to which the determination of this proviso is being made, would result
in beneficial ownership by the Buyer and its affiliates of more than 4.99% of
the outstanding shares of Common Stock. For purposes of the proviso to the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). In addition, the Company and Buyer agree that until the
Company either obtains shareholder approval of the issuance of the shares of
Common Stock upon conversion of the Debentures and exercise of the Warrants
herein described, or an exemption from NASDAQ’s corporate governance rules as
they may apply to such issuable shares, the Buyer may not and will not convert
the Debentures into more than 19.9% of the shares of Company's Common Stock
outstanding on the date hereof (the "Common Share Limit").
4. COMPANY
REPRESENTATIONS, ETC.
The
Company represents and warrants to the Buyer that:
a. Concerning
the Shares. The Company’s Certificate of Incorporation grants no preemptive
rights to any stockholder of the Company to acquire the Common
Stock.
b. Reporting
Company Status. The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of New York, and has the
requisite corporate power to own its properties and to carry on its business as
now being conducted. The Company is duly qualified as a foreign corporation to
do business and is in good standing in each jurisdiction where the nature of the
business conducted or property owned by it makes such qualification necessary
other than those jurisdictions in which the failure to so qualify would not have
a material and adverse effect on the business, operations, properties, prospects
or condition (financial or otherwise) of the Company. The Company has registered
its Common Stock pursuant to Section 12 of the Exchange Act, and the Common
Stock is listed and traded on the NASDAQ Capital Market. The Company shall
promptly provide to holders of the Debentures copies of any notices it receives
regarding the continued eligibility of the Common Stock for listing on the
NASDAQ Capital Market.
c. Authorized
Shares. The Company has sufficient authorized and unissued Shares as may be
reasonably necessary to effect the conversion of the Debentures. The Shares have
been duly authorized and, when issued upon conversion of the Debentures, will be
duly and validly issued, fully paid and non-assessable and will not subject the
holder thereof to personal liability by reason of being such
holder.
d. Securities
Purchase Agreement; Registration Rights Agreement and Stock. This Agreement and
the Registration Rights Agreement, the form of which is attached hereto as Annex
II (the "Registration Rights Agreement"), and the transactions contemplated
thereby, have been duly and validly authorized by the Company, this Agreement
has been duly executed and delivered by the Company and this Agreement is, and
the Registration Rights Agreement, when executed and delivered by the Company,
will be, valid and binding agreements of the Company enforceable in accordance
with their respective terms, subject as to enforceability to general principles
of equity and to bankruptcy, insolvency, moratorium, and other similar laws
affecting the enforcement of creditors' rights generally; and the Debentures
will be duly and validly authorized and, when executed and delivered on behalf
of the Company in accordance with this Agreement, will be valid and binding
obligations of the Company in accordance with their terms, subject to general
principles of equity and to bankruptcy, insolvency, moratorium, or other similar
laws affecting the enforcement of creditors' rights generally.
e. Non-contravention.
The execution and delivery of this Agreement and the Registration Rights
Agreement by the Company, the issuance of the Securities, and the consummation
by the Company of the other transactions contemplated by this Agreement, the
Registration Rights Agreement, and the Debentures do not and will not conflict
with or result in a breach by the Company of any of the terms or provisions of,
or constitute a default under (i) the articles of incorporation or by-laws of
the Company, (ii) any indenture, mortgage, deed of trust, or other material
agreement or instrument to which the Company is a party or by which it or any of
its properties or assets are bound, including any listing agreement for the
Common Stock except as herein set forth, (iii) to its knowledge, any existing
applicable law, rule, or regulation or any applicable decree, judgment, or (iv)
to its knowledge, any order of any court, United States federal or state
regulatory body, administrative agency, or other governmental body having
jurisdiction over the Company or any of its properties or assets, except such
conflict, breach or default which would not have a material adverse effect on
the transactions contemplated herein. The Company is not in violation of any
material laws, governmental orders, rules, regulations or ordinances to which
its property, real, personal, mixed, tangible or intangible, or its businesses
related to such properties, are subject.
f. Approvals.
No authorization, approval or consent of any court, governmental body,
regulatory agency, self-regulatory organization, or stock exchange or market is
required to be obtained by the Company for the issuance and sale of the
Securities to the Buyer as contemplated by this Agreement, except such
authorizations, approvals and consents that have been obtained.
g. SEC
Documents, Financial Statements. The Common Stock of the Company is registered
pursuant to Section 12(g) of the Exchange Act and, except as set forth in the
Disclosure Document, the Company has filed on a timely basis all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the Exchange Act, including
material filed pursuant to Section 13(a) or 15(d), in addition to one or more
registration statements and amendments thereto heretofore filed by the Company
with the SEC under the Act (all of the foregoing including filings incorporated
by reference therein being referred to herein as the " Company’s SEC
Documents"). The Company, through its agent, has delivered to the Buyer true and
complete copies of any and all SEC Documents (except for exhibits and
incorporated documents) requested by the Buyer. The Company has not provided to
the Buyer any information which, according to applicable law, rule or
regulation, should have been disclosed publicly by the Company but which has not
been so disclosed, other than with respect to the transactions contemplated by
this Agreement.
As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of the Act or the Exchange Act as the case may be and the rules
and regulations of the SEC promulgated thereunder and other federal, state and
local laws, rules and regulations applicable to such SEC Documents, and none of
the SEC Documents contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the
SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC or
other applicable rules and regulations with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except (i)
as may be otherwise indicated in such financial statements or the notes thereto
or (ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements) and fairly present
in all material respects the financial position of the Company as of the dates
thereof and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
h. Absence
of Certain Changes. Except as set forth in the Disclosure Document or the
Company’s SEC Documents, since December 31, 2007, there have been no material
adverse change and no material adverse development in the business, properties,
operations, financial condition, or results of operations of the
Company.
i. Full
Disclosure. There is no fact known to the Company (other than general economic
conditions known to the public generally) or as disclosed in the documents
referred to in Section 3(e), that has not been disclosed in writing to the Buyer
that (i) would reasonably be expected to have a material adverse effect on the
business or financial condition of the Company or (ii) would reasonably be
expected to materially and adversely affect the ability of the Company to
perform its obligations pursuant to this Agreement.
j. Absence
of Litigation. Except as disclosed in the Company’s SEC Documents, which the
Buyer has reviewed, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board or body pending or, to the
knowledge of the Company, threatened against or affecting the Company, wherein
an unfavorable decision, ruling or finding would have a material adverse effect
on the business or financial condition of the Company or the transactions
contemplated by this Agreement or any of the documents contemplated hereby or
which would adversely affect the validity or enforceability of, or the authority
or ability of the Company to perform its obligations under, this Agreement or
any of such other documents.
k. Absence
of Events of Default. Except as set forth in the Disclosure Document or the
Company’s SEC Documents, no Event of Default, as defined in the respective
agreement to which the Company is a party, and no event which, with the giving
of notice or the passage of time or both, would become an Event of Default (as
so defined), has occurred and is continuing, which would have a material adverse
effect on the Company's financial condition or results of
operations.
l. Prior
Issues. During the twelve (12) months preceding the date hereof, the Company has
not issued any convertible securities.
5. CERTAIN
COVENANTS AND ACKNOWLEDGMENTS.
a. Transfer
Restrictions. The Buyer acknowledges that (1) the Debentures have not been and
are not being registered under the provisions of the 1933 Act and, except as
provided in the Registration Rights Agreement, the Shares have not been and are
not being registered under the 1933 Act, and may not be transferred unless (A)
subsequently registered thereunder or (B) the Buyer shall have delivered to the
Company an opinion of counsel, reasonably satisfactory in form, scope and
substance to the Company, to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration; (2) any sale of the Securities made in reliance on Rule 144
promulgated under the 1933 Act may be made only in accordance with the terms of
said Rule and further, if said Rule is not applicable, any resale of such
Securities under circumstances in which the seller, or the person through whom
the sale is made, may be deemed to be an underwriter, as that term is used in
the 1933 Act, may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (3) neither the
Company nor any other person is under any obligation to register the Securities
(other than pursuant to the Registration Rights Agreement) under the 1933 Act or
to comply with the terms and conditions of any exemption
thereunder.
b. Restrictive
Legend. The Buyer acknowledges and agrees that the Debentures, and, until such
time as the Shares has been registered under the 1933 Act as contemplated by the
Registration Rights Agreement and sold in accordance with an effective
registration statement ("Registration Statement"), the Shares issued to the
Holder upon conversion of the Debentures shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of the Debentures and such Shares):
THE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE 1933 ACT, OR THE SECURITIES LAWS
OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR
OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED.
c. Registration
Rights Agreement. The parties hereto agree to enter into the Registration Rights
Agreement, in substantially the form attached hereto as Annex II, simultaneously
with the signing of this Securities Purchase Agreement.
d. Filings.
The Company undertakes and agrees to make all necessary filings in connection
with the sale of the Debentures to the Buyer under any United States laws and
regulations, or by any domestic securities exchange or trading
market.
e. Reporting
Status. So long as the Buyer beneficially owns any of the Debentures, the
Company shall file all reports required to be filed with the SEC pursuant to
Section 13 or 15(d) of the Exchange Act, and the Company shall not terminate its
status as an issuer required to file reports under the Exchange Act even if the
Exchange Act or the rules and regulations thereunder would permit such
termination.
f. Use
of Proceeds. The Company will use the proceeds from the sale of the Debentures
(excluding amounts paid by the Company for its costs of issuance in connection
with the sale of the Debentures) for working capital, and shall not, directly or
indirectly, use such proceeds for any loan to or investment in any other
corporation, partnership enterprise or other person.
g. Call
Option. The Company shall have the right to redeem any Debentures which have not
theretofore been surrendered for conversion, which right shall be exercised by
delivering a notice of redemption to the Holder, at any time within ninety (90)
days after any date upon which the closing price of the Common Stock on the
NASDAQ Capital Market for a period of twenty (20) consecutive trading days has
equaled or exceeded $2.00 per share. The redemption price shall be an
amount equal to the Debenture’s face value plus $0.05 per underlying common
share, or $525 for each $500 in principal amount of the Debentures. The Company
shall give the Buyer sixty (60) days notice to either convert the Debenture to
Shares of Common Stock or the Company will redeem as set forth
above.
h. Available
Shares. The Company shall have at all times authorized and reserved for
issuance, free from preemptive rights, shares of Common Stock sufficient to
yield the number of shares of Common Stock issuable at conversion as may be
required to satisfy the conversion rights of the Buyer pursuant to the terms and
conditions of the Debentures.
