**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D. C. 20549


**FORM
      10-QSB**





x
            Quarterly
                report under Section 13 or 15(d) of the Securities Exchange Act of
                1934.




For
      the
      quarterly period ended September 30, 2007.





o
            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**


(Exact
      name of small business issuer as specified in its charter)




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




**122
      Smith Road, Kinderhook, New York 12106**


(Address
      of principal executive offices)





**800-227-1243**


(Issuer's
      telephone number)





Check
      whether the issuer: (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for 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.





Yes
xNo
o





State
      the
      number of shares outstanding of each of the issuer's classes of common equity
      as
      of the latest practicable date:





21,744,768
      Common Shares as of November 12, 2007





Transitional
      Small Business Disclosure Format: Yes o No x









PART
      I


FINANCIAL
      INFORMATION




**American
      Bio Medica Corporation** **Balance
        Sheets**




**September
                30,**
            
            **December
                31,****2007**
            
            **2006****(Unaudited)****Assets**Current
                assets:Cash
                and cash equivalents
            
            $
            376,000
            
            $
            641,000Accounts
                receivable, net of allowance of $105,000 at both September 30, 2007
                and
                December 31, 2006
            
            
            2,066,000
            
            
            1,313,000Inventory,
                net of reserve for slow moving andobsolete
                inventory of $250,000 at both September 30, 2007 and December 31,
                2006
            
            
            4,216,000
            
            
            4,859,000Prepaid
                and other current assets
            
            
            189,000
            
            
            165,000Total
                current assets
            
            
            6,847,000
            
            
            6,978,000Property,
                plant and equipment, net
            
            
            2,293,000
            
            
            1,982,000Other
                assets
            
            
            57,000
            
            
            57,000Total
                assets
            
            $
            9,197,000
            
            $
            9,017,000**Liabilities
                and Stockholders’ Equity**Current
                liabilities:Accounts
                payable
            
            $
            1,103,000
            
            $
            1,091,000Accrued
                liabilities
            
            
            344,000
            
            
            509,000Wages
                payable
            
            
            406,000
            
            
            269,000Line
                of credit
            
            
            803,000
            
            
            176,000Current
                portion of mortgages and notes payable
            
            
            119,000
            
            
            17,000Other
                current liabilities
            
            
            60,000
            
            
            60,000Total
                current liabilities
            
            
            2,835,000
            
            
            2,122,000Long
                term portion of mortgages and notes payable
            
            
            1,137,000
            
            
            758,000Other
                long term liabilities
            
            
            100,000
            
            
            100,000Total
                liabilities
            
            
            4,072,000
            
            
            2,980,000Stockholders’
                equity:Preferred
                stock; par value $.01 per share; 5,000,000 shares authorized; none
                issued
                and outstandingCommon
                stock; par value $.01 per share; 50,000,000 shares authorized; 21,744,768
                and 21,719,768 shares issued and outstanding at September 30, 2007
                and
                December 31, 2006, respectively
            
            
            217,000
            
            
            217,000Additional
                paid-in capital
            
            
            19,268,000
            
            
            19,218,000Accumulated
                deficit
            
            
            (14,360,000
            )
            
            (13,398,000
            )Total
                stockholders’ equity
            
            
            5,125,000
            
            
            6,037,000Total
                liabilities and stockholders’ equity
            
            $
            9,197,000
            
            $
            9,017,000


*The
        accompanying notes are an integral part of the financial
        statements*
  2
 **American
          Bio Medica Corporation**


**Statements
        of Operations**


**(Unaudited)**




**For
                The Nine Months Ended****September
                30,****2007**
            
            
            **2006**Net
                sales
            
            $
            10,523,000
            
            $
            10,657,000Cost
                of goods sold
            
            
            6,383,000
            
            
            5,567,000Gross
                profit
            
            
            4,140,000
            
            
            5,090,000Operating
                expenses:Research
                and development
            
            
            520,000
            
            
            456,000Selling
                and marketing
            
            
            2,334,000
            
            
            2,273,000General
                and administrative
            
            
            2,149,000
            
            
            2,217,0005,003,000
            
            
            4,946,000Operating
                income/(loss)
            
            
            (863,000
            )
            
            144,000Other
                income (expense):Interest
                income
            
            
            7,000
            
            
            3,000Interest
                expense
            
            
            (106,000
            )
            
            (50,000
            )(99,000
            )
            
            (47,000
            )Income/(loss)
                before provision for income taxes
            
            
            (962,000
            )
            
            97,000Income
                taxes
            
            
            
            
            
            5,000Net
                income/(loss)
            
            $
            (962,000
            )
            $
            92,000Basic
                and diluted income/(loss) per common share
            
            $
            (0.04
            )
            $
            0.00Weighted
                average shares outstanding -basic
            
            
            21,733,779
            
            
            21,483,150Dilutive
                effect of stock options and warrants
            
            
            
            
            
            104,565Weighted
                average shares outstanding -diluted
            
            
            21,733,779
            
            
            21,587,715*The
                accompanying notes are an integral part of the financial
                statements*





3


**American
          Bio Medica Corporation**
 **Statements
          of Operations**


**(Unaudited)**


**For
                The Three Months Ended****September
                30,****2007**
            
            **2006**Net
                sales
            
            $
            3,912,000
            
            $
            3,564,000Cost
                of goods sold
            
            
            2,493,000
            
            
            1,890,000Gross
                profit
            
            
            1,419,000
            
            
            1,674,000Operating
                expenses:Research
                and development
            
            
            173,000
            
            
            145,000Selling
                and marketing
            
            
            818,000
            
            
            811,000General
                and administrative
            
            
            641,000
            
            
            722,0001,632,000
            
            
            1,678,000Operating
                loss
            
            
            (213,000
            )
            
