UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

Commission File Number:0-28666

518-758-8158

(Registrant’sRegistrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days x☒ Yes¨ ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files)x ☒ Yes¨ ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act¨   ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)¨ ☐ Yesx ☒ No

Indicate the number of shares outstanding of each of the issuer’sissuer's classes of common stock, as of the latest practicable date:

29,297,33348,098,476 Common Shares as of November 14, 2017

June 12, 2023

American Bio Medica Corporation

Index to Quarterly Report on Form 10-Q

For the quarter ended September 30, 2017March 31, 2023

PART I –- FINANCIAL INFORMATION

Item 1. Condensed Financial Statements

American Bio Medica Corporation

Condensed Balance Sheets

The accompanying notes are an integral part of the condensed financial statements

American Bio Medica Corporation

Condensed Statements of Operations

(Unaudited)

The accompanying notes are an integral part of the condensed financial statements

American Bio Medica Corporation

Condensed Statements of Operations

(Unaudited)

The accompanying notes are an integral part of the condensed financial statements

American Bio Medica Corporation

Condensed Statements of Cash Flows

(Unaudited)

The accompanying notes are an integral part of the condensed financial statements

Notes to condensed financial statements (unaudited)

September 30, 2017March 31, 2023

Note A –- Basis of Reporting

The accompanying unaudited interim condensed 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 (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Regulation S-X. Accordingly, these unaudited interim condensed financial statements do not include all information and footnotes required by U.S. GAAP for complete financial statement presentation. These unaudited interim condensed financial statements should be read in conjunction with audited financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.2022. In the opinion of management, the interim condensed financial statements include all normal, recurring adjustments which are considered necessary for a fair presentation of the financial position of the Company at September 30, 2017,March 31, 2023, and the results of operations for the three and nine month periods ended September 30, 2017 and September 30, 2016 and cash flows for the ninethree month periods ended September 30, 2017March 31, 2023 (the “First Quarter 2023”) and September 30, 2016.March 31, 2022 (the “First Quarter 2022”).

Operating results for the three and nine months ended September 30, 2017First Quarter 2023 are not necessarily indicative of results that maywill be expectedreported for the year ending December 31, 2017.2023 as the Company sold substantially all of its assets on February 28, 2023 to Healgen Scientific, LLC (“Healgen”). Amounts at December 31, 20162022 are derived from audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.2022.

During the nine months ended September 30, 2017,First Quarter 2023, there were no significant changes to the Company’s critical accounting policies, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.2022.

The preparation of these interim condensed 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 estimates, including those related to product returns, bad debts, inventories, income taxes, warranty obligations, contingencies and litigation. The Company bases 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 valuesvalue 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 interim condensed 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 independent registered public accounting firm’s report on the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016,2022, contained an explanatory paragraph regarding the Company’s ability to continue as a going concern. As of the date of this report, ourthe Company’s current cash balances together with cash generated from future operations and amounts available under our credit facilitiesexpected from its receivables (including the Employee retention Credit receivable and the retention (escrow) proceeds from the asset sale) may not be sufficient to fund operationsthe Company through November 2018. On May 1, 2017, we extended our line of credit. The new expiration date of our line of credit is June 29, 2020. The maximum availability on our line of credit remains to be $1,500,000. However, the amount available under our line of credit is based upon our accounts receivable and inventory. As of September 30, 2017, based on our availability calculation, there were no additional amounts available under our line of credit because we draw any balance available on a daily basis.2024.

As discussed in more detail in “Cash Flow, Outlook/Risk”, if sales levels decline further, we will have reduced availability on our line of credit due to decreased accounts receivable balances. In addition, we would expect our inventory levels to decrease if sales levels decline further, and this also will result in reduced availability on our line of credit. If availability under our line of credit is not sufficient to satisfy our working capital and capital expenditure requirements, we will be required to obtain additionalThe Company’s credit facilities or sell additional equity securities, or delay capital expenditures. There is no assurance that such financing will be available or that we will be able to complete financingwith Cherokee Financial, LLC (“Cherokee”) were paid in full with proceeds from the asset sale on satisfactory terms, if at all.February 28, 2023.

Recently Adopted Accounting Standards

We have disclosed the adoptionASU 2022-04, Liabilities – Supplier Finance Programs (Subtopic 405-50): Disclosure of previously released accounting standardsSupplier Finance Program Obligations, issued in earlier quarterly reports filedSeptember 2022, requires entities that use supplier finance programs in connection with the U.S. Securitiespurchase of goods and Exchange Commission (the “Commission”); these adoptionsservices to disclose the key terms of the programs and information about obligations outstanding at the end of the reporting period, including a rollforward of those obligations. The guidance does not affect the recognition, measurement or financial statement presentation of supplier finance program obligations. ASU 2022-04 became effective on January 1, 2023. The Company adopted ASU 2022-04 on January 1, 2023 and the adoption did not have an impact on ourthe Company’s financial statementcondition or results of operations. Inoperations as the three months ended September 30, 2017, we determined that Company does not (and has not historically) utilized supplier finance programs in connection with the purchase of goods and services.

ASU 2017-07, “Compensation - Retirement Benefits”2016-13, Financial Instruments—Credit Losses (Topic 326); Measurement of Credit Losses on Financial Instruments, issued in June 2016, requires companies to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The Company adopted ASU 2017-04 “Intangibles - Goodwill2016-13 on January 1, 2023 and Other (Topic 350)” (both previously disclosed in our Form 10-Q for the period ended June 30, 2017)adoption did not apply tohave a material impact on the Company. We did not adopt any new accounting standards in the three months ended September 30, 2017.Company’s financial condition or results of operations.

Accounting Standards Issued; Not Yet Adopted

ASU 2017-11, “Earnings Per Share, Distinguishing Liabilities from2022-03, Fair Value Measurement (Topic 820), Fair Value Measurement of Equity Derivatives and Hedging”. ASU 2017-11 wasSecurities Subject to Contractual Sale Restrictions, issued in July 2017.June 2022, clarifies that a contractual restriction on the sale of an equity security is not considered in measuring the security's fair value. The amendments in ASU 2017-11 change the classification analysis ofstandard also requires certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities ordisclosures for equity instruments, a down round feature will no longer preclude equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) would not be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entitiessecurities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt—Debt with Conversion and Other Options), including related EPS guidance (in Topic 260).contractual restrictions. ASU 2017-11 is2022-03 becomes effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.on January 1, 2024. Early adoption is permitted. The Company is evaluating the impact of ASU 2017-11.2022-03.

ASU 2017-09, “Compensation – Stock Compensation (Topic 718)”. ASU 2017-09 wasAny other new accounting pronouncements recently issued, in May 2017. The amendments in ASU 2017-09 provide guidance about which changesbut not yet effective, have been reviewed and determined to the termsbe not applicable or conditions of a share-based payment award require an entity to apply modification accounting. More specifically, that an entity should account for the effects of modification unless all the following are met: 1) the fair value, calculated or intrinsic value of the modified award is the same fair value, calculated or intrinsic value of the original award immediately before the original award is modified, 2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified and 3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original grant is modified. The current disclosure requirements in Topic 718 apply regardless of whether accounting modification is applied. ASU 2017-09 is effective for annual periods and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted. The Company is evaluating the impact of ASU 2017-09.

ASU 2017-01, “Business Combinations (Topic 805)”. ASU 2017-01 was issued in January 2017. The amendments in ASU 2017-01 clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for interim and annual periods beginning after December 15, 2017 and should be applied prospectively on or after the effective date. The Company is in the process of evaluating the impact of ASU 2017-01.

ASU 2016-02, “Leases”. ASU 2016-02 was issued in February 2016 and it requires a lessee to recognize a lease liability and a right-of-use asset on its balance sheet for all leases, including operating leases, with a term greater than 12 months. Lease classification will determine whether a lease is reported as a financing transaction in the income statement and statement of cash flows. ASU 2016-02 does not substantially change lessor accounting, but it does make certain changeswere related to leases for which collectabilitytechnical amendments or codification. As a result, the adoption of the lease payments is uncertain or there are significant variable payments. Additionally, ASU 2016-02 makes several other targeted amendments including a) revising the definition of lease payments to include fixed payments by the lessee to cover lessor costs related to ownership of the underlying asset such as for property taxes or insurance; b) narrowing the definition of initial direct costs which an entity is permitted to capitalize to include only those incremental costs of a lease that would not have been incurred if the lease had not been obtained; c) requiring seller-lessees in a sale-leaseback transaction to recognize the entire gain from the sale of the underlying asset at the time of sale rather than over the leaseback term; and d) expanding disclosures to provide quantitative and qualitative information about lease transactions. ASU 2016-02 is effective for all annual and interim periods beginning January 1, 2019, and is required to be applied retrospectively to the earliest period presented at the date of initial application, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2016-02.