i. Right
of Participation. As long as the Debentures remain outstanding and payable to
the Buyer, the Company shall provide reasonable prior written notice to the
Buyer, through Cantone Research, Inc. as its agent, of any new offering of
securities undertaken by the Company, and the Buyer shall have an opportunity to
participate in such offering, if qualified.
j. Non-Public
Information. The Company shall in no event disclose non-public information to
the Buyer, advisors to or representatives of the Buyer unless prior to
disclosure of such information the Company marks such information as "Non-Public
Information - Confidential" and provides the Buyer, such advisors and
representatives with a reasonable opportunity to accept or refuse to accept such
non-public information for review. Nothing herein shall require the Company to
disclose non-public information to the Buyer or its advisors or representatives,
and the Company represents that it does not disseminate non-public information
to any Buyers who purchase stock in the Company in a public offering, to money
managers or to securities analysts; provided, however, that notwithstanding
anything herein to the contrary, the Company will, as hereinabove provided,
immediately notify the advisors and representatives of the Buyer and, if any,
underwriters, of any event or the existence of any circumstance (without any
obligation to disclose the specific event or circumstance) of which it becomes
aware, constituting non-public information (whether or not requested of the
Company specifically or generally during the course of due diligence by such
persons or entities), which, if not disclosed in the prospectus included in the
registration statement, would cause such prospectus to include a material
misstatement or to omit a material fact required to be stated therein in order
to make the statements, therein, in light of the circumstances in which they
were made, not misleading. Nothing herein shall be construed to mean that such
persons or entities other than the Buyer (without the written consent of the
Buyer prior to disclosure of such information) may not obtain non-public
information in the course of conducting due diligence in accordance with the
terms of this Agreement and nothing herein shall prevent any such persons or
entities from notifying the Company of their opinion that based on such due
diligence by such persons or entities, that the Registration Statement contains
an untrue statement of a material fact or omits a material fact required to be
stated in the Registration Statement or necessary to make the statements
contained therein, in light of the circumstances in which they were made, not
misleading.
k. Additional
Covenant. As long as there are Debentures outstanding and payable to Buyers, the
Company shall be prohibited from issuing any variable priced equity linked
securities.
6. CONVERSION
PROCEDURES
a. Each
$500 in principal amount of the Debentures shall be convertible into 666.67
shares of Common Stock.
b. In
order to effect the conversion of all or part of the Debenture, the Debenture
holder shall issue a notice of conversion substantially in the form attached
hereto as Exhibit A to Annex I (the "Notice of Conversion") which may
be by facsimile and surrender the Debenture for conversion if the Debenture is
not already in possession of the Company. Each conversion of all or any portion
of the Debenture will be deemed to have been effected as of the close of
business on the date on which such Notice of Conversion is delivered to the
principal office of the Company via facsimile. At such time as such conversion
has been effected, to the extent that any portion of the Debenture is converted,
the rights of the Debenture holder with respect to such portion of the Debenture
shall cease and the Debenture holder shall be deemed to have become the holder
of record of the shares of Common Stock represented thereby.
c. No
fractional shares of Common Stock shall be issued upon conversion of the
Debenture. In lieu of any fractional share to which the holder would otherwise
be entitled, the Company shall round up to the nearest whole of Common
Share.
d. The
Company shall, immediately upon receipt of a Notice of Conversion, issue and
deliver to or upon the order of such Debenture holder, against delivery of the
Debentures which have been converted, a certificate or certificates for the
number of shares of Common Stock to which such holder shall be entitled and such
certificate or certificates shall not bear any restrictive legend; provided (a)
the shares of Common Stock evidenced thereby are sold pursuant to an effective
registration statement under the 1933 Act, (b) the holder provides the Company
with an opinion of counsel reasonably acceptable to the Company to the effect
that a public sale of such shares may be made without registration under the
1933 Act, or (c) such holder provides the Company with reasonable assurance that
such shares can be sold free of any limitations imposed by Rule 144, promulgated
under the 1933 Act. The Company shall cause such issuance and delivery to be
effected within five (5) business days and shall transmit the certificates by
messenger or overnight delivery service, or via the DWAC system, to reach the
address designated by such holder within five (5) business days after the
receipt of such notice.
7. GOVERNING
LAW: MISCELLANEOUS.
This
Agreement shall be governed by and interpreted in accordance with the laws of
the State of New York. Each of the parties consents to the jurisdiction of the
federal courts whose districts encompass any part of the City of Albany or the
state courts of the State of New York sitting in the City of Albany in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non conveniens, to the bringing of any such proceeding in such
jurisdictions. A facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original. The headings of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement. This Agreement
supersedes all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof.
8. NOTICES.
Any notice required or permitted hereunder shall be given in writing (unless
otherwise specified herein) and shall be deemed effectively given, (i) on the
date delivered, (a) by personal delivery, or (b) by fax or electronic messaging
(with confirmation of receipt), (ii) seven business days after deposit in the
United States Postal Service by regular or certified mail, or (iii) three
business days mailing by international express courier, with postage and fees
prepaid, addressed to each of the other parties thereunto entitled at the
following addresses, or at such other addresses as a party may designate by ten
(10) days advance written notice to each of the other parties
hereto.
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AMERICAN
BIO MEDICA CORPORATION
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122
Smith Road
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Kinderhook,
New York 12106
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ATTN:
Corporate Secretary/Chief Compliance Officer
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Telephone:
518-758-8158
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Facsimile:
518-758-8171
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Email:
mdwaterhouse@abmc.com
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With
a copy (which shall not constitute notice) to:
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NOLAN
& HELLER, LLP
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39
N. Pearl Street
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Albany,
New York 12207
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ATTN:
Richard L. Burstein, Esq.
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Telephone:
518-449-3300
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Facsimile:
518-432-3123
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Email:
rburstein@nolanandheller.com
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BUYER:
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At
the address set forth on the signature page of this
Agreement.
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9. SURVIVAL
OF REPRESENTATIONS AND WARRANTIES. Company's representations and warranties
shall survive the execution and delivery hereof of this Agreement and the
delivery of the Debentures and the Purchase Price, and shall inure to the
benefit of the Buyer and the successors and assigns thereof.
10. SUCCESSORS
AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted
assigns.
(signature
page follows)
SIGNATURE(S)
FOR INDIVIDUALS
IN
WITNESS WHEREOF, the undersigned represents that the foregoing statements are
true and correct and that it has caused this Agreement to be duly executed on
this ____ day of ______, 2008.
Printed
Name of Buyer:
Address: C/O
Cantone Research, Inc.
766 Shrewsbury
Avenue
Tinton Falls, NJ
07724
Telephone:
732-450-3500 (Cantone Research, Inc.)
Social
Security No.:_______________________________
Signed
by:________________________________
AGGREGATE
PURCHASE PRICE OF DEBENTURE: ___________
SIGNATURE(S)
FOR ENTITIES
IN
WITNESS WHEREOF, the undersigned represents that the foregoing statements are
true and correct and that it has caused this Agreement to be duly executed on
its behalf by the Buyer or one of its officers this ____ day of ______,
2008.
Printed
Name of Buyer:
Address: C/O
Cantone Research, Inc.
766 Shrewsbury
Avenue
Tinton Falls, NJ
07724
Telephone:
732-450-3500 (Cantone Research, Inc.)
EIN:__________________________________
Signed
by:________________________________
Printed
Name & Title:_________________________________
AGGREGATE
PURCHASE PRICE OF DEBENTURE:____________________
This
Agreement has been accepted as of the date set forth below.
AMERICAN
BIO MEDICA CORPORATION
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By:
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Stan
Cipkowski, Chief Executive
Officer
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ANNEX
I
To
Securities Purchase Agreement
FORM OF
SERIES A DEBENTURE
(FILED
WITH THIS REGISTRATION STATEMENT AS EXHIBIT 4.12)
ANNEX
II
REGISTRATION
RIGHTS AGREEMENT
(FILED
WITH THIS REGISTRATION STATEMENT AS EXHIBIT 4.13)
EXHIBIT
4.12
FORM OF
SERIES A DEBENTURE
THESE
SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE " ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE
ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED.
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No. 2008
A -_________________
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US
$_________________
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AMERICAN
BIO MEDICA CORPORATION
10%
CONVERTIBLE DEBENTURE DUE JULY 1, 2012
THIS
DEBENTURE is one of a duly authorized issue up to $1,500,000 in Series A and
Series B Debentures of AMERICAN BIO MEDICA CORPORATION, a corporation duly
organized and existing under the laws of the State of New York (the "Company")
designated as its 10% Convertible Debentures, Series A, due July 1,
2012. Capitalized terms used herein shall have the same meanings as
are ascribed to such terms in the Securities Purchase Agreement dated as of July
___, 2008 by and between the registered holder hereof (the "Holder"), unless
otherwise defined herein.
FOR VALUE
RECEIVED, the Company promises to pay to ________________, the Holder, the
principal sum of (US
$ )
Dollars on July 1, 2012 (the "Maturity Date") and to pay interest, in arrears on
the principal sum outstanding from time to time in arrears, on a semi annual
basis on July 1 and January 1 of each year with the first payment to be made on
January 1, 2009, at the rate of 10% per annum accruing from the date of initial
issuance. Accrual of interest shall commence on the date hereof until payment in
full of the principal sum has been made or duly provided for. Subject to the
provisions of paragraph 4 below, the principal of, and interest on, this
Debenture are payable in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts, at the address last appearing on the Debenture Register of the Company as
designated in writing by the Holder from time to time. The Company will pay the
principal of and interest upon this Debenture on the Maturity Date, less any
amounts required by law to be deducted, to the registered holder of this
Debenture as of the tenth day prior to the Maturity Date and addressed to such
holder at the last address appearing on the Debenture Register. The forwarding
of such check shall constitute a payment of principal and interest hereunder and
shall satisfy and discharge the liability for principal and interest on this
Debenture to the extent of the sum represented by such check plus any amounts so
deducted.
This
Debenture is subject to the following additional provisions:
1. The
Debentures are issuable in denominations of Ten Thousand Dollars (US$10,000) and
of $500 in excess of $10,000. The Debentures are exchangeable for an equal
aggregate principal amount of Debentures of different authorized denominations,
as requested by the Holders surrendering the same. No service charge will be
made for such registration or transfer or exchange.
2. The
Company shall be entitled to withhold from all payments of principal of, and
interest on, this Debenture any amounts required to be withheld under the
applicable provisions of the United States income tax laws or other applicable
laws at the time of such payments, and Holder shall execute and deliver all
required documentation in connection therewith.
