<PAGE>

                                   FORM 10-KSB

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934

For the fiscal year ended  ____________________________________

[X] TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934

For the transition period from May 01, 2001 to December 31, 2001
Commission File Number: 0-28666

                         American Bio Medica Corporation
                 (Name of Small Business Issuer in its charter)

             New York                                    14-1702188
 (State or other jurisdiction of               (IRS Employer Identification No.)
  incorporation or organization)

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


Issuer's telephone number (800) 227-1243

Securities registered pursuant to Section 12(b) of the Exchange Act:  None

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

                         Common Shares, $0.01 Par value
                               Title of each class



         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.
                                                                 [X] Yes [ ] No

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

         State issuer's revenues for its most recent fiscal year: $4,055,000

         The aggregate market value of 15,339,943 voting Common Shares held by
non-affiliates of the issuer was approximately $13,154,000 based on the average
bid and asked prices of the issuer's Common Shares, $.01 par value, as reported
on the Nasdaq SmallCap Market on April 9, 2002.

         As of April 9, 2002, the issuer had outstanding 20,609,548 Common
         Shares, $.01 par value. Documents Incorporated by reference:

         (1) The Proxy Statement for the Annual Meeting of Shareholders for the
             Transition Period ending December 31, 2001 in Part III of this Form
             10-KSB
         (2) Other documents incorporated by reference on this report are listed
             in the Exhibit Reference Table

         Transition Small Business Disclosure Format:  [ ] YES   [X] NO


<PAGE>

                         American Bio Medica Corporation

                    Index to Transition Report on Form 10-KSB
                  For the eight months ended December 31, 2001

<TABLE>
<CAPTION>
PART I.                                                                           PAGE
                                                                                  ----
<S>      <C>                                                                      <C>
         Item 1.   Description of Business                                          1
         Item 2.   Description of Property                                         15
         Item 3.   Legal Proceedings                                               15
         Item 4.   Submission of Matters to a Vote of Security Holders             16

PART II

         Item 5.   Market for Common Equity and Related Shareholder
                    Matters                                                        17
         Item 6.   Management's Discussion and Analysis or Plan of
                    Operations                                                     17
         Item 7.   Financial Statements                                            23
         Item 8.   Changes In and Disagreements With Accountants on
                    Accounting and Financial Disclosure                            23

PART III

         Item 9.   Directors, Executive Officers, Promoters and Control Persons;
                      Compliance with Section 16(a) of the Exchange Act            23
         Item 10. Executive Compensation                                           23
         Item 11. Security Ownership of Certain Beneficial Owners and
                   Management                                                      23
         Item 12. Certain Relationships and Related Transactions                   23
         Item 13. Exhibits and Reports on Form 8-K                                 23

Signatures                                                                        S-1
</TABLE>




                                       -1-
<PAGE>



         This Form 10-KSB may contain certain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. For this
purpose any statements contained in this Form 10-KSB that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, words such as "may," "will," "expect," "believe," "anticipate,"
"estimate" or "continue" or comparable terminology is intended to identify
forward-looking statements. It is important to note that our actual results
could differ materially from those anticipated from the forward-looking
statements depending on various important factors. These important factors
include our history of losses and ability to continue as a going concern, the
uncertainty of acceptance of current and new products in our markets,
competition in our markets, our dependence on our distributors and the other
factors discussed in our "Risk Factors" found on Page 9.

PART I
------
         Item 1.  Description of Business

Business Development
--------------------

         Our Company was incorporated on April 2, 1986 under the laws of the
State of New York under the name American Micro Media, Inc. On September 9,
1992, we filed an amendment to our Articles of Incorporation to change our name
to American Bio Medica Corporation. Our principal business office is located at
122 Smith Road, Kinderhook, New York, 12106. We also have a laboratory facility
in Bridgeport, New Jersey.

         In November 2001, we purchased our facility located in Kinderhook, New
York from Avoba, Inc. for $950,000. Included in the purchase were the facility,
its contents and 107 acres of land surrounding the facility.

Our Business
------------

         We develop, manufacture and market biomedical technologies and products
intended for the immediate, onsite screening for drugs of abuse. Our products
offer health care, law enforcement, government, industrial safety and
educational professionals, self-contained, one-step screening devices capable of
identifying illicit drug use within minutes. Our long-term objective is to
provide an extensive product portfolio to the expanding $6 billion immunoassay
market.

    Our Products

         Rapid Drug Screen(R): We manufacture the Rapid Drug Screen, or RDS(TM),
a patented, rapid, onsite, test kit that detects the presence or absence of
drugs of abuse in a urine specimen. We market the RDS as easy to-use,
cost-effective and highly reliable. Controlled tests conducted by an independent
laboratory, American Medical Laboratories, compared the Rapid Drug Screen with
results produced by EMIT II, an enzyme immunoassay laboratory test, and found
greater than 99% correlation of results. We produce several versions (panels) of
the Rapid Drug Screen. Each panel screens for a specified number of drugs (up to
10 classes of drugs) simultaneously. We can also custom produce panels for the
screening of any quantity or combination of the following classes of drugs:
cocaine, THC (marijuana), opiates, amphetamine, PCP, benzodiazepines,
methamphetamines, barbiturates, tricyclic antidepressants and methadone.

         To use our Rapid Drug Screen product, an individual slides a panel into
a self-contained, disposable, urine-filled cup and within minutes accurate
results are shown on the panel. A single line in the test area indicates a
positive reading, and a double line indicates a negative reading for the
presence of drugs. We believe that this ease of use is a competitive advantage
over lab products, as well as products that need to add reagents, manipulate the
test or utilize trained professionals to understand results.



                                       -1-



<PAGE>
         One of the problems that may occur in onsite drug testing is that of
fraud or evasion practiced by the person being tested. The most prevalent method
of avoiding adverse test results is the substitution, by the person being
tested, of a hidden "clean" urine sample, which he or she brings to the test. As
a consequence, each of our urine drug screens contains a temperature sensor,
which helps prevent the substitution of another urine sample. A substituted
sample would normally be of a lower temperature than a sample produced from the
body on the spot. In addition, both our urine and saliva-based drug screens
contain a control line, designed to assure the test administrator that the test
is working properly. Should the control line not appear, the administrator is
instructed to void the test and re-test the individual by obtaining another
sample. A positive result is normally confirmed by laboratory testing.

         Our Rapid Drug Screen is currently marketed in the following standard
configurations: two different 2-panel tests, three different 3-panel tests, two
different 4-panel tests, two different 5-panel tests, one 8-panel test and one
9-panel test. We can also produce, on special order, or if a market demands,
tests that can screen for any quantity (from two - ten) or configuration of
classes of drugs. These standard configurations are:

         o    Two panel tests, designed for the criminal justice and education
              markets that screen for cocaine and THC or methamphetamines and
              THC.

         o    Three panel tests, designed for various non-clinical markets, that
              screen for THC, cocaine and opiates; THC, cocaine and
              amphetamines; or THC, cocaine and methamphetamines.

         o    Four panel tests, designed for various non-clinical markets,
              including corporate/workplace and the criminal justice markets,
              that screen for cocaine, THC, opiates and alternatively
              amphetamines and methamphetemines.

         o    Five panel tests, designed for the corporate/workplace market,
              that screen for the "SAMHSA 5" (SAMHSA stands for the Substance
              Abuse and Mental Health Services Administration): cocaine, THC,
              opiates, PCP and amphetamine and an additional version of this
              test with methamphetamines replacing PCP.

         o    An eight panel test, designed for the clinical market, primarily
              for hospitals and physicians, that screens for the "SAMHSA 5"
              (listed above), plus benzodiazepines, methamphetamines and
              barbiturates.

         o    A nine panel test, also designed for the clinical market, that
              screens for drugs of abuse from the eight panel test, as well as
              tricyclic antidepressants (TCA).

         Rapid One(TM): We manufacture the Rapid One product line which consists
of 12 single drug tests, each of which screens for the presence or absence of
drugs of abuse in a urine specimen. The Rapid One product line utilizes the same
technology as the Rapid Drug Screen. It includes a single dip platform, an
identification and date area, and does not require the use of pipettes or
reagents. The Rapid One is designed for correctional facilities and other
markets where the person subject to substance abuse testing is known to use a
specific drug. It can also be used to enhance a Rapid Drug Screen by means of
allowing screening of an additional drug. The Rapid One product line originally
consisted of the following 10 classes of drugs: cocaine, THC (marijuana),
opiates, amphetamine, PCP, benzodiazepines, methamphetamines, barbiturates,
tricyclic antidepressants and methadone.





                                       -2-
<PAGE>

         In August 2001, we announced the completion of development of our Rapid
One test that detects Oxycodone. Oxycodone is a synthetic opiate that is found
in several legitimate and effective anti-pain medications, including
OxyContin(R). Initial orders of the Rapid One test for Oxycodone have been from
law enforcement programs. Drug abusers often chew tablets, crush tablets into
powder for snorting, or dissolve crushed powder in water for intravenous
injection to create a powerful heroin-like high. In March 2002, we received
510(k) clearance for our Rapid One test that detects Oxycodone from the U.S Food
and Drug Administration ("FDA"). (For more information on 510(k) clearance, see
"Government Regulations" found on Page 8.) 510(k) clearance allows the product
to be sold in the clinical markets.

         In December 2001, we received 510(k) clearance from the FDA for our
Rapid One test that detects the illegal designer drug MDMA (Ecstasy).

         Rapid Tec(TM): In August 2001, we launched a new version of the Rapid
One called the Rapid Tec , in which one individual drug testing strip would
include the chemistry to detect more than one class of drug. The Rapid Tec is
designed for those customers who require a less expensive product but still need
to test for more than one drug of abuse utilizing one urine sample. The Company
began shipping three versions of the Rapid Tec in March 2002. Those three
versions are:

         o        Rapid Tec-2: screens for THC and cocaine
         o        Rapid Tec-3: screens for THC, cocaine and methamphetamines
         o        Rapid Tec-4: screens for THC, cocaine, methamphetamines and
                  opiates

An additional version, the Rapid Tec-5, that will screen for THC, cocaine,
methamphetamines, opiates and amphetamines, is expected to be available for
shipping in June 2002.

         Rapid Drug Screen Scan-R(TM): In August 2001, we launched a software
system that provides a rapid, clear and convenient method to document onsite
drug screening results. The patent pending system allows the operator to combine
the scanned image of the Rapid Drug Screen test card with recording of the
actual test score on one result form. The simple easy-to-use software
automatically saves the document in a user definable format. The document,
complete with the image of the Rapid Drug Screen test card, can be saved,
printed or emailed for permanent documentation of the screening results. We
believe that the Rapid Drug Screen Scan-R greatly improves testing efficiency,
improves chain of custody issues for legal defensibility and optimizes protocol
proficiency. It also creates a database of results for future access and
retrieval.

         Rapid Drug Screen OralStat6(TM): In August 2001, we signed a licensing
agreement with ANSYS Technologies, Inc., to market an onsite saliva-based test
for drugs of abuse. The licensing agreement allows us to market this product to
the criminal justice, workplace and drug treatment sectors. We have trademarked
this saliva-based product the "Rapid Drug Screen OralStat6." The OralStat6 can
simultaneously test for six classes of drugs: THC, opiates, cocaine, PCP,
amphetamines and methamphetamines. Utilizing a simple saliva sample, it delivers
easy-to-read positive or negative results within 10-15 minutes. The test
requires no reader and no messy saliva collection or handling. Pending
submission for FDA 510(k) clearance, the product is labeled and made available
"for forensic use only", which means for use in legal determinations only; it is
not intended or promoted for a health or medical use or purpose.

         Drug Detector(TM): In January 2000, we licensed the right to distribute
and market a patented residue and/or trace drug detection system in select
markets in North and South America for a period of five years from Mistral
Security, Inc. We have adopted the trademark "Drug Detector" for this product.
The Drug Detector tests surfaces for the presence or absence of residue from
marijuana, cocaine, heroin or methamphetamines without the need for urine, hair
or saliva samples. The Drug Detector consists of an aerosol spray for a
specified drug, special collection papers and instructions.




                                       -3-
<PAGE>

         These Drug Detector tests can be performed without the knowledge of the
suspected drug abuser. As a result, this significantly reduces the likelihood of
any confrontation with a suspected drug abuser. To perform the test, the tester
simply needs to wipe the suspected surface area with the special collection
paper and spray the collection paper with the aerosol can. Within seconds, a
color change will occur if the presence of the drug is detected. No color change
will occur if the drug is not detected. The Company believes that the ability to
anonymously test for drugs greatly increases this product's chances for market
acceptance. We are currently marketing a retail (over-the-counter) version that
can perform ten tests.

         In April 2001, Eckerd drug stores began selling the Drug Detector in
its retail outlets in the United States. There is no minimum required purchase
of Drug Detector by Eckerd. The Drug Detector for crack/cocaine and the Drug
Detector for marijuana are the two versions currently being offered for sale by
Eckerd. The remaining two Drug Detector tests may be available for
over-the-counter sale at a later date.

