UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D. C. 20549


FORM
10-Q





xQuarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934





For the
quarterly period ended March
31, 2009





 ̈Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934





For the
transition period
from              to





Commission
File Number: 0-28666





AMERICAN
BIO MEDICA CORPORATION








New York
              
              14-1702188(State
      or other jurisdiction of
              
              (I.R.S.
      Employerincorporation
      or organization)
              
              Identification
      No.)





122 Smith Road, Kinderhook, New
      York
              
              12106(Address
      of principal executive offices)
              
              (Zip
      Code)





518-758-8158







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     o 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     o 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.





Large
      accelerated filer       o
                Accelerated
      filer                          
      oNon-accelerated
      filer         o
                Smaller
      reporting company         
      x





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act)


o  Yes     x  No




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




21,744,768
Common Shares as of May 14, 2009





American
Bio Medica Corporation





Index
to Quarterly Report on Form 10-Q


For
the quarter ended March 31, 2009





PAGEPART
      I – FINANCIAL INFORMATIONItem
      1.
                Financial
      StatementsBalance
      Sheets as of March 31, 2009 (unaudited) and December 31,
    2008
                3Unaudited
      Statements of Operations for the three months ended March 31, 2009 and
      March 31, 2008
                4Unaudited
      Statements of Cash Flows for the three months ended March 31, 2009 and
      March 31, 2008
                5Notes
      to Financial Statements
                6Item
      2.
                Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                10Item
      3.
                Quantitative
      and Qualitative Disclosures About Market Risk
                14Item
      4.
                Controls
      and Procedures
                14PART
      II – OTHER INFORMATIONItem
      1.
                Legal
      Proceedings
                14Item
      1A.
                Risk
      Factors
                14Item
      2.
                Unregistered
      Sales of Equity Securities and Use of Proceeds
                14Item
      3.
                Defaults
      Upon Senior Securities
                14Item
      4
                Submission
      of Matters to a Vote of Security Holders
                14Item
      5.
                Other
      Information
                14Item
      6.
                Exhibits
                15Signatures


2


PART
I - FINANCIAL INFORMATION





Item
1. Financial Statements


American
Bio Medica Corporation


Balance
Sheets





March
      31,
                                  
                                  
                                  December
      31,2009
                                  
                                  
                                  2008(Unaudited)ASSETSCurrent
      assetsCash
      and cash equivalents
                                  
                                  $
                                  592,000
                                  
                                  
                                  $
                                  201,000Accounts
      receivable - net of allowance for doubtful accounts of $105,000 at both
      March 31, 2009 and December 31, 2008
                                  
                                  
                                  1,391,000
                                  
                                  
                                  
                                  1,161,000Inventory
      – net of reserve for slow moving and obsolete inventory of $308,000 at
      both March 31, 2009 and December 31, 2008
                                  
                                  
                                  5,021,000
                                  
                                  
                                  
                                  5,552,000Prepaid
      expenses and other current assets
                                  
                                  
                                  107,000
                                  
                                  
                                  
                                  97,000Total
      current assets
                                  
                                  
                                  7,111,000
                                  
                                  
                                  
                                  7,011,000Property,
      plant and equipment, net
                                  
                                  
                                  1,897,000
                                  
                                  
                                  
                                  1,961,000Debt
      issuance costs
                                  
                                  
                                  109,000
                                  
                                  
                                  
                                  117,000Other
      assets
                                  
                                  
                                  44,000
                                  
                                  
                                  
                                  47,000Total
      assets
                                  
                                  $
                                  9,161,000
                                  
                                  
                                  $
                                  9,136,000LIABILITIES AND STOCKHOLDERS'
      EQUITYCurrent
      liabilitiesAccounts
      payable
                                  
                                  $
                                  1,540,000
                                  
                                  
                                  $
                                  1,568,000Accrued
      expenses and other current liabilities
                                  
                                  
                                  661,000
                                  
                                  
                                  
                                  544,000Wages
      payable
                                  
                                  
                                  263,000
                                  
                                  
                                  
                                  230,000Line
      of credit
                                  
                                  
                                  621,000
                                  
                                  
                                  
                                  431,000Current
      portion of long-term debt
                                  
                                  
                                  1,067,000
                                  
                                  
                                  
                                  1,098,000Current
      portion of unearned grant
                                  
                                  
                                  10,000
                                  
                                  
                                  
                                  10,000Total
      current liabilities
                                  
                                  
                                  4,162,000
                                  
                                  
                                  
                                  3,881,000Other
      long-term liabilities
                                  
                                  
                                  204,000
                                  
                                  
                                  
                                  207,000Long-term
      debt
                                  
                                  
                                  759,000
                                  
                                  
                                  
                                  760,000Unearned
      grant
                                  
                                  
                                  30,000
                                  
                                  
                                  
                                  30,000Total
      liabilities
                                  
                                  
                                  5,155,000
                                  
                                  
                                  
                                  4,878,000COMMITMENTS
      AND CONTINGENCIESStockholders'
      equity:Preferred
      stock; par value $.01 per share; 5,000,000 shares authorized, none issued
      and outstanding at March 31, 2009 and December 31, 2008Common
      stock; par value $.01 per share; 50,000,000 shares authorized; 21,744,768
      issued and outstanding at both March 31, 2009 and December 31,
      2008
                                  