3. This
Debenture has been issued subject to investment representations of the original
purchaser hereof and may be transferred or exchanged only in compliance with the
Act, and other applicable state and foreign securities laws. In the event of any
proposed transfer of this Debenture, the Company may require, prior to issuance
of a new Debenture in the name of such other person, that it receive reasonable
transfer documentation including opinions that the issuance of the Debenture in
such other name does not and will not cause a violation of the Act or any
applicable state or foreign securities laws. Prior to due presentment for
transfer of this Debenture, the Company and any agent of the Company may treat
the person in whose name this Debenture is duly registered on the Company's
Debenture Register as the owner hereof for the purpose of receiving payment as
herein provided and for all other purposes, whether or not this Debenture be
overdue, and neither the Company nor any such agent shall be affected by notice
to the contrary.
4. Subordination.
a. The
payment of principal of and interest on this Debenture shall be subordinate and
junior in right of payment, to the extent and in the manner hereinafter set
forth, to all Senior Obligations (as hereinafter defined).
b. If,
and to the extent that, after giving pro forma effect to a scheduled payment of
principal of, or interest on, this Debenture, the Company, in good faith, shall
conclude that the making of such payment would cause an Event of Default (as
defined in any agreement or instrument creating, evidencing, or modifying the
terms of, any Senior Obligation) to occur, then, and in such event, the Company
shall have the right to defer such payment (but only to the extent that it would
cause such an Event of Default) until (but not later than) such time as the same
might be made without causing any such Event of Default to
occur. After making any such conclusion, the Company will promptly
transmit, to the registered Holder of this Debenture, a notification thereof,
which notification shall set forth, in summary form, the computation upon which
such conclusion was based.
c. In
the event of any insolvency or bankruptcy proceedings, or any receivership,
liquidation, reorganization or other similar proceedings in connection therewith
relative to the Company or to its property, or in the event of any proceedings
for voluntary liquidation, dissolution or other winding up of the Company,
whether or not involving insolvency or bankruptcy, then the holders of Senior
Obligations shall be entitled to receive payment in full of the Senior
Obligations before the holder of this Debenture is entitled to receive any
payment on account of principal of or interest on this Debenture. To
that end (but subject to the power of a court of competent jurisdiction to make
other equitable provisions reflecting the rights conferred by these provisions
upon the holder of this Debenture and the holders of Senior Obligations by a
lawful plan of reorganization under applicable bankruptcy law), each holder of
Senior Obligations shall be entitled to receive, to the extent necessary to make
payment in full of such Senior Obligations, for application in payment thereof,
any payment or distribution of any kind or character whether in cash or property
or securities, which may be payable or deliverable in any such proceedings in
respect of this Debenture.
d. In
the event the Company shall default in the payment of the principal of or
premium, if any, or interest on any Senior Obligation when the same shall become
due and payable, whether at stated maturity or at a date fixed for prepayment or
by declaration, demand or automatic acceleration or otherwise (under
circumstances when the provisions of the foregoing Paragraph (b) shall not be
applicable), then, unless and until such default shall have been cured or waived
or shall have ceased to exist, the holders of the Senior Obligations shall be
entitled to receive payment in full of the Senior Obligations before the holder
of this Debenture is entitled to receive any payment on account of principal of
or interest on this Debenture.
e. The
foregoing provisions as to subordination are solely for the purpose of defining
the relative rights of the holders of Senior Obligations on the one hand, and
the holder of this Debenture on the other hand, and none of such provisions
shall impair, as between any holder of this Debenture and the Company, the
obligation of the Company to pay to such holder the principal hereof and
interest hereon in accordance with the terms hereof, nor shall any such
provisions prevent any holder of this Debenture upon default hereunder from
exercising, subject to the rights of the holders of Senior Obligations to
receive the cash, property or securities otherwise payable or deliverable to the
holder of this Debenture, any of its rights or remedies with respect to the
enforcement of this Debenture.
f. "Senior
Obligations" shall mean the principal of, premium, if any, and unpaid interest
on: (i) any obligation for borrowed money due from the Company to
First Niagara Financial Group (the “Senior Lender”), whether now outstanding or
hereafter incurred or assumed; (ii) any guaranty or other contingent
obligation incurred by the Company in favor of the Senior Lender whether now
outstanding or hereafter incurred or assumed;
and (iii) all modifications, deferrals, renewals,
extensions and refundings of any of the items described in the foregoing Clauses
(i) and (ii). Provided, however, that the following shall not
constitute Senior Obligations: (1) any obligation as to
which, in the instrument creating or evidencing the same or pursuant to which
the same is outstanding, it is expressly provided that such obligation is
subordinate in right of payment to all other indebtedness of the
Company; (2) any obligation which by its terms refers
explicitly to this Debenture and states that such obligation shall not be senior
in right of payment thereto; and (3) any obligation of the Company which, in
accordance with the provisions of this Paragraph 4(f) (except for this Clause
(3)), would constitute a Senior Obligation, if, and to the extent that, after
giving effect to the incurrence by the Company of such obligation, the aggregate
amount of all outstanding Senior Obligations would exceed the sum of
$2,500,000.
5. Subject
to the terms and conditions of this Debenture, the Holder of this Debenture
shall have a right of conversion, at any time commencing the earlier of (a) one
hundred twenty (120) days after the date of this Debenture, or (b) the effective
date of the Registration Statement filed pursuant to the Registration Rights
Agreement between the Company and the Holder, or the Holder's predecessor in
interest, of the principal amount of this Debenture into Shares of Common Stock
of the Company, at a conversion rate of 666.67 shares per $500 in principal
amount of this Debenture (representing an approximate conversion price of
approximately $0.75 per share), unless the closing price of Common Stock exceeds
$0.75 on the date of Closing Date of the Series A offering, in which case the
conversion rate per $500 in principal amount of this Debenture will be an amount
equal to $500 divided by one hundred twenty five (125%) percent of such price.
Conversion shall be effectuated by surrendering the Debentures to be converted
to the Company with the form of Notice of Conversion notice attached hereto as
Exhibit A, executed by the Holder of the Debenture evidencing such Holder's
intention to convert this Debenture or a specified portion (as above provided)
hereof, and accompanied, if required by the Company, by proper assignment hereof
in blank. Interest (and penalties) accrued or accruing from the date of issuance
to the date of conversion shall, at the option of the Company, be paid in cash.
No fraction of Shares or scrip representing fractions of Shares will be issued
on conversion, but the number of Shares issuable shall be rounded up to the
nearest whole share. The date on which a Notice of Conversion is given (the
"Conversion Date") shall be deemed to be the date on which the Holder has
delivered this Debenture, with the Notice of Conversion duly executed, to the
Company or, the date set forth in such facsimile or electronic delivery of the
Notice of Conversion if the Debenture is received by the Company within three
(3) business days therefrom. Facsimile delivery of the Notice of Conversion
shall be accepted by the Company at facsimile number (518-758-8171); ATTN:
Corporate Secretary). Common Stock upon conversion will be delivered in
certificate form via messenger or overnight delivery or via the DWAC system
within five (5) business days from the date the Notice of Conversion with the
original Debenture is delivered to the Company.
6. a. The
Company shall have the right to redeem any Debentures which have not theretofore
been surrendered for conversion at a price (the “Redemption Price”) equal to the
face value thereof plus $0.05 per underlying common share, or $525 per $500 in
principal amount of the Debentures, which right shall be exercised by delivering
a notice (a “Notice of Redemption”) to the Holder, at any time within ninety
(90) days after the occurrence of a “Triggering Event”. A "Triggering
Event" shall be deemed to have occurred on any date when the closing price of
the Common Stock on any exchange where the Common Stock is traded has equaled or
exceeded $2.00 per share for a period of twenty (20) consecutive trading
days.
b. Within
sixty (60) days after the date of the Notice of Redemption, the Holder shall
either (i) surrender its Debentures against receipt of the Redemption Price in
immediate funds, or (ii) exercise its right of conversion by delivering a Notice
of Conversion with the original Debenture to the Company as provided in Section
5.
c. The
Redemption Price shall be paid to the Holder within ten (10) days from the date
of surrender of its Debentures for redemption. . In the event such payment is
not timely made, the Notice of Redemption shall be null and void.
7. No
provision of this Debenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of, and interest on,
this Debenture at the time, place, and rate, and in the coin or currency, herein
prescribed. This Debenture and all other Debentures now or hereafter issued of
similar terms are direct obligations of the Company.
8. No
recourse shall be had for the payment of the principal of, or the interest on,
this Debenture, or for any claim based hereon, or otherwise in respect hereof,
against any incorporator, shareholder, officer or director, as such, past,
present or future, of the Company or any successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issue hereof, expressly waived
and released.
9. If
the Company merges or consolidates with another corporation or sells or
transfers all or substantially all of its assets to another person and the
holders of the Common Stock are entitled to receive stock, securities or
property in respect of or in exchange for Common Stock, then as a condition of
such merger, consolidation, sale or transfer, the Company and any such
successor, purchaser or transferee hereby agree that this Debenture may
thereafter be converted, in the manner, and at the conversion price set forth
above, into the kind and amount of stock, securities or property receivable upon
such merger, consolidation, sale or transfer by a holder of the number of shares
of Common Stock into which this Debenture might have been converted immediately
before such merger, consolidation, sale or transfer, subject to adjustments
which shall be as nearly equivalent as may be practicable. In the event of any
proposed merger, consolidation or sale or transfer of all or substantially all
of the assets of the Company (a "Sale"), the Holder hereof shall have the right
to convert by delivering a Notice of Conversion to the Company within fifteen
(15) days of receipt of notice of such Sale from the Company. In the event the
Holder hereof shall elect not to convert, the Company may prepay all outstanding
principal and accrued interest on this Debenture, less all amounts required by
law to be deducted, upon which tender of payment following such notice, the
right of conversion shall terminate.
10. The
Holder of the Debenture, by acceptance hereof, agrees that this Debenture is
being acquired for investment and that such Holder will not offer, sell or
otherwise dispose of this Debenture or the Shares issuable upon conversion
thereof except under circumstances which will not result in a violation of the
Act or any applicable state or federal laws or similar laws relating to the sale
of securities.
11. This
Debenture shall be governed by and construed in accordance with the laws of the
State of New York. Each of the parties consents to the jurisdiction of the
federal courts whose districts encompass any part of the City of Albany or the
state courts of the State of New York sitting in the City of Albany in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non coveniens, to the bringing of any such proceeding in such
jurisdictions.