    Our Markets

         Corporate/Workplace
         -------------------

         We have developed a nationwide network of distributors and
administrators of workplace drug testing programs to sell our Rapid Drug Screen
and Rapid One product lines. Our direct sales team also sells in this market to
key customers and coordinates all sales efforts in this market. We believe that
the market for utilization of onsite drug screens for pre-employment and
random/employee testing is expanding.

         o    In September 2001, the Office of National Drug Control Policy (the
              "ONDCP") reported that between 1992 and 1998, the overall cost of
              drug abuse to society increased at a rate of 5.9% annually. By
              1998, the societal cost of drug abuse was $143.4 billion.
              Furthermore, the ONDCP projected that by the year 2000, the
              societal cost of drug abuse would be $160.7 million.

         o    According to the 2000 SAMHSA National Household Survey on Drug
              Abuse, 77% of adults who use illegal drugs are employed.

         o    According to the U.S. Chamber of Commerce, drug users are 2.5
              times more  likely to have  absences  of 8 or more days and health
              benefit utilization is 300% higher among drug users.

         o    According to the Employee Assistance Society of America, 47% of
              workplace accidents are drug-related.

         o    According to the U.S. Department of Justice-Drug Enforcement
              Agency drug users are 5 times more likely to file a workman's
              compensation claim.

         o    The Hazelden Foundation conducted a national survey and found more
              than 60% of adults know people who have gone to work under the
              influence of drugs or alcohol.

         According to the American Management Association ("AMA"), drug testing
is performed by 67% of major U.S. firms. For the reasons, stated above, not only
are there financial benefits of drug testing, but a drug-free environment is a
safer one. Incentives encourage employers to adopt Drug Free Workplace Programs.
Drug testing is an integral part of a Drug Free Workplace Program. In some
states, there are workman's compensation and unemployment insurance premium
reductions, tax deductions and other incentives for adopting these programs. The
Drug Free Workplace Act requires employers receiving federal contracts of
$100,000 or more to enact a Drug Free Workplace program (the Federal Acquisition
Streamlining Act of 1994 (FASA) raised the threshold of contracts covered by the
Drug Free Workplace Act from $25,000 to those exceeding $100,000).






                                       -4-
<PAGE>

         Government, Corrections and Law Enforcement
         -------------------------------------------

         We utilize our network of distributors and our direct sales team to
sell our products in this market. This market includes federal, state and county
level agencies, including correctional facilities, pretrial agencies, probation,
drug courts and parole departments at the federal and state levels and juvenile
correctional facilities. According to the Bureau of Justice, as of December 31,
2000, there were more than 2 million inmates nationally: 1.38 million in state
and federal prisons and 621,000 in local jails. As of October 2001, over 55.5%
of inmates in federal prisons were sentenced as drug offenders according to the
Federal Bureau of Prisons. According to the Bureau of Justice Statistics
("BOJ"), 33% of inmates in state and 22% of inmates in federal prisons admitted
they had committed their crime while under the influence of drugs. According to
the BOJ, in local jails, 36% of inmates admitted to committing their crime while
under the influence. The BOJ also reported that as of December 31, 2000,
approximately 3,839,500 adults were under federal, state or local jurisdiction
on probation, and about 725,500 were on parole. Almost all persons on parole or
probation have one or more conditions to their sentence required by the court or
probation agency including periodic drug testing and substance abuse treatment.
Our products are aimed at this and other similar markets.

         Rehabilitation Centers
         ----------------------

         We utilize our network of distributors and our direct sales team to
sell our products in this market. This market for our products includes people
in treatment for substance abuse. There is a high frequency of testing in this
market. For example, in many residence programs, patients are tested each time
they leave the facility and each time they return. In outpatient programs,
patients are generally tested on a weekly basis.

         International Markets
         ---------------------

         We sell our products primarily through distributors in this market. We
have entered into distribution agreements with companies in several countries
and are pursuing a course of multinational distribution of our products through
both clinical and non-clinical distribution companies. As of February 2002, we
had 18 distributors in 27 countries outside the United States. We also sell our
products directly in 4 additional countries.

         Clinics, Physicians, and Hospitals
         ----------------------------------

         This market includes emergency rooms, physician offices, hospitals and
clinics and rehabilitation facilities associated with hospitals. In their latest
report, March 2001, the Drug Abuse Warning Network estimated that in the year
2000, there were approximately 1.1 million episodes in emergency departments in
the United States in which drugs were mentioned. Our Rapid Drug Screen nine
panel test is used in this market as it provides fast and accurate results when
time is critical. We are negotiating an exclusive distribution agreement with a
multi-national diagnostics company focused on the clinical point of care market.

         Consumer/Over-the-Counter
         -------------------------

         The Drug Detector is currently being sold in Eckerd drug store's retail
outlets in the United States. There is no minimum required purchase of Drug
Detector by Eckerd. We believe that the Drug Detector can be used by persons who
are concerned about the welfare of someone they think is abusing drugs. The Drug
Detector allows surfaces to be tested for drug residue outside the presence of
the suspected person greatly reducing the chances of confrontation with the
suspected drug abuser.




                                       -5-
<PAGE>

         Educational Market
         ------------------

         According to the 2001 University of Michigan Monitoring the Future
study, 11.7% of 8th graders, 22.7% of 10th graders and 25.7% of 12th graders had
used an illicit drug within the prior 30 days of being interviewed for the
study. Furthermore, over half (54%) of young people have tried an illicit drug
by the time they finish high school. We believe our products could be an
integral part of helping schools test due to their ease of use and immediate,
accurate results.

         Additional Markets
         ------------------

          We believe that the Department of Transportation ("DOT") and the
federally regulated markets could be a future market for our products.
Presently, the DOT market is not available to any onsite drug of abuse testing
device. Federal law requires that anyone with a commercial driving license be
randomly tested for use of drugs of abuse and that certified laboratories be
used in these testing situations. We believe that there is potential for growth
in this market as the regulatory agencies are considering implementing new
guidelines that will permit the use of onsite drug testing devices.

    Product Distribution

         We have a two-pronged distribution strategy that focuses both on
growing business through our valued third party distribution partners and
targeting key customers on a direct basis. Through the transition period ending
December 31, 2001, we sold our products through third party distribution
channels whose ultimate customers are the corporate/workplace, government,
corrections and law enforcement agency markets, and directly through a staff of
highly experienced and well-trained sales executives with drugs of abuse testing
expertise.

         Our direct sales force consists of a National Sales Director, a
Director of Key Accounts and four Directors of Business Development in addition
to a staff of inside sales representatives. They call on non-clinical accounts
directly and support our worldwide distribution network. We intend to promote
our products through direct mail campaigns, selected advertising, participation
at high profile trade shows, use of key onsite advocate consultants and other
marketing activities.

         We have entered into national and international non-exclusive,
non-clinical market distribution agreements with a number of distributors. These
agreements permit our distributors to sell non-competitive products of other
manufacturers and permit us to sell our test kits to other distributors within
and outside the territory of each distributor. The agreements are cancelable by
either us or the distributor upon 30 days written notice.

         We will continue to recruit and utilize third party distribution
partners for select markets, including corporate/workplace,
government/corrections/law enforcement, international and education, in addition
to selling directly in these markets and to key customers. We intend to enter
into a distribution agreement with a multi-national diagnostics company for
sales to the clinical market.

    Competition

         Competition to our onsite urine-based products comes from onsite tests
developed by companies including, but not limited to, Roche Diagnostics, Medtox
Scientific, Inc. and Biosite Diagnostics.

         These and other competitors have longer operating histories than we do
and significantly greater financial, technical and marketing resources than us.
Currently the pricing of our products are cost competitive, however, these
competitors can devote substantially more resources than we can to business
development and may adopt more aggressive pricing policies.





                                       -6-
<PAGE>

         We compete on the following factors:

              o   effectiveness of pricing;

              o   quality of product;

              o   ease and user-friendliness of services; and

              o   timeliness of product delivery.

          Competitors' onsite urine tests generally use a collection or delivery
method different than our onsite urine tests. Our products do not require
pipetting of the specimen, adding or mixing of reagents or other manipulation of
the device by the user. Also, many of our competitors have products, which
combine the testing mechanism with the collection device, which increases the
potential of tampering with the testing mechanism by the person being tested.
With our products, the testing mechanism is not given to the person being
tested, but is held by the test administrator.

          Aside from onsite urine tests offering immediate results, some of our
competitors offer traditional laboratory testing, where a urine sample is sent
to a laboratory for analysis, and hair testing where a hair sample is sent to a
laboratory for analysis, are also available. These forms of drug testing are
more expensive and take longer to produce results than our products.

         Other competitors to our onsite urine tests are onsite tests with
platforms utilizing saliva instead of urine. Saliva-based drug tests have
limitations relative to detection time, generally detecting traces of drugs of
abuse in a 3 to 18 hour window compared to one to three days for urine-based
testing. However, this shorter window of detection can be useful in some market
segments, such as post-accident testing in the workplace. In August 2001, we
signed a licensing agreement with ANSYS Technologies, Inc., to market an onsite
saliva-based test for drugs of abuse. Some of our competitors in the
saliva-based testing market have been promoting their products longer and
therefore, have more experience in marketing saliva-based products to the
appropriate segment(s).

    Manufacturing

         In September 1999, we moved into a 30,000 square foot facility in
Kinderhook, New York, which houses assembly and packaging of our products in
addition to administration. We continue to contract-out the printing and
manufacture of specimen cup components of the Rapid Drug Screen. We do not
manufacture the Drug Detector or OralStat6 components.

         We lease a 9,138 square foot R&D and production laboratory facility in
Bridgeport, New Jersey that houses research and development and bulk strip
manufacturing.

         Our present manufacturing equipment is sufficient to produce 200,000
drug test kits per month, assuming one shift per day, five days per week. In the
transition period ending December 31, 2001, we sold approximately 819,200 test
kits. Our facilities in Kinderhook, New York and Bridgeport, New Jersey would
allow us to increase our production capacity if additional personnel are hired
and more equipment is installed. We could further increase capacity with
additional shifts. We expect to add additional assembly/packaging personnel
and/or equipment when production needs of our products increases. (See Item 2.
Description of Property).

         We currently have approximately fifty suppliers who provide us with the
raw materials necessary to manufacture our drug testing strips and Rapid Drug
Screen kit. (See Risk Factors beginning on Page 9.)





                                       -7-
<PAGE>

    Patents and Trademarks/Licenses

         To date, we have been granted eleven patents related to the Rapid Drug
Screen and/or Rapid One product lines, including four U.S. design patents and a
utility patent. We currently have an additional 7 United States patent
applications, and 8 foreign patent applications pending.

         We have registered "ABM" and its logo in the United States, Canada,
Chile, Mexico and Europe. We have registered the "Rapid Drug Screen" trademark
in the United States, Mexico, Canada, Europe and Russia. We have additional
trademark applications pending in the United States. There can be no assurance
that the additional patents and/or trademarks will be granted or that, if
granted, they will withstand challenge. (See "Risk Factors - Patents and
Trademarks" on page 12).

         We have licensing agreements with Mistral Security for the Drug
Detector and ANSYS Technologies, Inc., for the OralStat6. The licensing
agreements with Mistral allows us to market and distribute the Drug Detector to
select markets, including over-the-counter, in North and South America. The
licensing agreement with ANSYS Technologies, Inc. allows us to market the
OralStat6 to the criminal justice, workplace and drug treatment sectors.

         In connection with the settlement of a patent infringement suit we
filed against numerous parties in April 2001, we have a licensing and royalty
agreement with Phamatech, Inc., under which we were paid a licensing fee and
will continue to be paid a percentage of revenues of versions of the Phamatech
product that infringe on our Rapid Drug Screen.

    Research and Development

         We currently manufacture all of our individual drug testing strips. Our
Research and Development, or R&D, efforts have been focused on enhancing and/or
maintaining the performance and reliability of our drug testing strips. In
addition, this fiscal year, our R&D team developed the Rapid One tests for
Oxycodone and MDMA (Ecstasy). The R&D team also developed the first three
versions of the Rapid Tec, and are currently developing the fourth version. The
R&D team continues to consider the potential of a "CLUB-DRUG" panel that could
be a useful tool against the latest drugs of choice, such as Rohypnol, Ecstasy,
Ketamine, Ritalin, GHB and Methamphetamines. Our R&D expenditures were $289,000
for the transition period ending December 31, 2001 and $361,000 for the eight
months ended December 31, 2000.

    Government Regulations

          The development, testing, manufacture and sale of our Rapid Drug
Screen and Rapid One and possible additional biomedical products are subject to
regulation by the United States and foreign regulatory agencies. Pursuant to the
Federal Food, Drug, and Cosmetic Act, and the regulations promulgated
thereunder, the FDA regulates the pre-clinical and clinical testing,
manufacture, labeling, distribution and promotion of medical devices. If the
Company fails to comply with applicable requirements it may be subject to fines,
injunctions, civil penalties, recall or seizure of products, total or partial
suspension of production, failure of the government to grant pre-market
clearance or pre-market approval for devices, withdrawal of marketing clearances
or approvals and criminal prosecution.

         Our products fall under the category of 510(k) submissions to the FDA.
A 510(k) is a premarketing submission made to FDA to demonstrate that the device
to be marketed is as safe and effective, that is, substantially equivalent, to a
legally marketed device that is not subject to premarket approval (PMA).
Applicants must compare their 510(k) device to one or more similar devices
currently on the U.S. market and make and support their substantial equivalency
claims. A legally marketed device is a device that was legally marketed prior to
May 28, 1976 (preamendments device), or a device that has been reclassified from
Class III to Class II or I, a device which has been found to be substantially
equivalent to such a device through the 510(k) process, or one established
through Evaluation of Automatic Class III Definition. The legally marketed
device(s) to which equivalence is drawn is known as the "predicate" device(s).
Applicants must submit descriptive data and, when necessary, performance data to
establish that their device is substantially equivalent to a predicate device.





