Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. AMERICAN BIO MEDICA CORP (896747) 10-Q published on May 20, 2021 at 4:06 pm
Reporting Period: Mar 30, 2021
Sales of drug tests continued to be negatively impacted by the price competitiveness in our core markets (government, employment and clinical) and by the Covid-19 pandemic. Sales related to Covid-19 testing also declined in the First Quarter 2021 compared to sales in the middle and latter part of the year ended December 31, 2020. In addition to the marketing of our drug tests, in the First Quarter 2021 we continued to market the Covid-19 IgG/IgM Rapid Test Cassette to detect Covid-19 antibodies in whole blood, serum or plasma (via a distribution agreement with Healgen Scientific, LLC, and we continued to market (via distribution) the Co-Diagnostics Logix Smart Covid-19 test. In December 2020, we announced that we were distributing a Rapid Covid-19 Antigen Test Cassette. In the middle of the First Quarter 2021, we were informed by the manufacturer that we could no longer offer the Covid-19 antigen test for sale in the United States.
In addition to the Covid-19 tests, we continued to offer additional products and services to diversify our revenue stream through third party relationships. We currently offer a lower-cost alternative for onsite drug testing, point of care products for certain infectious diseases and alternative drug testing sample methods. With the exception of the lower-cost drug test alternative, these offering have yet to materially positively impact sales. In the year ended December 31, 2019, we expanded our contract manufacturing operations with two (2) new customers. Unfortunately, the Covid-19 pandemic halted sales to these new customers in the year ended December 31, 2020. In the First Quarter 2021, we began discussions with these customers to resume sales given the introduction of Covid-19 vaccines and the belief that the need for their products will resume. We have open purchase orders (from 2020) with both customers and we expect to ship those orders starting the second quarter of 2021. One of the customers also placed an additional (new) order in April 2021.
Due to the Covid-19 pandemic, we are not yet marketing our oral fluid drug tests (OralStat®) in the employment and insurance markets in the United States (under a limited exemption set forth by the FDA). We remain hopeful that we can effectively market our OralStat in the United States markets given its superior sensitivity and accuracy. Initially we may re-introduce the product in markets outside the United States via distribution relationships.
NET SALES: Net sales for the First Quarter 2021 decreased 22.4% when compared to net sales in the First Quarter 2020. Sales of drug tests continue to be negatively impacted by the Covid-19 pandemic along with the price competitive nature of our core markets (government, employment and clinical). All of these markets are still requiring a lower amount of testing due to lingering stay at home orders, reduced workforce, telecommuting and reduced budgets (especially in the government market as financial resources are used for Covid-19 testing and vaccination. In the latter part of Fiscal 2020, we started to see some rebound in our drug testing markets, however, this rebound has not been consistent and we are unsure at this time when our drug testing markets will get back to normal. Sales in the Clinical markets improved slightly in the First Quarter 2021 when compared to the First Quarter 2020; this is a good sign for the Clinical market as they were not yet significantly impacted in the First Quarter 2020. This indicates we may be seeing a return to normalcy in the Clinical market. Our international drug testing sales were relatively flat when comparing the First Quarter 2021 with the First Quarter 2020. This indicates that while we are seeing some improvement in sales outside the United States, foreign markets are still being negatively impacted by the Covid-19 pandemic. Contract manufacturing sales improved in the First Quarter 2021 compared to the First Quarter 2020. This is primarily a result of orders of RSV (Respiratory Syncytial Virus) diagnostic tests in the First Quarter 2021. As indicated earlier in this document, the Covid-19 pandemic halted sales to two customers we secured in the year ended December 31, 2019. We have open purchase orders (from 2020) with both customers and we expect to ship those orders starting the second quarter of 2021. One of the customers also placed an additional (new) order in April 2021.
G&A expense increased 50.7% in the First Quarter 2021 compared to the First Quarter 2020. The primary reasons for the increase were fees incurred in connection with the extension of the Cherokee loans, which totaled $148,000 and, $15,000 in increased accounting fees (related to the Fiscal 2020 audit). In addition, increased costs associated with quality assurance salaries (due to increased rate of pay), general and administrative salaries (due to one additional employee), warehouse supplies (due to timing of purchases), repairs and maintenance associated with production, the timing of maintenance fee payments, and ISO audit fees, were partially offset by decreased director fees (due to telephonic meeting fees versus in person meeting fees), accounting fees (due to timing of fees) and repairs and maintenance of the Kinderhook facility (due to repairs needed in the First Quarter 2020 that did not recur in the First Quarter 2021). Share based payment expense remained relatively unchanged to $0 in the First Quarter 2021 from $1,000 in the First Quarter 2020.
Our loan and security agreement and 2019 Term Note with Cherokee for $900,000 and $220,000, respectively, expired on February 15, 2021; however, on February 24, 2021, the Company completed a transaction related to one-year Extension Agreements dated February 14, 2021 with Cherokee under which Cherokee extended the due date of the Cherokee LSA ($900,000) and the 2019 Term Loan with Cherokee ($220,000). Under the terms of the extension, the $900,000 (secured) Cherokee LSA was increased to $1,000,000 to include a $100,000 penalty that was due as a result of the Company being unable to pay back the principal balance to Cherokee on February 15, 2021. The annual interest rate on the extended Cherokee LSA was increased to a fixed rate of 10% (the prior fixed rate was 8%) plus a 1% annual oversight fee (that remained unchanged). In addition, the 2019 Cherokee Term Loan was increased to $240,000 to include a $20,000 penalty that was due as a result of the Company being unable to pay back the principal balance to Cherokee on February 15, 2021. Our total debt at March 31, 2021 with Cherokee Financial, LLC was $1,240,000. We do not expect cash from operations within the next 12 months to be sufficient to pay the amounts due under these credit facilities, which is due in full on February 15, 2022. We may be able to utilize the Lincoln Park equity facility to pay down a portion (or all) of the debt owed to Cherokee prior to the maturity date of February 15, 2022; however, as of the date of this report, that is not a certainty.