                                  
                                  217,000
                                  
                                  
                                  
                                  217,000Additional
      paid-in capital
                                  
                                  
                                  19,279,000
                                  
                                  
                                  
                                  19,279,000Accumulated
      deficit
                                  
                                  
                                  (15,490,000
                                  )
                                  
                                  
                                  (15,238,000
                                  )Total
      stockholders’ equity
                                  
                                  
                                  4,006,000
                                  
                                  
                                  
                                  4,258,000Total
      liabilities and stockholders’ equity
                                  
                                  $
                                  9,161,000
                                  
                                  
                                  $
                                  9,136,000


The
accompanying notes are an integral part of the financial
statements


3





American
Bio Medica Corporation


Statements
of Operations


(Unaudited)





For
      The Three Months EndedMarch
      312009
                
                
                2008Net
      sales
                
                $
                2,255,000
                
                
                $
                3,299,000Cost
      of goods sold
                
                
                1,336,000
                
                
                
                1,872,000Gross
      profit
                
                
                919,000
                
                
                
                1,427,000Operating
      expenses:Research
      and development
                
                
                101,000
                
                
                
                138,000Selling
      and marketing
                
                
                498,000
                
                
                
                768,000General
      and administrative
                
                
                524,000
                
                
                
                683,0001,123,000
                
                
                
                1,589,000Operating
      loss
                
                
                (204,000
                )
                
                
                (162,000
                )Other
      income (expense):Interest
      income
                
                
                1,000
                
                
                
                1,000Interest
      expense
                
                
                (47,000
                )
                
                
                (34,000
                )Other
      expense
                
                
                (2,000
                )
                
                
                (4,000
                )(48,000
                )
                
                
                (37,000
                )Loss
      before tax
                
                
                (252,000
                )
                
                
                (199,000
                )Income
      taxNet
      loss after tax
                
                $
                (252,000
                )
                
                $
                (199,000
                )Basic
      and diluted loss per common share
                
                $
                (0.01
                )
                
                $
                (0.01
                )Weighted
      average number of shares outstanding – basic & diluted
                
                
                21,744,768
                
                
                
                21,744,768





The
accompanying notes are an integral part of the financial
statements


4





American
Bio Medica Corporation


Statements
of Cash Flows


(Unaudited)





For
      The Three Months EndedMarch
      31,2009
                            
                            
                            2008Cash
      flows from operating activities:Net
      loss
                            
                            $
                            (252,000
                            )
                            
                            $
                            (199,000
                            )Adjustments
      to reconcile net loss to net cash provided by operating
      activities:Depreciation
                            
                            
                            86,000
                            
                            
                            
                            92,000Loss
      on disposal of fixed assets
                            
                            
                            2,000
                            
                            
                            
                            4,000Amortization
      of debt issuance costs
                            
                            
                            8,000Changes
      in:Accounts
      receivable
                            
                            
                            (230,000
                            )
                            
                            
                            (143,000
                            )Inventory
                            
                            
                            531,000
                            
                            
                            
                            (79,000
                            )Prepaid
      expenses and other current assets
                            
                            
                            (10,000
                            )
                            
                            
                            (46,000
                            )Other
      non-current assets
                            
                            
                            3,000
                            
                            
                            
                            50,000Accounts
      payable
                            
                            
                            (28,000
                            )
                            
                            
                            236,000Accrued
      expenses and other current liabilities
                            
                            
                            117,000
                            
                            
                            
                            205,000Patent
      sublicense
                            
                            
                            
                            
                            
                            
                            (50,000
                            )Wages
      payable
                            
                            
                            33,000
                            
                            
                            
                            8,000Other
      long-term liabilities
                            
                            
                            (3,000
                            )Net cash provided by operating activities
                            
                            
                            257,000
                            
                            
                            
                            78,000Cash
      flows from investing activities:Purchase
      of property, plant and equipment
                            
                            
                            (24,000
                            )
                            
                            
                            (7,000
                            )Net
      cash used in investing activities
                            
                            
                            (24,000
                            )
                            
                            
                            (7,000
                            )Cash
      flows from financing activities:Payments
      on debt financing
                            
                            
                            (32,000
                            )
                            
                            
                            (30,000
                            )Net
      proceeds from line of credit
                            
                            
                            190,000Net
      cash provided by / (used in) financing activities
                            
                            
                            158,000
                            
                            
                            
                            (30,000
                            )Net
      increase in cash and cash equivalents
                            
                            
                            391,000
                            
                            
                            
                            41,000Cash
      and cash equivalents - beginning of period
                            
                            
                            201,000
                            
                            
                            
                            336,000Cash
      and cash equivalents - end of period
                            
                            $
                            592,000
                            
                            
                            $
                            377,000Supplemental
      disclosures of cash flow informationCash
      paid during period for interest
                            
                            $
                            65,000
                            
                            
                            $
                            34,000





The
accompanying notes are an integral part of the financial
statements


5





Notes to
financial statements (unaudited)




March 31,
2009




Note
A - Basis of Reporting




The
accompanying unaudited interim financial statements of American Bio Medica
Corporation (the “Company”) have been prepared in accordance with generally
accepted accounting principles in the United States of America for interim
financial information and in accordance with the instructions to Form 10-Q and
Regulation S-X. Accordingly, they do not include all information and footnotes
required by generally accepted accounting principles for complete financial
statement presentation. In the opinion of management, the interim financial
statements include all normal, recurring adjustments, which are considered
necessary for a fair presentation of the financial position of the Company at
March 31, 2009, and the results of its operations and cash flows for the three
month periods ended March 31, 2009 and March 31, 2008.