ASU 2014-09, “Revenue from Contracts with Customers”. ASU 2014-09 was issued in May 2014 and it provides guidance for revenue recognition. The core principle of ASU 2014-09 is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under current guidance. Examples of the use of judgments and estimates may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The update also requires more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. ASU 2014-09 provides for two transition methods to the new guidance: a retrospective approach and a modified retrospective approach. In August 2015, ASU 2015-14, “Revenue from Contracts with Customers: Deferral of the Effective Date” was issued as a revision to ASU 2014-09. ASU 2015-14 revised the effective date to fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted but not prior to periods beginning after December 15, 2016 (i.e. the original adoption date per ASU No. 2014-09). The Company is currently evaluating the transition methods and the impact of adopting this ASU.

There are no other accounting pronouncements, issues during the nine months ended September 30, 2017 that arewhen effective, is not expected to have or that could have a significant impactmaterial effect on ourthe Company’s financial position or results of operations.

Reclassifications

Certain items have been reclassified from the prior year to conform to the current year presentation.

Note B – Inventory

Inventory is comprised of the following:

*On February 28, 2023, the Company sold substantially all of its assets to Healgen, including its inventory.

Note C – Property, Plant and Equipment

Property, plant and equipment, is comprised of the following:

*On February 28, 2023, the Company sold substantially all of its assets to Healgen, including its property, plant and equipment.

Note D – Accrued Expenses

Accrued expenses and other current liabilities consisted of the following as of March 31, 2023 and December 31, 2022:

Note E – Net LossIncome / (Loss) Per Common Share

Basic net lossincome / (loss) per common share is calculated by dividing the net lossincome / (loss) by the weighted average number of outstanding common shares during the period. Diluted net lossincome / (loss) per common share includes the weighted average dilutive effect of stock options and warrants. When the Company has a loss, option and warrants are not included as they would be anti-dilutive. In the three months ended March 31, 2023, although the Company had net income, there were no options in the money at March 31, 2023. Potential common shares outstanding as of September 30, 2017March 31, 2023 and 2016:2022:

The number of securities not included in the diluted net loss per share for the three and nine months ended September 30, 2017 was 4,207,000, as their effect would have been anti-dilutive due to the net loss in each period.

The number of securities not included in the diluted net loss per share for the three and nine months ended September 30, 2016 was 4,242,000, as their effect would have been anti-dilutive due to the net loss in each period.

Note DF – Litigation/Legal Matters

In February 2017, the Company filed a complaint in the Supreme Court of the State of New York in Columbia County against Premier Biotech Inc., Premier Biotech Labs, LLC and its principals, including its President Todd Bailey, and Peckham Vocational Industries, Inc. (together the “Defendants”). Mr. Bailey formerly served as the Company’s Vice President of Sales and Marketing and as a sales consultant until December 23, 2016. The complaint seeks preliminary and permanent injunctions and a temporary restraining order against Todd Bailey (for his benefit or the benefit of another party or entity) related to the solicitation of Company customers as well as damages related to any profits and revenues that would result from actions taken by the Defendants related to Company customers. In March 2017, the complaint was moved to the federal court in the Northern District of New York. In April 2017, the Defendants filed a motion to dismiss, to which the Company responded on April 21, 2017. On July 10, 2017, the Company was notified that it was not awarded a contract with a state agency for which it has held a contract in excess of 10 years. The contract in question is included in the February 2017 complaint. The Company believes that the Defendants actions related to this customer and a RFP that was issued by the state agency resulted in the loss of the contract award to the Company and the award of the contract to Peckham and Premier Biotech. This contract historically accounted for 10-15% of the Company’s annual revenue. The Company continued to hold a contract with the agency through September 30, 2017. The Company did protest the award of the contract to Peckham and Premier Biotech, and the state agency advised the Company on July 26, 2017 that they denied the Company’s protest of the award. The Company amended its complaint against the Defendants to show actual damages caused by the Defendants and to show proprietary and confidential information (belonging to the Company) used by the Defendants in their response to the RFP. This confidential information belonging to the Company enabled the Defendants to comply with specifications of the RFP. The Defendants filed a response to the court opposing our supplemental motion and we filed our reply papers to the Defendants response on November 2, 2017. As of the date of this report, the Company is awaiting the court’s rulings on the parties’ motions.

In addition, fromFrom time to time, the Company may be namedinvolved in immaterial legal proceedings in connection with matters that arise during the normal course of business. While the ultimate outcome of any such immaterial litigation cannot be predicted, if we arethe Company is unsuccessful in defending any such litigation, the resulting financial losses couldare not expected to have ana material adverse effect on the financial position, results of operations andor cash flows of the Company. We are aware of no significant litigation loss contingencies for which management believes it is both probable that a liability has been incurred and that the amount of the loss can be reasonably estimated.

Note EG – Debt

The Company’s Line of Credit and Debt consisted of the following as of March 31, 2023 and December 31, 2022:

LOAN AND SECURITY AGREEMENT (“LSA”) WITH CHEROKEE FINANCIAL, LLC (“CHEROKEE”)

On March 26, 2015, the Company entered into a LSA with Cherokee Financial, LLC (the “Cherokee LSA”). The purpose in the amount of the Cherokee LSA$1,200,000, which was to refinance, at a better interest rate, the Company’s Series A Debentures and Cantone Asset Management Bridge Loan (both of which matured on February 1, 2015), as well as the Company’s Mortgage Consolidation Loan with First Niagara Bank (“First Niagara”). The loan is collateralized by a first security interest in real estate and machinery and equipment. UnderThe Cherokee LSA reached maturity on February 15, 2020 with a balance of $900,000 (after 4 principal reduction payments of $75,000 each were made over the course of the initial term). In February 2020, the Cherokee LSA was extended for one year, or until February 15, 2021. No terms of the facility were changed under the February 2020 extension.

In February 2021, the Cherokee LSA was further extended for another year, or until February 15, 2022 (the “February 2021 Extension”). Under the February 2021 Extension, the principal of the Cherokee LSA was increased to $1,000,000 to include a $100,000 penalty that was due as a result of the Company was providedbeing unable to pay back the sum of $1,200,000 in the form of a 5-year Note at anprincipal balance to Cherokee on February 15, 2021. The annual interest rate of 8%. The Company is making interest only payments quarterly on the Cherokee Note, with the first interest payment paid on May 15, 2015. The Company is also required to make an annual principal reduction payment of $75,000 on each anniversary of the date of the closing; with the first principal reduction payment being made on February 15, 2016 and the most recent principal reduction payment being made on February 16, 2017. A final balloon payment is due on March 26, 2020. In addition to the 8% interest, the Company pays Cherokee Financial, LLC (“Cherokee”) a 1% annual fee for oversight and administration of the loan. This oversight fee is paid in cash and is paid contemporaneously with the quarterly interest payments. The Company can pay off the Cherokee Note at anytime with no penalty; except that a 1% administration fee would be required to be paid to Cherokee to close out all participations.

The Company issued 1.8 million restricted shares of the Company’s common stock to Cherokee for payment of fees. In addition, because the loan was not repaid in full as of March 19, 2016, the Company issued another 600,000 restricted shares of common stock to Cherokee in March 2016.

As placement agent for the transaction, Cantone Research, Inc. (“CRI”) received a 5% cash fee on the $1.2 million, or $60,000, and 200,000 restricted shares of the Company’s common stock. In addition, because the loan was not repaid in full as of March 19, 2016, the Company issued another 196,000 restricted shares of common stock to CRI in March 2016.

The Company received net proceeds of $80,000 after $1,015,000 of debt payments, $60,000 in placement agent fees, $19,000 in legal fees, $19,000 in expenses, $3,000 in state filing fees and $4,000 in interest expense (for 8% interest on $511,000 in new participations received from February 24, 2015 through March 25, 2015). With the adoption of ASU No. 2015-03 in the First Quarter 2016, these transaction costs (with the exception of the interest expense) are now being deducted from the balance on the Cherokee LSA was also increased to a fixed rate of 10% (the prior fixed rate was 8%) plus a 1% annual oversight fee (that remained unchanged). Interest and are being amortized over the termoversight fee were still due quarterly.

Under the terms of the debt.February 2021 Extension, if the Company didn’t pay off the principal on or before February 15, 2022, Cherokee could charge an 8% delinquent fee on the principal balance ($1,000,000) on February 15, 2022. The Company was not able to pay off the facility on February 15, 2022; however, on June 14, 2022 Cherokee agreed that they would defer the principal amounts due under the Cherokee LSA until February 15, 2023 and that any applicable penalties would also be deferred as long as the Company remained current on the quarterly interest payments.