            (4,000
            )Other
                income (expense):Interest
                income
            
            
            2,000
            
            
            2,000Interest
                expense
            
            
            (41,000
            )
            
            (14,000
            )(39,000
            )
            
            (12,000
            )Loss
                before provision for income taxes
            
            
            (252,000
            )
            
            (16,000
            )Net
                loss
            
            $
            (252,000
            )
            $
            (16,000
            )Basic
                and diluted income/(loss) per common share
            
            $
            (0.01
            )
            $
            0.00Weighted
                average shares outstanding -basic
            
            
            21,744,768
            
            
            21,459,768Dilutive
                effect of stock options and warrants
            
            
            
            
            
            70,246Weighted
                average shares outstanding -diluted
            
            
            21,744,768
            
            
            21,530,014*The
                accompanying notes are an integral part of the financial
                statements*




4




**American
        Bio Medica Corporation**


**Statements
        of Cash Flows**
 **(Unaudited)**




**For
                The Nine Months Ended****September
                30,****2007**
            
            
            **2006****Cash
                flows from operating activities:**Net
                income/(loss)
            
            $
            (962,000
            )
            $
            92,000Adjustments
                to reconcile net income/(loss) to net cash (used in)/provided by
                operating
                activities:Depreciation
            
            
            338,000
            
            
            279,000Non-cash
                compensation expense
            
            
            26,000
            
            
            21,000Changes
                in:Accounts
                receivable
            
            
            (753,000
            )
            
            (54,000
            )Inventory
            
            
            643,000
            
            
            473,000Prepaid
                and other current assets
            
            
            (24,000
            )
            
            (90,000
            )Accounts
                payable
            
            
            12,000
            
            
            (324,000
            )Accrued
                liabilities
            
            
            (165,000
            )
            
            170,000Other
                liabilities
            
            
            
            
            
            29,000Wages
                payable
            
            
            137,000
            
            
            36,000Net
                cash (used in)/ provided by operating activities
            
            
            (748,000
            )
            
            632,000**Cash
                flows from investing activities:**Purchase
                of property, plant and equipment
            
            
            (632,000
            )
            
            (334,000
            )Net
                cash (used in) investing activities
            
            
            (632,000
            )
            
            (334,000
            )**Cash
                flows from financing activities:**Proceeds
                from exercise of options
            
            
            23,000
            
            
            85,000Debt
                payments
            
            
            (74,000
            )
            
            (26,000
            )Proceeds
                from debt financing
            
            
            539,000Proceeds
                from line of credit
            
            
            900,000
            
            
            103,000Line
                of credit payments
            
            
            (273,000
            )Net
                cash provided by financing activities
            
            
            1,115,000
            
            
            162,000**Net
                increase / (decrease) in cash and cash
                equivalents**
            
            
            (265,000
            )
            
            460,000Cash
                and cash equivalents - beginning of period
            
            
            641,000
            
            
            446,000**Cash
                and cash equivalents - end of period**
            
            $
            376,000
            
            $
            906,000**Supplemental
                disclosures of cash flow information**Cash
                paid during period for interest
            
            $
            106,000
            
            $
            50,000Purchase
                of property, plant and equipment, financing through capital
                lease
            
            $
            17,000
            
            $




*The
        accompanying notes are an integral part of the financial
        statements*
  5





Notes
      to
      financial statements (unaudited)





September
      30, 2007





**Note
      A - Basis of Reporting**





The
      accompanying unaudited financial statements have been prepared in accordance
      with accounting principles generally accepted in the United States of America
      for interim financial information and with the instructions to Form 10-QSB.
      Accordingly, they do not include all of the information and footnotes required
      by accounting principles generally accepted in the United States of America
      for
      complete financial statements. In the opinion of management, such statements
      include all normal, recurring adjustments, which are considered necessary for
      a
      fair presentation of the financial position of American Bio Medica Corporation
      (the "Company" or "ABMC") at September 30, 2007, and the results of its
      operations for the three and nine month periods ended September 30, 2007 and
      September 30, 2006, and cash flows for the nine-month periods ended September
      30, 2007 and 2006. The results of operations for the three-month and nine-month
      periods ended September 30, 2007 are not necessarily indicative of the operating
      results for the full year. These financial statements should be read in
      conjunction with the Company's audited financial statements and related
      disclosures for the year ended December 31, 2006 included in the Company's
      Form
      10-KSB.





**Note
      B - Critical accounting policies and estimates**





During
      the nine months ended September 30, 2007, there were no significant changes
      to
      the Company's critical accounting policies, which are included in the Company's
      Annual Report on Form 10-KSB for the year ended December 31, 2006.





The
      preparation of these financial statements requires ABMC 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, ABMC evaluates its estimates, including those related to product
      returns, bad debts, inventories, income taxes, warranty obligations, and
      contingencies and litigation. ABMC 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.





ABMC
      believes the following critical accounting policies affect its more significant
      judgments and estimates used in the preparation of its financial statements.
      ABMC records estimated reductions to revenue for customer returns and allowances
      based on historical experience. If market conditions were to decline, ABMC
      may
      take actions to increase customer incentive offerings possibly resulting in
      an
      incremental reduction of gross margins. ABMC recognizes revenue upon shipment
      to
      customers. ABMC maintains allowances for doubtful accounts for estimated losses
      resulting from the inability of its customers to make required payments. If
      the
      financial condition of ABMC's customers were to deteriorate, resulting in an
      impairment of their ability to make payments, additional allowances may be
      required. ABMC writes down its inventory for estimated obsolescence or
      unmarketable inventory equal to the difference between the cost of inventory
      and
      the net realizable value based upon assumptions about future demand and market
      conditions. If actual market conditions are less favorable than those projected
      by management, additional inventory write-downs may be required. ABMC records
      a
      valuation allowance to reduce its deferred tax assets to the amount that is
      more
      likely than not to be realized. While ABMC has considered future taxable income
      and ongoing prudent and feasible tax planning strategies in assessing the need
      for the valuation allowance, in the event ABMC were to determine that it would
      be able to realize its deferred tax assets in the future in excess of its net
      recorded amount, an adjustment to the deferred tax asset would increase income
      in the period such determination was made.