                                       -8-
<PAGE>

         Although FDA clearance is not required for non-clinical markets (such
as industry and corrections), it is required for clinical markets (such as
hospitals and physicians).

         We believe that clinical markets will become a major marketplace for
our drug screening products. We have received 510(k) clearance for our nine
panel test. With this approval, we can offer a variety of combinations to meet
customer requirements, both with our multiple panel tests and our nine
individual Rapid One tests. In November 2001, we received 510(k) clearance for
our tests for methadone and Ecstasy. In March 2002, we received 510(k) clearance
for our test for Oxycodone. The OralStat6 has not yet received 510(k) clearance
from the FDA and is currently only available for "forensic use only". We expect
to file our submission to the FDA for 510(k) clearance for the Rapid Tec in
April 2002.

         The Company's Drug Detector does not require FDA approval for sale in
any of the Company's markets.

    Employees

         As of the date hereof, we have approximately 65 employees. None of our
employees are covered by collective bargaining agreements, and we believe our
relations with our employees are good.

    Risk Factors

We have a limited operating history, which may make it difficult to accurately
forecast our future revenues and other operating results.

         We began selling our products in 1996. As a result, we have only a
limited operating history upon which you may evaluate our business and
prospects. Our limited operating history may make it difficult or impossible for
analysts or investors to accurately forecast regarding our future revenues and
other operating results and the price of our common stock could decline
substantially.

We have incurred net losses since we were formed.

         Since inception in 1992, we have incurred net losses. As of December
31, 2001, we had an accumulated deficit of $15.2 million. We expect to continue
to make substantial expenditures for sales and marketing, product development
and other purposes. Our ability to achieve and maintain profitability in the
future will primarily depend on our ability to increase sales of our products,
reduce production and other costs and successfully introduce new and enhanced
versions of our existing products into the marketplace. We cannot assure you
that we will be able to increase our revenues at a rate that equals or exceeds
expenditures. Our failure to do so will result in our incurring additional
losses.

We depend on distributors for a substantial portion of our sales and the loss
of, or reduction in sales by, our current distributors could significantly harm
our business.

         We derive a substantial portion of our revenues, and expect to continue
to derive a substantial portion of our revenues in the near future, from sales
by our distributors. Currently we have approximately 75 distributors. For the
transition period ending December 31, 2001, approximately 34.5%, or $1.4 million
of our sales were made to distributors. No distributor accounted for more than
10% of our total revenues in the transition period ending December 31, 2001.
Unless and until we diversify and expand our sales force, our success will
depend significantly upon the future sales by our distributors. The loss of or
inability to replace any one or more of these distributors, significant changes
in their product requirements, delays of significant orders or the occurrence of
any sales fluctuations of our products could reduce our revenues.





                                       -9-
<PAGE>

We only offer a limited number of products and the failure of any one of them to
achieve widespread market acceptance would significantly harm our results of
operation.

       We offer a limited number of products, and we currently derive most of
our revenues from sales of our primary product, the Rapid Drug Screen product
line. To attain break-even results of operations, we must achieve approximately
$2.3 million in quarterly revenues from our products. If our products do not
achieve and maintain this level of revenue, our results of operations would be
significantly harmed.

       In addition, we only began selling our Rapid Drug Screen product line in
1996, and cannot yet predict whether they will gain widespread market
acceptance. Achieving market acceptance for our drug tests will require
substantial marketing efforts and expenditure of significant funds to inform
potential distributors and customers of the distinctive characteristics,
benefits and advantages of our test kits. Our Drug Detector was introduced into
the widespread over-the-counter market in late April 2001, the OralStat6 into
the forensic markets in October 2001 and the Rapid Tec into the non-clinical
markets in March 2002. We have no history upon which to base market or customer
acceptance of these products. Introduction of the Drug Detector, OralStat6 and
Rapid Tec have required, and may continue to require, substantial marketing
efforts and expenditure of funds.

         Due to the variety and complexity of the environments in which our
customers operate, our products may not operate as expected. This could result
in cancelled orders, delays and increased expenses. In addition, the success of
competing products and technologies, pricing pressures or manufacturing
difficulties could further reduce our profitability and the price of our common
stock.

If we fail to keep up with technological factors and fail to develop our
products, we may be at a competitive disadvantage.

       The onsite drug testing market is highly competitive. Several companies
produce drug tests that compete directly with our Rapid Drug Screen and Rapid
One product lines, including Roche Diagnostics, Biosite Diagnostics and Medtox
Scientific, Inc. As new technologies become introduced into the onsite testing
market, we may be required to commit considerable additional efforts, time and
resources to enhance our current product line or develop new products. Our
success will depend upon new products meeting targeted product costs and
performance, in addition to timely introduction into the marketplace. We are
subject to all of the risks inherent in product development, which could cause
material delays in manufacturing.

We rely on third parties for raw materials used in our Rapid Drug Screen product
line.

         We currently have approximately fifty suppliers who provide us with the
raw materials necessary to manufacture our drug testing strips and Rapid Drug
Screen kit. The loss of one or more of these suppliers, the non-performance of
one or more of their materials or the lack of availability of raw materials
could suspend our manufacturing process related to the Rapid Drug Screen and/or
Rapid One product lines. This interruption of the manufacturing process could
impair our ability to fill customers' orders as they are placed, which would put
us at a competitive disadvantage.

We depend on our Research & Development ("R&D") team for product development
and/or product enhancement.

        Product development and/or enhancement are performed by our R&D team.
There can be no assurance that our R&D team can successfully develop and/or
complete the enhancement of our current products and/or the development of new
products. Furthermore, the loss of one or more members of our R&D team could
result in the interruption or termination of new product development and/or
current product enhancement, affecting our ability to provide new or improved
products to the marketplace, which would put us at a competitive disadvantage.





                                      -10-
<PAGE>

Our products must be cost competitive and perform to the satisfaction of our
customers.

        Cost competitiveness and satisfactory product performance are essential
for success in the onsite drug testing market. There can be no assurance that
new products we may develop will meet projected price or performance objectives.
Moreover, there can be no assurance that unanticipated problems will not arise
with respect to technologies incorporated into our test kits or that product
defects, affecting product performance, will not become apparent after
commercial introduction of our additional test kits. In the event that we are
required to remedy defects in any of our products after commercial introduction,
the costs to us could be significant, which could have a material adverse effect
on our revenues or earnings.

We face significant competition in the drug testing market and potential
technological obsolescence.

        We face competition from other manufacturers of drug test kits such as
Roche Diagnostics, Medtox Scientific, Inc. and Biosite Diagnostics. These
competitors are more well known and have far greater financial resources than
us. The markets for drug test kits and related products are highly competitive.
There can be no assurance that other companies will not attempt to develop or
market products directly competitive with the Rapid Drug Screen product line or
Rapid One. We expect other companies to develop technologies or products, which
will compete with our products.

Possible inability to find and attract qualified personnel.

        We will need additional skilled, sales and marketing, technical and
production personnel to grow the business. If we fail to retain our present
staff or attract additional qualified personnel our business could suffer.

We depend on key personnel to manage our business effectively.

        We are dependent on the expertise and experience of our senior
management such as Gerald Moore, President and Chief Executive Officer, Stan
Cipkowski, Executive Vice President, Douglas Casterlin, Executive Vice President
of Operations, Martin Gould, Vice President of Technology and Keith Palmer,
Chief Financial Officer, for our future success. The loss of Messrs. Moore,
Cipkowski, Casterlin, Gould and/or Palmer could negatively impact our business
and results of operations. We do not maintain key man insurance for any of our
management employees.

Failure to effectively manage our growth and expansion could adversely affect
our business and operating results.

        We anticipate expansion of our operations in the coming year. Any
failure to manage our growth effectively will result in less efficient
operations, which could adversely affect our operating and financial results.

To effectively manage our growth, we must, among other things:

         o  accurately estimate the number of employees we will require and the
            areas in which they will be required;
         o  upgrade and expand our office infrastructure so that it is
            appropriate for our level of activity;
         o  manage expansion into additional geographic areas; and
         o  improve and refine our operating and financial systems.





                                      -11-
<PAGE>

        We expect to devote considerable resources and management time to
improving our operating and financial systems to manage our growth. Failure to
accomplish any of these objectives would impede our ability to deliver products
and services in a timely fashion, fulfill existing customer orders and attract
and retain new customers, which impediment would have a material adverse effect
on our financial condition and results of operations.

Any adverse changes in our regulatory framework could negatively impact our
business.

        Approval from the FDA is not currently required for the sale of our
products in non-clinical markets, but is required in the clinical and
over-the-counter markets. Recently, the FDA informed onsite manufacturers that
it intended to enforce its draft guidance document related to the sale of onsite
tests in the workplace market, initially released in 1999. This enforcement
would require that each onsite device be priced to include, up-front, the cost
of obtaining laboratory confirmation of the results of the test. The FDA also
seeks to require the onsite tests to meet over the counter (OTC) clearance or
have a special industrial use clearance (the FDA has not yet published any
guidance with respect to the applicable standards for granting the special
industrial clearance). Although our Rapid Drug Screen has met the FDA
requirements for professional use, we have not obtained OTC clearance from the
FDA. The workplace market is one of our primary markets and the added cost of
confirmation and additional FDA clearance may raise the price of our products
making it difficult to compete with laboratory based testing, thereby negatively
impacting our revenues. Furthermore, there can be no assurance that if, and
when, we are required to apply for either the OTC clearance or the special
industrial clearance, either clearance will be granted. If either such clearance
is not granted, we would be unable to sell our products in the workplace market
and our revenues would be negatively impacted.

        Although we are currently unaware of any changes in regulatory standards
related to the clinical and OTC markets, if regulatory standards were to change
in the future, there can be no assurance that the FDA will grant us the
approvals, if and when we apply for them, required to comply with the changes.

We rely on intellectual property rights, and we may not be able to obtain patent
or other protection for our technology, products or services.

        We rely on a combination of patent, copyright, trademark and trade
secret laws, confidentiality procedures and contractual provisions to protect
our proprietary technology, products and services. We also believe that factors
such as the technological and creative skills of our personnel, new product
developments, frequent product enhancements and name recognition are essential
to establishing and maintaining our technology leadership position.

        We seek to protect our proprietary products under trade secret and
copyright laws, which afford only limited protection. We currently have eleven
patents relating to the Rapid Drug Screen and/or Rapid One product line. We have
additional patent applications pending in the United States, and other foreign
countries, related to the Rapid Drug Screen. We have trademark applications
pending in the United States. Certain trademarks have been registered in the
United States and in other foreign countries.

        Despite our efforts to protect our proprietary rights, unauthorized
parties may attempt to copy aspects of our products or to obtain information
that we regard as proprietary. For example, our sales were adversely affected in
fiscal 2000 and fiscal 2001 (year ending April 30, 2001) as a result of sales of
products similar to ours. In April of 1999, we filed suit in a federal court
against Phamatech, Inc. of California, a former supplier of ours, and numerous
other parties to stop these sales. We incurred significant legal fees of $1.6
million attempting to enforce our patents. In April 2001, we settled with
Phamatech and all other defendants in this lawsuit. The settlement agreement
established a license and royalty arrangement under which we were paid a
licensing fee and will continue to be paid a percentage of revenues of the
product. Under the terms of the settlement, each party has agreed not to
disclose to any third parties the terms and conditions of this agreement.





                                      -12-
<PAGE>

        We may be required to incur significant costs to protect our
intellectual property rights. In addition, the laws of some foreign countries do
not ensure that our means of protecting our proprietary rights in the United
States or abroad will be adequate. Policing and enforcement against the
unauthorized use of our intellectual property rights could entail significant
expenses and could prove difficult or impossible. Additionally, there is no
assurance that the additional patents will be granted or that additional
trademarks will be registered.

Potential issuance and exercise of new warrants and exercise of outstanding
warrants could adversely affect our share price.

        In connection with our sale of 1,408,450 common shares for $2,000,000
($1.42 per share) in a private placement to Seaside Partners, L.P. on April 28,
2000, we issued a 5-year warrant to Seaside to purchase 953,283 common shares of
our stock at an exercise price of $1.1689 per share. To settle a penalty owed to
Seaside because of a late effective registration statement, we adjusted the
exercise price of the 953,283 warrant shares from $1.1689 to $0.95 in February
2001. In May 2001, we issued a 5-year warrant to purchase 200,000 common shares
of our stock at an exercise price of $1.50 per share to Brean Murray & Co., Inc.
as compensation for their services as a financial advisor. On August 22, 2001,
we issued warrants, exercisable during a 54 month period beginning February 22,
2002, to purchase 1,274,500 common shares of our stock at an exercise price of
$1.05 per share in connection with the private placement of 2,549,000 shares of
common stock. We also issued, on August 22, 2001, warrants, exercisable during a
54 month period beginning February 22, 2002, to purchase a total of 203,920
common shares of our stock at an exercise price of $1.20 per share, of which
warrants to purchase 152,940 common shares were issued to Brean Murray & Co.,
Inc. as compensation for their services as placement agent and warrants to
purchase 12,745 common shares were issued to Axiom Capital Management, Inc.,
warrants to purchase 5,735 common shares were issued to Jeffrey Goldberg,
warrants to purchase 16,250 common shares were issued to Barry Zelin, warrants
to purchase 16,250 common shares were issued to David L. Jordon, for their
services as sub-agents of Brean Murray & Co., Inc. On November 15, 2001, we
issued a warrant to purchase 20,000 common shares at an exercise price of $1.00
to Hudson River Bank & Trust Company ("HRBT") in connection with the purchase of
our facility in Kinderhook, New York.

