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Significant Improvements in Financial Position
American Bio Medica Corporation (ABMC), a leading manufacturer of diagnostic test kits, has reported significant improvements in its financial position following the sale of nearly all of the company’s assets to Healgen Scientific Limited Liability Company (Healgen) in the first quarter of 2023. The asset sale, which included inventory, property, plant, and equipment, enabled ABMC to pay off several outstanding loans, leading to a positive impact on the company’s financial status.
Asset Sale Allows ABMC to Repay Loans
Based on the quarterly report for the period ended March 31, 2023, the asset sale allowed ABMC to fully repay the Loan and Security Agreement with Cherokee Financial LLC, amounting to $1,000,000, and the 2019 Term Loan with Cherokee Financial LLC, amounting to $240,000. Both loans were due for repayment by February 15, 2023.
Additional Debt Payments and Interest Waived
Furthermore, the company paid off the September 2022 Healgen Loan & Promissory Note, amounting to $965,000, on February 28, 2023. As a result, Healgen waived all interest due under the Healgen Loan, further bolstering ABMC’s financial position.
Total Debt Reduction
ABMC’s total debt reduced to $175,000 as of March 31, 2023, compared to the previous year’s figure of $2,230,000. The current debt includes the November 2020 Term Loan with an individual shareholder, amounting to $50,000, and the December 2021 Shareholder Loans, amounting to $125,000.
Reduced Interest Expenses
The company has reported reduced interest expenses in the first quarter of 2023, with $13,000 for the Cherokee Loan and Security Agreement, $4,000 for the 2019 Cherokee Term Loan, $1,000 for the 2020 Term Loan, and $4,000 for the 2021 Shareholder Loans. This shows a marked decrease in interest expenses in comparison to the first quarter of 2022.
Adoption of Accounting Standards Updates
While ABMC adopted several Accounting Standards Updates (ASU) during this period, none had a material impact on the company’s financial condition or results of operations. The company is currently evaluating the impacts of ASU 2022-03, which becomes effective on January 1, 2024.
Conclusion: Improved Financial Flexibility and Stability
In conclusion, the sale of assets to Healgen allowed ABMC to significantly reduce its overall debt, improve its financial position, and avoid potential penalties associated with loan defaults. This should grant the company greater financial flexibility and stability going forward and enable it to focus on its core business operations.