During
      the year ended December 31, 2006, the Company earned a net income of $196,000
      from net sales of $13,838,000, and had net cash provided by operating activities
      of $342,000. During the nine months ended September 30, 2007, the Company
      sustained a net loss of $962,000 from net sales of $10,523,000. The Company
      had
      net cash used in operating activities of $748,000 for the first nine months
      of
      2007. During the first nine months of 2007, the Company continued to take steps
      to improve its financial prospects including focusing on research and
      development, new products, and selling and marketing, while investing in
      automation equipment and expanding manufacturing capacity to increase
      production.




6





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, if necessary.




NEW
      ACCOUNTING STANDARDS





In
      June
      2006, the FASB issued FIN 48, “Accounting for Uncertainty in Income Taxes—an
      Interpretation of FASB Statement No. 109”. This Interpretation clarifies the
      accounting for uncertainty in income taxes recognized in an enterprise’s
      financial statements in accordance with FASB Statement No. 109, “Accounting for
      Income Taxes” *.* The
      Company adopted FIN48 on January 1, 2007 and it did not have a significant
      effect on its financial statements.





In
      September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No.
      157”). SFAS No. 157 establishes a common definition for fair value to be applied
      to U.S. GAAP guidance requiring use of fair value, establishes a framework
      for
      measuring fair value, and expands disclosure about such fair value measurements.
      This Statement is effective for fiscal years beginning after November 15, 2007,
      and interim periods within those fiscal years. The Company does not believe
      that
      the adoption of FAS No. 157 will have a significant effect on its financial
      statements.





In
      September 2006, the SEC issued Staff Accounting Bulletin (“SAB”) No. 108,
“Considering the Effects of Prior Year Misstatements when Quantifying
      Misstatements in Current Year Financial Statements.” SAB No. 108 addresses how
      the effects of prior year uncorrected misstatements should be considered when
      quantifying misstatements in current year financial statements. SAB No. 108
      requires companies to quantify misstatements using a balance sheet and income
      statement approach and to evaluate whether either approach results in
      quantifying an error that is material in light of relevant quantitative and
      qualitative factors. SAB No. 108 is effective for fiscal years ending after
      November 15, 2006. Prior to SAB 108, the Company used the “roll-over” method for
      accounting for audit differences. It was determined that under the roll-over
      method, a vacation accrual was not material to the financial statements taken
      as
      a whole in any given year. At December 31, 2006 unpaid vacation was estimated
      to
      be approximately $80,000, which was deemed material to the Company’s financial
      statements under SAB 108. This liability of $80,000 had accumulated steadily
      over a ten-year period. A change in accounting principle was recorded in the
      Company’s fiscal year ended December 31, 2006 financial statements that had not
      been previously recorded. The adjustment was included in the beginning balances
      (December 31, 2005) of wages payable and the accumulated deficit.





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities Including an Amendment of SFAS No.
      115 ” (SFAS No. 159). This new standard permits entities to choose to measure
      many financial instruments and certain warranty and insurance contracts at
      fair
      value on a contract-by-contract basis. This standard is effective for fiscal
      years beginning after November 15, 2007. While the Company is currently
      evaluating the provisions of SFAS No. 159, the Company does not expect the
      adoption of this statement to have a material impact on its consolidated
      financial statements.





**Note
      C - Net Income/(Loss) Per Common Share**





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





Potential
      common shares outstanding as of September 30, 2007 and 2006:





**September
                30,**
              **2007**
            
            **September
                30,**
              **2006****Warrants**
            
            
            150,000
            
            
            550,000**Options**
            
            
            3,968,080
            
            
            3,993,080




7




For
      the
      three and nine months ended September 30, 2007 the number of securities not
      included in the diluted EPS, because the effect would have been anti-dilutive,
      were 4,118,080.





For
      the
      three and nine months ended September 30, 2006 the number of securities not
      included in the diluted EPS, because the effect would have been anti-dilutive,
      were 3,481,080 and 3,401,080, respectively.





**Note
      D - Litigation**





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





**Note
      E - Reclassifications**





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





**Note
      F - Line of Credit**





On
      October 5, 2006, the Company was notified that the maximum amount available
      under its line of credit with First Niagara Financial Group, Inc. (“FNFG”) was
      increased from $350,000 to $875,000. The maximum available line of $875,000
      is
      not to exceed 70% of accounts receivable less than 60 days. The purpose of
      the
      line of credit is to provide working capital. The interest rate is .25% above
      the FNFG prime rate. The Company is required to maintain certain financial
      covenants such as net worth (stockholders’ equity) greater than $5 million and
      working capital greater than $4 million. Further, the Company is required to
      maintain a minimum Debt Service Coverage Ratio of not less than 1.2:1.0 measured
      at each fiscal year end beginning December 31, 2006. Debt Service Coverage
      Ratio
      is defined as Net Operating Income divided by annual principal and interest
      payments on all loans relating to subject property. The Company meets the
      stockholder’s equity and working capital financial covenants as of September 30,
      2007 and the Debt Service Coverage Ratio must be measured as of December 31,
      2007. There can be no assurance that the Company will meet any or all of the
      financial covenant requirements at fiscal year end December 31, 2007. There
      is
      no requirement for annual repayment of all principal on this line of credit;
      it
      is payable on demand at any time. The amount outstanding on this line of credit
      as of September 30, 2007 was $762,000.