        If the Seaside warrant, the Brean Murray Warrants, the Private Placement
Warrants and the HRBT warrants are exercised, the common shares issued will be
freely tradable, increasing the total number of common shares issued and
outstanding. If these shares are offered for sale in the public market, the
sales could adversely affect the prevailing market price by lowering the bid
price of our common shares. The exercise of any of these warrants could also
materially impair our ability to raise capital through the future sale of equity
securities because issuance of the common shares underlying the warrants would
cause further dilution of our securities. The warrants are subject to or contain
certain anti-dilution protection that may result in the issuance of additional
shares under some circumstances including, but not limited to, paying of a
dividend, subdivision of our outstanding shares into a greater number of shares,
combination of our outstanding shares into a smaller number of shares, an
issuance of shares of common stock by reclassification or in the case of the
Brean Murray and Seaside warrants, a sale of our common shares, or a security
convertible into common shares, for consideration per share less than the
exercise price of the warrants.

Potential issuance and exercise of new options and exercise of outstanding
options could adversely affect our share price.




                                      -13-
<PAGE>


        The Board of Directors of the Company has adopted four (4) Nonstatutory
Stock Option Plans providing for the granting of options to employees,
directors, and consultants (see Note J-4). As of the date of this report, there
were 4,374,000 options issued and outstanding under all four plans combined, of
which 2,525,000 were exercisable as of December 31, 2001. As of December 31,
2001, there were 50,000 options available for issuance under the Fiscal 2000
Plan and 2,396,000 options available for issuance under the Fiscal 2001 Plan.
There are no options available for issuance under either the Fiscal 1997 Plan or
the Fiscal 1998 Plan, as options expire or are cancelled under these latter two
plans, they are not re-issued.

        If these options are exercised, the common shares issued will be freely
tradable, increasing the total number of common shares issued and outstanding.
If these shares are offered for sale in the public market, the sales could
adversely affect the prevailing market price by lowering the bid price of our
common shares. The exercise of any of these options could also materially impair
our ability to raise capital through the future sale of equity securities
because issuance of the common shares underlying the options would cause further
dilution of our securities. The options are subject to or contain certain
anti-dilution protection that may result in the issuance of additional shares
under some circumstances including, but not limited to, paying of a dividend in
common shares, a declaration of a dividend payable in a form other than common
shares in an amount that has a material effect on the price of common shares, a
combination or consolidation of the outstanding Common Shares (by
reclassification or otherwise) into a lesser number of Common Shares, a
recapitalization, a spin-off or a similar occurrence.

Substantial resale of restricted securities may depress the market price of our
stock.

        There are 4,936,255 common shares presently issued and outstanding as of
the date hereof that are "restricted securities" as that term is defined under
the Securities Act of 1933, as amended, (the "Securities Act") and in the future
may be sold in compliance with Rule 144 of the Securities Act, or pursuant to a
Registration Statement filed under the Securities Act. Rule 144 provides that a
person holding restricted securities for a period of one year or more may, in
any three month period, sell those securities in unsolicited brokerage
transactions or in transactions with a market maker, in an amount equal to the
greater of one percent of the our outstanding common shares or the average
weekly trading volume for the prior four weeks. Sales of unrestricted shares by
affiliates of the Company are also subject to the same limitation upon the
number of shares that may be sold in any three-month period. Investors should be
aware that sales under Rule 144 or 144(k), or pursuant to a registration
statement filed under the Act, may depress the market price of our Company's
securities in any market that may develop for such shares.

We may need additional funding for our existing and future operations.

        We believe the proceeds from our August 2001 private placement will be
sufficient to fund operations until at least August 2002. This estimate is based
on certain assumptions and there can be no assurance that unanticipated costs
will not be incurred. Future events, including the problems, delays, expenses
and difficulties which may be encountered in establishing and maintaining a
substantial market for our products could make cash on hand insufficient to fund
operations. There can be no assurance that we will be able to obtain any
necessary financing on terms acceptable to us, if at all. Any financing may
result in further dilution to our existing shareholders.

Our ability to retain and attract market makers is important to the continued
trading of our stock.

        The common shares trade on the Nasdaq SmallCap Market under the symbol
"ABMC". In the event that the market makers cease to function as such, public
trading in common shares will be adversely affected or may cease entirely.





                                      -14-
<PAGE>

If we fail to meet the continued listing requirements of the Nasdaq SmallCap
Market, our common shares could be delisted.

        Our common shares are listed on the Nasdaq SmallCap Market. The Nasdaq
Stock Market's Marketplace Rules impose requirements for companies listed on the
Nasdaq SmallCap Market to maintain their listing status, including minimum bid
price of $1.00 and $2,500,000 in shareholders' equity. As of the date of this
report, our common shares are trading at levels lower than the minimum bid
requirement.

        Delisting could reduce the ability of investors to purchase or sell
shares as quickly and as inexpensively as they have done historically and could
subject transactions in our shares to the penny stock rules. Furthermore,
failure to obtain listing on another market or exchange may make it more
difficult for traders to sell our securities. Broker-dealers may be less willing
or able to sell or make a market in our common shares because of the penny stock
disclosure rules. Not maintaining a listing on a major stock market may result
in a decrease in the trading price of our common shares due to a decrease in
liquidity and less interest by institutions and individuals in investing in our
common shares. Delisting from the Nasdaq Stock Market would also make it more
difficult for us to raise capital in the future.

        Item 2. Description of Property

        In September 1999 we began leasing a 30,000 square foot facility in
Kinderhook, New York, which houses administrative offices, assembly and
packaging, quality control/quality assurance and sales and marketing. We entered
into a Lease/Purchase Agreement with the landlord, Avoba, Inc., to purchase the
building by December 2001 for $1.3 million. In May 2001, we renegotiated the
purchase price down to $950,000 allocating $728,000 to the building, and
$222,000 to the 107 acres of land based upon an appraisal done in conjunction
with the acquisition. The State of New York, Columbia County and the town of
Stuyvesant tentatively agreed to provide incentives of more than $200,000
towards the purchase price. In November 2001, we purchased the facility and the
surrounding 107 acres. We obtained a mortgage from Hudson River Bank & Trust
Company ("HRBT") in the amount of $360,000, a loan in the amount of $240,000
from the New York State Business Development Corporation and a loan from the
Columbia Economic Development Corporation in the amount of $120,000. We intend
to sell approximately 85 of the 107 acres to a third party to offset the
purchase price of the facility.

        In August 1999, we leased a 3,900 square foot R&D and production
laboratory facility in Bridgeport, New Jersey. This facility is leased for a
period of three years at which time we have the option to renew the lease. In
March 2001, we expanded the New Jersey facility by leasing an additional 5,238
square feet, for a total of approximately 9,000 square feet. The combined cost
of leasing for the New Jersey facility is $5,220 per month.







                                      -15-
<PAGE>

        Item 3. Legal Proceedings

        In June 1999, Richard Davidson filed a lawsuit against the Company in
New York. Davidson claims that two placement memoranda dated September 15, 1992
and February 5, 1993, obligates the Company to issue him 1,155,601 ABMC common
shares. He claims he is entitled to the common shares in consideration of
brokering the acquisitions subject to the Share Exchange Agreement with Dr.
Robert Friedenberg (Friedenberg also filed suit against the Company and the case
was dismissed in September 1999). In addition, Davidson is claiming a finder's
fee of 5% of the funds raised by the September 1992 private placement. He
alleges that a sum of $1 million was raised. He also claims he is entitled to a
consulting fee of $24,000. Management denies the claims and is vigorously
contesting the suit. A trial date was set for November 2000; however, the
Company filed a motion for summary judgment against Davidson and Davidson
cross-moved for summary judgment. In July 2001, the Company's motion for summary
judgment was denied. In August 2001 the Company filed a Notice of Appeal related
to the court's denial of the Company's motion for summary judgment. The court is
currently considering Davidson's cross-motion for summary judgment, which the
Company opposed in September 2001. The Company filed its brief to appeal the
denial of the Company's summary judgment on March 15, 2002. At the same time, a
trial date has been set for May 6, 2002. Management believes based on
consultation with counsel, that it has substantial and compelling defenses to
Davidson's claims and there is a reasonable chance that the Company would
prevail if the matter were to go to trial.

        In June 1995 the Company filed a lawsuit against Jackson Morris, the
lawyer engaged to draft and advise the Company on the Share Exchange Agreement
with Dr. Robert Friedenberg. Morris, who had been recommended to the Company by
Dr. Friedenberg and whose fees were paid by the Company, was alleged to have
breached his fiduciary duty to the Company in several ways, including by later
advising Friedenberg, individually, on how to rescind the Share Exchange
Agreement as well as testifying for Friedenberg over the Company's objections
and in violation of his obligations to the Company. Morris was also charged with
negligence in drafting the Share Exchange Agreement. The Company's lawsuit
demanded damages in the amount of $1,000,000. Morris counterclaimed as a party
to the Share Exchange Agreement and sought common shares. The basis of all of
Mr. Morris' claims stemmed from the Friedenberg claim. On July 27, 2001, the
Company settled the lawsuit against Mr. Morris. The Company has issued 115,000
shares of the Company's common stock to Mr. Morris as settlement of all
outstanding claims. The Company has agreed to file a registration statement
related to these shares no later than June 1, 2002.

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

        None.






                                      -16-
<PAGE>

PART II
-------

        Item 5. Market for Common Equity and Related Stockholders Matters

        Our common shares trade on the National Association of Securities
Dealers Automated Quotation System Small Cap Market (Nasdaq Small Cap) under the
symbol ABMC. The following table sets forth the high and low sales prices as
reported by the Nasdaq Small Cap Market for the periods indicated.

<TABLE>
<CAPTION>
         Eight months ending December 31, 2001                              High                  Low
         -------------------------------------                              ----                  ---
         <S>                                                                <C>                   <C>
              Transition period ending December 31, 2001                    $1.53                 $0.75
              Quarter ending October 31, 2001                               $1.20                 $0.65
              Quarter ending July 31, 2001                                  $1.30                 $0.75


         Fiscal year ending April 30, 2001                                  High                  Low
         ---------------------------------                                  ----                  ---

              Quarter ending April 30, 2001                                 $1.25                 $0.69
              Quarter ending January 31, 2001                               $1.50                 $0.25
              Quarter ending October 31, 2000                               $1.50                 $0.97
              Quarter ending July 31, 2000                                  $2.00                 $1.13
</TABLE>

        As of April 9, 2002 there were approximately 4,500 holders of common
shares. As of April 9, 2002 there were outstanding 20,609,548 common shares. The
Company has not declared any dividends on the common shares and does not expect
to do so in the foreseeable future.

        On April 9, 2002, the last reported sales price for the common shares as
reported on the Nasdaq Small Cap Market was $0.83 per share. Average daily
trading volume on our common shares during the three-month period from January
9, 2002 to April 9, 2002 was approximately 49,507 shares.

        Recent sales of unregistered securities

        The following is a list of all unregistered securities sold by the
Company within the period covered by this report, including, where applicable,
the identity of the person who purchased the securities, title of the
securities, and the date sold.

        On December 7, 2001, the Company issued 115,000 common shares to Jackson
Morris, as settlement of all outstanding claims between Mr. Morris and the
Company. (See Item 3. Litigation).





                                      -17-
<PAGE>

        Item 6.       Management's Discussion and Analysis or Plan of Operations

         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 except for the description of historical
facts contained herein, this Form 10-KSB contains certain forward-looking
statements that involve risks and uncertainties as detailed herein and from time
to time in the Company's 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, risks associated with international operations
and regulatory, competitive and contractual risks and product development; (b)
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; and (c)
acquisitions.

Critical Accounting Policies and Estimates

        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. 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 customer programs and incentives, product returns, bad debts,
inventories, income taxes, financing operations, 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. If market conditions were to decline, ABMC may take actions to
increase customer incentive offerings possibly resulting in an incremental
reduction of revenue at the time the incentive is offered. 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 estimated market 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.
Likewise, should ABMC determine that it would not be able to realize all or part
of its net deferred tax asset in the future, an adjustment to the deferred tax
asset would be charged to income in the period such determination was made.





                                      -18-
<PAGE>

Results of Operations for the Eight Months Ended December 31, 2001 (the
transition period) Compared to the Eight Months Ended December 31, 2000
(unaudited).