Operating
results for the three months ended March 31, 2009 are not necessarily indicative
of results that may be expected for the year ending December 31, 2009. Amounts
at December 31, 2008 are derived from the Company’s audited financial statements
included in the Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2008.




During
the three months ended March 31, 2009, 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, 2008.




The
preparation of these interim financial statements requires the Company to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. On an on-going basis, the Company evaluates its estimates,
including those related to product returns, bad debts, inventories, income
taxes, warranty obligations, and contingencies and litigation. The Company bases
its estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.




These
unaudited interim financial statements have been prepared assuming that the
Company will continue as a going concern and, accordingly, do not include any
adjustments that might result from the outcome of this uncertainty. The
Company's independent registered public accounting firm's report of the
financial statements included in the Company's Annual Report on Form 10-K for
the year ended December 31, 2008, contained an explanatory paragraph regarding
the Company's ability to continue as a going concern.




Recently
Adopted Accounting Standards




In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS
No. 157”). SFAS No. 157 established a common definition for fair value to be
applied to U.S. GAAP guidance requiring use of fair value, established a
framework for measuring fair value, and expanded disclosure about such fair
value measurements. SFAS No. 157 became effective for our financial assets and
liabilities on January 1, 2008.  Certain provisions of SFAS No. 157
relating to the Company’s nonfinancial assets and liabilities became effective
January 1, 2009. The implementation of SFAS No. 157 does not materially affect
the Company’s interim financial statements.




SFAS No.
157 establishes a hierarchy for ranking the quality and reliability of the
information used to determine fair values.  SFAS No. 157 requires that
assets and liabilities carried at fair value be classified and disclosed in one
of the following three categories:




Level
1:  Unadjusted quoted market prices in active markets for identical
assets or liabilities.




Level
2:  Unadjusted quoted prices in active markets for similar assets or
liabilities, unadjusted quoted prices for identical or similar assets or
liabilities in markets that are not active, or inputs other than quoted prices
are observable for the asset or liability.


6


Level
3:  Unobservable inputs for the asset or liability.




The
Company endeavors to utilize the best available information in measuring fair
value.  Financial assets and liabilities are classified based on the
lowest level of input that is significant to the fair value
measurement.  The following methods and assumptions were used by the
Company in estimating its fair value disclosures for financial
instruments:




Cash
Equivalents – The carrying amount reported in the balance sheet for cash
equivalents approximates its fair value due to the short-term maturity of these
instruments.




Line of
Credit andLong-Term Debt – The carrying amounts of the Company’s
borrowings under its line of credit agreement and other long-term debt
approximates fair value, based upon current interest rates.




In
December 2007, the FASB issued SFAS No. 141(R), “Business Combinations,” (“SFAS
No. 141(R)”) and SFAS No. 160, “Noncontrolling Interests in Consolidated
Financial Statements” (“SFAS No. 160”). Effective for the Company as of January
1, 2009, SFAS No. 141(R) requires the acquiring entity in a business combination
to recognize all (and only) the assets acquired and liabilities assumed in the
transaction; establishes the acquisition-date fair value as the measurement
objective for all assets acquired and liabilities assumed; and requires the
acquirer to disclose to investors and other users all of the information they
need to evaluate and understand the nature and financial effect of the business
combination. Effective January 1, 2009, SFAS No. 160 requires all entities to
report noncontrolling (minority) interests in subsidiaries as equity in the
consolidated financial statements. Moreover, SFAS No. 160 eliminates the
diversity that currently exists in accounting for transactions between an entity
and noncontrolling interests by requiring they be treated as equity
transactions. The Company adopted SFAS No. 141(R) and SFAS No. 160 as of January
1, 2009 and this adoption had no impact on our interim financial
statements.




In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities – an Amendment of FASB Statement No. 133” (“SFAS No.
161”). SFAS No. 161 expands the disclosure requirements in SFAS No. 133,
regarding an entity’s derivative instruments and hedging activities. SFAS No.
161 is effective on January 1, 2009.  The Company adopted SFAS No. 161
as of January 1, 2009 and this adoption had no impact on our interim financial
statements.




Note
B – Net Loss Per Common Share




Basic net
loss per common share is calculated by dividing the net loss by the weighted
average number of outstanding common shares during the period. Diluted net loss
per common share includes the weighted average dilutive effect of stock options
and warrants.




Potential
common shares outstanding as of March 31, 2009 and 2008:




March 31,
                    2009
                  
                  
                  March 31,
                    2008Warrants
                  
                  
                  75,000
                  
                  
                  
                  150,000Options
                  
                  
                  3,762,080
                  
                  
                  
                  3,768,080




For the
three months ended March 31, 2009 and March 31, 2008, the number of securities
not included in the diluted EPS because the effect would have been anti-dilutive
were 3,837,080 and 3,918,080, respectively.




Note
C – Litigation




The Company has been named in legal
proceedings in connection with matters that arose during the normal course of
its business, and that in the Company’s opinion are not
material.  While the ultimate result of any litigation cannot be
determined, it is management’s opinion, based upon consultation with counsel,
that it has adequately provided for losses that may be incurred related to these
claims.  If the Company is unsuccessful in defending any or all of
these claims, resulting financial losses could have an adverse effect on the
financial position, results of operations and cash flows of the
Company.