The
      Company obtained an additional line of credit from FNFG for $75,000 during
      the
      first quarter of 2006. The line of credit is to be used exclusively for payments
      on a sublicense agreement entered into during the first quarter of 2006. The
      interest rate is .50% above the FNFG prime rate and principal may be repaid
      at
      any time and borrowed again as needed. There is no requirement for annual
      repayment of all principal on this line of credit. The Company intends to repay
      the funds drawn down on this line within one year of each draw to allow
      borrowing of additional amounts related to future payments due under the
      sublicense agreement. The amount outstanding on this line of credit at September
      30, 2007 was $41,000.





**Note
      G -Sublicense Agreement**




On
      February 28, 2006, the Company entered into a non-exclusive Sublicense Agreement
      (the "Agreement") related to certain patents to allow the Company to expand
      its
      contract manufacturing operations. Under this Agreement, the Company is
      committed to pay a non-refundable fee of $175,000 over the course of 2 years,
      of
      which $75,000 was paid in the first quarter of 2006, the next payment of $50,000
      was paid in February 2007, and the final payment of $50,000 is due by the end
      of
      January 2008. The Company would also be required to pay royalties for products
      the Company manufactures that fall within the scope of these patents. The
      Company has not manufactured any products that fall within the scope of these
      patents, and therefore, no royalty payments are currently required.




8





**Note
      H - Integrated Bio Technology Agreement**





On
      March
      29, 2006, the Company entered into a royalty agreement with Integrated Bio
      Technology Corporation (“IBC”). IBC is the owner of the RSV test and previously
      purchased the tests from the Company, via a contract manufacturing agreement,
      for resale to its distributor. As of December 31, 2005, IBC had outstanding
      amounts due to ABMC totaling approximately $119,000. To address this outstanding
      balance, and to streamline the delivery of product to IBC’s distributor, the
      Company agreed to work directly with IBC’s distributor to receive orders,
      manufacture product and execute all invoicing and collection directly from
      the
      distributor. Effective January 1, 2006, the Company began paying a royalty
      equal
      to 20% of total sales to IBC. The Company will pay only 25% of royalties earned
      during the first two years, with the remaining 75% applied to amounts currently
      owed to ABMC by IBC. From the inception of the agreement with IBC through the
      first nine months of 2007, ABMC manufactured and sold approximately $785,000
      of
      the RSV tests to IBC’s distributor. The royalties earned on these sales are
      approximately $157,000, of which $119,000 has been applied to the prepaid
      royalty, leaving a zero balance due from IBC as of September 30, 2007.





**Note
      I - Stock Option Grants**





In
      June
      2006, the Company’s Board of Directors granted a stock option to purchase 72,000
      shares of the Company’s common stock to the Company’s then Chief Financial
      Officer, and an option to purchase 3,000 shares of the Company’s common stock to
      an employee in the Company’s R&D division. Both option grants have exercise
      prices of $1.05 (the closing price of the Company’s common shares on the date of
      grant) and vested 100% on the one-year anniversary of the date of the grant.
      In
      accordance with FAS 123(R) (see “New Accounting Standards” herein), the Company
      has recognized $63,347 in non-cash compensation expense related to these grants
      over the past twelve months. Included in the nine months ended September 30,
      2007 is $26,000 of this non-cash compensation expense.





Upon
      his
      departure (see Note J), the Company’s former Chief Financial Officer, Keith
      Palmer, was prohibited from engaging in trading in the Company’s securities as
      his trading window was closed under the Company’s Trading Policy (this
      prohibition included exercise of options). Under Palmer’s option agreements, the
      Company’s Compensation Committee of the Board of Directors had the sole
      discretion and authority to permit Palmer to exercise his options as though
      his
      resignation had not occurred if such resignation was with the Company’s consent.
      As Palmer’s resignation was with the Company’s consent and since Palmer was
      prohibited from exercising his options upon his departure, the Compensation
      Committee unanimously agreed to provide Palmer with a 6-month period (following
      his departure and ending January 4, 2008), to exercise his options. At the
      time
      of his departure, Palmer had 78,000 options at an exercise price of $0.94,
      50,000 options at an exercise price of $1.04 and 72,000 options at an exercise
      price of $1.05, all of which were fully vested.





**Note
      J - Employment Agreements**





In
      the
      second quarter of 2007, the Company entered into employment agreements with
      the
      Chief Executive Officer, Stan Cipkowski, Chief Science Officer, Martin R. Gould,
      and then Chief Financial Officer, Keith E. Palmer , providing for aggregate
      annual salaries of $504,000. The
      agreement with the Chief Executive Officer, Cipkowski, provides for a $206,000
      annual salary, is for a term of one year, expiring April 19, 2008, and
      automatically renews unless either party gives advance notice of 60 days. The
      agreement with the Chief Science Officer, Gould, provides for a $149,000 annual
      salary, is for a term of one year, expiring May 31, 2008, and automatically
      renews unless either party gives advance notice of 60 days. The agreement with
      the Chief Financial Officer, Palmer, provided for a $149,000 annual salary,
      was
      for a term of one year and automatically renewed unless either party gave
      advance notice of 60 days. Copies of these employment agreements were filed
      as
      exhibits to the Company’s quarterly report on Form 10-QSB filed with the
      Securities and Exchange Commission (the “Commission”) on August 13,
      2007.




9





The
      employment agreement with Chief Financial Officer Palmer was terminated
      effective July 6, 2007 as a result of Palmer’s resignation.