The following table presents certain financial information for the 8 months
ended December 31, 2001 and 2000 respectively.
<TABLE>
<CAPTION>
                                                                       Eight Months Ended
                                                                 December 31,        December 31,
                                                                    2001                2000
                                                                    ----                ----
                                                                                     (unaudited)
<S>                                                              <C>                 <C>
Revenues                                                         $ 4,055,000         $ 5,192,000
                                                                 ===========         ===========
Gross profit                                                     $ 2,331,000         $ 3,464,000
                                                                 ===========         ===========


Loss before extraordinary items                                   (1,890,000)         (1,274,000)
Earnings per common share before extraordinary items             $      (.09)        $      (.07)
Extraordinary items                                                  259,000         -----------
                                                                 -----------         -----------
Net loss                                                         $(1,631,000)        $(1,274,000)
                                                                 ===========         ===========
Earnings per common share                                        $      (.08)        $      (.07)
                                                                 -----------         -----------
Weighted average common shares outstanding                        19,345,000          18,044,000
                                                                 -----------         -----------
</TABLE>

        Net sales were $4,055,000 for the transition period compared to
$5,192,000 for the eight months ended December 31, 2000. Sales to distributors
were $1,409,000 for the transition period compared to $2,709,000 for the eight
months ended December 31, 2000. The decrease is a result of some distributors
selling competing products, including a similar product that was the subject of
our patent litigation. The decline in distributor sales was partially offset by
an increase in direct sales of $675,000 during the transition period and an
increase in sales from our telemarketing efforts. Direct sales continued growth
is consistent with management's business plan and will surpass sales from
Distributor's during the first or second quarter of 2002. The Company's
telemarketing efforts focus on smaller volume clients who are contacted directly
by individuals who work out of the Company's headquarters. Efforts include but
are not limited to cold calls to potential customers and direct mail campaigns.

        Gross profit for the transition period was $2,331,000, or 57.5% of net
sales, as compared to $3,464,000, or 66.7% of net sales, for the eight months
ended December 31, 2000. Gross profit decreased as a percentage of net sales as
a result of increased large volume, lower margin sales to direct customers, as
well as the inclusion of $111,000 of net adjustments to inventory in cost of
sales during the transition period relating to shrinkage and inventory write
downs, and $112,000 to establish a reserve for returns of consignment inventory.
Costs of raw materials, labor and overhead associated with manufacturing have
remained consistent during the transition period when compared to the eight
months ended December 31, 2000.





                                      -19-
<PAGE>

        The following table sets forth the percentage relationship of selling,
general and administrative costs to net sales for the transition period and the
eight months ended December 31, 2000:








<TABLE>
<CAPTION>
                                                                                  Eight Months
                                                                                      Ended
                                                                                   December 31,
                                        Transition Period    Percent of Sales          2000        Percent of Sales
<S>                                     <C>                  <C>                   <C>             <C>
Sales salaries and commissions            $ 718,000                17.7%            $ 618,000          11.9%
Sales travel                                165,000                4.1                247,000           4.7
Consulting & other selling expenses
                                            205,000                5.1                612,000          11.8
Marketing and promotion                     168,000                4.1                492,000           9.5
Investor relations costs                    492,000               12.2                235,000           4.5
Legal fees                                  307,000                7.6                844,000          16.3
Accounting fees                             348,000                8.6                148,000           2.9
Office salaries                             695,000               17.1                507,000           9.8
Payroll taxes and insurance                 180,000                4.4                116,000           2.2
Telephone                                    84,000                2.1                100,000           1.9
Insurance                                    37,000                0.9                 29,000           0.6
Bad debts                                    58,000                1.4                  1,000           0.0
Other administrative costs                  420,000               10.4                421,000           8.1
                                            -------                                   -------

Total selling, general &
administrative costs                     $3,877,000                95.7%           $4,370,000           84.2%
                                         ==========                                ==========
</TABLE>
        Selling, general and administrative costs were $3,877,000, or 95.7% of
net sales, for the transition period compared to $4,370,000, or 84.2% of net
sales, for the eight months ended December 31, 2000. This increase as a
percentage of sales for the transition period was primarily due to the inclusion
of $85,000 in severance costs in office salaries, $235,000 of non-cash
compensation for financial advisory services, accounting fees of approximately
$67,000 and legal fees of approximately $44,000 related to the filing of the S3
registration statement for the private placement completed in August 2001 and
the resultant SEC comment letters, approximately $114,000 reserved for the
settlement of current legal matters, and additional accounting fees of $50,000
relating to the year end audit and financial reporting for the transition
period.

        Sales salaries increased during the transition period as compared to the
eight months ended December 31, 2000 primarily due to the inclusion of the
salaries of the Directors of Business Development driving the direct sales
efforts. Also included in the salaries are the related commissions associated
with the growth in direct sales. Sales travel declined as part of a management
initiative to control spending. Consulting and other selling expenses declined
primarily due to the inclusion of $454,000 in non-cash compensation in the eight
months ended December 31, 2000 related to a one year consulting agreement with
an individual knowledgeable in the medical diagnostic testing area. In
connection therewith, the Company issued 300,000 common shares and granted
options to purchase 200,000 common shares at $2.00 per share, vesting as of
December 15, 2000.

        Marketing and promotion costs declined during the eights ended December
31, 2001 compared to the same period ending December 31, 2000 primarily due to
the discontinuation of the Company's promotion of the Drug Detector. In the
eight month period ended December 31, 2000, marketing and promotion costs
included two individuals' salaries and benefits responsible for the sale and
promotion of Drug Detector.

        Investor relations costs have increased in the transition period as
compared to the eight months ended December 31, 2000. The increase is primarily
due to the inclusion of an executive vice president of corporate relations
previously included in office salaries, the filing of the registration statement
related to the equity private placement completed in August of 2001, and
non-cash expense related to the issuance of warrants to several firms for
financial advisory services for a one year term ending in April 2002.





                                      -20-
<PAGE>

        Legal expenses of $844,000 in the eight months ended December 31, 2000
related primarily to the patent litigation that was settled in the fourth
quarter of fiscal 2001 [see note L to the financial statements]. A settlement
relating to the fees was reached with the Company's attorneys following
settlement of the litigation and an extraordinary gain of $259,000 was
recognized in the transition period. Included in our legal fees for the
transition period are approximately $44,000 relating to the filing of our S-3
registration statement for registration of the shares related the equity private
placement completed in August 2001, and $221,000 of accruals for legal
settlements We expect our legal fees to be significantly lower in fiscal 2002 as
a result of the settlement of patent infringement litigation.

        Accounting fees increased $200,000 for the transition period compared to
the same period ending December 31, 2000. This increase is primarily related to
the fees for filing of the S-3 registration statement for registration of the
shares related the equity private placement completed in August 2001 Accounting
fees of approximately $67,000 were incurred from our prior auditors relating to
the filing of our S-3 registration statement for registration of the shares
related the equity private placement completed in August 2001. Further, on
October 2, 2001, the Board of Directors of the Company approved the discharge of
Richard A. Eisner & Company, LLP and the appointment of PricewaterhouseCoopers,
LLP as the Company's independent auditors. (See Form 8-K filed October 4, 2001,
and incorporated herein by reference). This transition required coordination
with both firms for the filing of our 10-QSB for the quarter ended October 31,
2001 as well as the 10-KSB for the transition period.

        Office salaries increased in the transition period as compared to the
eight months ended December 31, 2000 due to the addition of our former CEO,
Robert Aromando. Also during the transition period an employee's salary
previously reported in investor relations was reported in office salaries due to
a change in responsibilities.

        Payroll taxes and insurance increased in the transition period as
compared to the eight months ended December 31, 2000 commensurate with the
inclusion of the new CEO as well as associated increases in insurance for
benefits, property and casualty, and workers compensation.

        Bad debt expense increased to $58,000 in the transition period from
$1,000 in the eight month period ended December 31, 2000. One account comprised
$48,000 of this write off, deemed uncollectable after all efforts to collect the
debt were exhausted.

         Other administrative expenses remained flat for the eight months ending
December 31, 2001 compared to the same period ending December 31, 2000. During
the transition period the Company incurred $10,000 of non-cash expense for
warrants, management travel and entertainment increased $29,000 to support the
transition of the CEO, purchasing department increases of $12,000 representing a
full eight months in 2001 (only 4 months in 2000), increased freight costs to
ship product of $19,000, building rental increases of $24,000 relating to higher
rent in Kinderhook and added space in New Jersey, and D&O insurance increase of
$8,000. These increases were partially offset by decreases of $92,000 in outside
service fees, $8,000 in postage, $6,000 in utilities, $16,000 in miscellaneous
expense and $10,000 in bank service fees.

        Depreciation and amortization expense was $90,000 for the transition
period compared to $82,000 for the eight months ended December 31, 2000.
Depreciation expense is expected to increase in 2002 due to the acquisition of
the Kinderhook facility in December 2001, as well as the addition of capital
equipment. The increase in depreciation is expected to be offset by a reduction
in facility cost related to the Kinderhook headquarters of approximately $50,000
annually.

        Research and development expenses were $289,000 for the transition
period compared to $361,000 in the eight months ended December 31, 2000. This is
expected to increase in 2002 as the Company pursues projects in conjunction with
OEM contracts and new product development.





                                      -21-
<PAGE>

        Net other income was $35,000 for the transition period comprised of
interest income and expense and a loss on disposal of assets no longer in
service of $4,000. Net other income was $71,000 in the eight months ended
December 31, 2000 comprised of interest income and expense.

        Net loss attributable to common shareholders was $1,631,000 for the
transition period including the gain from extraordinary items, resulting in
basic and diluted net loss per common share of $.08 compared to a net loss of
$1,274,000 in the eight months ended December 31, 2000 and a basic and diluted
net loss per common share of $.07.

Liquidity and Capital Resources as of December 31, 2001

        At December 31, 2001 we had cash and cash equivalents of $288,000 and
working capital of $1,492,000. We have historically satisfied our working
capital requirements principally through proceeds from private placements of
equity securities. The Company does not anticipate paying any cash dividends.

        Net cash used in operating activities was $1,810,000 during the
transition period compared to $1,260,000 for the eight months ended December 31,
2000. The net cash used in operating activities during the transition period was
primarily related to the net loss of $1,631,000, an increase in inventory of
$644,000 and a reduction in accounts payable of $389,000, offset by non cash
expenses related to compensatory stock and stock options and warrants of
$477,000 and decreases in accounts receivable of $144,000 and notes receivable
of $179,000. Net cash used in operating activities for the eight months ended
December 31, 2000 was primarily due to a net loss of $1,274,000, a decrease in
accounts receivable of $118,000, a decrease in other receivables of $380,000 and
a decrease in inventory of $184,000, partially offset by an increase in accounts
payable of $340,000, an increase in amortization of compensatory stock options
of $454,000 and depreciation expense of $82,000.

        Net cash used in investing activities for the transition period was
$1,202,000 relating solely to the acquisition of property, plant and equipment.

        Cash flow from financing activities was $3,035,000 for the transition
period relating to the $2,332,000 net proceeds from our equity private placement
completed in August 2001 and $720,000 financing secured for the purchase of our
Kinderhook facility in December 2001. For the eight months ended December 31,
2000, net cash used in financing activities was $125,000 relating to cash
dividends paid.

        Our primary short-term needs are to maintain and perhaps increase
manufacturing and production capabilities, maintain adequate inventory levels,
continue to support research and development programs, and to finance sales and
marketing promotion in conjunction with our direct sales and marketing group.
Columbia County and the Town of Stuyvesant have tentatively agreed to provide
incentives of more than $200,000 in conjunction with our acquisition of our
Kinderhook headquarters in December 2001. Additionally, we are currently
negotiating to sell 85 of the 107 acres acquired to an unaffiliated party.

        We expect our capital requirements to increase over the next several
years as we expand our research and development efforts, sales and
administration infrastructure, manufacturing capabilities and facilities in our
Bridgeport, New Jersey location in conjunction with the inventory increases
necessary to meet anticipated demand from increased sales. Our future liquidity
and capital funding requirements will depend on numerous factors, including the
extent to which our products under development are successfully developed and
gain market acceptance, the timing of regulatory actions regarding our potential
products, the costs and timing of expansion of sales, marketing and
manufacturing activities, facilities expansion needs, procurement and
enforcement of patents important to our business, and results of clinical
investigations and competition. If cash generated from operations is not
sufficient to satisfy the Company's working capital and capital expenditure
requirements, the Company may be required to sell additional equity or debt
securities or obtain additional credit facilities. There is no assurance that we
will be able to secure additional financing on acceptable terms if at all.





                                      -22-
<PAGE>

        Item 7.       Financial Statements

        The Company's Financial Statements are set forth beginning on page F-1.


        Item 8.       Changes in and Disagreements with Accountants on
                      Accounting and Financial Disclosure.

        On October 2, 2001, the Board of Directors of the Company approved the
discharge of Richard A. Eisner & Company, LLP and the appointment of
PricewaterhouseCoopers LLP as the Company's independent auditors. (See Form 8-K
filed October 4, 2001, and incorporated herein by reference)


PART III
--------

        Item 9.       Directors, Executive Officers, Promoters, and Control
                      Persons; Compliance with Section 16(A) of The Exchange Act

           The information required by this item is contained in our definitive
Proxy Statement with respect to our Annual Meeting of Shareholders for the
Transition Period ending December 31, 2001, under the captions "Election of
Directors--Nominees", and "Security Ownership of Management and Certain
Beneficial Owners", and is incorporated herein by reference.

        Item 10.      Executive Compensation

            The information required by this item is contained in our definitive
Proxy Statement with respect to our Annual Meeting of Shareholder for the
Transition Period ending December 31, 2001, under the caption "Executive
Compensation", and is incorporated herein by reference.