From these netOn February 28, 2023, with proceeds in April 2015,from the Asset Sale to Healgen, the Company also paid $15,000 in interest expense relatedall amounts due to 15% interest on $689,000 in Series A DebenturesCherokee under the LSA for principal and CAM Bridge Loan for the period of February 1, 2015 through March 25, 2015.interest.

The Company recognized $128,000$13,000 in interest expense related to the Cherokee LSA in the nine months ended September 30, 2017 (of which $70,000 is debt issuance cost amortization recorded as interest expense as a result of the adoption of new accounting standards in the first quarter of 2016,First Quarter 2023 and $137,000 in interest expense in the nine months ended September 30, 2016 (of which $64,000 was debt issuance cost amortization recorded as interest expense as a result of the adoption of new accounting standards in the first quarter of 2016). The Company recognized $45,000$25,000 in interest expense related to the Cherokee LSA in the three months ended September 30, 2017 (ofFirst Quarter 2022

As of March 31, 2023 and December 31, 2022, the balance of the Cherokee LSA was $0 and $1,000,000, respectively.

2019 TERM LOAN WITH CHEROKEE

In February 2019, the Company entered into an agreement with Cherokee under which $23,000 is debt issuance cost amortization recorded asCherokee provided the Company with a loan in the amount of $200,000 (the “2019 Cherokee Term Loan”). The annual interest expenserate under the 2019 Cherokee Term Loan was 18% (fixed) paid quarterly in arrears.

In February 2020, the 2019 Cherokee Term Loan was extended for one year, or until February 15, 2021. No terms of the facility were changed under the February 2020 extension. The Company incurred a penalty in the amount of $20,000 which was added to the principal balance of the 2019 Cherokee Term Loan; bringing the principal to $220,000.

In February 2021, the 2019 Cherokee Term Loan was further extended to February 15, 2022. Under the terms of this additional extension, the 2019 Cherokee Term Loan was increased to $240,000 to include a $20,000 penalty that was due as a result of the adoption of new accounting standards inCompany being unable to pay back the first quarter of 2016)principal balance to Cherokee on February 15, 2021. In addition, if the Company didn’t pay off the principal on or before February 15, 2022, Cherokee could charge an 8% delinquent fee on the principal balance ($240,000) on February 15, 2022. The Company was not able to pay off the facility on February 15, 2022; however, on June 14, 2022 Cherokee agreed that they would defer the principal amounts due under the 2019 Cherokee Term Loan until February 15, 2023 and $47,000that any applicable penalties would also be deferred as long as the Company remained current on the quarterly interest payments.

The Company recognized $4,000 in interest expense in the three months ended September 30, 2016 (of which $23,000 was debt issuance cost amortization recorded asFirst Quarter 2023 and $11,000 in interest expense as a resultin the First Quarter 2022. The Company paid all principal and interest due to Cherokee on February 28, 2023 with proceeds from the Asset Sale to Healgen. The balance of the adoption of new accounting standards2019 Cherokee Term Loan was $0 at March 31, 2023 and $240,000 at December 31, 2022.

NOVEMBER 2020 TERM LOAN

On November 4, 2020, the Company entered into a loan agreement with an individual shareholder in the principal amount of $50,000. There were no expenses related to the term loan and the interest rate is 7%. The first quarterinterest only payment was made on February 4, 2021 and the final interest payment and principal was due on May 4, 2021. On May 4, 2021, the Company extended this loan for another 6 months, or until November 4, 2021. The interest rate and all other terms of 2016).the note remained unchanged under this extension.

The Company had $11,000recognized less than $1,000 in accrued interest expense related to the November 2020 Term Loan in the First Quarter 2023 and $1,000 in interest expense in the First Quarter 2022. The balance on the November 2020 Term Loan was $50,000 at March 31, 2023 and December 31, 2022. (See Note M – Subsequent Events for more information on the November 2020 Term Loan)

DECEMBER 2021 SHAREHOLDER LOANS

On December 14, 2021, the Company entered into Loan Agreements with two non-affiliated shareholders resulting in gross (and net) proceeds of $75,000 as there were no costs associated with the loans. Interest on the loans was 7% per annum until principal and interest were due in full, or until June 15, 2022. The first interest payments were due March 15, 2022 and payment of final interest and principal was due June 15, 2022.

One of the loans (in the amount of $25,000) was paid in full on June 13, 2022 along with the final interest payment due.

On April 6, 2022, the Company amended the loan with the other non-affiliated shareholder. This amendment (No.1; hereinafter referred to in this paragraph as “Amendment No. 1”) increased the principal due to the shareholder by $25,000; bringing their total principal to $75,000. No other terms of the loan were changed under Amendment No. 1.

On April 14, 2022, the loan was amended again (under Amendment No. 2; hereinafter referred to in this paragraph as “Amendment No. 2”) increasing the principal again by $50,000; bringing their total principal to $125,000. No other terms of the loan were changed under Amendment No. 2.

On May 11, 2022, the loan was amended again (under Amendment No. 3; hereinafter referred to in this paragraph as “Amendment No. 3”) increasing the principal again by $75,000; bringing their total principal to $200,000. The loan was further amended to include a specific payment schedule based on receipt of anticipated ERC refunds.

On June 13, 2022, the Company made a principal reduction payment to this shareholder in the amount of $25,000 from proceeds from the ERC refund received on June 2, 2022; bringing the principal amount owed on the loan to $175,000.

On July 13, 2022, the loan was amended again (under Amendment No. 4; hereinafter referred to in this paragraph as “Amendment No. 4”) increasing the principal by $25,000; bringing their total principal to $200,000 again. The loan agreement was also amended to revise the maturity date from June 15, 2022 to no specific maturity date.

On September 30, 2017,13, 2022, the loan was amended again (under Amendment No. 5; hereinafter referred to in this paragraph as “Amendment No. 5”) increasing the principal by $25,000; bringing their total principal to $225,000 again.

On September 28, 2022, the shareholder provided the Company with additional funds, $40,000, under this loan with the understanding that the amount would be paid back once the Healgen Loan funds were received and $18,000there would be no interest charged on this additional amount. This increased the amount due to the shareholder under the facility to $265,000. The Company did pay this additional amount in full on October 4, 2022; bringing the balance of the loan back to $225,000.

The Company incurred $4,000 in interest expense related to these loans in the First Quarter 2023 and $1,000 in interest expense related to these loans in the First Quarter 2022.

The balance on these loans was $125,000 on March 31, 2023 and $225,000 at December 31, 2016.2022. (See Note M – Subsequent Events for more information on the December 2021 Shareholder Loans)

AsSEPTEMBER 2022 HEALGEN LOAN & PROMISSORY NOTE

On September 28, 2022, the Company entered into a Loan and Promissory with Healgen Scientific Limited Liability Company (the “Healgen Loan”) at a fixed rate of September 30, 2017,1% per month, (compounded monthly) and received initial gross/net proceeds of $40,000 and subsequent gross/net proceeds of $360,000; for a total of $400,000. The Company utilized $34,000 of the loan proceeds to pay off the Crestmark Line of Credit and the balance was used for working capital. The Healgen Loan was collateralized by a first security interest in the Company’s receivables, inventory, and all other assets with the exception of those assets already encumbered. The first payment under the Healgen Loan was due on January 28, 2023 and was in the amount of $140,000.

The Healgen Loan was amended on November 15, 2022 to increase the principal due under the loan to $700,000. Under this first amendment, the loan maturity date was extended to April 15, 2023 and the first payment date was extended to February 15, 2023 and changed to $246,000.

The Healgen loan was amended again on December 19, 2022 to increase the principal due under the loan to $715,000. Under this second amendment, the amount of the first payment was changed to $251,000 with payments of the same amount due on March 15, 2023 and April 15, 2023.

The Healgen Loan was amended again on January 6, 2023 to increase the principal due under the loan to $815,000. Under this third amendment, the amount of the first payment (due February 15, 2023) was changed to $286,000 with payments of the same amount due on March 15, 2023 and April 15, 2023. No other terms of the Healgen Loan were changed.

The Healgen Loan was amended again on February 9, 2023 to increase the principal due under the loan to $965,000. Under this fourth amendment, the amount of the first payment (due February 15, 2023) was changed to $337,000 with payments of the same amount due on March 15, 2023 and April 15, 2023. No other terms of the Healgen Loan were changed.