In
      the
      third quarter of 2007, the Company entered into an employment agreement with
      its
      current Chief Financial Officer, Stefan Parker. The agreement provides for
      a
      $120,000 annual salary, is for a term of one year, expiring August 22, 2008,
      and
      automatically renews unless either party gives advance notice of 60 days. A
      copy
      of this employment agreement was filed as an exhibit to the Company’s current
      report on Form 8-K filed with the Commission on August 24, 2007.




**Item
      2. Management's Discussion and Analysis or Plan of
      Operation**





MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR
      THE
      THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006





ABMC’s
      discussion and analysis of its financial condition and results of operations
      are
      based upon ABMC's financial statements, which have been prepared in accordance
      with accounting principles generally accepted in the United States of America.
      The following discussion of the Company's financial condition and the results
      of
      operations should be read in conjunction with the Financial Statements and
      Notes
      thereto appearing elsewhere in this document.





The
      Private Securities Litigation Reform Act of 1995 provides a safe harbor for
      forward-looking statements. In order to comply with the terms of the safe
      harbor, the Company notes that in addition to the description of historical
      facts contained herein, this report contains certain forward-looking statements
      that involve risks and uncertainties as detailed herein and from time to time
      in
      the Company's other filings with the Securities and Exchange Commission and
      elsewhere. Such statements are based on management's current expectations and
      are subject to a number of factors and uncertainties, which could cause actual
      results to differ materially from those described in the forward-looking
      statements. These factors include, among others: (a) the Company's fluctuations
      in sales and operating results; (b) risks associated with international
      business; (c) regulatory, competitive and contractual risks; (d) product
      development risks; and (e) the ability to achieve strategic initiatives,
      including but not limited to the ability to achieve sales growth across the
      business segments through a combination of enhanced sales force, new products,
      and customer service.





**Results
      of operations for the nine months ended September 30, 2007 compared to the
      nine
      months ended September 30, 2006**





Net
      sales
      were $10,523,000 for the nine months ended September 30, 2007 as compared to
      $10,657,000 for the nine months ended September 30, 2006, a decrease of
      $134,000, or 1.3%. Increases in national account sales and international sales
      were offset by declines in outside sales and contract manufacturing sales.
      Contract manufacturing sales during the first nine months of 2007 totaled
      $218,000, down $336,000 from $554,000 a year ago, resulting primarily from
      the
      timing of orders from the distributor of the RSV test. Orders in the first
      quarter of 2006 had previously occurred in the fourth quarter of preceding
      years, but were delayed from the fourth quarter of 2005 into the first quarter
      of 2006.





Sales
      of
      the Company’s OralStat® oral fluid test, the Rapid Drug Screen® (RDS®) InCup®
(the Company’s all-inclusive drug test cup) and Rapid TOX® (the cassette product
      introduced by the Company in late 2005) increased when comparing the first
      nine
      months of 2007 with the first nine months of 2006. These increases were offset
      by a declines in sales of the RDS and Rapid TEC® product lines during the first
      nine months of 2007, compared to the same period a year ago. Some of the RDS
      attrition may be a result of customers ordering the RDS InCup (rather than
      the
      RDS) due to its “all inclusive” cup format and the Rapid TOX (rather than the
      Rapid TEC or RDS) due to its lower cost and cassette platform. The Company
      anticipates continued growth in sales of the Rapid TOX product as it continues
      to gain market acceptance and penetrate new markets. The Company also
      anticipates growth in its OralStat oral fluid test and contract manufacturing
      operations.




10





During
      the nine months ended September 30, 2007, the Company continued its extensive
      program to market and distribute its urine and oral fluid based point of
      collection tests for drugs of abuse. The Company also continued marketing its
      Rapid Reader®, the first all-inclusive drug screen interpretation and data
      management system cleared by the U.S. Food and Drug Administration (“FDA”).
      Sales of the Rapid Reader totaled $35,000 for both the nine months ended
      September 30, 2007 and September 30, 2006.





In
      the
      first nine months of 2007, the Company launched the patent-pending OralStat
      EX,
      a new oral fluid point of collection test that improves the limits of detection
      over other point of collection oral fluid drug tests on the market. The OralStat
      EX was developed for use in those markets where speed and accuracy are vital.
      OralStat EX has been specifically designed to make both point of collection
      testing and confirmation testing simple. Sales of the OralStat EX totaled
      $29,000 in the nine months ended September 30, 2007.





During
      the first nine months of 2007, the Company announced that it had entered into
      a
      Purchase Agreement with one of the world’s largest clinical laboratories. As of
      the date of this report, the name of the client has not yet been disclosed
      at
      the client’s request, however the client is an S&P 500 listed company that
      performs millions of drugs of abuse tests annually. The laboratory will purchase
      the Company’s point of collection drugs of abuse testing devices for use at
      locations strategically located throughout the United States. Sales to this
      entity were $812,000 in the nine months ended September 30, 2007. These sales
      are included in the increase in national account sales.





In
      the
      nine months ended September 30, 2007, the Company filed an application with
      the
      U.S. Food and Drug Administration (“FDA”) for CLIA (Clinical Laboratory
      Improvement Amendments of 1988) waived status for its RDS, Rapid One® and Rapid
      TOX product lines. CLIA established quality standards for laboratory testing
      to
      ensure the accuracy, reliability and timeliness of patient test results
      regardless of where the test was performed. CLIA waived tests are recognized
      by
      FDA to be so simple to use and so accurate that there is little risk of error.
      As a result, those using CLIA waived tests are not subject to the more stringent
      and expensive requirements of moderate or high complexity laboratories. If
      the
      Company is granted CLIA waived status for its RDS, Rapid One and/or Rapid TOX
      product lines, it expects to see increased sales in markets including, but
      not
      limited to the occupational health market and the clinical (i.e. hospital and
      physician) market. As of the date of this report, the Company has not yet
      received the CLIA waiver, but the Company does expect to receive the CLIA waiver
      in the future. There can be no assurance, however, that the Company will receive
      this CLIA waiver.