        Item 11.      Security Ownership of Certain Beneficial Owners and
                      Management

             The information required by this item is contained in our
definitive Proxy Statement with respect to the Annual Meeting of Shareholders
for the Transition Period ending December 31, 2001, under the caption "Security
Ownership of Management and Certain Beneficial Owners", and is incorporated
herein by reference.

        Item 12.      Certain Relationships and Related Transactions

           The information required by this item is contained in our definitive
Proxy Statement with respect to the Annual Meeting of Shareholder for the
Transition Period ending December 31, 2001, under the caption "Certain
Relationships and Related Transactions", and is incorporated herein by
reference.


        Item 13.      Exhibits and Reports on Form 8-K

         (a)      Exhibits

                  See Exhibit Index on page E-1, incorporated herein by
reference.


                     (b)      Reports on Form 8-K

                      On December 12, 2001, the Company filed a Current Report
                   on Form 8-K related to the purchase of its facility in
                   Kinderhook, New York.





                                      -23-
<PAGE>

SIGNATURES


         In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.


                                           AMERICAN BIO MEDICA CORPORATION


                                               By /s/ Gerald Moore
                                               ---------------------------------
                                               Gerald Moore
                                               Chairman, President & CEO


Date:  April 15, 2002


         In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities
indicated on April 15, 2002:


/s/ Gerald Moore                               Chairman, President &
---------------------------                    Chief Executive Officer
Gerald Moore


/s/ Stan Cipkowski                             Executive Vice President &
---------------------------                    Director
 Stan Cipkowski


/s/ Edmund Jaskiewicz                          Corporate Secretary & Director
 Edmund Jaskiewicz


/s/ Robert L. Aromando, Jr.                    Director
---------------------------
 Robert L. Aromando, Jr.


/s/ Denis O'Donnell, M.D.                      Director
---------------------------
 Denis O'Donnell, M.D.


/s/ Keith E. Palmer                            Chief Financial Officer
---------------------------                    (Principal Financial Officer)
Keith E. Palmer






                                                                             S-1

<PAGE>


AMERICAN BIO MEDICA CORPORATION

CONTENTS

                                                                      PAGE
                                                                      ----

FINANCIAL STATEMENTS

   Independent auditors' report                                       F-2

   Report of prior independent auditors                               F-3

   Balance sheet                                                      F-4

   Statements of operations                                           F-5

   Statements of changes in stockholders' equity                      F-6

   Statements of cash flows                                           F-7

   Notes to financial statements                                      F-9







                                                                             F-1

<PAGE>


INDEPENDENT AUDITORS' REPORT

To the Stockholders and Board of Directors of
American Bio Medica Corporation


In our opinion, the financial statements listed in the accompanying index,
present fairly, in all material respects, the financial position of American Bio
Medica Corporation at December 31, 2001, and the results of its operations and
its cash flows for the eight months then ended in conformity with accounting
principles generally accepted in the United States of America. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion. The financial statements of the Company as of
April 30, 2001 and for each of the two years then ended were audited by other
independent accountants whose report dated June 20, 2001 expressed an
unqualified opinion on those statements.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note A to the financial
statements, the Company has experienced continuing operating losses and
operating cash flow deficits and has been largely dependent on its ability to
sell additional shares of its common stock. These factors raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plans in regard to future operations are also described in Note A to the
financial statements. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.







/s/PricewaterhouseCoopers LLP

Albany, New York
March 8, 2002



                                                                             F-2


<PAGE>

INDEPENDENT AUDITOR'S REPORT

To the Stockholders and Board of Directors of
American Bio Medica Corporation

We have audited the accompanying balance sheet of American Bio Medica
Corporation as of April 30, 2001 and the related statements of operations,
changes in stockholders' equity and cash flows for each of the years in the
two-year period ended April 30, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We did not audit the
financial information as of and for the period ended December 31, 2000.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements enumerated above present fairly, in all
material respects, the financial position of American Bio Medica Corporation as
of April 30, 2001 and the results of its operations and its cash flows for each
of the years in the two-year period ended April 30, 2001, in conformity with
accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note A to the
financial statements, the Company has experienced recurring net losses and
negative cash flows from operations that raise substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note A. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

Richard A. Eisner & Company, LLP

New York, New York
June 20, 2001

With respect to Note B
July 23, 2001


                                                                             F-3
<PAGE>


AMERICAN BIO MEDICA CORPORATION

Balance Sheets
<TABLE>
<CAPTION>
                                                                               December 31,          April 30,
                                                                                   2001                 2001
<S>                                                                           <C>                <C>
                                    ASSETS
                                    ------
Current assets
   Cash and cash equivalents                                                   $    288,000      $   265,000
   Accounts receivable - net of allowance for doubtful accounts of $70,000
    and $86,000 at December 31, 2001 and April 30, 2001, respectively               882,000        1,010,000
   Other receivables                                                                171,000          270,000
   Inventory                                                                      2,087,000        1,444,000
   Prepaid expenses                                                                  90,000           41,000
                                                                               ------------      -----------
   Total current assets                                                           3,518,000        3,030,000

Property, plant and equipment, net                                                1,455,000          348,000
Other receivables                                                                                     80,000
Restricted cash                                                                     106,000          146,000
Other assets                                                                          7,000           36,000
                                                                               ------------      -----------

    Total Assets                                                               $  5,086,000      $ 3,640,000
                                                                               ============      ===========

                    LIABILITIES AND STOCKHOLDERS' EQUITY
                    ------------------------------------

Current liabilities
   Accounts payable                                                            $  1,064,000     $  1,453,000
   Accrued expenses                                                                 562,000          412,000
   Customer advance deposits                                                        243,000
   Wages payable                                                                    114,000          516,000
   Current portion of capital lease obligations                                      19,000           25,000
   Current portion of notes payable                                                  24,000
                                                                               ------------      -----------
   Total current liabilities                                                      2,026,000        2,406,000

   Long-term portion of capital lease obligations                                    10,000           21,000
   Long-term portion of notes payable                                               696,000
                                                                               ------------      -----------
   Total liabilities                                                              2,732,000        2,427,000

Stockholders' equity:
   Preferred stock; par value $.01 per share; 5,000,000 shares authorized,
      none issued and outstanding
   Common stock; par value $.01 per share; 50,000,000 shares authorized;            207,000          180,000
      20,609,548 shares issued and outstanding at December 31, 2001 and
      17,995,548 at April 30, 2001
   Treasury stock, at cost, 25,000 shares                                           (23,000)
   Additional paid-in capital                                                    17,765,000       15,052,000
   Due from Officer/Director/Shareholder                                           (437,000)        (472,000)
   Subscription receivable                                                           (5,000)          (5,000)
   Unearned portion of compensatory options                                                          (19,000)
   Unrealized loss on investments available for sale
   Accumulated deficit                                                          (15,154,000)     (13,523,000)
                                                                               ------------      -----------

   Total stockholders' equity                                                     2,353,000        1,213,000
                                                                               ------------      -----------

     Total liabilities and stockholders' equity                                $  5,086,000     $  3,640,000
                                                                               ============     ============
</TABLE>
See notes to financial statements

                                                                             F-4

<PAGE>

AMERICAN BIO MEDICA CORPORATION

Statements of Operations


<TABLE>
<CAPTION>
                                                         For the Eight        For the Year        For the Year
                                                         Months Ended            Ended                Ended
                                                          December 31,          April 30,            April 30,
                                                              2001                 2001                 2000

<S>                                                     <C>                  <C>                  <C>
Net sales                                               $   4,055,000        $    7,484,000       $   7,653,000

Cost of goods sold                                          1,724,000             2,571,000           3,602,000
                                                        -------------        --------------       -------------

Gross profit                                                2,331,000             4,913,000           4,051,000
                                                        -------------        --------------       -------------

Operating expenses:
   Selling, general and administrative                      3,877,000             6,566,000           5,223,000
   Depreciation and amortization                               90,000               123,000             106,000
   Research and development                                   289,000               614,000             799,000
                                                        -------------        --------------       -------------

Operating loss                                             (1,925,000)           (2,390,000)         (2,077,000)
                                                        -------------        --------------       -------------

Other income (expense):
   Loss on sale of investments                                                     (124,000)           (122,000)
   Loss on disposition of assets                               (4,000)              (60,000)
    Licensing and royalty settlement                                                604,000
   Interest income                                             51,000               106,000              84,000
    Interest expense                                          (12,000)              (16,000)            (21,000)
                                                        -------------        --------------       -------------

Loss before extraordinary item                             (1,890,000)           (1,880,000)         (2,136,000)

Extraordinary item                                            259,000
                                                        -------------        --------------       -------------

Net loss                                                   (1,631,000)           (1,880,000)         (2,136,000)

Adjustments:
   Preferred stock beneficial conversion feature                                                        (57,000)
   Preferred stock dividends                                                                            (82,000)
                                                        -------------        --------------       -------------

Net loss attributable to common shareholders            $  (1,631,000)       $   (1,880,000)      $  (2,275,000)
                                                        =============        ==============       =============

Basic and diluted loss per common share                         $(.08)                $(.10)              $(.15)
                                                                =====                 =====               =====


Weighted average number of shares outstanding -
basic and diluted                                          19,345,000            18,034,000          15,481,000
                                                           ==========            ==========          ==========
</TABLE>
See notes to financial statements

                                                                           F-5


<PAGE>
AMERICAN BIO MEDICA CORPORATION

Statements of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
                                 Preferred       Common Stock                   Additional                     Due from
                                   Stock    --------------------    Treasury     Paid-in    Subscription   Officer/Director
                                  Shares      Shares      Amount     Stock       Capital     Receivable      Shareholder
                                 ---------  ----------    -------   --------    ----------  -------------  ----------------
<S>                              <C>        <C>           <C>       <C>         <C>         <C>            <C>
Balance - April 30, 1999            1,536   14,875,190   $149,000              $12,326,000    $(9,000)
Preferred "D" shares converted
  to common shares                 (1,647)   1,445,759     14,000                  (14,000)
Dividends paid to holders of
  Preferred "D" shares:
    Preferred shares                  111                                          112,000
    Cash
Fair value of compensatory stock
  options                                                                           83,000
Common shares issued in a private
  placement                                  1,408,450     14,000                1,986,000
Exercise of common stock options                17,649
Common stock and common stock
  options issued to consultants,
  net of amortization                          300,000      3,000                  721,000
Cancellation of common stock                    (1,500)                             (4,000)     4,000
Amortization of compensatory stock
  options
Net loss
Other comprehensive loss:
  Unrealized loss on securities
    available for sale

Comprehensive loss
                                  -------   ----------   --------    -------   -----------    -------         ---------
Balance - April 30, 2000                 0  18,045,548    180,000          0    15,210,000     (5,000)

Warrant registration penalty                                                        26,000
Cancellation of common stock                   (50,000)                            (38,000)
Amortization of compensatory
stock and options
Non-employee granted options
fully vested                                                                      (165,000)
Common stock options issued
  to consultants                                                                    19,000
----------------
Due from officer/director/
shareholder accrued interest                                                                                   (472,000)

Net loss
Other comprehensive loss:
Net change in unrealized loss
on securities available for sale

Comprehensive loss
                                  -------   ----------   --------    -------   -----------    -------         ---------

Balance - April 30, 2001                0   17,995,548    180,000          0    15,052,000     (5,000)         (472,000)

Equity private placement                     2,549,000     26,000                2,306,000
Amortization of compensatory
stock and options
Shares issued in settlement of
litigation                                     115,000      1,000                  105,000
Options issued as severance                                                         85,000
Due from officer/director/
shareholder accrued interest                                                                                    (36,000)
Warrants issued for financial
advisory services                                                                  265,000
Shares received as payment
on loan                                        (50,000)              (23,000)      (48,000)                      71,000
Net loss
Comprehensive loss

                                 --------   ----------   --------    -------   -----------    -------         ---------
Balance-December 31, 2001               0   20,609,548   $207,000    (23,000)  $17,765,000    $(5,000)        $(437,000)
                                 ========   ==========   ========    =======   ===========    =======         =========
</TABLE>

<PAGE>

[RESTUB]
<TABLE>
<CAPTION>
                                                                        Accumulated
                                                                           Other
                                      Comprehensive        Unearned    Comprehensive    Accumulated
                                           Loss          Compensation       Loss          Deficit         Total
                                      -------------      ------------  -------------    -----------     ---------
<S>                                   <C>                <C>           <C>            <C>             <C>
Balance - April 30, 1999                                  $ (13,000)    $(56,000)       $(9,424,000)   $    2,973
Preferred "D" shares converted
  to common shares
Dividends paid to holders of
  Preferred "D" shares:
    Preferred shares                                                                        (82,000)       30,000
    Cash                                                                                     (1,000)       (1,000)
Fair value of compensatory stock
  options                                                                                                  83,000
Common shares issued in a private
  placement                                                                                             2,000,000
Exercise of common stock options                                                                                0
Common stock and common stock
  options issued to consultants,
  net of amortization                                      (452,000)                                      272,000
Cancellation of common stock
Amortization of compensatory stock
  options                                                    11,000                                        11,000
Net loss                              $(2,136,000)                                       (2,136,000)   (2,136,000)
Other comprehensive loss:
  Unrealized loss on securities
    available for sale                    (21,000)                       (21,000)                         (21,000)
                                      -----------
Comprehensive loss                    $(2,157,000)
                                      ===========         ---------     --------        -----------    ----------
Balance - April 30, 2000                                   (454,000)     (77,000)       (11,643,000)    3,211,000