On February 28, 2023, with proceeds from the Asset Sale to Healgen, the Company made a payment in the amount of $965,000 to Healgen for all principal due under the Healgen Loan. Healgen waived all interest due under the Healgen Loan.

The balance on the Cherokee LSA is $1,050,000; however the discounted balance is $823,000. As ofHealgen Loan was $0 at March 31, 2023 and $715,000 at December 31, 2016,2022.

OTHER DEBT INFORMATION

In addition to the balancedebt indicated previously, previous debt facilities (paid in full via refinance or conversion into equity) had financial impact on the Cherokee LSA was $1,125,000; however the discounted balance, net of debt discount and debt issuance costs was $828,000.First Quarter 2022. More specifically:

LINE OF CREDIT WITH CRESTMARK BANK (“CRESTMARK”)

On June 29, 2015, (the “Closing Date”), the Company entered into a three-year Loan and Security Agreement (“LSA”) with Crestmark related to a new Senior Lender, to refinance the Company’s Linerevolving line of Credit with Imperium Commercial Finance, LLC (“Imperium”credit (the “Crestmark LOC”). The Crestmark Line of Credit isLOC was used for working capital and general corporate purposes. On May 1, 2017,Upon completion of the initial 5 year term, the Crestmark LOC automatically renewed for additional one (1) year terms unless notice of termination from the Company entered into term loan withwas received by Crestmark not less than sixty (60) days prior to the end of the renewal term. On September 29, 2022, the Company made a payment to Crestmark in the amount of $38,000 related to$34,000 which paid off the purchase of manufacturing equipment (See “Equipment Loan with Crestmark”), and in connection with this equipment loan, the Company executed an amendment to its LSA and Promissory Note with Crestmark. The amendments addressed the inclusion of the equipment loan into the Crestmark LSA and an extension of the Company’s line of credit with Crestmark. Apart from the extension of the LSA, no terms of the line of credit were changed in the amendment. The termination date of the Crestmark line of credit was changed from June 22, 2018 to June 22, 2020 under the amendments.

Under the LSA, Crestmark is providing the Company with a Line of Credit of up to $1,500,000 (“Maximum Amount”) with a minimum loan balance requirement of $500,000. The Line of Credit is secured by a first security interest in the Company’s inventory, and receivables and security interest in all other assets of the Company (in accordance with permitted prior encumbrances).

The Maximum Amount is subject to an Advance Formula comprised of: 1) 90% of Eligible Accounts Receivables (excluding, receivables remaining unpaid for more than 90 days from the date of invoice and sales made to entities outside of the United States), and 2) up to 40% of eligible inventory plus up to 10% of Eligible Generic Packaging Components not to exceed the lesser of $350,000 (“Inventory Sub-Cap Limit”), or 100% of the Eligible Accounts Receivable.

So long as any obligations are due to Crestmark, the Company must comply with a minimum Tangible Net Worth (“TNW”) Covenant. Under the LSA, as amended, the Company must maintain a TNW of at least $650,000. Additionally, if a quarterly net income is reported, the TNW covenant will increase by 50% of the reported net income. If a quarterly net loss is reported, the TNW covenant will remain the same as the prior quarter’s covenant amount. TNW is defined as: Total Assets less Total Liabilities less the sum of (i) the aggregate amount of non-trade accounts receivables, including accounts receivables from affiliated or related persons, (ii) prepaid expenses, (iii) deposits, (iv) net lease hold improvements, (v) goodwill and (vi) any other asset that would be treated as an intangible asset under GAAP; plus Subordinated Debt. Subordinated Debt means any and all indebtedness presently or in the future incurred by the Company to any creditor of the Company entering into a written subordination agreement with Crestmark. The Company is in compliance with this covenant at September 30, 2017.

If the Company terminates the LSA prior to June 22, 2020, an early exit fee of 2% of the Maximum Amount (plus any additional amounts owed to Crestmark at the time of termination) would be due.

In the event of a default of the LSA, which includes but is not limited to, failure of the Company to make any payment when due and non-compliance with the TNW covenant, Crestmark is permitted to charge an Extra Rate. The Extra Rate is the Company’s then current interest rate plus 12.75% per annum.

Under the LSA, interest on the Crestmark Line of Credit is at a variable rate based on the Wall Street Journal Prime Rate plus 2% with a floor of 5.25%. As of the date of this report, the interest only rate on the Crestmark Line of Credit is 6.25%. In addition to the interest rate, on the Closing Date and on each one-year anniversary date thereafter, the Company will pay Crestmark a Loan Fee of 0.50%, or $7,500, and a Monthly Maintenance Fee of 0.30% of the actual average monthly loan balance from the prior month will be paid to Crestmark. As of the date of this report, the interest rate in effect is 10.93% (with all fees; including the weighted annual fee, which is charged on the closing date anniversary and is $7,500 regardless of our balance on the line of credit).

In addition to the Loan Fee paid to Crestmark on the Closing Date, the Company had to pay a success fee (i.e. early termination fee) to Imperium in the amount of $50,000 on the Closing Date, and a Broker’s Fee of 5%, or $75,000, to Landmark Pegasus Inc. Prior to the Closing, the Company paid $12,000 in due diligence fees to Crestmark. The Company also incurred $3,000 of its own legal costs related to the Crestmark Line of Credit. With the exception of the early term fee ($50,000) paid to Imperium (which was fully expensed in the year ended December 31, 2015), these expenses are all being amortized over the initial term of the Crestmark Line of Credit, or three years. The Company recognized $24,000 of this expense in the nine months ended September 30, 2017 and in the nine months ended September 30, 2016. The Company recognized $8,000 of this expense in the three months ended September 30, 2017 and in the three months ended September 30, 2016.LOC.

The Company recognized $76,000 of interest expense related to the Crestmark Line of Credit in the nine months ended September 30, 2017 (of which $24,000 is debt issuance cost amortization recorded as interest expense as a result of the adoption of new accounting standards) and $73,000incurred $0 in interest expense in the nine months ended September 30, 2016 (of which $26,000 is debt issuance cost amortization recorded as interest expense). The Company recognized $25,000 of interest expense in the three months ended September 30, 2017 (of which $8,000 is debt issuance cost amortization recorded as interest expense)First Quarter 2023 and $24,000$10,000 in interest expense in the three months endedFirst Quarter 2022.

NOTE H – Employee Retention Credit

The employee retention credit (“ERC”), as originally enacted on March 27, 2020 by the CARES Act, was a refundable tax credit against certain employment taxes equal to 50% of the qualified wages an eligible employer paid to employees and allowed claims through December 31, 2021 by eligible employers who retained employees during the Covid-19 pandemic. However, in November 2021, the ERC was terminated as of September 30, 2016 (of which $8,000 is debt issuance cost amortization recorded as interest expense).2021 instead of December 31, 2021.

GivenThe maximum qualified wages for each employee under the natureERC was $10,000 per quarter. Also, because the Company has 100 or fewer full-time employees, health plan expenses borne by the Company could also be included as qualified wages in addition to salary. In August 2021, the Company’s payroll service provider processed and mailed a Form 941-X to claim a refund in the amount of $202,000 on qualified wages paid in the administrationfirst quarter of 2021. Due to a change in the Crestmark LineForm 941-X, the Company’s payroll service provider did not process and mail its Form 941-X to claim a refund in the amount of Credit, at September 30, 2017,$198,000 on qualified wages paid in the second quarter of 2021 until October 28, 2021.

The Company was informed that the IRS did not have record of receiving the Company’s Form 941-X for the first quarter of 2021 (which was mailed by the Company’s service provider in August 2021). The Company re-sent the Form 941-X for the first quarter of 2021 via overnight service on December 31, 2021 and the IRS received it on January 5, 2022. This lack of receipt resulted in a delay in receiving the expected refund in the amount of $202,000.

On June 2, 2022, the Company received a refund for the second quarter of 2021 in the amount of $199,000. This amount represents the $198,000 claimed as a refund and $1,000 in interest. The Company has had a number of discussions with the IRS and has been given a number of time frames in which the refund for the first quarter of 2021 could be expected. As of March 31, 2023, the Company had $0not yet received the refund. (See Note M – Subsequent Events for updated information on the ERC refund)

Note I – Asset Sale to Healgen

Over the last several years, the Company has retained financial consultants to seek out alternative solutions; most recently in accrued interest expense relatedearly Fiscal 2022. The consultants were seeking solutions including but not limited to potential mergers, acquisitions, investment in the Company, and strategic relationships. Simultaneously, the Company’s management was seeking alternative solutions and began discussions with Healgen. With the current financial condition of the Company, the Company was not able to find a suitable alternative apart from the Asset Sale to Healgen.