12. The
following shall constitute an "Event of Default":
a. The
Company shall default in the payment of principal upon the Maturity Date;
or
b. The
Company shall default in the payment of interest on this Debenture and such
default shall remain unremedied for twenty (20) days after the due date of such
payment of interest; or
c. Any
of the representations or warranties made by the Company herein, in the
Securities Purchase Agreement, or in any certificate or financial or other
written statements furnished by the Company in connection with the execution and
delivery of this Debenture or the Securities Purchase Agreement shall be false
or misleading in any material respect at the time made; or
d. The
Company fails to issue shares of Common Stock to the Holder or to cause its
Transfer Agent to issue shares of Common Stock upon exercise by the Holder of
the conversion rights of the Holder in accordance with the terms of this
Debenture, fails to transfer or to cause its Transfer Agent to transfer any
certificate for shares of Common Stock issued to the Holder upon conversion of
this Debenture and when required by this Debenture or the Registration Rights
Agreement, or fails to remove any restrictive legend or to cause its Transfer
Agent to transfer on any certificate or any shares of Common Stock issued to the
Holder upon conversion of this Debenture as and when required by this Debenture,
the Securities Purchase Agreement or the Registration Rights Agreement and any
such failure shall continue uncured for three (3) business day after the Company
has been notified of such failure in writing by Holder; or
e. The
Company shall fail to perform or observe, in material respect, any other
covenant, term, provision, condition, agreement or obligation of the Company
under this Debenture and such failure shall continue uncured for a period of
thirty (30) days after written notice from the Holder of such failure;
or
f. The
Company shall (1) admit in writing its inability to pay its debts generally as
they mature; (2) make an assignment for the benefit of creditors or commence
proceedings for its dissolution; or (3) apply for or consent to the appointment
of a trustee, liquidator or receiver for its or for a substantial part of its
property or business; or
g. A
trustee, liquidator or receiver shall be appointed for the Company or for a
substantial part of its property or business without its consent and shall not
be discharged within sixty (60) days after such appointment; or
h. Any
governmental agency or any court of competent jurisdiction at the instance of
any governmental agency shall assume custody or control of the whole or any
substantial portion of the properties or assets of the Company and shall not be
dismissed within sixty (60) days thereafter; or
i. Any
money judgment, writ or warrant of attachment, or similar process in excess of
Five Hundred Thousand Dollars ($500,000) in the aggregate shall be
entered or filed against the Company or any of its properties or other assets
and shall remain unpaid, unvacated, unbonded or unstayed for a period of sixty
(60) days or in any event later than five (5) days prior to the date of any
proposed sale thereunder; or
j. Bankruptcy,
reorganization, insolvency or liquidation proceedings or other proceedings for
relief under any bankruptcy law or any law for the relief of debtor shall be
instituted by or against the Company and, if instituted against the Company,
shall not be dismissed within sixty (60) days after such institution or the
Company shall by any action or answer approve of, consent to, or acquiesce in
any such proceedings or admit the material allegations of, or default in
answering a petition filed in any such proceeding.
Then, or
at any time thereafter, and in each and every such case, unless such Event of
Default shall have been waived in writing by the Holder (which waiver shall not
be deemed to be a waiver of any subsequent default) at the option of the Holder
and in the Holder's sole discretion, the Holder may consider this Debenture
immediately due and payable, without presentment, demand, protest or notice of
any kinds, all of which are hereby expressly waived, anything herein or in any
note or other instruments contained to the contrary notwithstanding, and the
Holder may immediately enforce any and all of the Holder's rights and remedies
provided herein or any other rights or remedies afforded by law. Upon
the occurrence of an Event of Default, the rate of interest on this Debenture
will be increased to the lesser of: (i) twenty percent (20%) per annum, or (ii)
the highest interest rate allowable by applicable law.
13. Nothing
contained in this Debenture shall be construed as conferring upon the Holder the
right to vote or to receive dividends or to consent or receive notice as a
shareholder in respect of any meeting of shareholders or any rights whatsoever
as a shareholder of the Company, unless and to the extent converted in
accordance with the terms hereof.
IN
WITNESS WHEREOF, the Company has caused this instrument to be duly executed by
an officer thereunto duly authorized.
Dated:
________ __, 2008
AMERICAN
BIO MEDICA CORPORATION
EXHIBIT
A
NOTICE OF
CONVERSION
(To be
Executed by the Holder in order to Convert the Debenture)
The
undersigned hereby irrevocably elects to convert $ _______________ of the
principal amount of Debenture No. 2008A-_____ into shares of Common Stock of
AMERICAN BIO MEDICA CORPORATION (the "Company") according to the conditions
hereof, as of the date written below. In converting the Debenture No.
2008A-_______, the undersigned hereby confirms and acknowledges that the shares
of Common Stock are being acquired solely for the account of the undersigned and
not a nominee for any other party, and that the undersigned will not offer, sell
or otherwise dispose of any such shares of Common Stock, except under
circumstances that will not result in a violation of the Securities Act of 1933,
as amended.
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Date
of Conversion*
___________________________________
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Applicable
Conversion Price _____________________________
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Signature:
___________________________________________
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Printed
Name: ________________________________________
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Address:
____________________________________________
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_______________________________________________
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* This
original Debenture and Notice of Conversion must be received by the Company by
the third business date following the Date of Conversion.
EXHIBIT
4.13
FORM OF
REGISTRATION RIGHTS AGREEMENT
THIS
REGISTRATION RIGHTS AGREEMENT, dated as of July __, 2008 (this "Agreement"), is
made by and between AMERICAN BIO MEDICA CORPORATION, a New York corporation (the
"Company"), and the person or entity named on the signature page hereto (the
"Buyer").
WITNESSETH:
WHEREAS,
upon the terms and subject to the conditions of the Securities Purchase
Agreement, dated as of July __, 2008, between the Buyer and the Company (the
"Securities Purchase Agreement"), the Company has agreed to issue and sell to
the Buyer one or more 10% Convertible Debentures, Series A of the Company, in an
aggregate principal amount not exceeding $750,000 (collectively, the
"Debentures"), which Debentures will be convertible into shares of the common
stock, $0.01 par value (the "Common Stock"), of the Company (the "Conversion
Shares") upon the terms and subject to the conditions of such Debentures;
and
WHEREAS,
the Company has agreed to provide certain registration rights under the
Securities Act of 1933, as amended, and the rules and regulations thereunder, or
any similar successor statute (collectively, the "Securities Act"), with respect
to the Conversion Shares; and
NOW,
THEREFORE, in consideration of the premises and the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Buyer hereby agree as
follows:
1. Definitions.
a. As
used in this Agreement, the following terms shall have the following
meanings:
i. "Buyer"
means the Buyer and any permitted transferee or assignee of the Buyer that
agrees to become bound by the provisions of this Agreement in accordance with
Section 9 hereof, and “Buyers” means all of the foregoing as a
group.
ii. "Register,"
"Registered," and "Registration" refer to a registration effected by preparing
and filing a Registration Statement or Statements in compliance with the
Securities Act and pursuant to Rule 415 under the Securities Act or any
successor rule providing for offering securities on a continuous basis ("Rule
415"), and the declaration or ordering of effectiveness of such Registration
Statement by the United States Securities and Exchange Commission (the
"SEC").
iii. "Potential
Material Event" means any of the following: (a) the possession by the Company of
material information not ripe for disclosure in a registration statement, which
shall be evidenced by determinations in good faith by the Board of Directors of
the Company that disclosure of such information in the registration statement
would be detrimental to the business and affairs of the Company; or (b) any
material engagement or activity by the Company which would, in the good faith
determination of the Board of Directors of the Company, be adversely affected by
disclosure in a registration statement at such time, which determination shall
be accompanied by a good faith determination by the Board of Directors of the
Company that the registration statement would be materially misleading absent
the inclusion of such information.
iv. "Registrable
Securities" means the Conversion Shares and up to 150,000 shares of Common Stock
issuable under warrants to be issued to Cantone Research, Inc., as placement
agent fee for the Debentures.
v. "Registration
Statement" means a registration statement of the Company under the Securities
Act.
b. Capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings set forth in the Securities Purchase Agreement.
2. Registration.
a. Mandatory
Registration. The Company shall use commercially reasonable efforts to prepare
and file with the SEC, no later than eight (8) months following the completion
of the Series A Debenture offering, an effective Registration Statement on Form
S-3 registering not less than the aggregate number of Registrable
Securities.
b. Minimum
Sale Requirement. The Company shall have no obligation to prepare a Registration
Statement on Form S-3 for filing with the SEC unless the gross proceeds of the
Series A Debentures offering exceed $250,000. If the minimum sale requirement is
met under the Series A offering and the Company elects to undertake the Series B
offering, the Registration Statement on Form S-3 shall register the aggregate
number of Registrable Securities under the Series A Debenture offering and the
Series B Debenture offering.
3. Obligations
of the Company. In connection with the registration of the
Registrable Securities, the Company shall do each of the following.
a. Use
commercially reasonable efforts to prepare and file with the SEC a Registration
Statement with respect to not less than the number of Registrable Securities
provided in Section 2(a), above, and thereafter use its reasonable best efforts
to cause such Registration Statement relating to Registrable Securities to
become effective the earlier of (a) 5 days after notice by the SEC that it may
be declared effective, and keep the Registration Statement effective at all
times until the earliest (the "Registration Period") of (i) the date that is
four (4) years after the date of the Series A Completion Date (ii) the date when
the Buyers may sell all Registrable Securities under Rule 144 or (iii) the date
no Buyer any longer owns any of the Registrable Securities, which Registration
Statement (including any amendments or supplements thereto and prospectuses
contained therein) shall not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading;
b. Prepare
and file with the SEC such amendments (including post-effective amendments) and
the prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;
c. Furnish
to each Buyer whose Registrable Securities are included in the Registration
Statement and such Buyer’s legal counsel identified to the Company, (i) promptly
after the same is prepared and publicly distributed, filed with the SEC, or
received by the Company, one (1) copy of the Registration Statement and each
amendment thereto, and (ii) such number of copies of a prospectus, and all
amendments thereto and such other documents, as such Buyer may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Buyer;
d. As
promptly as practicable after becoming aware of such event, notify each Buyer of
the happening of any event of which the Company has knowledge, as a result of
which the prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, and
use its best efforts promptly to prepare an amendment to the Registration
Statement or other appropriate filing with the SEC to correct such untrue
statement or omission, and deliver a number of copies of such supplement or
amendment to each Buyer as such Buyer may reasonably request;
e. As
promptly as practicable after becoming aware of such event, notify each Buyer
who holds Registrable Securities being sold of the issuance by the SEC of a
notice of effectiveness or any stop order or other suspension of the
effectiveness of the Registration Statement at the earliest possible
time;
f. Notwithstanding
the foregoing, if at any time or from time to time after the date of
effectiveness of the Registration Statement, the Company notifies the Buyers in
writing of the existence of a Potential Material Event, no Buyer shall offer or
sell any Registrable Securities, or engage in any other transaction involving or
relating to the Registrable Securities, from the time of the giving of notice
with respect to a Potential Material Event until such Buyer receives written
notice from the Company that such Potential Material Event either has been
disclosed to the public or no longer constitutes a Potential Material Event;
provided, however, that the Company may not so suspend the right of any Buyer
for more than two twenty (20) day periods in the aggregate during any 12-month
period ("Suspension Period") with at least a ten (10) business day interval
between such periods, during the periods the Registration Statement is required
to be in effect;
g. Provide
a transfer agent and registrar, which may be a single entity, for the
Registrable Securities not later than the effective date of the Registration
Statement;
h. Cooperate
with the Buyers who hold Registrable Securities being offered to facilitate the
timely preparation and delivery of certificates for the Registrable Securities
to be offered pursuant to the Registration Statement and enable such
certificates for the Registrable Securities to be in such denominations or
amounts as the case may be, as the Buyers may reasonably request, and, within
three (3) business days after a Registration Statement which includes
Registrable Securities is ordered effective by the SEC, the Company shall
deliver, and shall cause legal counsel selected by the Company to deliver, to
the transfer agent for the Registrable Securities (with copies to the Buyers
whose Registrable Securities are included in such Registration Statement) an
appropriate instruction and opinion of such counsel; and
i. Take
all other reasonable actions necessary to expedite and facilitate disposition by
the Buyer of the Registrable Securities pursuant to the Registration
Statement.