7


Note
D – Reclassifications




Certain items have been reclassified to
conform to the current presentation.




Note
E – Line of Credit and Long-Term Debt




Real Estate
Mortgage




On
November 6, 2006, the Company obtained a real estate mortgage (“Real Estate
Mortgage”) related to its facility in Kinderhook, New York. The loan through
First Niagara Financial Group (“FNFG”) is in the amount of $775,000 and has a
term of ten (10) years with a twenty (20) year amortization. The interest rate
is fixed at 7.50% for the first five (5) years. Beginning with year six (6) and
through the end of the loan term, the rate changes to 2% above the Federal Home
Loan Bank of New York five (5) year term, fifteen (15) year Amortization
Advances Rate. The Company’s monthly payment is $6,293 with the final payment
being due on December 1, 2016. The loan is collateralized by the Company's
facility in Kinderhook, New York and its personal property.  The
amount outstanding on this mortgage was $734,000 and $739,000 at March 31, 2009
and December 31, 2008, respectively.




Line of
Credit




The
Company has a Line of Credit with FNFG. As disclosed in the Company’s Current
Report on Form 8-K filed with the Securities and Exchange Commission (the
“Commission”) on August 8, 2008, effective August 1, 2008, the Company and FNFG
entered into an amendment to the original Loan Documents (the “Amendment”). The
Amendment combined two lines of credit already in place with FNFG into one line
of credit (the “Line of Credit”) and amended certain terms related to the Line
of Credit. Pursuant to the Amendment, the maximum amount available under the
Line of Credit was lowered to $750,000, and the maturity date of the Line of
Credit was April 1, 2009. The interest rate on the Line of Credit was prime plus
1%.  Pursuant to the Amendment, the Company was required to maintain
certain financial covenants; the Company’s monthly net loss was not to exceed
$75,000 during any month and, while any loans or commitments are outstanding and
due FNFG, the Company was to maintain a minimum debt service coverage ratio of
1.10x, to be measured at December 31, 2008. The minimum debt service coverage
ratio is defined as net income plus interest expense plus depreciation plus
expense related to the amortization of derivative securities divided by required
principal payments over the preceding twelve months plus interest expense. There
is no requirement for annual repayment of all principal on this Line of Credit
and it is payable on demand. The amount outstanding on the Line of Credit was
$621,000 at March 31, 2009 and $431,000 at December 31, 2008.




Term
Note




On
January 22, 2007, the Company entered into a Term Note with FNFG in the amount
of $539,000 (the “Note”). The term of the Note is 5 years with a fixed interest
rate of 7.17%. The Company’s monthly payment is $10,714 with the final payment
being due on January 23, 2012. The Company has the option of prepaying the Note
in full or in part at any time during the term without penalty. The loan is
secured by Company assets now owned or hereafter acquired. The proceeds received
were used for the purchase of automation equipment to enhance the Company's
manufacturing process in its New Jersey facility. The amount outstanding on this
Note was $330,000 and $356,000 at March 31, 2009 and December 31, 2008,
respectively.




Forbearance
Agreement




On
February 4, 2009, although the Company was current with the payment schedules
for its Real Estate Mortgage, Term Note and Line of Credit, the Company received
a letter from FNFG notifying the Company that an event of default had occurred
under the Loan Documents related to the Line of Credit, Real Estate Mortgage and
Term Note (the “Credit Facilities”); the event of default occurred as a result
of, among other things, the Company’s failure to comply with the maximum monthly
net loss covenant set forth in the Amendment.  Pursuant to the terms
of the Loan Documents, all obligations of the Company to FNFG under the Loan
Documents could be declared by FNFG to be immediately due and payable. The
principal amount totaled $1,636,635.97, plus interest and other charges through
February 4, 2009 (collectively, the “Debt”).




The
February 4, 2009 notice also stated that, as an accommodation to the Company,
FNFG decided not to immediately accelerate the Debt, and that they expected the
Company to enter into a Forbearance Agreement with FNFG memorializing measures
and conditions required by FNFG. FNFG also notified the Company that they were
reducing the commitment on the Line of Credit from $750,000 to $650,000 and
placing a hold on one of our accounts held at FNFG.


8


On March
12, 2009, the Company entered into a Forbearance Agreement (the “Agreement”)
with FNFG. The Agreement addresses the Company’s non-compliance with the maximum
monthly net loss and the minimum debt service coverage ratio covenants
(“Existing Defaults”) under the Loan Documents related to the Debt. Under the
terms of the Agreement, FNFG will forbear from exercising its rights and
remedies arising under the Loan Documents from the Existing Defaults. The
Agreement is in effect until (i) June 1, 2009; or (ii) the date on which FNFG
elects to terminate the Agreement upon the occurrence of an event of default
under the Agreement or under the Loan Documents (other than an Existing
Default); or (iii) the date on which any subsequent amendment to the Agreement
becomes effective (the “Forbearance Period”).




During
the Forbearance Period, FNFG will continue to place a hold on one of the
Company’s accounts but agreed to release up to $5,000 per month from the account
to be used for the purpose of paying a financial advisory firm engaged by the
Company to find and evaluate alternative funding sources; the financial advisory
firm was referred to the Company by FNFG. The Company began making payments to
this financial advisory firm on March 1, 2009. As of the date of this report
there is a balance of $86,000 in this account.