The
      Company continued its contract manufacturing operations for unaffiliated third
      parties during the first nine months of 2007. During the third quarter of 2006,
      the customer for whom the company was developing and manufacturing an HIV
      product entered into a royalty agreement with a third party developer and a
      distributor to share in the profits of sales of an HIV test that already has
      FDA
      clearance. As a result, the Company does not anticipate any future development
      or manufacturing of this HIV product for this customer. The Company does
      manufacture an HIV test for another smaller distributor.





The
      Company also manufactures other tests for infectious disease, a test for fetal
      amniotic membrane rupture, a test for RSV (Respiratory Syncytial Virus) and
      other agricultural testing products. The Company is also evaluating several
      other requests for contract manufacturing including incorporation of the
      Company’s drugs of abuse tests into another test manufactured by an unrelated
      third party that is used in hospitals, emergency rooms and clinics, and
      development of variations of the Company’s current oral fluid product to meet
      specific market demands in Europe.





Cost
      of
      goods sold for the nine months ended September 30, 2007 was $6,383,000, or
      60.7%
      of net sales, compared to $5,567,000, or 52.2% of net sales, for the nine months
      ended September 30, 2006. The increase in cost of goods sold is due to increases
      in the average cost of labor and overhead during the first nine months of 2007,
      stemming from the greater diversity and complexity of new products along with
      preparation for fulfilling anticipated orders during the remainder of 2007.




11








Also
      affecting cost of goods sold are disposals of certain inventory components
      manufactured during the introduction of the new Rapid TOX product in the fourth
      quarter of 2005, inventory disposals of expired products, and components
      enhanced as a result of product development.





The
      Company continues to evaluate all aspects of its manufacturing and assembly
      processes to identify any areas of cost savings to improve gross margins. To
      increase capacity and automate assembly, the Company has invested nearly $1
      million in equipment and facilities at its manufacturing facility in New Jersey
      since the summer of 2006. The single largest investment was approximately
      $654,000 for equipment to automatically assemble and pouch the Company’s Rapid
      TOX product and related site improvements to the Company’s New Jersey facility
      required as a result of automation. This automation will increase output and
      reduce the number of assemblers required to meet expected increased demand.
      Further, the Company acquired additional manufacturing space at its
      manufacturing facility in New Jersey during the fourth quarter of 2006 and
      thus
      increased manufacturing space at the New Jersey facility by nearly 100%.
      Increased price pressure in the marketplace has limited the Company’s ability to
      recover manufacturing cost increases while maintaining market share.





Operating
      expenses were $5,003,000 in the first nine months of 2007, compared to
      $4,946,000 in the same period in 2006, an increase of $57,000, or 1.2%.
      Increases of $64,000 in research and development and $61,000 in selling and
      marketing expense were offset by a decrease of $68,000 in general and
      administrative. Operating expenses increased to 47.5% of net sales in the first
      nine months of 2007, from 46.4% for the same period in 2006.





Research
      and development (R&D) expense





R&D
      expenses for the nine months ended September 30, 2007 were $520,000, or 4.9%
      of
      net sales, an increase of 14.0%, compared to $456,000, or 4.3% of net sales,
      for
      the nine months ended September 30, 2006. The increase is due to increases
      in
      salaries, facilities costs due to expansion of New Jersey facility, supplies
      and
      travel costs, offset by a decrease in consulting fees primarily related to
      FDA
      compliance. During the nine months ending September 30, 2007, R&D efforts
      were also specifically focused on the development of variations of the Company’s
      current oral fluid product to meet specific market demands in Europe and the
      development of a new product to address price pressures the Company is
      encountering in government markets. Management continues its overall strategy
      to: focus on new product development to meet the changing needs of the point
      of
      collection drugs of abuse testing market; respond to requests from other
      contract manufacturing inquiries; and develop new uses and applications of
      immunoassay lateral flow technology.





Selling
      and marketing expense





Selling
      and marketing expenses were $2,334,000, or 22.2% of net sales, in the first
      nine
      months of 2007, an increase of 2.7%, compared to selling and marketing expenses
      of $2,273,000, or 21.3% of net sales, in the same nine months of 2006. This
      slight increase in selling and marketing expenses is due to increases in sales
      commissions, postage, advertising, travel related costs and trade show costs,
      offset by decreases in salaries. The Company continues to focus on direct sales
      and inside direct sales, while identifying new contract manufacturing operations
      and pursuing new national accounts.





General
      and administrative (G&A) expense





G&A
      expenses were $2,149,000, or 20.4% of net sales, in the first nine months of
      2007, a decrease of 3.1%, compared to $2,217,000, or 20.8% of net sales, in
      the
      first nine months of 2006. The decrease in G&A is a result of reductions in
      outside service fees, patent and license fees and bad debts, offset by increases
      in salaries and costs associated with obtaining our CLIA waiver from FDA.




**Results
      of operations for the three months ended September 30, 2007 compared to the
      three months ended September 30, 2006**





Net
      sales
      were $3,912,000 for the three months ended September 30, 2007, compared to
      $3,564,000 for the three months ended September 30, 2006. This represents an
      increase of $348,000, or 9.8%. Increases in national account sales and contract
      manufacturing sales were off set by decreases in outside sales, in-house sales
      and international sales. Outside sales were down primarily as a result of lost
      personnel within the outside sales department and a decrease in the Company’s
      criminal justice sales as a result of government budget constraints and price
      pressure in the government bid process. The Company is currently in the process
      of recruiting new personnel to address the lost personnel issue and focusing
      its
      efforts to provide government entities with less expensive drug testing
      options.