4. Obligations
of the Buyers. In connection with the registration of the Registrable
Securities, the Buyers shall have the following obligations:
a. It
shall be a condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable
Securities of a particular Buyer that such Buyer shall furnish to the Company
such information regarding itself, the Registrable Securities held by it, and
the intended method of disposition of the Registrable Securities held by it, as
shall be reasonably required to effect the registration of such Registrable
Securities and shall execute such documents in connection with such registration
as the Company may reasonably request. At least five (5) days prior to the first
anticipated filing date of the Registration Statement, the Company shall notify
each Buyer of the information the Company requires from each such Buyer (the
"Requested Information") if such Buyer elects to have any of such Buyer's
Registrable Securities included in the Registration Statement.
b. Each
Buyer by such Buyer's acceptance of the Registrable Securities agrees to
cooperate with the Company as reasonably requested by the Company in connection
with the preparation and filing of the Registration Statement hereunder, unless
such Buyer has notified the Company in writing of such Buyer's election to
exclude all of such Buyer's Registrable Securities from the Registration
Statement; and
c. Each
Buyer agrees that, upon receipt of any notice from the Company of the happening
of any event of the kind described in Section 3(d) or 3(e), above, such Buyer
will immediately discontinue disposition of Registrable Securities pursuant to
the Registration Statement covering such Registrable Securities until such
Buyer's receipt of the copies of the amended prospectus contemplated by Section
3(d) or 3(e) and, if so directed by the Company, such Buyer shall deliver to the
Company (at the expense of the Company) or destroy (and deliver to the Company a
certificate of destruction) all copies in such Buyer's possession, of the
prospectus covering such Registrable Securities current at the time of receipt
of such notice.
5. Expenses
of Registration. All expenses, other than underwriting discounts and commissions
incurred in connection with registrations, filings or qualifications pursuant to
Section 3, but including, without limitation, all registration, listing, and
qualifications fees, printers and accounting fees, the fees and disbursements of
counsel for the Company, shall be borne by the Company.
6. Indemnification. In
the event any Registrable Securities are included in a Registration Statement
under this Agreement:
a. To
the extent permitted by law, the Company will indemnify and hold harmless each
Buyer who holds such Registrable Securities, the directors, if any, of such
Buyer, the officers, if any, of such Buyer, each person, if any, who controls
any Buyer within the meaning of the Securities Act or the Exchange Act (each, an
"Indemnified Party", against any losses, claims, damages, liabilities or
expenses (joint or several) (including reasonable attorneys fees) incurred
(collectively, "Claims") to which any of them may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations in the Registration Statement, or any post-effective amendment
thereof, or any prospectus included therein: (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
any post-effective amendment thereof or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, (ii) any untrue statement or alleged
untrue statement of a material fact contained in the final prospectus (as
amended, if the Company files any amendment thereof with the SEC) or the
omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation under the Securities Act, the Exchange
Act or any state securities law (the matters in the foregoing clauses (i)
through (iii) being, collectively, "Violations"). Subject to clause (b) of this
Section 6, the Company shall reimburse the Buyers, promptly as such expenses are
incurred and are due and payable, for any legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a) shall not (I) apply to
a Claim by any Indemnified Party arising out of or based upon a Violation which
occurs in reliance upon and in conformity with information furnished in writing
to the Company by or on behalf of such Indemnified Party expressly for use in
connection with the preparation of the Registration Statement or any such
amendment thereof, (II) be available to an Indemnified Party to the extent such
Claim is based on a failure of such Indemnified Party to deliver or cause to be
delivered the prospectus made available by the Company; or (III) apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of the Company, which consent shall not be
unreasonably withheld. Each Buyer will indemnify the Company and its officers,
directors and agents against any claims arising out of or based upon a Violation
which occurs in reliance upon and in conformity with information furnished in
writing to the Company, by or on behalf of such Buyer, expressly for use in
connection with the preparation of the Registration Statement, subject to such
limitations and conditions as are applicable to the Indemnification provided by
the Company to this Section 6. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
Party and shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9;
b. Promptly
after receipt by an Indemnified Party under this Section 6 of notice of the
commencement of any action (including any governmental action), such Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Party, as the case may be. In case any
such action is brought against any Indemnified Party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate in, and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, assume the defense thereof,
subject to the provisions herein stated and after notice from the indemnifying
party to such Indemnified Party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such Indemnified Party
under this Section 6 for any legal or other reasonable out-of-pocket expenses
subsequently incurred by such Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation, unless the indemnifying
party shall not pursue the action of its final conclusion. The Indemnified Party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and reasonable out-of-pocket
expenses of such counsel shall not be at the expense of the indemnifying party
if the indemnifying party has assumed the defense of the action with counsel
reasonably satisfactory to the Indemnified Party or Indemnified Party. The
failure to deliver written notice to the indemnifying party within a reasonable
time of the commencement of any such action shall not relieve such indemnifying
party of any liability to the Indemnified Party under this Section 6, except to
the extent that the indemnifying party is prejudiced in its ability to defend
such action. The indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as such expense, loss, damage or liability is incurred and is due
and payable.
7. Contribution.
To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section
6 to the fullest extent permitted by law; provided, however, that (a) no
contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section
6; (b) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any seller of Registrable Securities who
was not guilty of such fraudulent misrepresentation; and (c) contribution by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable
Securities.
8. Reports
under Exchange Act. With a view to making available to the Buyers the benefits
of Rule 144 promulgated under the Securities Act or any other similar rule or
regulation of the SEC that may at any time permit the Buyers to sell securities
of the Company to the public without registration ("Rule 144"), the Company
agrees to:
a. make
and keep public information available, as those terms are understood and defined
in Rule 144;
b. file
with the SEC in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act; and
c. furnish
to each Buyer so long as such Buyer owns Registrable Securities, promptly upon
request, (i) a written statement by the Company that it has complied with the
reporting requirements of Rule 144, the Securities Act and the Exchange Act,
(ii) a copy of the most recent annual or quarterly report of the Company and
such other reports and documents so filed by the Company and (iii) such other
information as may be reasonably requested to permit the Buyers to sell such
securities pursuant to Rule 144 without registration.
9. Assignment
of the Registration Rights. The rights to have the Company register Registrable
Securities pursuant to this Agreement shall be automatically assigned by the
Buyers to any transferee of the Registrable Securities (or all or any portion of
any Debenture which is convertible into such securities) only if: (a) the Buyer
agrees in writing with the transferee or assignee to assign such rights, and a
copy of such agreement is furnished to the Company within a reasonable time
after such assignment, (b) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (i) the name and
address of such transferee or assignee and (ii) the securities with respect to
which such registration rights are being transferred or assigned, (c)
immediately following such transfer or assignment the further disposition of
such securities by the transferee or assignee is restricted under the Securities
Act and applicable state securities laws, and (d) at or before the time the
Company received the written notice contemplated by clause (b) of this sentence
the transferee or assignee agrees in writing with the Company to be bound by all
of the provisions contained herein. In the event of any delay in filing or
effectiveness of the Registration Statement as a result of such assignment, the
Company shall not be liable for any damages arising from such
delay.
10. Amendment
of Registration Rights. Any provision of this Agreement may be amended and the
observance thereof may be waived (either generally or in a particular instance
and either retroactively or prospectively), only with the written consent of the
Company and Buyers who hold an eighty (80%) percent interest of the Registrable
Securities of all Buyers. Any amendment or waiver affected in
accordance with this Section 10 shall be binding upon each Buyer and the
Company.
11. Miscellaneous.
a. A
person or entity is deemed to be a holder of Registrable Securities whenever
such person or entity owns of record such Registrable Securities. If the Company
receives conflicting instructions, notices or elections from two or more persons
or entities with respect to the same Registrable Securities, the Company shall
act upon the basis of instructions, notice or election received from the
registered owner of such Registrable Securities.
b. Notices
required or permitted to be given hereunder shall be in writing and shall be
deemed to be sufficiently given when personally delivered (by hand, by courier,
by facsimile transmission or electronic messaging, receipt confirmed, or other
means) or sent by certified mail, return receipt requested, properly addressed
and with proper postage pre-paid (i) if to the Company, AMERICAN BIO MEDICA
CORPORATION, 122 Smith Road, Kinderhook, New York 12106, ATTN: Corporate
Secretary, Facsimile Number: 518-758-8171 or email: mdwaterhouse@abmc.com; with
a copy to Nolan & Heller, LLP, 39 N. Pearl Street, Albany, NY 12207
Attention: Richard L. Burstein, Esq. Facsimile Number: 518-432-3123; (ii) if to
the Buyer, at the address set forth under its name in the Securities Purchase
Agreement, (iii) or at such other address as each such party furnishes by notice
given in accordance with this Section 11(b), and shall be effective, when
personally delivered, sent via facsimile or electronic messaging (receipt
confirmed), upon receipt and, when so sent by certified mail, four (4) calendar
days after deposit with the United States Postal Service.
c. Failure
of any party to exercise any right or remedy under this Agreement or otherwise,
or delay by a party in exercising such right or remedy, shall not operate as a
waiver thereof.
d. This
Agreement shall be governed by and interpreted in accordance with the laws of
the State of New York. Each of the parties consents to the jurisdiction of the
federal courts whose districts encompass any part of the City of Albany or the
state courts of the State of New York sitting in the City of Albany in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non coveniens, to the bringing of any such proceeding in such
jurisdictions. A facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original. The headings of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement. This Agreement
supersedes all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof.
e. This
Agreement constitutes the entire agreement among the parties hereto with respect
to the subject matter hereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein. This Agreement
supersedes all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof.
f. Subject
to the requirements of Section 9 hereof, this Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
hereto.
g. Neither
party shall be liable for consequential damages.