The
maximum available under the Line of Credit during the Forbearance Period will be
the lesser of $650,000, or the Net Borrowing Capacity. Net Borrowing Capacity is
defined as Gross Borrowing Capacity less the Inventory Value Cap. Gross
Borrowing Capacity is defined as the sum of (i) 80% of eligible accounts
receivable, (ii) 20% of raw material inventory and (iii) 40% of finished goods
inventory. Inventory Value Cap is defined as the lesser of $400,000, or the
combined value of items (ii) and (iii) of Gross Borrowing Capacity. Since
September 2008, the Company’s Net Borrowing Capacity has declined from
$1,195,000 to $910,000 as of the date of this report.




During
the Forbearance Period, interest will accrue on the Line of Credit at the rate
of prime plus 4%, an increase from prime plus 1%. Interest accruing on the Real
Estate Mortgage during the Forbearance Period remains unchanged at the fixed
rate of 7.5% and interest on the Note remains unchanged at the fixed rate of
7.17%. In the event of default under the Agreement, interest under the Line of
Credit will increase to the greater of prime plus 6% or 10%. The Line of Credit
terminates on June 1, 2009.




Under the
Agreement, during the Forbearance Period: FNFG waives any further default
relating to the maximum monthly net loss covenant and minimum debt service
coverage ratio provided the Company shows a net loss no greater than $300,000
for the quarter ending March 31, 2009, and on or before May 1, 2009, the Company
is required to provide to FNFG a legally binding and executed commitment letter
from a bona-fide third party lender setting forth the terms of a full
refinancing of the Debt to close on or before June 1, 2009.




The
Company is in compliance with the net loss requirement for the quarter ended
March 31, 2009 and remains in compliance with its payment schedules related to
the Credit Facilities. On April 1, 2009, the Company entered into a non-binding
proposal with a third party related to a revolving secured line of credit of up
to $1,500,000. The financing is subject to completion of the third party’s due
diligence. In connection with this proposal, the Company has paid the third
party a non-refundable deposit of $12,500, for their time and costs involved in
their due diligence review and evaluation.  FNFG authorized the
release of these funds from the Company’s account currently frozen by
FNFG.




On May 6,
2009, the Company entered into Letter Agreement related to the Forbearance
Agreement of March 12, 2009. The Letter Agreement requires the Company to
produce to FNFG, on or before May 15, 2009, a legally binding and executed
commitment letter from a bona-fide third party lender setting forth the terms of
a full refinancing of the Line of Credit to close on or before June 1, 2009.
Furthermore, on or before June 1, 2009, the Company must produce to FNFG a
legally binding and executed commitment letters from a bona-fide third party
lender setting forth the terms of a full refinancing of the Term Note and the
Real Estate Mortgage to close on or before July 1, 2009. As of the date of this
report, the Company continues to work with the third party lender referenced
above towards finalizing a loan commitment by May 15, 2009.




Copier
Lease




On May 8,
2007, the Company purchased a copier through an equipment lease with RICOH in
the amount of $17,000.  The term of the lease is five (5) years with
an interest rate of 14.11%.  The amount outstanding on this lease was
$12,000 and $13,000 at March 31, 2009 and December 31, 2008,
respectively.


9


Series A Debenture
Financing




On August
15, 2008, the Company completed its offering of the Series A Debentures and
received gross proceeds of $750,000 (see Current Report on Form 8-K and
amendment on Form 8-K/A-1 filed with the Commission on August 8, 2008 and August
18, 2008 respectively). The net proceeds of the offering of Series A Debentures
were $631,000 after $54,000 of placement agent fees and expenses, legal and
accounting fees of $63,000 and $2,000 of state filing fees. The securities
issued in this transaction were sold pursuant to the exemption from registration
afforded by Rule 506 under Regulation D ("Regulation D") as promulgated by the
Commission under the Securities Act of 1933, as amended (the "1933 Act"), and/or
Section 4(2) of the 1933 Act.




The
Series A Debentures accrue interest at a rate of 10% per annum (payable by the
Company semi-annually) and mature on August 1, 2012. The payment of principal
and interest on the Series A Debentures is subordinate and junior in right of
payment to all Senior Obligations, as defined under the Series A Debentures.
Holders of the Series A Debentures will have a right of conversion of the
principal amount of the Series A Debentures into shares (the “Conversion
Shares”) of the common stock of the Company (“Common Stock”), at a conversion
rate of 666.67 shares per $500 in principal amount of the Series A Debentures
(representing a conversion price of approximately $0.75 per share). This
conversion right can be exercised at any time, commencing the earlier of (a) one
hundred twenty (120) days after the date of the Series A Debentures, or (b) the
effective date of a Registration Statement to be filed by the Company with
respect to the Conversion Shares. The Company has the right to redeem any Series
A Debentures that have not been surrendered for conversion at a price equal to
the Series A Debentures’ face value plus $0.05 per underlying common share, or
$525 per $500 in principal amount of the Series A Debentures, representing an
aggregate conversion price of $787,500. This redemption right can be exercised
by the Company at any time within ninety (90) days after any date when the
closing price of the Common Stock has equaled or exceeded $2.00 per share for a
period of twenty (20) consecutive trading days.