Warrant registration penalty                                                                               26,000
Cancellation of common stock                                                                              (38,000)
Amortization of compensatory                                289,000                                       289,000
stock and options
Non-employee granted options
fully vested                                                165,000                                             0
Common stock options issued
  to consultants                                            (19,000)                                            0
----------------
Due from officer/director/
shareholder accrued interest                                                                             (472,000)

Net loss                               (1,880,000)                                       (1,880,000)   (1,880,000)
Other comprehensive loss:
Net change in unrealized loss
on securities available for sale           77,000                         77,000                           77,000
                                     ------------
Comprehensive loss                     (1,803,000)
                                     ============         ---------      -------       ------------    ----------

Balance - April 30, 2001                                    (19,000)           0        (13,523,000)    1,213,000

Equity private placement                                                                               $2,176,000
Amortization of compensatory
stock and options                                            19,000                                             0
Shares issued in settlement of
litigation                                                                                                106,000
Options issued as severance                                                                                85,000
Due from officer/director/
shareholder accrued interest                                                                              (36,000)
Warrants issued for financial
advisory services                                                                                         265,000
Shares received as payment
on loan
Net loss                             $ (1,631,000)                                     $ (1,631,000)   (1,631,000)
                                     ------------
Comprehensive loss                   $ (1,631,000)
                                     ============
                                                           ----------    -------       ------------    ----------
Balance-December 31, 2001                                  $        0    $     0       $(15,154,000)   $2,353,000
                                                           ==========    =======       ============    ==========
</TABLE>

See notes to financial statements
                                                                             F-6



<PAGE>

AMERICAN BIO MEDICA CORPORATION

Statements of Cash Flows
<TABLE>
<CAPTION>

                                                                Eight Months
                                                                   Ended                   For the year ended
                                                                December 31,           April 30,          April 30
                                                                    2001                 2001               2000
                                                                    ----                 ----               ----
<S>                                                             <C>                <C>               <C>
Cash flows from operating activities:
 Net loss                                                      $  (1,631,000)     $  (1,880,000)      $  (2,136,000)
 Adjustments to reconcile net loss:
    Amortization and depreciation                                     90,000            123,000             106,000
    Penalty charge for late registration                                                 26,000
    Allowance for note receivable, net                                                                      105,000
    Provision for bad debts                                          (16,000)            (5,000)             11,000
    Compensatory stock and stock options                             477,000            289,000             367,000
    Accrued interest on due from officer/director/shareholder        (36,000)           (55,000)            (23,000)
    Loss on disposition of assets                                      5,000            184,000              14,000
    Changes in:
      Accounts receivable (and notes receivable in 1999)             144,000            145,000            (197,000)
      Other receivables                                              179,000           (350,000)
      Inventory                                                     (644,000)          (112,000)            356,000
      Prepaid expenses                                               (49,000)             5,000              51,000
      Restricted cash                                                 40,000            (34,000)
      Other assets                                                    29,000             18,000             (35,000)
      Accounts payable                                              (389,000)           140,000             394,000
      Accrued expenses                                               150,000             70,000             141,000
      Customer advance deposits                                      243,000
      Wages payable                                                 (402,000)           516,000
                                                               -------------      -------------       -------------

         Net cash used in operating activities                    (1,810,000)          (920,000)           (846,000)
                                                               -------------      -------------       -------------

Cash flows from investing activities:
 Purchase of property, plant and equipment                        (1,202,000)           (73,000)           (145,000)
 Purchase of investments                                                                                    (73,000)
 Loan to BioSys, Inc.                                                                  (100,000)           (280,000)
 Proceeds from sales and maturity of investments                                        407,000             571,000
 Collections on note receivable                                                                              23,000
 Loans to officer/director/shareholder                                                 (120,000)            (32,000)
                                                               -------------      -------------       -------------

         Net cash (used in) provided by investing activities      (1,202,000)           114,000              64,000
                                                               -------------      -------------       -------------

Cash flows from financing activities:
  Proceeds from private placement                                  2,332,000                              2,000,000
  Cash dividends paid                                                                                        (1,000)
  Repayment of note payable to shareholder                                             (125,000)           (130,000)
  Proceeds from debt financing                                       720,000
  Repayment of capital lease obligations                             (17,000)           (11,000)            (11,000)
                                                               -------------      -------------       -------------
          Net cash provided by (used in) financing activities      3,035,000           (136,000)          1,858,000
                                                               -------------      -------------       -------------

          Net increase (decrease) in cash and cash equivalents        23,000           (942,000)          1,076,000
Cash and cash equivalents - beginning of period                      265,000          1,207,000             131,000
                                                               -------------      -------------       -------------
Cash and cash equivalents - end of period                      $     288,000      $     265,000       $   1,207,000
                                                               =============      =============       =============
</TABLE>

                                                                            F-7

<PAGE>

AMERICAN BIO MEDICA CORPORATION

Statement of Cash Flows (continued):

<TABLE>
<CAPTION>
                                                                Eight Months
                                                                   Ended                 For the year ended
                                                                December 31,        April 30,          April 30
                                                                    2001               2001              2000
                                                                    ----               ----              ----

<S>                                                            <C>                  <C>                <C>
Supplemental disclosures of cash flow information:
 Cash paid during the year for:
    Interest                                                    $     12,000        $   16,000        $    8,000

Noncash activities:
 Common shares issued in connection with stock dividends                                                 111,000
     to holders of preferred stock
    Dividend accrued, not yet paid
 Acquisition of property under capital leases                                           10,000
    Settlement of registration rights agreement
  Sale of book business and related assets for a note receivable                                         205,000
 Cancellation of common stock                                                                              4,000
 Preferred stock converted to common stock                                                             1,647,000
 Common stock received in repayment of loan from                      71,000            38,000
     officer/director/shareholder
   Conversion of equity investment in BioSys, Inc.                                     380,000
   Non-employee options granted fully vested                                           165,000

</TABLE>



See notes to financial statements

                                                                            F-8

<PAGE>


AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
December 31, 2001


NOTE A - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES

The Company:

         American Bio Medica Corporation (the Company) was incorporated in the
state of New York on April 10, 1986 and is in the business of manufacturing,
developing and marketing biomedical technologies and products. The Company
currently owns two technologies for screening drugs of abuse, a workplace
screening test and a preliminary test for use by laboratories.

         The Company was involved in marketing educational books and software to
schools and municipal libraries and audio-visual educational packages to
corporations throughout the United States, which constituted less than 10% of
net sales. In September 1999, the Company sold this business (see Note H).

         The Company's financial statements have been prepared assuming the
Company will continue as a going concern, which assumes the realization of
assets and the satisfaction of liabilities in the normal course of business.
During the transition period ended December 31, 2001 the Company sustained a net
loss of $1,631,000 and had net cash outflows from operating activities of
$1,654,000. To date the Company has been largely dependent on its ability to
sell additional shares of its common stock to fund its operating losses During
the prior fiscal year and continuing throughout this transition period, the
Company commenced implementing programs to improve its financial prospects
including entering into national and international distribution agreements with
a number of distributors, completing and refining its in-house strip
manufacturing program to reduce costs and other measures to enhance profit
margins.

         In August 2001 the Company completed a private placement of its common
stock to raise working capital and does not expect to experience certain costs
at the levels sustained in the transition period and year ended April 30, 2001.
Such capital raised was necessary to fund working capital requirements including
an agreement to settle legal fees.

         The Company's history of losses raises substantial doubt about its
ability to continue as a going concernand its 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.

Significant Accounting Policies:

[1]    Cash Equivalents:

         The Company considers all highly liquid debt instruments purchased with
a maturity of three months or less to be cash equivalents.


[2]     Inventory:

         Inventory is stated at the lower of cost or market; cost is determined
by the first-in-first-out method.

                                                                            F-9

<PAGE>

AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
December 31, 2001



[3]    Income Taxes:

         The Company accounts for income taxes in accordance with Statements of
Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes.
Deferred tax assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities, and are measured
using the enacted laws and tax rates that will be in effect when the differences
are expected to reverse. The measurement of deferred tax assets is reduced, if
necessary, by a valuation allowance for any tax benefits that are not expected
to be realized. The effect on deferred tax assets and liabilities of a change in
tax rates are recognized in the period that such tax rate changes are enacted.

[4]    Depreciation and amortization:

         Property, plant and equipment assets are depreciated on the
straight-line method over their estimated useful lives. Leasehold improvements
and capitalized lease assets are amortized by the straight-line method over the
shorter of their estimated useful lives or the term of the lease.

[5]    Revenue recognition:

         The Company recognizes revenue when title transfers upon shipment. No
obligation on the part of ABMC exists for customer acceptance. The Company's
price is fixed and determinable at the date of sale. The buyer has paid the
Company or is obligated to pay the Company and the obligation is not contingent
on the resale of the product. The buyer's obligation would not be changed in the
event of theft or physical destruction or damage to the product. The buyers
acquiring the product for resale (i.e. distributor/wholesaler) have economic
substance apart from that provided by the Company and the Company does not have
significant obligations for future performance to directly bring about the
resale of the product. All distributors have economic substance apart from
customers and the payment terms are not conditional. The transactions with
distributors are on terms similar to the terms given to the Company's other
customers. No agreements exist with the distributors that offer a right of
return. Revenue from consignment sales is not recognized until all conditional
terms have been met.

[6]    Research and development:

         Research and development costs are charged to operations when incurred.

[7]    Loss per common share:

         Basic loss per share is calculated by dividing net loss by the weighted
average number of outstanding common shares during the period. No effect has
been given to potential issuances of common stock including outstanding options
and warrants in the diluted computation, as their effect would be antidilutive.
The basic and diluted net loss per common share for the transition period and
the years ended April 30, 2001 and 2000 are:
<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------------------------------------
                                                                Eight Months Ended
                                                                 December 31, 2001       April 30, 2001       April 30, 2000
-------------------------------------------------------------- --------------------- --------------------- --------------------

<S>                                                                  <C>                    <C>                  <C>
Basic and diluted net loss per common share from operations          $    (.09)             $    (.10)           $    (.15)
-------------------------------------------------------------- --------------------- --------------------- --------------------

Basic and diluted netloss per common share from
extraordinary item                                                   $     .01
-------------------------------------------------------------- --------------------- --------------------- --------------------

Basic and diluted net loss per common share                          $    (.08)             $    (.10)           $    (.15)
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                                                           F-10

<PAGE>

AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
December 31, 2001



         Potential common shares outstanding as of December 31 and April 30,
2001:

                                  December 31, 2001               April 30, 2001
                                  -----------------               --------------

         Warrants                         2,656,703                      953,283
         Options                          4,374,000                    3,620,000


         Assuming an adequate number of shares held as collateral for the loan
to officer/director/shareholder are retired at the closing price on December 31,
2001 in satisfaction of the officer/director/shareholder obligation to the
Company, the pro forma number of shares outstanding at December 31, 2001 would
be 20,107,289.

[8]    Use of estimates:

         The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that effect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

[9]    Impairment of long-lived assets:

         In accordance with SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of, the Company
records impairment losses on long-lived assets used in operations when events
and circumstances indicate that the assets might be impaired and the
undiscounted cash flows estimated to be generated by those assets are less than
the carrying amounts of those assets. No such losses have been recorded.

[10]  Financial Instruments:

         The carrying amounts of cash and cash equivalents, accounts receivable
- net, other receivables, due from officer/director/stockholder, restricted
cash, accounts payable and accrued expenses approximate their fair value based
on the nature of those items.

         Estimated fair value of financial instruments is determined using
available market information. In evaluating the fair value information,
considerable judgment is required to interpret the market data used to develop
the estimates. The use of different market assumptions and/or different
valuation techniques may have a material effect on the estimated fair value
amounts.

         Accordingly, the estimates of fair value presented herein may not be
indicative of the amounts that could be realized in a current market exchange.

[11]  Accounting for stock-based compensation:

         The Company accounts for its stock-based compensation plans using the
intrinsic value method under Accounting Principles Board Opinion (APB) No. 25,
Accounting for Stock Issued to Employees and related interpretations. The
Financial Accounting Standards Board issued SFAS No. 123, Accounting for
Stock-Based Compensation, which establishes a fair value-based method of
accounting for stock-based compensation plans. The Company has adopted the
disclosure-only alternative under SFAS No. 123, which requires disclosure of the
pro forma effects on net loss and net loss per share as if stock-based employee
compensation was measured under SFAS No. 123, as well as certain other
information. The Company accounts for stock-based compensation to non-employees
using the fair value method in accordance with SFAS No. 123.

                                                                           F-11

<PAGE>

AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
December 31, 2001



[12]  Concentration of credit risk:

         The Company sells its drug testing products primarily to United States
distributors. Credit is extended based on an evaluation of the customer's
financial condition. The Company establishes an allowance for doubtful accounts
based on factors surrounding the credit risk of specific customers and other
information.

         The Company maintains certain cash balances at a financial institution
that is federally insured and at times the balances have exceeded federally
insured limits.

[13] Reporting comprehensive loss:

         The Company reports comprehensive loss in accordance with the
provisions of SFAS No. 130, Reporting Comprehensive Income. The provisions of
SFAS No. 130 require the Company to report the change in the Company's equity
during the period from transactions and events other than those resulting from
investments by, and distributions to, the shareholders.