After carefully weighing the facts and circumstances associated with the Asset Sale to Healgen as well as alternative courses of action, the Company’s Board of Directors (the “Board”) unanimously concluded that the proposed sale of substantially all of the Company’s assets was the best available alternative to maximize value for shareholders.

The Board believes the Company’s status as a fully reporting public company is an asset which may be sufficiently attractive to induce others to enter into business combinations with the Company. The Company is exploring strategic transactions which may result in entering into a new line of business (subject to specific competitive limitations under the Asset Sale to Healgen). The Company believes strategic acquisitions using the Company’s publicly traded stock as transaction consideration could enhance shareholder value. Nonetheless, the Board may later determine to dissolve the Company and distribute any remaining assets to the Crestmark Line of Credit, and thereCompany’s shareholders if the Company is $0 in additional availability under the Crestmark Line of Credit.

As of September 30, 2017, the balance on the Crestmark Line of Credit was $580,000, and as of December 31, 2016, the balance on the Crestmark Line of Credit was $639,000.

EQUIPMENT LOAN WITH CRESTMARKunable to make any strategic acquisitions or enter into any strategic transactions.

On May 1, 2017,December 19, 2022, the Company entered into term loanan Asset Purchase Agreement (“APA”) with CrestmarkHealgen, pursuant to which the Company agreed, subject to the approval of its shareholders, to sell substantially all of the Company’s operating assets (excluding its cash, accounts receivables arising prior to the closing date, and certain other assets). The Company submitted the Asset Sale to Healgen to a shareholder vote via a preliminary Proxy Statement filed on December 22, 2022. On January 5, 2023, the Company filed an amendment to its Preliminary Proxy Statement and on January 11, 2023, the Company filed its Definitive Proxy Statement with the SEC.

On February 15, 2023, the Company held the 2023 Special Meeting of Shareholders (the “Special Meeting”) at the Company’s corporate offices in Kinderhook, New York, at which a quorum (27,863,899 shares of common stock of the 47,098,476 shares of common stock outstanding) was present in person or represented by proxy.

Approval of the Asset Sale to Healgen required the affirmative vote of the holders of a majority of the outstanding shares of the Company’s common stock (par value $0.01). 26,381,832, or 54.84% of the total outstanding shares of the Company, voted in favor of the Asset Sale to Healgen. 1,476,077, or 3.06% of the total outstanding shares, voted against the Asset Sale to Healgen. 5,990, or 0.01% of the total shares outstanding, withheld voting on the Asset Sale to Healgen. Given the majority of total outstanding shares voted in favor of the Asset Sale to Healgen, the Asset Sale to Healgen was approved.

On February 28, 2023, the Company completed the Asset Sale to Healgen and disposition of substantially all of the Company’s assets. In connection with the closing of the Asset Sale to Healgen, and in accordance with the terms of the Asset Purchase Agreement, Healgen paid an aggregate purchase price of $3 million (“Purchase Price”). $300,000 of the Purchase Price is being held back in a retention fund to cover potential indemnification claims during the six months following the close. Net proceeds in the amount of $38,000 related to$247,000 were received by the purchaseCompany after satisfaction of manufacturing equipment. The equipment1) a loan is collateralized by a first security interest in a specific piece of manufacturing equipment. The Company executed an amendment to its LSA and Promissory Note with Crestmark. The amendments addressed the inclusion of the term loan into the LSA and an extension of the Company’s line of credit with Crestmark. No terms of the line of credit were changedHealgen in the amendment. Theamount of $965,000, 2) the Cherokee LSA, (totaling $1,031,000 for principal and interest rate onthrough February 27, 2023), 3) the term loan is2019 Cherokee Term Loan (totaling $252,000 for principal and interest through February 27, 2023), 4) delinquent property related taxes in the WSJ Prime Rate plus 3%; or 7.25% asamount of the date of this report. The termination date of the Crestmark line of credit was changed from June 22, 2018 to June 22, 2020 under the amendments. The balance on the equipment loan was $34,000 as of September 30, 2017.$193,000 and 5) $12,000 for current property related taxes.

NOTE FJ – Stock Options and Warrants

The Company currently has two non-statutory stock option plans, the Fiscal 2001 Non-statutory Stock Option Plan (the “2001 Plan”) and the 2013 Equity Compensation Plan (the “2013 Plan”). Both plans have been adopted by ourthe Board of Directors and approved by our shareholders. Both the 2001 Plan and the 2013 Plan have options available for future issuance. Any common shares issued as a result of the exercise of stock options would be new common shares issued from our authorized issued shares.

During the three months ended September 30, 2017First Quarter 2023 and September 30, 2016,the First Quarter 2022, the Company issued 0 stock options.options to purchase shares of common stock.

Stock option activity for the nine months ended September 30, 2017First Quarter 2023 and September 30, 2016the First Quarter 2022 is summarized as follows (the figures contained within the tables below have been rounded to the nearest thousand):

The following table summarizes weighted-average assumptions using the Black-Scholes option-pricing model used on the date of the grants issued during the nine months ended September 30, 2017 and September 30, 2016:

The Company recognized $33,000$0 in share based payment expense in the nine months ended September 30, 2017First Quarter 2023 and $49,000 inthe First Quarter 2022. At March 31, 2023, there was $0 of unrecognized share based payment expense in the nine months ended September 30, 2016. The Company recognized $10,000 in share based payment expense in the three months ended September 30, 2017 and $13,000 in share based payment expense in the three months ended September 30, 2016. As of September 30, 2017, there was approximately $16,000 of total unrecognized compensation cost related to non-vested stock options, which vest over time. The cost is expected to be recognized over a period ranging from 3-8 months.

Warrantsoptions.

Warrant activity for the nine months ended September 30, 2017 and September 30, 2016 is summarized as follows:

In the nine months ended September 30, 2017 and September 30, 2016, the Company recognized $0NOTE K – Changes in debt issuance and deferred finance costs related to the issuance of the above warrants outstanding. In the three months ended September 30, 2017 and September 30, 2016, the Company recognized $0 in debt issuance and deferred finance costs related to the issuance of the above warrants. As of September 30, 2017, there was $0 of total unrecognized expense.Stockholders’ Deficit

NOTE G – SUBSEQUENT EVENTLANDMARK CONSULTING AGREEMENT

On October 20, 2017,March 7, 2022, the Company received noticeentered into a Financial Advisory Agreement (the “Agreement”) with Landmark Pegasus, Inc. (‘Landmark”). The Agreement provided that Todd Bailey (“Bailey”)Landmark would provide certain financial advisory services for a minimum period of 3 months (which period commenced on February 28, 2022), its former Vice Presidentand as consideration for these services, the Company would pay Landmark (a) a retainer fee consisting of Sales & Marketing500,000 restricted shares of common stock and sales consultant filed a complaint againstwarrant to purchase 2.75 million shares of the Company’s common stock at a strike price equal to the average closing price of the Company’s common shares for the 30 days preceding the Agreement, or $0.035 per share, resulting in gross proceeds to the Company in the Stateamount of Minnesota seeking deferred commissions$96,250. The warrant would vest upon the closing of $164,000a transaction involving Landmark or upon the invocation of a “Breakup Fee”.

In a subsequent amendment, the terms of the warrant were changed to reflect that Bailey allegesthe warrant would be issued immediately preceding the closing of a transaction involving Landmark or immediately upon the invocation of the Breakup Fee. In each case, the warrant would vest immediately (i.e. the warrant would be 100% immediately exercisable).

The Breakup Fee would be invoked upon the generation of a specific transaction to ABMC which meets certain criteria agreed upon by both the Company and Landmark; which transaction is owed to himthen rejected by the Company. Bailey is oneThe Company would also pay to Landmark a “Success Fee” for the consummation of a transaction closing during the term of the defendantsAgreement and for 12 months thereafter, between the Company and any party first introduced to the Company by Landmark, or with any party the Company has specifically requested Landmark’s assistance with the transaction. Upon invocation of the Breakup Fee or payment of the Success Fee, the Company would also issue an additional 250,000 restricted shares of the Company’s common stock. In the event that the Company consummated a transaction involving the provision of services to any party introduced to the Company by Landmark or with any party the Company has specifically requested Landmark’s assistance with, the Company would pay Landmark 10% of any revenues received from the transaction, unless this percentage is modified by both the Company and Landmark in writing. There is no material relationship between the Company and Landmark, other than with respect to the Agreement.

Apart from the initial 500,000 restricted common shares, no additional stock was issued to Landmark and no further amounts were paid to Landmark.