IN
WITNESS WHEREOF, the parties have caused this Agreement to be duly executed by
their respective officers thereunto duly authorized as of the day and year first
above written.
AMERICAN
BIO MEDICA CORPORATION
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Stan
Cipkowski, Chief Executive Officer
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By:
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EXHIBIT
4.14
FORM OF
PLACEMENT AGENT WARRANT AGREEMENT
WARRANT AGREEMENT dated as of June 25, 2008, between American Bio Medica
Corporation, a New York corporation ("Company"), and Cantone Research, Inc.
("Agent”).
WITNESSETH
WHEREAS,
the Agent has agreed to act as the placement agent in connection with the
Company's proposed private placement (the "Private Placement") of a minimum of
$250,000 and a maximum of $1,500,000, of $750,000 of 10% Subordinated
Convertible Debentures, Series A due 2012 (the “Series A Debentures”) and
$750,000 of 10% Subordinated Convertible Debentures, Series B due Four (4) Years
from Issuance the “Series B Debentures”) of the Company, which are convertible
into shares of the Company’s common stock, $0.01 par value per share (the
“Common Stock”); and
WHEREAS,
the Company proposes to issue to the Agent, warrants ("Agent Warrants") to
purchase 50 shares of Common Stock for every $500 in principal amount of Series
A Debentures placed by the Agent, and accepted by the Company in the Private
Placement; and
WHEREAS,
the Agent Warrants to be issued pursuant to this Agreement will be issued by the
Company to the Agent in consideration for, and as part of the Agent’s
compensation in connection with the Agent acting as the placement agent in the
Private Placement upon the Company’s receipt of not less than $250,000 in gross
sales of Series A Debentures
NOW,
THEREFORE, the parties hereto agree as follows:
1. Grant. In
consideration of $1.00 and other valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by the Company, the Company hereby
grants to the Agent, and its assigns (each, a "Holder"), by issuance of the
Agent Warrants, the right to purchase, at any time during the term ("Warrant
Exercise Term") commencing on the date hereof and ending at 5:00 p.m., Eastern
Time, on the fourth anniversary of the date hereof, an aggregate number of
shares of Common Stock equal to 50 such shares for every $500 in principal
amount of Series A Debentures placed by the Agent and accepted by the Company in
the Private Placement at an exercise price equal to the publicly traded closing
price of the shares of the Company’s Common Stock on the NASDAQ Capital Market
on the Closing Date (the “Exercise Price”). As used herein, “Closing Date” shall
have the meaning given such term, and shall be determined in accordance with the
provisions of, the Securities Purchase Agreement, dated June __, 2008, by and
between the Company and the Agent.
2. Certificates
Evidencing the Agent Warrants. The Agent Warrants shall
be evidenced by a warrant certificate ("Warrant Certificate") in the form
attached as Exhibit A hereto. The Warrant Certificate, as well as the
certificate evidencing the Common Stock underlying the Agent Warrants and
issuable upon exercise of the Agent Warrants (the "Agent Shares"), shall be duly
and properly executed by the Company.
3. Exercise
of the Agent Warrants
3.1 Exercise
of the Agent Warrants. The Agent Warrants may be
exercised, in whole or in part (but not as to fractional shares), by surrender
of the Warrant Certificate with the annexed Form of Election to Purchase duly
executed, together with payment in the form of a certified or bank cashier’s
check payable to the order of the Company in an amount equal to the Exercise
Price multiplied by the number of Agent Warrants being exercised at the
Company's principal offices which, at the date hereof, is: American Bio Medica
Corporation, Attn: Corporate Secretary, 122 Smith Road, Kinderhook, New York
12106.
In the
case of the purchase of less than all the Agent Shares purchasable under the
Warrant Certificate, the Company shall cancel the Warrant Certificate and shall
execute and deliver a new Warrant Certificate of like tenor for the unexercised
balance of the Agent Warrants. The date on which all deliveries required to be
made to the Company upon exercise of Agent Warrants pursuant to this Section 3.1
shall have been made shall mean the "Exercise Date".
3.2 Issuance
of Certificates for Agent Shares. Upon the exercise of the Agent Warrants, the
issuance of certificates for Agent Shares shall be made forthwith (and in any
event such issuance shall be made within ten (10) business days from the
Exercise Date) without charge to the Holder thereof, including, without
limitation, any tax which may be payable in respect of the issuance thereof, and
such certificates shall (subject to the provisions of Section 5 hereof) be
issued in the name of, or in such names as may be directed by, the Holder
thereof; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance and
delivery of any such certificates in a name other than that of the Holder and
the Company shall not be required to issue or deliver such certificates unless
or until the person or persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
4. Transfer
of Securities. The Agent, by acceptance of the Warrant
Certificate, covenants and agrees that it is acquiring the Agent Warrants
evidenced thereby, and, upon exercise thereof, the Agent Shares, for its own
account as an investment and not with a view to distribution
thereof.
The Agent
acknowledges that the Agent Warrants have not been, and are not being registered
under the Securities Act of 1933, as amended, (the “1933 Act”), and as of the
date hereof, the Agent Shares have not been registered under the 1933 Act. The
Agent acknowledges and agrees that the Agent Warrants, and until such time as
the Agent Shares have been registered under the 1933 Act and sold in accordance
with an effective Registration Statement (the “Registration Statement”), shall
bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the Agent Warrant and
Agent Shares).
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, OR THE SECURITIES LAWS OF ANY STATE. THEY MAY NOT BE
SOLD, OR OFFERED FOR SALE, IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES, OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
Any
purported transfer of any Agent Warrants or Agent Shares not in compliance with
the provisions of this Section 4 shall be null and void.
5. Registration
Rights.
5.1 The
Company shall use commercially reasonable efforts to prepare and file with the
Securities and Exchange Commission (“SEC”), no later than eight (8) months
following the completion of the Series A offering under the Private Placement,
an effective Registration Statement on Form S-3 registering not less than the
aggregate number of (1) shares into which all Series A Debentures and Series B
Debentures would be convertible, plus (2) shares issuable pursuant to the Agent
Warrants, then entitled to registration and exercisable at the time of filing of
the Form S-3 (collectively, the “Registrable Securities”).
5.2 Minimum
Sale Requirement. The Company shall have no obligation to prepare a Registration
Statement on Form S-3 for filing with the SEC with respect to the Registrable
Securities unless the gross proceeds of either the Series A Debentures offering
or the Series B Debenture offering exceed $250,000 (the “Minimum Sale
Requirement”).
5.3
Obligations of the
Company. In connection with the registration of the Registrable
Securities, the Company shall do each of the following.
a) Use
commercially reasonable efforts to prepare and file with the SEC a Registration
Statement with respect to not less than the number of Registrable Securities
provided in Sub-Section 5.1, above, and thereafter use its reasonable best
efforts to cause such Registration Statement relating to Registrable Securities
to become effective the earlier of (a) 5 days after notice by the SEC that it
may be declared effective, and keep the Registration Statement effective at all
times until the earliest (the "Registration Period") of (i) the date that is
four (4) years after the date of the closing of the Private Placement (ii) the
date when the buyers of the Debentures (the “Buyers”) may sell all Registrable
Securities under Rule 144 or (iii) the date no Buyer or Holder any longer owns
any of the Registrable Securities, which Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading.
b) Use
commercially reasonable efforts to prepare and file with the SEC such amendments
(including post-effective amendments) and the prospectus used in connection with
the Registration Statement as may be necessary to keep the Registration
Statement effective at all times during the Registration Period, and, during the
Registration Period, comply with the provisions of the Securities Act with
respect to the disposition of all Registrable Securities of the Company covered
by the Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the Registration
Statement.
c) Furnish
to the Agent and the Agent’s legal counsel identified to the Company, (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one (1) copy of the Registration Statement and
each amendment thereto, and (ii) such number of copies of a prospectus, and all
amendments thereto and such other documents, as the Agent may reasonably request
in order to facilitate the disposition of any Registrable Securities owned by
the Agent.
d) As
promptly as practicable after becoming aware of such event, notify the Agent of
the happening of any event of which the Company has knowledge, as a result of
which the prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, and
use its best efforts promptly to prepare an amendment to the Registration
Statement or other appropriate filing with the SEC to correct such untrue
statement or omission, and deliver a number of copies of such supplement or
amendment to the Agent if requested.
e) As
promptly as practicable after becoming aware of such event, notify the Agent of
the issuance by the SEC of a notice of effectiveness or any stop order or other
suspension of the effectiveness of the Registration Statement at the earliest
possible time.
f) Notwithstanding
the foregoing, if at any time or from time to time after the date of
effectiveness of the Registration Statement, the Company notifies the Agent in
writing of the existence of (a) the possession by the Company of material
information not ripe for disclosure in a registration statement, which shall be
evidenced by determinations in good faith by the Board of Directors of the
Company that disclosure of such information in the registration statement would
be detrimental to the business and affairs of the Company; or (b) any material
engagement or activity by the Company which would, in the good faith
determination of the Board of Directors of the Company, be adversely affected by
disclosure in a registration statement at such time, which determination shall
be accompanied by a good faith determination by the Board of Directors of the
Company that the registration statement would be materially misleading absent
the inclusion of such information “Potential Material Event”), the Agent shall
not offer or sell any Agent Shares, or engage in any other transaction involving
or relating to the Agent Shares, from the time of the giving of notice with
respect to a Potential Material Event until the Agent receives written notice
from the Company that such Potential Material Event either has been disclosed to
the public or no longer constitutes a Potential Material Event; provided,
however, that the Company may not so suspend the right of the Agent for more
than two twenty (20) day periods in the aggregate during any 12-month period
("Suspension Period") with at least a ten (10) business day interval between
such periods, during the periods the Registration Statement is required to be in
effect.
g) Provide
a transfer agent and registrar, which may be a single entity, for the Agent
Shares no later than the effective date of the Registration
Statement.
h) Cooperate
with the Agent to facilitate the timely preparation and delivery of certificates
for the Agent Shares to be offered pursuant to the Registration Statement and
enable such certificates for the Agent Shares to be in such denominations or
amounts as the case may be, as the Agent may reasonably request, and, within
three (3) business days after a Registration Statement which includes the Agent
Shares is ordered effective by the SEC, the Company shall deliver, and shall
cause legal counsel selected by the Company to deliver, to the transfer agent
for the Agent Shares (with copies to the Agent) an appropriate instruction and
opinion of such counsel.
i) Take
all other reasonable actions necessary to expedite and facilitate disposition by
the Agent.