As
placement agent Cantone Research, Inc. (“CRI”) received a Placement Agent fee of
$52,500, or 7% of the gross principal amount of Series A Debentures sold. In
addition, the Company issued CRI a four (4) year warrant to purchase 30,450
shares of the Company’s common stock at an exercise price of $0.37 per share
(the closing price of the Company’s common shares on the Closing Date) and a
four (4) year warrant to purchase 44,550 shares of the Company’s common stock at
an exercise price of $0.40 per share (the closing price of the Company’s common
stock on the Series A Completion Date), (together the “Placement Agent
Warrants”). All warrants issued to CRI were immediately exercisable upon
issuance.




Pursuant
to a Registration Rights Agreement, the Company was to use reasonable efforts to
register the Conversion Shares and the shares of Common Stock issuable upon
exercise of the Placement Agent Warrants, and the Company filed a Registration
Statement on Form S-3 on April 15, 2009, and further amended the Registration
Statement on May 5, 2009.




The
Company has incurred $131,000 in costs related to the offering. Included in
these costs was $12,000 of non-cash compensation expense related to the issuance
of the Placement Agent Warrants to CRI. These costs will be amortized over the
term of the Series A Debentures.  For the three months ended March 31,
2009, the Company amortized $8,000 of expense related to these debt issuance
costs. The Company has also accrued $12,000 in interest expense at March 31,
2009 related to the Series A Debentures.




Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations




General




The
following discussion of the Company's financial condition and the results of
operations should be read in conjunction with the interim Financial Statements
and Notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q.
This discussion contains, in addition to historical statements, forward-looking
statements that involve risks and uncertainties. Our actual future results could
differ significantly from the results discussed in the forward-looking
statements. Factors that could cause or contribute to such differences include,
but are not limited to, the factors discussed in the section titled "Risk
Factors" in our Annual Report on Form 10-K for the year ended December 31, 2008.
Any forward-looking statement speaks only as of the date on which such statement
is made and we do not intend to update any such forward-looking
statements.


10


Overview




During the three months ended March 31,
2009, the Company sustained a net loss of $252,000 from net sales of $2,255,000.
The Company had net cash provided by operating activities of $257,000 for the
first three months of 2009.




During
the first three months of 2009, the Company continued to take steps to improve
its financial position. Beginning in April 2008, the Company implemented a
number of cost cutting initiatives including but not limited to, reducing the
number of employees in selling and marketing, research and development and
general and administrative departments. The Company also continued to take steps
to reduce manufacturing costs related to its products to increase the Company’s
gross margin. Simultaneously with these efforts, the Company continues to focus
on the development of new products to address market trends and
needs.




The
Company's continued existence is dependent upon several factors, including its
ability to raise revenue levels and reduce costs to generate positive cash
flows, and to sell additional shares of the Company's common stock to fund
operations and/or obtain additional credit facilities, if and when
necessary.




In March 2009, the Company was notified
by the United States Patent & Trademark office that it will be granted two
patents; one for its oral fluid drug testing product line and the other for its
all inclusive urine point of collection drug test cup product line. With these
grants, ABMC's intellectual property portfolio for its drug of abuse testing
line will increase to 12 United States patents and 14 foreign patents, in
addition to a number of pending patent applications both within the US and
internationally.




Plan
of Operations




The
Company’s sales strategy continues to be a focus on direct sales, while
identifying new contract manufacturing opportunities and pursuing new national
accounts. During the three months ended March 31, 2009, the Company continued
its program to market and distribute its urine and oral fluid based point of
collection tests for drugs of abuse and its Rapid Reader® drug screen results
and data management system. Contract manufacturing operations also continued in
the three months ended March 31, 2009.




Results
of operations for the three months ended March 31, 2009 compared to the three
months ended March 31, 2008




NET SALES: Net sales for the
quarter ended March 31, 2009 decreased $1,044,000 or 31.6% when compared to net
sales for the quarter ended March 31, 2008. Sales in all markets continued to be
affected by the global economic crisis and price pressures in the first quarter
of 2009. Sales in our Corporate/Workplace market (which includes our national
account division) continue to be negatively impacted as new and existing
employment levels of our customers either remain lower or in some cases
experienced further declines. Price pressure from foreign competitors in our
Government/Corrections/Law Enforcement market also continues to negatively
impact that market. Sales in our International markets also declined slightly in
the first quarter of 2009. We expect to continue to see declines in the
Corporate/Workplace market as a result of declines in the employment levels of
our customers, and increased price pressure in the Government/Corrections/Law
Enforcement market, until the economy begins to recover. We are optimistic that
sales in our International markets will either recover or decline at a lower
rate.  To combat the sales decline we are experiencing with our
current customers in the Corporate/Workplace market, we hope to close new
accounts (including but not limited to new national accounts). To combat the
decline in the Government/Corrections/Law Enforcement market, we have started
offering our customers a modified version of our Rapid TOX Cup® product, the
Rapid TOX Cup II. Certain raw material costs associated with the Rapid TOX Cup
II are lower, which means we can offer the Rapid TOX Cup II at a reduced cost to
our customers, which we hope will allow us to be successful in combating the
price pressures in the Government/Corrections/Law Enforcement market. We will
continue to focus our sales efforts on national accounts, direct sales and
contract manufacturing, while striving to reduce manufacturing costs, which
could enable us to be more cost competitive.