Note L- Income Taxes

The Company follows ASC 740 “Income Taxes” (“ASC 740”) which prescribes the asset and liability method whereby deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities, and are measured using the enacted laws and tax rates that will be in effect when the differences are expected to reverse. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance for any tax benefits that are not expected to be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the litigation discussed previously in Note D. On November 2, 2017, we filed a Noticeperiod that such tax rate changes are enacted. Under ASC 740, tax benefits are recorded only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of Removal in this actionbenefit that is greater than 50 percent likely to move the matter from state to federal court. On November 9, 2017, we filed a motion to dismiss or,be realized upon ultimate settlement. Unrecognized tax benefits are tax benefits claimed in the alternative to transfer venueCompany’s tax returns that do not meet these recognition and consolidate, the Bailey complaint with our litigation filed previously against Bailey and others (see Note D).measurement standards.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. With regards to the use of net losses incurred for 2018 and later, such net operating losses have no expiration, while taxable income can only be offset up to 80% of taxable income. Net operating losses incurred prior to 2018 may be fully utilized to offset taxable income.

A reconciliation of the U.S. Federal statutory income tax rate to the effective income tax rate is as follows:

Item2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

The following discussion and analysis provides information, which we believe is relevant to an assessment and understanding of our financial condition and results of operations. The discussion should be read in conjunction with the Interim Condensed Financial Statements contained herein and the notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q. Certain statements contained in this Quarterly Report on Form 10-Q, including, without limitation, statements containing the words “believes”, “anticipates”, “estimates”, “expects”, “intends”, “projects”, and words of similar import, are forward-looking as that term is defined by the Private Securities Litigation Reform Act of 1995 (“1995 Act”), and in releases issued by the United State Securities and Exchange Commission (the “Commission”). These statements are being made pursuant to the provisions of the 1995 Act and with the intention of obtaining the benefits of the “Safe Harbor” provisions of the 1995 Act. We caution that any forward-looking statements made herein are not guarantees of future performance and that actual results may differ materially from those in such forward-looking statements as a result of various factors, including, but not limited to, any risks detailed herein, in our “Risk Factors” section of our Form 10-K for the year ended December 31, 2016,2022, in our most recent reports on Form 10-Q and Form 8-K and from time to time in our other filings with the Commission, and any amendments thereto. Any forward-looking statement speaks only as of the date on which such statement is made, and we are not undertaking any obligation to publicly update any forward-looking statements. Readers should not place undue reliance on these forward-looking statements.

Overview/Plan of Operations

Our ability to maintain and/or increaseOverview

Throughout the last several years, our products sales have been negatively impacted as customer pricing continues to be impacted bydecrease as a very cost-competitive market currently dominated byresult of our markets being saturated with products made outside of the United States. Evidenced byStates; primarily products made in China. This has resulted in a commoditization of the onsite drug testing market at a time when costs associated with labor, utilities, materials, insurance, etc. keep rising. In attempts to retain current customers and/or attract new customers that require lower pricing, we have been offering customers two drug test product lines that are manufactured in China.

Other efforts to offset declines in our manufactured product sales involved selling various diagnostic product lines, including but not limited to, various Covid-19 rapid tests. In addition to increased costs, materials used in the manufacture of our drug test products are the same materials used in the manufacture of lateral flow Covid-19 tests as well as lateral flow tests for Influenza and RSV, both of which surged in the latter part of Fiscal 2022. This increased need for the same materials has resulted in supply chain delays; some of which negatively impacted our customer relationships. One of those customers was our largest customer which severely negatively impacted our sales.

Gross margin has continually declined over the last several years due to the increased costs of manufacturing in the United States and the fact that overhead costs associated with both of our facilities could not be decreased any further. As sales continued to decline, these costs cannot be adjusted downward, thereby creating greater manufacturing inefficiencies. Manufacturing inefficiencies continued to increase despite our efforts to mitigate them. Efforts were also made to control operational expenses to ensure they remained in line with sales, however, as a reporting public company; there is a certain level of expenses that much be maintained.

From August 2013 until June 2020 we maintained a salary deferral program for our sole executive officer, our Chief Executive Officer/Principal Financial Officer Melissa Waterhouse. The salary deferral program was initiated by Ms. Waterhouse voluntarily in both August 2013 and April 2022. In the First Quarter of 2022, we did make payments to Ms. Waterhouse totaling $10,000. We stopped making payments on Ms. Waterhouse’s deferred compensation in April 2022 when Ms. Waterhouse again voluntarily deferred her salary by 20%. This deferral remained in place through February 28, 2023.

As of March 31, 2023, we had deferred compensation owed to Ms. Waterhouse in the nine months ended September 30, 2017 decreased again when comparedamount of $92,000 and $7,000 in payroll taxes that are due as payments are made to the same period last year.Ms. Waterhouse; for a total of $99,000 in deferred compensation owed to Ms. Waterhouse. In addition, our sales have been impacted by actions taken byas of March 31, 2023, we owed Ms. Waterhouse $32,000 in current salary that was not paid. (See Note M – Subsequent Events for updated information on the currently salary owed to Ms. Waterhouse)

Beginning in April 2022, another member of senior management participated in the salary deferral program. As of March 31, 2023, we had deferred compensation owed to this individual in the amount of $14,000 and $1,000 in payroll taxes that are due as payments are made to this individual; for a former Vice President Sales & Marketing/Sales Consultant. We have initiated litigation against this former employee/consultant relatedtotal of $15,000 in deferred compensation. This individual ceased participating in the salary deferral program on December 9, 2022 and received their full salary through February 28, 2023 (the closing date of the Asset Sale to these actions (see Note D – Litigation/Legal Matters)Healgen).

During the nine months ended September 30, 2017, we recorded an operating loss of $83,000. This comparesAsset Sale to an operating loss of $118,000 in the same period last year. Decreased operating expenses were the primary cause of the improvement in operating loss (relative to sales). Net loss in the nine months ended September 30, 2017 was $252,000, compared to a net loss of $130,000 in the same period last year. This is primarily due to other income of $200,000 (of which $150,000 was related to a tech transfer with a contract manufacturing customer) in the nine months ended September 30, 2016 that did not reoccur in the nine months ended September 30, 2017.Healgen/Outlook

We had cash provided by operating activitiesOn February 28, 2023, we completed the Asset Sale to Healgen and disposition of $158,000 in the nine months ended September 30, 2017. This compares to cash provided by operating activities of $185,000 in the nine months ended September 30, 2016.

We continuously examine all expenses in efforts to achieve profitability (when/if sales levels improve) or to minimize losses going forward (if sales continue to decline). Over the course of the last two fiscal years (Fiscal 2016 and Fiscal 2015), we refinanced substantially all of our existing debt at lower interest rates, manufactured our products in a partially consolidated operating environment, and maintained a salary and commission deferral program; all as part of our efforts to decrease expenses and improve cash flow.

The salary and commission deferral program previously referenced continued throughout the nine months ended September 30, 2017. The deferral program currently consists of a 20% salary deferral for our executive officer and our non-executive VP Operations (and previously included the former Vice President Sales & Marketing/Sales Consultant referred to earlier in this report; until his termination in December 2016). As of September 30, 2017, we had total deferred compensation owed of $253,000. Over the course of the program, we repaid portions of the deferred compensation (with $29,000 in payments in the nine months ended September 30, 2017 and $70,000 in payments in the nine months ended September 30, 2016.). As cash flow from operations allows, we intend to continue to make paybacks, however the deferral program is continuing and we expect it will continue for up to another 12 months.

We continue to believe that new products and our ability to sell those products in new markets will be a future growth driver. In August 2017, the U.S. Food and Drug Administration granted over-the-counter marketing clearance for our Rapid TOX Cup II (an all-inclusive, urine based drug testing cup). We are hopeful that this marketing clearance will enable us to further penetrate clinical markets as to increase our business with our laboratory alliance.

Although our primary markets continue to be extremely price-competitive, this marketing clearance should enable us to garner new sales in clinical markets (such as pain management and drug treatment) because although price is always a factor, quality and accuracy are equally important in these clinical markets.

New assays and product platform developments are also in our future research and development plans. We remain focused on selling our point of collection drugs of abuse tests, and growing our business through direct sales and select distributors.

Over the course of the last 12 months, we have reorganized and restructured our sales and marketing department. In addition, we brought on new products and service offerings to diversify our revenue stream through third party relationships. These new products and services include products for the detection of alcohol, alternative sample options for drug testing (such as lab based oral fluid testing and hair testing) as well as toxicology management services. In addition, we are now offering customers lower-cost alternatives for onsite drug testing. And finally, we are reviewing our contract manufacturing operations in efforts to capitalize on offerings in that area. We have not derived any significant revenue from these new additions; however, the majority of the relationships were only finalized in March/April 2017.