5.4 Obligations
of the Agent. In connection with the registration of the Registrable Securities,
the Agent shall have the following obligations:
a) It
shall be a condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable
Securities, including but not limited to the Agent Shares, that the Agent shall
furnish to the Company such information regarding itself, the Agent Shares, and
the intended method of disposition of the Agent Shares held by it, as shall be
reasonably required to effect the registration of the Agent Shares, and shall
execute such documents in connection with such registration as the Company may
reasonably request. At least ten (10) days prior to the first anticipated filing
date of the Registration Statement, the Company shall notify the Agent of the
information the Company requires from the Agent (the "Requested Information") if
the Agent elects to have the Agent Shares included in the Registration
Statement.
b) The
Agent agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless the Agent has notified the Company in writing of the
Agent’s election to exclude the Agent Shares from the Registration
Statement.
c) The
Agent agrees that, upon receipt of any notice from the Company of the happening
of any event of the kind described in Sub-Section 5.3(d) or 5.3(e), above, the
Agent will immediately discontinue disposition of Agent Shares pursuant to the
Registration Statement covering the Agent Shares until the Agent's receipt of
the copies of the amended prospectus contemplated by Sub-Section 5.3(d) or
5.3(e) and, if so directed by the Company, the Agent shall deliver to the
Company (at the expense of the Company) or destroy (and deliver to the Company a
certificate of destruction) all copies in the Agent’s possession, of the
prospectus covering the Agent Shares current at the time of receipt of such
notice.
5.5 Expenses
of Registration. All expenses, other than underwriting discounts and commissions
incurred in connection with registrations, filings or qualifications pursuant to
Section 5, but including, without limitation, all registration, listing, and
qualifications fees, printers and accounting fees, the fees and disbursements of
counsel for the Company, shall be borne by the Company.
5.6 Indemnification. In
the event the Agent Shares are included in a Registration
Statement:
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a)
To the extent permitted by law, the Company will indemnify and hold
harmless the Agent, its directors, officers, each person, if any, who
controls the Agent within the meaning of the Securities Act or the
Exchange Act (each, an "Indemnified Party", against any losses, claims,
damages, liabilities or expenses (joint or several) (including reasonable
attorneys fees) incurred (collectively, "Claims") to which any of them may
become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations in the Registration
Statement, or any post-effective amendment thereof, or any prospectus
included therein: (i) any untrue statement or alleged untrue statement of
a material fact contained in the Registration Statement or any
post-effective amendment thereof or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, (ii) any untrue statement
or alleged untrue statement of a material fact contained in the final
prospectus (as amended, if the Company files any amendment thereof with
the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading
or (iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any state securities law or any rule or
regulation under the Securities Act, the Exchange Act or any state
securities law (the matters in the foregoing clauses (i) through (iii)
being, collectively, "Violations"). Subject to clause (b) of this Section
5.6, the Company shall reimburse the Agent, promptly as such expenses are
incurred and are due and payable, for the reasonable legal fees or other
reasonable expenses incurred by it in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section
5.6(a) shall not (I) apply to a Claim by any Indemnified Party arising out
of or based upon a Violation which occurs in reliance upon and in
conformity with information furnished in writing to the Company by or on
behalf of such Indemnified Party expressly for use in connection with the
preparation of the Registration Statement or any such amendment thereof,
(II) be available to an Indemnified Party to the extent such Claim is
based on a failure of such Indemnified Party to deliver or cause to be
delivered the prospectus made available by the Company; or (III) apply to
amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not
be unreasonably withheld. The Agent will indemnify the Company and its
officers, directors and agents against any claims arising out of or based
upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company, by or on behalf of the
Agent, expressly for use in connection with the preparation of the
Registration Statement, subject to such limitations and conditions as are
applicable to the Indemnification provided by the Company to this
Sub-Section 5.6. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Indemnified
Party and shall survive the transfer of the Agent Shares by the Agent
pursuant to Section 5.8
.
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b)
Promptly after receipt by an Indemnified Party under this Section 5.6 of
notice of the commencement of any action (including any governmental
action), such Indemnified Party shall, if a Claim in respect thereof is to
be made against any indemnifying party under this Section 5.6, deliver to
the indemnifying party a written notice of the commencement thereof and
the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the defense
thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Party, as the case may be. In case any such action is
brought against any Indemnified Party, and it notifies the indemnifying
party of the commencement thereof, the indemnifying party will be entitled
to participate in, and, to the extent that it may wish, jointly with any
other indemnifying party similarly notified, assume the defense thereof,
subject to the provisions herein stated and after notice from the
indemnifying party to such Indemnified Party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
Indemnified Party under this Section 5.6 for any legal or other reasonable
out-of-pocket expenses subsequently incurred by such Indemnified Party in
connection with the defense thereof other than reasonable costs of
investigation, unless the indemnifying party shall not pursue the action
of its final conclusion. The Indemnified Party shall have the right to
employ separate counsel in any such action and to participate in the
defense thereof, but the fees and reasonable out-of-pocket expenses of
such counsel shall not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with counsel
reasonably satisfactory to the Indemnified Party. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party
of any liability to the Indemnified Party under this Section 5.6, except
to the extent that the indemnifying party is thereby prejudiced in its
ability to defend such action. The indemnification required by this
Section 5.6 shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as such expense, loss,
damage or liability is incurred and is due and
payable.
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c)
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Contribution.
To the extent any indemnification by an indemnifying party is prohibited
or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be
liable under Sub-Section 5.6 to the fullest extent permitted by law;
provided, however, that (a) no contribution shall be made under
circumstances where the maker would not have been liable for
indemnification under the fault standards set forth in Sub-Section 5.6;
(b) no seller of Agent Shares guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any seller of Agent Shares who was not
guilty of such fraudulent misrepresentation; and (c) contribution by any
seller of Agent Shares shall be limited in amount to the net amount of
proceeds received by such seller from the sale of the Agent
Shares.
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5.7 Reports
under Exchange Act. With a view to making available to the Agent the benefits of
Rule 144 promulgated under the Securities Act or any other similar rule or
regulation of the SEC that may at any time permit the Agent to sell securities
of the Company to the public without registration ("Rule 144"), the Company
agrees to:
a) make
and keep public information available, as those terms are understood and defined
in Rule 144;
b) file
with the SEC in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act; and
c) furnish
to the Agent so long as the Agent owns Agent Shares, promptly upon request, (i)
a written statement by the Company that it has complied with the reporting
requirements of Rule 144, the Securities Act and the Exchange Act, (ii) a copy
of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company and (iii) such other information
as may be reasonably requested to permit the Agent to sell such securities
pursuant to Rule 144 without registration.
5.8 Assignment
of Registration Rights. The rights to have the Company register the Agent Shares
shall be automatically assigned by the Agent to any transferee of the Agent
Shares (or all or any portion of the Agent Warrants which are convertible into
such securities) only if: (a) the Agent agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is furnished to the
Company within a reasonable time after such assignment, (b) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of (i) the name and address of such transferee or assignee and
(ii) the securities with respect to which such registration rights are being
transferred or assigned, (c) immediately following such transfer or assignment
the further disposition of such securities by the transferee or assignee is
restricted under the Securities Act and applicable state securities laws, and
(d) at or before the time the Company received the written notice contemplated
by clause (b) of this sentence the transferee or assignee agrees in writing with
the Company to be bound by all of the provisions contained herein. In the event
of any delay in filing or effectiveness of the Registration Statement as a
result of such assignment, the Company shall not be liable for any damages
arising from such delay.
5.9 Amendment
of Registration Rights. Any provision of this Agreement may be amended and the
observance thereof may be waived (either generally or in a particular instance
and either retroactively or prospectively), only with the written consent of the
Company and the Agent. Any amendment or waiver affected in accordance with this
Sub-Section 5.9 shall be binding upon the Agent and the Company.
6. Exchange
and Replacement of Warrant Certificates. Each Warrant Certificate is
exchangeable without expense, upon the surrender thereof by the Agent at the
principal office of the Company, for a new Warrant Certificate of like tenor and
date representing in the aggregate the right to purchase the same number of
securities in such denominations as shall be designated by the Agent at the time
of such surrender.
Upon
receipt by the Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of any Warrant Certificate, and, in case of
loss, theft or destruction, of indemnity or security reasonably satisfactory to
it, and reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of the Warrants, if mutilated, the
Company will make and deliver a new Warrant Certificate of like tenor, in lieu
thereof.
7. Elimination
of Fractional Interests. The Company shall not be required to issue certificates
representing fractions of shares of Common Stock upon the exercise of the Agent
Warrants, but instead shall pay cash in lieu of such fractional interests to the
Agent based on the Exercise Price.
8. Reservation
and Listing of Securities. The Company shall at all times reserve and keep
available out of its authorized shares of Common Stock, solely for the purpose
of issuance upon the exercise of the Agent Warrants, such number of shares of
Common Stock as shall be issuable upon the exercise thereof. The Company
covenants and agrees that, upon exercise of the Agent Warrants and payment of
the Exercise Price, all shares of Common Stock issuable upon such exercise shall
be duly and validly issued, fully paid, non-assessable and not subject to the
preemptive rights of any stockholder.
9. Notice
to Agent as Warrant Holder. Nothing contained in this Agreement shall be
construed as conferring upon Agent as a Warrant Holder, the right to vote or to
consent or to receive notice as a stockholder in respect of any meetings of
stockholders for the election of directors or any other matter, or as having any
rights whatsoever as a stockholder of the Company.
10. Notices.
All notices, requests, consents and other communications hereunder shall be in
writing and shall be deemed to have been duly made when delivered, mailed by
registered or certified mail, return receipt requested, or sent by facsimile or
electronic delivery with confirmation of delivery:
(a) If
to the Agent, to the address shown on the books of the Company; or
(b) If
to the Company, to the address set forth in Section 3.1 hereof, or to such other
address as the Company may designate by notice to the Agent.