11


When comparing the first quarter of
2009 to the first quarter of 2008, sales of Rapid TOX®, Rapid TOX Cup and Rapid
STATTM increased. Increases in these product lines were offset by declines in
sales of InCup®, Rapid Drug Screen®, OralStat® and Rapid Reader®. While most of
these declines are simply the result of our lower sales levels, some of the
attrition in these product lines is a result of customers switching from one
product line to another due to either increased ease of use (in the case of the
OralStat and Rapid STAT) or lower cost (in the case of InCup and Rapid TOX
Cup).




The
Company’s contract manufacturing operations currently include the manufacture of
a HIV test, a test for fetal amniotic membrane rupture, and a test for RSV.
Contract manufacturing sales during the first quarter of 2009 totaled $94,000,
down from $131,000 in the same period a year ago.




COST OF GOODS SOLD: Cost of
goods sold for the three months ending March 31, 2009 increased to 59.2% of net
sales, compared to 56.7% of net sales for the three months ending March 31,
2008. Beginning in the fourth quarter of fiscal year ended December 31, 2008,
the unanticipated sharp decline in sales due to the downturn of the economy
negatively impacted our gross profit margin; more specifically, our labor and
overhead costs and raw material expenditures were not in line with the level of
sales achieved. In the first quarter of 2009, we began reducing manufacturing
labor and overhead costs and raw material expenditures in efforts to improve our
gross profit margin going forward, anticipating that sales will either continue
to stay at lower levels or further decline until the economy recovers. As a
result of these efforts, we did see some positive impact on our gross profit
margin in the first quarter of 2009, however, due to the timing of the efforts,
the impact was not fully realized.




OPERATING EXPENSES: Operating
expenses declined 29.3%, when comparing the first quarter of 2009 to the first
quarter of 2008. As a percentage of sales, operating expenses were 49.8% of net
sales in the first quarter of 2009, compared to 48.2% of net sales in the first
quarter of 2008. To improve its results of operations during the global economic
crisis, the Company implemented a number of cost cutting initiatives and these
initiatives have resulted in decreases in expenses in all three divisions as
described in the following detail:




Research and development
(“R&D”) expense




R&D
expenses for the first three months of 2009 decreased 26.8% when compared to the
first quarter of 2008. The greatest savings was in salary expense.  In
June 2008, the Vice President of Product Development retired and the Company has
not filled this position, nor do we expect to fill this position in the future.
The R&D department continues to focus their efforts on the enhancement of
current products and exploration of contract manufacturing
opportunities.




Selling and marketing
expense




Selling
and marketing expenses for the first three months of 2009 decreased 35.2% when
compared to the first quarter of 2008.  Reductions in sales salaries
and commissions, sales employee related benefits, travel expense, trade show
related expense, postage, royalty expense, consulting fees, and advertising
expense were partially offset by increases in marketing salaries and marketing
employee related benefits. A number of these reductions stem from our cost
cutting initiatives that began in 2008.




In the
first quarter of 2009, we continued to promote our products through selected
advertising, participation at high profile trade shows and other marketing
activities. Our direct sales force continued to focus their selling efforts in
our targets markets, which include but are not limited to, Corporate/Workplace,
and Government/Corrections/Law Enforcement. In addition, beginning in the fourth
quarter of 2008, our direct sales force began to focus more efforts on the
Clinical/Physician/Hospital market, as a result of our receipt of a CLIA
(Clinical Laboratory Improvement Amendments) waiver related to our Rapid TOX
product line. The Clinical Laboratory Improvement Amendments (CLIA) of 1988
established quality standards for laboratory testing to ensure the accuracy,
reliability and timeliness of patient test results regardless of where the test
was performed. As a result, those using CLIA waived tests are not subject to the
more stringent and expensive requirements of moderate or high complexity
laboratories.




General and administrative
(“G&A”) expense




G&A
expenses for the first three months of 2009 decreased 23.3% when compared to the
first quarter of 2008. Reductions in investor relations expense, quality
assurance salaries and supplies, CLIA waiver expense, legal fees, patents,
licenses and permits, training, computer supplies, General Service
Administration fees, bad debts and bank service fees were partially offset by
increases in G&A salaries, consulting fees, auto allowance, postage, repairs
and maintenance, payroll service fees and depreciation.


12


Liquidity
and Capital Resources as of March 31, 2009




The
Company's cash requirements depend on numerous factors, including product
development activities, sales and marketing efforts, market acceptance of its
new products, and effective management of inventory levels in response to sales
forecasts. The Company expects to devote substantial capital resources to
continue product development, refine manufacturing efficiencies, and support
direct sales efforts.  The Company will examine other growth
opportunities including strategic alliances and expects such activities will be
funded from existing cash and cash equivalents, issuance of additional equity or
debt securities or additional borrowings subject to market and other conditions.
The Company’s financial statements for the fiscal year ended December 31, 2008
were prepared assuming it will continue as a going concern. As of the date of
this report, the Company does not believe that its current cash balances,
together with cash generated from future operations and amounts available under
our credit facilities will be sufficient to fund operations for the next twelve
months. If cash generated from operations is not sufficient to satisfy our
working capital and capital expenditure requirements, we will be required to
sell additional equity or obtain additional credit facilities. There is no
assurance that such financing will be available or that the Company will be able
to complete financing on satisfactory terms, if at all.