In September 2016, our contract manufacturing sales began to decrease on an annual basis due to a manufacturing shift with one of our contract customers. More specifically, as a result of a tech transfer with the customer, they are now their own primary supplier with the Company moving into a position of back up or secondary supplier. Although contract manufacturing is not considered a material portion of our net sales, given this expected change, we are making efforts to identify and secure new contract work and possible diversification alternatives.Company’s assets. In connection with the tech transfer, we receivedclosing of the Asset Sale to Healgen, and in accordance with the terms of the Asset Purchase Agreement, Healgen paid an aggregate purchase price of $3 million (“Purchase Price”). $300,000 of the Purchase Price is being held back in a $300,000 tech transfer fee from this customer. We recognized $150,000 relatedretention fund to this tech transfer fee as other incomecover potential indemnification claims during the six months following the close. Net proceeds in the nine months ended September 30, 2016.

Our continued existence is dependent upon several factors, including our ability to:amount of $247,000 were received by the Company after satisfaction of 1) raise revenue levels even though we have suffereda loan with the lossHealgen in the amount of a material contract that will impact sales starting October 1, 2017,$965,000, 2) control costs to generate positive cash flows,the Cherokee LSA, (totaling $1,031,000 for principal and interest through February 27, 2023), 3) maintain ourthe 2019 Cherokee Term Loan (totaling $252,000 for principal and interest through February 27, 2023), 4) delinquent property related taxes in the amount of $193,000 and 5) $12,000 for current credit facilities or refinance our current credit facilities if necessary, and 4) if needed, our ability to obtain working capital by selling additional shares of our common stock.property related taxes.

The Board believes our status as a fully reporting public company is an asset which may be sufficiently attractive to induce others to enter into business combinations. The Board is exploring strategic transactions which may result in entering into a new line of business (subject to specific competitive limitations under the Asset Sale to Healgen). The Board believes strategic acquisitions using the Company’s publicly traded stock as transaction consideration could enhance shareholder value. Nonetheless, the Board may later determine to dissolve the Company and distribute any remaining assets to the Company’s shareholders if the Company is unable to make any strategic acquisitions or enter into any strategic transactions.

Results of operations for the nine months ended September 30, 2017

First Quarter 2023 compared to the nine months ended September 30, 2016First Quarter 2022

NET SALES:Net sales for the nine months ended September 30, 2017First Quarter 2023 decreased 9.5%53.3% when compared to net sales in the nine months ended September 30, 2016. The decreaseFirst Quarter 2022 primarily as a result in a decline in sales isof drugs of abuse (“DOA”) test that we manufacture and the fact that our last product sale was recorded on February 28, 2023. The decline in DOA sales stems almost entirely from decreased sales to our largest customer who has historically been a significant portion of our revenues. This customer had two segments of their business for which we supplied products. They informed us in February 2022 that sales to one of those segments (which we supplied exclusively) would decrease as a result of their desire to have multiple vendors supplying the segment. They indicated this was to ensure uninterrupted supply as they had experienced periodic supply interruptions with us in 2021 (as a result of the anticipated decreasesupply chain issues we experienced in contract manufacturing sales in the nine months ended September 30, 2017 when compared2021 and continued to the nine months ended September 30, 2016. More specifically, contract manufacturing sales declined by approximately $222,000 (of which $197,000 was to the customer involved with the tech transfer)experience into 2022). The remaining $195,000 in decreased sales resulted primarily from a decrease in government sales (most of which is due to the loss of an account in the fourth quarter of the year ended December 31, 2016). These declines were partially offset by an increase in national accounts and international sales to Latin and South America.

GROSS PROFIT:Gross profit in the nine months ended September 30, 2017 decreasedincreased to 42.7% of net sales compared to 44.2%45.1% of net sales in the nine months ended September 30, 2016. WhileFirst Quarter 2023 from 8% of net sales in the First Quarter 2022. This increase in gross profit stems from the timing of the closing of the Asset Sale to Healgen and the fact that the bulk of the sales in the First Quarter 2023 were higher margin sales of the private labeled RSV product we are still maintaining manufacturing efficiencies, there were certain periods within the nine months ended September 30, 2017 that we produced less testing strips duesupplied to the product sales mix.an unaffiliated third party.

OPERATING EXPENSES: Operating expenses decreased 14.0% in the nine months ended September 30, 2017First Quarter 2023 compared to the nine months ended September 30, 2016. Expenses in researchFirst Quarter 2022. Selling and developmentMarketing and sellingGeneral and marketingAdministrative expenses decreased while generalResearch and administrative expenseDevelopment expenses increased. More specifically:

Research and development (“R&D”)

R&D expense decreased 30.9%increased 27.3%, when comparing the nine months ended September 30, 2017First Quarter 2023 with the same period last year. DecreasedFirst Quarter 2022. FDA compliance costs associated with(the cost of facility registrations and their timing) were the timingprimary cause of actions taken related to our FDA marketing clearance for Rapid TOX Cup II werethe increase. The increase was partially offset by an increase in supplies and materials. Our R&D department continuesdecreased salary expense since payroll ceased on February 28, 2023; closing of the Asset Sale to focus their efforts on the enhancement of current products, the development of new testing assays, new product platforms and the evaluation of contract manufacturing opportunities.Healgen.

Selling and marketing

Selling and marketing expense in the nine months ended September 30, 2017First Quarter 2023 decreased 35.7%52.4% when compared to the same period last year. OneFirst Quarter 2022. Reductions in sales salary expense and benefits (due to the closing of the Asset Sale to Healgen on February 28, 2023) offset by increased costs associated with shipping were the primary reasonsreason for the decline in expenses is decreased commission expense. In the latter part of December 2016, we terminated our relationship with a sales consultant due to competitive issues that arose during our relationship; we subsequently filed a complaint against this consultant in the early part of 2017 (See Note D – Litigation/Legal Matters). In addition to the decline in commissions, sales salaries and benefits, customer relations expense, postage and marketing consulting expenses decreased. These declines were minimally offset by an increase in costs associated with trade show attendance. Our direct sales force continues to focus their efforts in our target markets, which include, but are not limited to, Workplace, Government, and Clinical (i.e. pain management and drug treatment) and in the forensic and international markets for our oral fluid product. Our sales force has also started to promote new products and service offerings to diversify our revenue stream. These new products and services (through relationships with third parties) include products for the detection of alcohol, alternative sample options for drug testing (such as lab based oral fluid testing and hair testing) as well as toxicology management services, and lower-cost alternatives for onsite drug testing. And finally, with the FDA marketing clearance granted in August 2017, our sales force is also promoting the new market application of the product in the clinical market.expenses.

General and administrative (“G&A”)

G&A expense increased 4.3%decreased 19.3% in the nine months ended September 30, 2017 whenFirst Quarter 2023 compared to the same period last year. Increases in legalFirst Quarter 2022. G&A salary expense and benefits (related to purchasing, warehouse, quality assurance and administrative personnel) decreased as a result of the closing of the Asset Sale to Healgen on February 28, 2023. Consulting fees (due toalso decreased when comparing the initiation of litigation in the early part of 2017; see Note D – Litigation/Legal Matters), and accounting fees were partially offset by reduced expenses related to investor relations (due to decreased travel), telephone and non-cash compensation (I.e. share based payment expense; due to less options outstanding subject to amortization). Share based payment expense was $33,000 in the nine months ended September 30, 2017 compared to $49,000 in the nine months ended September 30, 2016.

Results of operations for the three months ended September 30, 2017

compared to the three months ended September 30, 2016

NET SALES:Net sales for the three months ended September 30, 2017 declined 4.4% when compared to the three months ended September 30, 2016. The decrease in sales results from a decrease in government sales (most of which is due to the loss of an account in the fourth quarter of 2016), and a decline in contract manufacturing sales.two periods. These declines were partially offset by increased salescosts associated with the Asset Sale to Latin AmericaHealgen (legal fees, taxes, and South America andinsurance). There was no expense related to national accounts.share based payments in either the First Quarter 2023 or the First Quarter 2022.

GROSS PROFIT:Gross profit decreased to 41.8% of net salesOther income / (expense):

Other income in the three months ended September 30, 2017 comparedFirst Quarter 2023 consisted of other income of $3,035,000 (which is the $3,000,000 purchase price paid for the Company’s assets and $35,000 in amounts reimbursed by Healgen in connection with the Asset Sale; pro-rated real estate taxes and payment of 50% of the payout related to gross profitemployee vacation expense). This income was offset by a loss on the sale of 43.1% of net sales in the three months ended September 30, 2016. While we are still maintaining manufacturing efficiencies, there were certain periods within the three months ended September 30, 2017 that we produced less testing strips due to the product sales mix.assets ($921,000) and interest expense associated with our debt.