11. Supplements
and Amendments. The Company and the Agent may from time to time supplement or
amend this Agreement in order to cure any ambiguity, to correct or supplement
any provision contained herein which may be defective or inconsistent with any
provision herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company and the Agent may deem necessary
or desirable and which the Company and the Agent deem shall not adversely affect
the interests of any Holder of the Debentures.
12. Successors.
All the covenants and provisions of this Agreement shall be binding upon and
inure to the benefit of the Company, the Agent and their respective successors
and assigns hereunder.
13. Termination.
This Agreement shall terminate at the close of business on the fourth
anniversary of the date hereof. Notwithstanding the foregoing, the
indemnification provisions of Section 5.5 hereof shall survive such termination
until the close of business on the tenth anniversary of the date
hereof.
14. Miscellaneous.
This Agreement shall be governed by and interpreted in accordance with the laws
of the State of New York. Each of the parties consents to the jurisdiction of
the federal courts whose districts encompass any part of the City of Albany or
the state courts of the State of New York sitting in the City of Albany in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non conveniens, to the bringing of any such proceeding in such
jurisdictions. A facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original. The headings of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement. This Agreement
supersedes all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof.
(Signature
page follows)
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed, as of the day and year first above written.
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AMERICAN
BIO MEDICA CORPORATION
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By:
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________________________________________________
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Name:
Stan Cipkowski
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Title:
Chief Executive Officer
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CANTONE
RESEARCH, INC.
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By:
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________________________________________________
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Name:
Anthony J. Cantone
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Title:
President
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FORM OF
AGENTS WARRANT CERTIFICATE
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, OR THE SECURITIES LAWS OF ANY STATE. THEY MAY NOT BE
SOLD, OR OFFERED FOR SALE, IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES, OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THE
TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE AGENT WARRANT AGREEMENT REFERRED TO
HEREIN.
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No.
AW- ________
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___________
Warrants
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AGENT'S
WARRANT CERTIFICATE
This
Agent Warrant Certificate certifies that Cantone Research, Inc., or its assigns,
is the Holder of ____________ Warrants (the "Agent Warrants") to purchase
initially, at any time after the date hereof until 5:00 p.m. Eastern Time on the
fourth anniversary of the date hereof, ("Expiration Date"), up to __________
shares of common stock ("Common Stock"), of American Bio Medica Corporation, a
New York corporation (the "Company"), at the exercise price of $_______ per
share of Common Stock (“Exercise Price”) upon surrender of this Agent Warrant
Certificate and payment of the Exercise Price, subject to the conditions set
forth herein and in the Placement Agent Warrant Agreement dated June 25, 2008
between the Company and Cantone Research, Inc. (the "Warrant Agreement").
Capitalized terms used herein and not defined herein shall have the meanings
ascribed to such terms by the Warrant Agreement. Payment of the Exercise Price
shall be in the form of a certified or bank cashier’s check payable to the order
of the Company in an amount equal to the Exercise Price multiplied by the number
of Agent Warrants being exercised.
No
Warrant may be exercised after 5:00 p.m., Eastern Time, on the Expiration Date,
at which time all Agent Warrants evidenced hereby, unless exercised prior
thereto, hereby shall thereafter be void.
The
Agent Warrants evidenced by this Agent Warrant Certificate are part of a duly
authorized issue of Agent Warrants issued pursuant to the Warrant Agreement,
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to for a description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Company and the Holders of the Agent Warrants.
Upon
due presentment for registration of transfer of this Agent Warrant Certificate
and executed form of assignment as attached hereto at the office of the Company
set forth in the Warrant Agreement, a new Agent Warrant Certificate or Agent
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Agent Warrants shall be issued to the transferee(s) in exchange for this
Agent Warrant Certificate, subject to the limitations provided herein and in the
Warrant Agreement, without any charge except for any tax or other governmental
charge imposed in connection with such transfer.
Upon
the exercise of less than all of the Agent Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new Agent
Warrant Certificate representing such unexercised Agent Warrants.
The
Company may deem and treat the Holder(s) hereof as reflected on the records of
the Company as the absolute owner(s) of this Agent Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, and of any distribution to the
Holder(s) hereof, and for all other purposes, and the Company shall not be
affected by any notice to the contrary.
IN
WITNESS WHEREOF, the Company has caused this Agent Warrant Certificate to be
duly executed under its corporate seal.
Dated as
of
________,
2008
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American
Bio Medica Corporation
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________________________________________________
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BY:
Stan Cipkowski
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ITS:
Chief Executive Officer
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(AFFIX
CORPORATE SEAL)
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FORM OF
ELECTION TO PURCHASE
The
undersigned hereby irrevocably elects to exercise the right, represented by this
Warrant Certificate, to purchase ___________ Shares of Common
Stock.
In
accordance with the terms of Section 3.1 of the Placement Agent Warrant
Agreement dated as of June 25, 2008, between American Bio Medica Corporation.
and Cantone Research, Inc., the undersigned requests that a certificate for such
Common Stock be registered in the name of ______whose address is
______________ and that such Certificate be
delivered to
whose
address is _______________________________________________________.
Dated:
_________________, 20____
Signature:
_____________________________________________________________
BY:
ITS:
(Signature
must conform in all respects to name of holder as specified on the face of the
Warrant Certificate.)
__________________________________
(Insert
Social Security or Other Identifying Number of Holder)
FORM OF
ASSIGNMENT
(To be
executed by the Holder if such Holder to transfer the Agent Warrant
Certificate.)
FOR VALUE
RECEIVED
_____________________________________________________hereby
sells, assigns and transfers unto
_________________________________________________________________________________________
_________________________________________________________________________________________
________________________
(Please
print name and address of transferee)
this
Agent Warrant Certificate, together with all right, title and interest therein,
and does hereby authorize the transfer of the within Warrant Certificate on the
books of American Bio Medica Corporation, with full power of
substitution.
Dated:
______________________________________
Signature:
__________________________________________
(Signature
must conform in all respects to name of holder as specified on the face of the
Warrant Certificate.)
____________________________________
(Insert
Social Security or Other Identifying Number of Holder)
EXHIBIT
5.1
May 5,
2009
American
Bio Medica Corporation
122 Smith
Road
Kinderhook,
New York 12106
Re:
Registration Statement on Form S-3
Ladies
and Gentlemen:
We have
acted as special counsel to American Bio Medica Corporation, a New York
corporation (the “Company”), in connection with the Registration Statement on
Form S-3 (the “Registration Statement”) filed by the Company with the Securities
and Exchange Commission (the “Commission”) under the Securities Act of 1933, as
amended (the “Securities Act”), relating to the resale of up to 1,000,001 shares
(the “Conversion Shares”), of the Company’s common stock, par value $0.01 per
share (the “Common Stock”), initially issuable (i) upon conversion of
$750,000aggregate principal amount of the Company’s 10% Subordinated Convertible
Debentures, Series A due 2012 (the “Debentures”), issued in an offering under
Regulation D under the Securities Act and completed August 15, 2008, and (ii) up
to 75,000 shares of Common Stock that may be issued upon the exercise of private
placement agent warrants (the “Warrants”), issued by us to Cantone Research,
Inc., as placement agent. This opinion is being furnished in accordance with the
requirements of Item 601(b)(5) of Regulation S-K under the Securities
Act.
We have
examined and relied upon originals or copies, certified or otherwise identified
to our satisfaction, of the Registration Statement, the Company’s 2009 Annual
Proxy Statement, the Debentures, the Debenture Placement Agreement, the
Securities Purchase Agreement, the Warrants, the Certificate of Incorporation of
the Company as currently amended and filed with the Secretary of State of the
State of New York, the Bylaws of the Company as currently amended and restated
and in effect, a form of the share certificate, and such records of the Company
and such agreements, certificates of public officials, certificates of officers
or other representatives of the Company and others, and such other documents,
certificates and records as we have deemed necessary or appropriate as a basis
for the opinions set forth herein.
In our
examination, we have assumed the legal capacity of all natural persons, the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, the conformity to original documents of all documents submitted to
us as copies, that the parties to all executed documents (other than the
Company) had all requisite power to enter into and perform all obligations
thereunder, the due authorization by all requisite action of such documents, the
due execution and delivery by such parties of such documents (where due
execution and delivery are a prerequisite to the effectiveness thereof), and the
validity and binding effect of such documents on such parties. As to any facts
material to the opinions expressed herein which we have not independently
established or verified, we have assumed and relied upon the truth, accuracy and
completeness of the information, statements and representations contained in the
records, documents, instruments and certificates we have reviewed.
Based
upon the foregoing, and subject to the assumptions, qualifications, limitations
and exceptions set forth herein, we are of the opinion that:
1. The
Debentures constitute valid and legally binding obligations of the Company,
enforceable against the Company in accordance with their terms, subject to the
limitations under any applicable bankruptcy, insolvency, fraudulent conveyance
or transfer, equitable subordination, reorganization, moratorium or similar laws
relating to or affecting creditors’ rights generally and except as enforcement
thereof is subject to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law).
2. The
Conversion Shares initially issuable upon conversion of the Debentures, when
issued and delivered in accordance with the provisions of the Debentures and the
Securities Purchase Agreement, and the shares of Common Stock issuable upon
exercise of the Warrants, when issued and delivered in accordance with the
provisions of the Debenture Placement Agreement, will be validly issued, fully
paid and non-assessable.
We are
licensed to practice law in the State of New York, and we express no opinion as
to the law of any jurisdiction other than the laws of the State of New York and
the federal laws of the United States of America. Our opinions are
subject to the effects of, and we express no opinion with respect to the
application of or compliance with, state securities or “blue sky” laws,
statutes, rules or regulations.
This
opinion is furnished as of the date hereof and we assume no responsibility to
advise you of any changes in law or fact which may hereafter come to our
attention.
We hereby
consent to the filing of this opinion letter as an exhibit to the Registration
Statement and to the reference to our firm under the caption “Legal Matters” in
the prospectus included in the Registration Statement. In giving such
consent, however, we do not admit that we are within the category of persons
whose consent is required under Section 7 of the Securities Act or the rules and
regulations of the Commission issued thereunder.
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Very
truly yours,
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NOLAN
& HELLER, LLP
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EXHIBIT
23.1
CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We
consent to the incorporation by reference in the Registration Statement on Form
S-3, Amendment No. 1 (File No. 333-158582), pertaining to the Series A
Debentures of American Bio Medica Corporation, of our report dated March 30,
2009, included in its Annual Report on Form 10-K dated March 30, 2009, relating
to the financial statements of American Bio Medica Corporation as of December
31, 2008 and 2007 and for each of the years then ended.
UHY
LLP
Albany,
New York
May 5,
2009