12





Sales
      of
      the Company’s OralStat oral fluid test, Rapid TOX (the cassette product
      introduced by the Company in late 2005) and RDS InCup increased when comparing
      the third quarter of 2007 with the third quarter of 2006. These increases were
      offset by declines in Rapid Drug Screen and Rapid TEC sales during the third
      quarter of 2007, compared to the same period a year ago. Some of the RDS
      attrition may be a result of customers ordering the RDS InCup (rather than
      the
      RDS) due to its “all inclusive” cup format and the Rapid TOX (rather than the
      RDS or Rapid TEC) due to its lower cost and cassette platform. The Company
      anticipates continued growth in sales of the Rapid TOX product as it continues
      to gain market acceptance and penetrate new markets. The Company also
      anticipates growth in its OralStat oral fluid test and contract manufacturing
      operations.





During
      the three months ended September 30, 2007, the Company continued its extensive
      program to market and distribute its urine and oral fluid based point of
      collection tests for drugs of abuse. The Company also continued marketing its
      Rapid Reader, the first all inclusive drug screen interpretation and data
      management system cleared by FDA. Sales of the Rapid Reader totaled $16,000
      during the three months ended September 30, 2007, compared to $9,000 during
      the
      third quarter of 2006.





The
      Company continued its contract manufacturing operations for unaffiliated third
      parties during the third quarter of 2007. The Company continues to manufacture
      an HIV test and other infectious disease tests, a test for fetal amniotic
      membrane rupture, a test for RSV and other agricultural testing products. The
      Company is also evaluating several other requests for contract manufacturing
      including incorporation of the Company’s drugs of abuse tests into another test
      manufactured by an unrelated third party that is used in hospitals, emergency
      rooms and clinics. Contract manufacturing sales during the third quarter of
      2007
      totaled $136,000, up from $66,000 in the same period a year ago.





Cost
      of
      goods sold for the three months ended September 30, 2007 was $2,493,000, or
      63.7% of net sales, compared to $1,890,000, or 53.0% of net sales, for the
      three
      months ended September 30, 2006. The increase in cost of goods sold is primarily
      due to inventory disposals of expired product. This expired product was made
      specifically in response to forecasts of a somewhat unique product configuration
      from a particular customer, which was subsequently not ordered by the customer
      due to the fact that the customer required a CLIA waiver for these products.
      Average cost of labor and overhead during the third quarter of 2007, stemming
      from the greater diversity and complexity of new products along with preparation
      for fulfilling anticipated orders during the remainder of 2007 also contributed
      to the increase in cost of goods.





Operating
      expenses were $1,632,000 in the third quarter of 2007, compared to $1,678,000
      in
      the same period in 2006, a decrease of $46,000, or 2.7%. A decrease in general
      and administrative expense of $81,000 was offset by increases of $28,000 in
      research and development expense and $7,000 in selling and marketing expense.
      Operating expenses decreased to 41.7% of net sales for the three months ended
      September 30, 2007, from 47.1% for the same period in 2006.





Research
      and development (R&D) expense





R&D
      expenses for the three months ended September 30, 2007 were $173,000, or 4.4%
      of
      net sales, compared to $145,000, or 4.1% of net sales, for the three months
      ended September 30, 2006. This is relatively unchanged when comparing the same
      periods. Slight increases in salary and facilities costs were offset by savings
      in FDA compliance and repairs and maintenance. During the third quarter of
      2007,
      R&D efforts were also specifically focused on the development of variations
      of the Company’s current oral fluid product to meet specific market demands in
      Europe and the development of a new product to address price pressures the
      Company is encountering in government markets. Management continues its overall
      strategy to: focus on new product development to meet the changing needs of
      the
      point of collection drugs of abuse testing market; respond to requests from
      other contract manufacturing inquiries; and develop new uses of immunoassay
      lateral flow technology.




13





Selling
      and marketing expense





Selling
      and marketing expenses were $818,000 in the third quarter of 2007. This is
      relatively unchanged from $811,000 in the third quarter of 2006. As a percentage
      of sales, selling and marketing was 20.9% of net sales in the third quarter
      of
      2007, and 22.8% of net sales in the third quarter of 2006. This increase in
      expense was primarily a result of increases in commissions, offset by savings
      in
      salaries. The Company continues to focus on direct sales and inside direct
      sales, while identifying new contract manufacturing operations and pursuing
      new
      national accounts.





General
      and administrative (G&A) expense





G&A
      expenses were $641,000, or 16.4% of net sales in the third quarter of 2007,
      compared to $722,000, or 20.3% of net sales, in the third quarter of 2006.
      The
      decrease is as a result of savings in license and permit fees, outside service
      fees and non-cash compensation, offset by increases in salaries and facilities
      costs.




LIQUIDITY
      AND CAPITAL RESOURCES AS OF SEPTEMBER 30, 2007





The
      Company's cash requirements depend on numerous factors, including product
      development activities, ability to penetrate the direct sales market, 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 its product development, expand manufacturing capacity,
      and support its 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 believes that its current cash balances, and cash generated from
      future operations, will be sufficient to fund operations for the next twelve
      months. If cash generated from operations is insufficient to satisfy the
      Company's working capital and capital expenditure requirements, the Company
      may
      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.





Management
      believes that research and development, selling and marketing and general and
      administrative costs may increase as the Company continues its investment in
      long-term growth and creates the necessary infrastructure to: achieve its
      worldwide drug test marketing and sales goals, continue its penetration of
      the
      direct sales market, support research and development projects and leverage
      new
      product initiatives. However, management has implemented programs it expects
      to
      control the rate of increase of these costs to be consistent with the expected
      sales growth rate of the Company.