The
Company has a Line of Credit, a Real Estate Mortgage and a Term Note with FNFG
(See Item I, Note E).




Working
capital




The
Company’s working capital decreased $181,000 at March 31, 2009, when compared to
working capital at December 31, 2008. In the fourth quarter of 2008, the Company
reclassified its long-term bank debt with FNFG to short-term as a result of the
Company’s default under the Loan Documents related to our credit facilities with
FNFG and the subsequent forbearance (See Item I, Note E).




The
Company has historically satisfied its net working capital requirements through
cash from operations, bank debt, occasional proceeds from the exercise of stock
options and warrants (approximately $623,000 since 2002) and through the private
placement of equity securities ($3,299,000 in gross proceeds since August 2001,
with net proceeds of $2,963,000 after placement, legal, transfer agent,
accounting and filing fees).




Dividends




The
Company has never paid any dividends on its common shares and anticipates that
all future earnings, if any, will be retained for use in the Company's business
and it does not anticipate paying any cash dividends.




Cash
Flows




Decreases
in inventory and increases in accrued expenses and wages payable offset by
increases in accounts receivable and decreases in accounts payable, resulted in
cash provided by operations of $257,000 in the first three months of
2009.  The primary use of cash in the first quarter of 2009 was
funding of operations.




Net cash
used in investing activities in both the first quarter of both 2009 and 2008 was
for investment in property, plant and equipment.




Net cash
provided by financing activities in the first three months of 2009 consisted of
net proceeds from our Line of Credit offset by payments on outstanding debt. Net
cash used in financing activities in the first three months of 2008 consisted of
payments on outstanding debt.




At March
31, 2009, the Company had cash and cash equivalents of
$592,000.


13


Outlook




The
Company's primary short-term capital and working capital needs relate to
continued support of its research and development programs, exploring new
distribution opportunities, focusing sales efforts on segments of the drugs of
abuse testing market that will yield high volume sales, refining its
manufacturing and production capabilities, and establishing adequate inventory
levels to support expected sales. While the Company believes that its current
infrastructure is sufficient to support its business, if at some point in the
future, the Company experiences renewed growth in sales, it may be required to
increase its current infrastructure to support sales. It is also possible that
additional investments in research and development, selling and marketing and
general and administrative may be necessary in the future to: develop new
products in the future, enhance current products to meet the changing needs of
the point of collection testing market, grow contract manufacturing operations,
promote the Company’s products in its markets and institute changes that may be
necessary to comply with various new public company reporting requirements
including but not limited to requirements related to internal controls over
financial reporting. However, the Company has taken measures to control the rate
of increase of these costs to be consistent with any sales growth rate of the
Company.




The
Company believes that it will need to raise additional capital in fiscal 2009 to
be able to continue operations. If events and circumstances occur such that the
Company does not meet its current operating plans, or it is unable to raise
sufficient additional equity or debt financing, or credit facilities are
insufficient or not available, the Company may be required to further reduce
expenses or take other steps which could have a material adverse effect on its
future performance.




Item
3. Quantitative and Qualitative Disclosures About Market Risk




Not applicable




Item
4. Controls and Procedures




(a)Evaluation
of Disclosure Controls and Procedures




Our Chief
Executive Officer (Principal Executive Officer) and Chief Financial Officer
(Principal Financial Officer), together with other members of management, have
reviewed and evaluated the effectiveness of our “disclosure controls and
procedures” (as defined in the Securities Exchange Act of 1934 Rule 13a-15(e)
and 15d-15(e)) as of the end of the period covered by this report. Based on this
review and evaluation, our Principal Executive Officer and Principal Financial
Officer have concluded that our disclosure controls and procedures are effective
to ensure that material information relating to the Company is recorded,
processed, summarized, and reported in a timely manner.




(b)
Changes in Internal Control Over Financial Reporting




There
have been no changes in the Company's internal control over financial reporting
during the last quarterly period covered by this report that have materially
affected, or are reasonably likely to materially affect, the Company's internal
control over financial reporting.




PART
II – OTHER INFORMATION




Item
1. Legal Proceedings




See “Note
C – Litigation” in the Notes to interim Financial Statements included in this
report for a description of pending legal proceedings in which the Company is a
party.




Item
1A. Risk Factors




Not
applicable.




Item
2. Unregistered Sales of Equity Securities and Use of Proceeds




None.




Item
3. Defaults Upon Senior Securities




None.




Item
4. Submission of Matters to a Vote of Security Holders




None.




Item
5.  Other Information




None.


14


Item
6.  Exhibits




31.1
            Rule
      13a-14(a)/15d-14(a) Certification of Chief Executive
    Officer




31.2
            Rule
      13a-14(a)/15d-14(a) Certification of Chief Financial
    Officer




32.1
            Certification
      of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002




32.2
            Certification
      of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002




15


SIGNATURES





In
accordance with the requirements of the Exchange Act, the registrant has caused
this report to be signed on its behalf by the undersigned thereunto duly
authorized.





AMERICAN
      BIO MEDICA CORPORATION(Registrant)By: /s/Stefan ParkerStefan
      ParkerChief
      Financial OfficerExecutive
      Vice President, FinancePrincipal
      Financial Officer and duly authorized
Officer





Dated:
May 14, 2009


16