OPERATING EXPENSES: Operating expenses decreased 16.4% in the three months ended September 30, 2017, compared to the three months ended September 30, 2016. Expenses in research and development and selling and marketing decreased while general and administrative expense increased. More specifically:

Research and development (“R&D”)

R&D expense decreased 7.1% when comparing the three months ended September 30, 2017 with the three months ended September 30, 2016. Decreased supplies and materials costs were partially offset by increased employee benefit costs. Our R&D department continues to focus their efforts on the enhancement of current products, the development of new testing assays, new product platforms and the evaluation of contract manufacturing opportunities.

Selling and marketing

Selling and marketingOther expense in the three months ended September 30, 2017 decreased 42.2% when compared to the three months ended September 30, 2016. OneFirst Quarter 2022 consisted of the primary reasons for the decline in expenses is related to decreased commission expense. In the latter partinterest expense associated with our credit facilities (our (now former) line of December 2016, we terminatedcredit with Crestmark Bank, our relationshiploans with a sales consultant due to competitive issues that arose duringCherokee Financial, LLC and our relationship; we subsequently filed a complaint against this consultant in the early part of 2017 (See Note D – Litigation/Legal Matters). In addition to the decline in commissions, sales salaries and benefits, customer relations expense, and marketing consulting expenses decreased. These declines were minimally offset by an increase sales travel expense. Our direct sales force continues to focus their efforts in our target markets, which include, but are not limited to, Workplace, Government, and Clinical (i.e. pain management and drug treatment) and in the forensic and international markets for our oral fluid product. Our sales force has also started to promote new products and service offerings to diversify our revenue stream. These new products and services (through relationshipsloans with third parties) include products for the detection of alcohol, alternative sample options for drug testing (such as lab based oral fluid testing and hair testing) as well as toxicology management services, and lower-cost alternatives for onsite drug testing. And finally, with the FDA marketing clearance granted in August 2017, our sales force is also promoting the new market application of the product in the clinical market.two shareholders).

General and administrative (“G&A”)

G&A expense increased 2.2% in the three months ended September 30, 2017 when compared to G&A expense in the three months ended September 30, 2016. Increased legal fees (due to the initiation of litigation in the early part of 2017; see Note D – Litigation/Legal Matters) were partially offset by reduced expenses related to telephone, consulting fees, brokers fees and non-cash compensation (i.e. share based payment expense; due to less options outstanding subject to amortization). Share based payment expense was $10,000 in the three months ended September 30, 2017 compared to $13,000 in the three months ended September 30, 2016.

Liquidity and Capital Resources as of September 30, 2017March 31, 2023

OurUntil the closing of the Asset Sale to Healgen on February 28, 2023, our cash requirements depend on numerous factors, including but not limited to manufacturing costs (such as labor and overhead costs, raw materials, equipment, etc.), selling and marketing initiatives, product development activities, regulatory costs, legal costs, associated with current litigation, and effective management of inventory levels and production levels in response to sales forecasts. We expecthistory and forecasts (if available). Since the closing of the Asset Sale to devote capital resources to continue selling and marketing initiatives and product development/research and development activities. We are examining other growth opportunities including strategic alliances. GivenHealgen, our current and historical cash position,requirements depend on the costs we expect such activities wouldwill need to be fundedincur to maintain our status as a fully reporting public entity and the time it will take to either bring another business into the public shell or dissolve the Company and distribute any remaining assets to the shareholders; along with management of amounts due to vendors and receipt of additional customer receivables and receipt of the retention fund.

The following transactions materially impacted our liquidity and cash flow in the First Quarter 2023 and/or the First Quarter 2022 or are expected to have an impact on our cash flow in the year ending December 31, 2023:

Asset Sale to Healgen

On December 19, 2022, we entered into an Asset Purchase Agreement (“APA”) with Healgen, pursuant to which the Company agreed, subject to the approval of its shareholders, to sell substantially all of our operating assets (excluding cash, accounts receivables arising prior to the closing date, and certain other assets). On February 15, 2023, we held the 2023 Special Meeting of Shareholders (the “Special Meeting”) at our corporate offices in Kinderhook, New York, at which a quorum (27,863,899 shares of common stock of the 47,098,476 shares of common stock outstanding) was present in person or represented by proxy. Approval of the Asset Sale to Healgen required the affirmative vote of the holders of a majority of the outstanding shares of the Company’s common stock (par value $0.01) and 26,381,832, or 54.84% of the total outstanding shares of the Company, voted in favor of the Asset Sale to Healgen.

On February 28, 2023, we completed the Asset Sale to Healgen and disposition of substantially all of our assets. In connection with the closing of the Asset Sale to Healgen, and in accordance with the terms of the Asset Purchase Agreement, Healgen paid an aggregate purchase price of $3 million (“Purchase Price”). $300,000 of the Purchase Price is being held back in a retention fund to cover potential indemnification claims during the six months following the close. Net proceeds in the amount of $247,000 were received after satisfaction of 1) a loan with Healgen in the amount of $965,000, 2) the Cherokee LSA, (totaling $1,031,000 for principal and interest through February 27, 2023), 3) the 2019 Cherokee Term Loan (totaling $252,000 for principal and interest through February 27, 2023), 4) delinquent property related taxes in the amount of $193,000 and 5) $12,000 for current property related taxes.

Healgen Loan Promissory Note

On September 28, 2022, we entered into a Loan Promissory Note with Healgen (the “Healgen Loan”) and received gross/net proceeds of $400,000. We utilized $34,000 of the loan proceeds to pay off the Crestmark Line of Credit. On November 15, 2022, we amended the Healgen Loan to address an additional $300,000 in principal received under the Healgen Loan; bringing the total principal due under the Healgen Loan to $700,000. The Healgen Loan was further amended on December 19, 2022 to address an additional $15,000 in principal received under the Healgen Loan; bringing the total principal due under the Healgen Loan to $715,000. (See Note E – Line of Credit and Debt)

The Healgen Loan was amended again on January 6, 2023 to increase the principal due under the loan to $815,000. Under this third amendment, the amount of the first payment (due February 15, 2023) was changed to $286,000 with payments of the same amount due on March 15, 2023 and April 15, 2023. No other terms of the Healgen Loan were changed.

The Healgen Loan was amended again on February 9, 2023 to increase the principal due under the loan to $965,000. Under this fourth amendment, the amount of the first payment (due February 15, 2023) was changed to $337,000 with payments of the same amount due on March 15, 2023 and April 15, 2023. No other terms of the Healgen Loan were changed.

On February 28, 2023, with proceeds from the issuanceAsset Sale to Healgen, we made a payment in the amount of additional equity or additional credit borrowings, subject$965,000 to marketHealgen for all principal due under the Healgen Loan. Healgen waived all interest due under the Healgen Loan.

ERC Refund

As discussed in Note F, as of March 31, 2023 we were still awaiting the refund for the first quarter of 2021; expected to be $202,000. (See Note M – Subsequent Events for updated information on the ERC refund)

Loans from CEO Melissa Waterhouse

Over the course of the First Quarter 2022, via expense reports, Ms. Waterhouse extended various amounts to the Company for expenses including, but not limited to, amounts for manufacturing materials, services, patent maintenance fees, office supplies, and other conditions. equipment. Upon closing of the Asset Sale to Healgen, we made a payment to Ms. Waterhouse in the amount of $43,000 to pay all amounts due in connection with these loans.

In addition, at March 31, 2023, we owed Ms. Waterhouse $32,000 in current salary (which is 13 weeks of her non-deferred salary). (see Note M – Subsequent Events for updated information on the Waterhouse loans)

Going Concern

Our financial statements for the year ended December 31, 2016First Quarter 2023 were prepared assuming we will continue as a going concern.

concern, which assumes the satisfaction of liabilities in the normal course of business. Our current cash balances, together with cash generatedamounts from future operationsaccounts receivable, ERC refunds and amounts available under our credit facilitiesthe receipt of the retention fund associated with the Asset Sale to Healgen, may not be sufficient to fund operations through November 2018. May 2024. At March 31, 2023, we have Stockholders’ Deficit of $(458,000).

Debt

Our loan and security agreement and 2019 Term Note with Cherokee for $1,000,000 and $240,000, respectively, expired on February 15, 2022. On June 14, 2022, Cherokee agreed that they would defer the principal amounts due under the Cherokee LSA until February 15, 2023 and that any applicable penalties would also be deferred as long as we remained current on the quarterly interest payments. We used proceeds from the Asset Sale to Healgen to pay off the Cherokee facilities on February 28, 2023.