The
      Company has working capital of $4,012,000 at September 30, 2007 compared to
      working capital of $4,856,000 at December 31, 2006. If needed, the Company
      has
      historically satisfied its net working capital requirements through cash
      generated by proceeds from private placements of equity securities with
      institutional investors and debt financing. 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.





Net
      cash
      used in operating activities was $748,000 for the nine months ended September
      30, 2007 compared to net cash provided by operating activities of $632,000
      for
      the nine months ended September 30, 2006. The net cash used in operating
      activities for the nine months ended September 30, 2007 resulted primarily
      from
      a net loss and decreases in accrued liabilities and increases in accounts
      receivable.




14





Net
      cash
      used in investing activities was $632,000 for the nine months ended September
      30, 2007, compared to net cash used in investing activities of $334,000 for
      the
      nine months ended September 30, 2006. The net cash used in both years was for
      investment in property, plant and equipment. Included in cash used in 2007
      is
      $270,000 representing the cost of automation equipment purchased for use in
      the
      Company’s New Jersey manufacturing facility and site improvements to the
      Company’s New Jersey facility required as a result of automation. Delivery of
      the new equipment occurred in the first quarter of 2007. This investment is
      for
      machinery that is used to assemble the Rapid TOX cassette product and in
      preparation for significant growth in demand forecasted for the remainder of
      2007.





Net
      cash
      provided by financing activities was $1,115,000 for the nine months ended
      September 30, 2007. This consisted of proceeds of $900,000 from the Company’s
      lines of credit, $539,000 in proceeds from a five-year term note entered into
      in
      the first quarter of 2007, and $23,000 from proceeds from the exercise of stock
      options. These amounts were offset by debt payments and line of credit payments.





The
      term
      note was entered into w ith
      First
      Niagara Financial Group (“FNFG”). The term of the note is five (5) years with a
      fixed interest rate of 7.17%. The Company's monthly payment is $10,714 and
      payments commenced on February 1, 2007, with the final payment being due on
      January 1, 2012. The Company has the option of prepaying the term note in full
      or in part at any time during the term without penalty. There were no closing
      costs associated with this term note. The loan is secured by Company assets
      now
      owned or to be acquired. The
      term
      note proceeds were used for the purchase of automation equipment in the New
      Jersey manufacturing facility.





Net
      cash
      provided by financing activities in the first nine months of 2006 was $162,000,
      which includes proceeds from the Company’s line of credit and proceeds from the
      exercise of stock options, offset by debt payments.





The
      Company has available two lines of credit from First Niagara Financial Group,
      Inc. ("FNFG"). The first line has a maximum available line of $875,000, not
      to
      exceed 70% of accounts receivable less than 60 days for general operating use.
      The interest rate is .25% above the FNFG prime rate. The Company is required
      to
      maintain certain financial covenants such as net worth (stockholders’ equity)
      greater than $5 million and working capital greater than $4 million. Further,
      the Company is required to maintain a minimum Debt Service Coverage Ratio of
      not
      less than 1.2:1.0 measured at each fiscal year end beginning December 31, 2006.
      Debt Service Coverage Ratio is defined as Net Operating Income divided by annual
      principal and interest payments on all loans relating to subject property.
      The
      Company meets the stockholder’s equity and working capital financial covenants
      as of September 30, 2007 and the Debt Service Coverage Ratio must be measured
      as
      of December 31, 2007. There can be no assurance that the Company will meet
      any
      or all of the financial covenant requirements at fiscal year end December 31,
      2007. There is no requirement for annual repayment of all principal on this
      line
      of credit; it is payable on demand at any time. The amount outstanding on this
      line of credit was $762,000 as of September 30, 2007 and $72,000 as of September
      30, 2006.





The
      second line of credit was obtained during the first quarter of 2006 for the
      limited purpose of paying amounts associated with a sublicense agreement
      executed during the first quarter. This line is for a maximum of $75,000 with
      an
      interest rate of .50% above the FNFG prime rate and the Company is not required
      to pay the principal down to $0 during each twelve-month period. The amount
      outstanding on this line of credit at September 30, 2007 was $41,000, and
      $31,000 was outstanding at September 30, 2006.





At
      September 30, 2007, the Company had cash and cash equivalents of
      $376,000.





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, increasing its
      manufacturing and production capabilities, establishing adequate inventory
      levels to support expected sales and instituting controls necessary to comply
      with financial disclosure controls as necessitated by new regulatory
      requirements.




15




ITEM
      3.
      CONTROLS AND PROCEDURES





As
      of the
      end of the period covered by this report, American Bio Medica Corporation
      carried out an evaluation, under the supervision and with the participation
      of
      the Chief Financial Officer and the Chief Executive Officer, to evaluate the
      effectiveness of the disclosure controls and procedures (as defined in Rule
      13a-15(e) under the Securities Exchange Act of 1934, as amended ("Exchange
      Act")). Based on that evaluation, the Chief Financial Officer and the Chief
      Executive Officer have concluded that American Bio Medica Corporation's
      disclosure controls and procedures as of the date of this report are effective
      for recording, processing, summarizing, and reporting information that is
      required to be disclosed in its reports under the Exchange Act, as amended,
      within the time periods specified in the Securities and Exchange Commission's
      rules and forms. Additionally, based upon this most recent evaluation, we have
      concluded that there were no significant changes in internal controls or other
      factors that have materially affected or are likely to materially affect the
      Company’s internal control over financial reporting during the period covered by
      this report.





PART
      II





OTHER
      INFORMATION





Item
      1.
      Legal Proceedings:





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





Item
      2.
      Changes in Securities





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.





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.




16




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 ParkerChief Financial Officer and Principal Accounting
                Officer
              and duly authorized
                Officer


Dated:
      November 13, 2007





17