[14]  Reclassifications

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

NOTE B - RESTRICTED CASH

         Restricted cash consists of one certificate of deposit in the amount of
$106,000 including accrued interest at a rate of 1.5% at December 31, 2001,
which is collateral for a bank loan in the name of officer/director/shareholder,
that is payable on demand in the amount of $100,000. As of April 30, 2001 the
restricted cash consisted of two certificates of deposit aggregating $146,000,
accruing interest at 5.35%. The first certificate, in the amount of $119,000 was
collateral for a bank loan, that is payable on demand in the amount of $100,000.
The other certificate, in the amount of $27,000 collateralized a corporate
credit card in the amount of $7,000, in the name of a Company
officer/director/shareholder. On July 23, 2001, the outstanding amounts due on
the collateralized credit card were paid, the account closed and all
restrictions on the $27,000 certificate of deposit released. The cash from this
certificate was subsequently transferred to operating cash.

NOTE C - LICENSING AND ROYALTY SETTLEMENT

         On April 3, 2001, the Company settled the patent infringement lawsuit
(see Note N3) against Phamatech Inc. (Phamatech) and the other defendants. The
agreement establishes a license and royalty arrangement under which Phamatech
will continue to market its line of products for drugs-of-abuse testing, and the
Company will be paid a percentage of revenues from this product. In return, the
Company dismissed the lawsuit against Phamatech and the other defendants. No
significant royalties from the continued sale of products are expected. Under
the terms of the settlement, each party has agreed not to disclose to any third
parties the terms and conditions of this agreement.

NOTE D - EXTRAORDINARY ITEM

During the transition period the Company recorded an extraordinary gain in the
amount of $259,000 related to a negotiated settlement of outstanding obligations
to a former attorney.

NOTE E - INVENTORY

Inventory is comprised of the following:
<TABLE>
<CAPTION>

                                                                December 31, 2001        April 30, 2001
                                                                -----------------        --------------
<S>                                                             <C>                       <C>
Raw Materials                                                   $         913,000         $    571,000
Work In Process                                                           597,000              373,000
Finished Goods Including $167,000 held on consignment on
December 31, 2001 and $199,000 on April 30, 2001 net of
reserve for returns of $112,000 and $0 at December 31, 2001
and April 30, 2001, respectively                                          577,000              500,000
                                                                -----------------         ------------
                                                                $       2,087,000         $  1,444,000
                                                                =================         ============
</TABLE>

                                                                           F-12
<PAGE>

AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
December 31, 2001


NOTE F - PROPERTY, PLANT AND EQUIPMENT

         In December 2001, the Company purchased its previously leased facility
in Kinderhook, N.Y. for $950,000, including a building and 107 acres of land.
The Company financed the purchase through mortgage loans with the Hudson River
Bank and Trust Company for $360,000, the New York State Business Development
Corporation for $240,000, and the Columbia Economic Development Corporation for
$120,000.

         Property, plant and equipment, at cost, are as follows:
<TABLE>
<CAPTION>

                                                               December 31, 2001       April 30, 2001
                                                               -----------------       --------------
<S>                                                             <C>                    <C>
         Land                                                   $       222,000
         Buildings and improvements                                     835,000           $   62,000


         Manufacturing and warehouse equipment, including
         $42,000 and  $23,000 in leased equipment at December
         31, 2001 and  April 30, 2001,respectively                      584,000              378,000
         Office equipment, including $29,000 and  $60,000 in
         leased equipment at December 31, 2001 and  April 30,
         2001, respectively                                             240,000              255,000
                                                                ---------------           ----------
                                                                      1,881,000              695,000
         Less accumulated depreciation                                  426,000              347,000
                                                                ---------------           ----------
                                                                $     1,455,000           $  348,000
                                                                ===============           ==========
</TABLE>

         Depreciation expense was $90,000, $123,000 and $106,000 for the
transition period ended December 31, 2001 and the fiscal years ended April 30,
2001 and 2000, respectively.

NOTE G - DUE FROM OFFICER/DIRECTOR/SHAREHOLDER

         At December 31, 2001 and April 30, 2001, the Company has a loan due
from an officer/director/shareholder for $437,000 and $472,000, respectively,
partially evidenced by a note bearing interest at 11.5% per annum and payable on
demand.

         During the first quarter of the year ended April 30, 2001 and during
the year ended April 30, 2000, the Company advanced $120,000 and $32,000,
respectively to the officer/director/shareholder. Interest income in connection
with the note receivable for the transition period ended December 31, 2001 and
the fiscal year ended April 30, 2001 was $36,000 and $55,000, respectively.

         The officer/director/shareholder has provided 1,000,000 common shares
as collateral for the loan and is surrendering to the Company, 25,000 common
shares each quarter valued at the closing price on the second day following the
earnings release, to reduce the outstanding loan balance. During the transition
period, 75,000 common shares valued at $71,000 were redeemed to pay down the
loan. 25,000 of the shares surrendered have been retained by the Company and are
included as treasury stock on the accompanying balance sheet; all other shares
have been cancelled. Such loan is reflected in the Company's financial
statements as a reduction of stockholder's equity.

                                                                           F-13
<PAGE>

AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
December 31, 2001



NOTE H - OTHER ASSETS

         On September 1, 1999, the Company sold its book sales business
including all inventories and accounts receivable to an entity in exchange for a
$250,000 five year secured promissory note. During the year ended April 30,
2000, the Company repossessed certain assets, upon the default of the note and
collected $23,000. In April 2001, the $60,000 carrying value of the assets of
the book business were determined to be impaired and were written off.

NOTE I - DEBT

Long term debt at December 31, 2001consisted of the following.
<TABLE>
<CAPTION>

                                                                                December 31, 2001
<S>                                                                            <C>
     Hudson River Bank and Trust Co.:
      Mortgage payable in equal monthly installments of $3,209 including
     interest at 8.75% through January 1, 2012 with a final lump sum payment
     of $255,000 at maturity, collateralized by the building and land
                                                                                    $ 360,000
     New York  Business Development Corporation:
     Mortgage payable in equal monthly installments of $1,996 including
     interest at 7.92% through January 1, 2012 with a final lump sum payment
     of $164,000 at maturity, collateralized by the building and land,
     equipment, and furnitures and fixtures
                                                                                      240,000
     Columbia Economic Development Corporation:
     Mortgage payable in equal monthly installments of $1,159 including
     interest at 3.00% collateralized by building and land due in January
     1, 2012                                                                          120,000
                                                                                    ---------
                                                                                    $ 720,000
     Less current portion                                                             (24,000)
                                                                                    ---------
     Non-current portion                                                            $ 696,000
                                                                                    =========
</TABLE>

         At December 31, 2001, the following are the maturities of long-term
debt for each of the next five years:

                               2002                      $  24,000
                               2003                         24,000
                               2004                         25,000
                               2005                         27,000
                               2006                         29,000
                               Thereafter                  567,000
                                                         ---------
                                                         $ 720,000
                                                         =========
                                                                          F-14

<PAGE>


AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
December 31, 2001


NOTE J - CAPITAL LEASE OBLIGATIONS

         The Company leases certain equipment under a capital lease. As of
December 31, 2001 and April 30, 2001, minimum future lease payments on the
capital leases are as follows:

                                                December 31,       April 30,
                                                    2001             2001
                                                ------------       ---------
2002                                              $ 22,000         $ 27,000
2003                                                 9,000           22,000
2004                                                 1,000            5,000
                                                  --------         --------
Total future minimum lease payments                 32,000           54,000
Less amounts representing interest                  (3,000)          (8,000)
                                                  --------         --------
Present value of minimum lease payments           $ 29,000         $ 46,000
Less current portion of capital lease payments     (19,000)         (25,000)
                                                  --------         --------
Long term portion of capital lease obligations    $ 10,000         $ 21,000
                                                  ========         ========

NOTE K - INCOME TAXES

         A reconciliation of the U.S. Federal statutory income tax rate to the
effective income tax rate is as follows:
<TABLE>
<CAPTION>
                                                                Transition
                                                               Period Ended                  Year Ended
                                                             December 31, 2001             April 30, 2001

<S>                                                                      <C>                        <C>
 Tax benefit at federal statutory rate                                   (34%)                      (34%)
 State tax benefit, net of federal tax effect                              (5)                        (5)
 Valuation allowance                                                       39                         39
                                                               --------------             --------------
 Effective income tax rate                                                 0%                         0%
                                                               ==============             ==============
</TABLE>
                                                                        F-15
<PAGE>

AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
December 31, 2001


Significant components of the Company's deferred tax assets are as follows:
<TABLE>
<CAPTION>
                                                          December 31, 2001          April 30, 2001

<S>                                                           <C>                       <C>
       Inventory                                              $   68,000                $    16,000
       Stock Based Compensation                                  291,000                          -
       Allowance for Doubtful Accounts                            27,000                     34,000
       Property, plant, and equipment                            (84,000)                         -
       Capital losses                                             41,000                          -
       Net operating loss carryforward                         4,290,000                  3,762,000
                                                              ----------                -----------
       Total gross deffered tax assets                         4,633,000                  3,812,000
       Less valuation allowance                               (4,633,000)                (3,812,000)
                                                              ----------                -----------
       Net deferred tax assets                                $        -                $         -
                                                              ==========                ===========
</TABLE>

The valuation allowance for deferred tax assets as of December 31, 2001 and
April 30, 2001 was $4,633,000 and $3,812,000 respectively. The net change in the
total valuation allowance was an increase of $821,000 for the eight months ended
December 31, 2001 and an increase of $312,000 for the year ended April 30, 2001.

The Company has federal and New York state net operating loss carry forwards for
income tax purposes of approximately $11,001,000 which begin to expire in 2009.
The Company has federal and New York state capital losses of approximately
$105,000 which begin to expire in 2005.

In assessing the realizability of deferred tax assets, management considers
whether or not it is more likely than not that some portion or all deferred tax
assets will be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
projected future taxable income and tax planning strategies in making this
assessment.

The Company's ability to utilize the operating loss carry forwards may be
subject to an annual limitation in future periods pursuant to Section 382 of the
Internal Revenue Code of 1986, as amended, if future changes in ownership occur.

NOTE L - STOCKHOLDERS' EQUITY

[1] Preferred stock:

         During April 1998, the Company completed a private placement in which
it netted proceeds of approximately $2,312,000 through the sale of 2,500 shares
of 8% Series D Convertible Preferred Shares with a stated value of $1,000 per
share. Each Preferred Share was convertible at the lesser of (i) 95% of the
average of the closing bid prices of the common shares over any three trading
days selected by the holder of the Preferred Shares in the 20 trading days
immediately preceding the date of conversion or (ii) $4.625 based on a formula
as provided. Dividends were payable in cash or additional Preferred Shares at
the Company's option.

         Pursuant to a Registration Rights Agreement dated April 24, 1998 (the
Registration Rights Agreement), the Company agreed to register the resale of the
Company's common shares issuable upon conversion of the Company's Series D
Preferred Stock and upon exercise of certain stock purchase warrants. Pursuant
to the Registration Rights Agreement, if a registration statement covering the
resale of such shares of common shares was not declared effective by July 23,
1998 or once declared effective sales could not be made thereunder for any
reason (a Registration Statement Deficiency), the Company agreed to pay a late
registration penalty. The Registration Statement filed by the Company was not
declared effective until March 17, 1999, resulting in a penalty. In the fourth
quarter of fiscal 1999, the Series D preferred shareholders (the "holders")
communicated to the Company that they were willing to accept $250,000 in cash in
settlement of the penalty. On May 28, 1999, the Company entered into a
definitive Agreement as of April 30, 1999 (the "1999 Agreement") to settle all
claims against the Company, including the late registration penalty and certain
other claims under the Securities Purchase Agreement dated April 24, 1998.
Pursuant to the 1999 Agreement, the Company gave as consideration $225,000 on
June 1, 1999 ($100,000 in cash and a one-year promissory note in the principal
amount of $125,000 accruing interest at the rate of 14% annually), which was
subsequently repaid.

                                                                           F-16
<PAGE>

AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
December 31, 2001

         On January 27, 2000, the holders of the Series D Preferred Shares
agreed to convert all of their preferred shares into common shares. Pursuant to
this agreement certain preferred shares were converted at a price of $1.078646
resulting in an additional preferred dividend of approximately $57,000 for the
difference between the original conversion rate and the adjusted conversion
price. During the year ended April 30, 2000, the Company issued 1,445,759 common
shares on conversion of the preferred shares and paid accrued dividends of
approximately $111,000.

[2]   Common stock purchase agreement:

         On April 28, 2000, the Company entered into an agreement with Seaside
Partners, L.P. (Investor) to issue and sell 1,408,450 common shares at a per
share price of $1.42 (the closing price) for a total of $2 million. In
conjunction with the agreement, the Company agreed to issue a five-year warrant
to the investor to purchase up to 1,877,934 common shares pursuant to a formula
based on the Company's stock price on the ten consecutive trading days prior to
the six-month anniversary of the closing date. The agreement provided that if
the six-month anniversary price per share was $2.13 or more per share, the
Company would not be required to issue any warrants. If the anniversary price
was less than $2.13 per share, the Company would be required to issue warrants
exercisable at the anniversary price into a number of common shares based on a
formula. The anniversary price was not $2.13 and the Company issued 953,283
warrants with an exercise price of $1.1689. These warrants were subsequently
repriced to a $0.95 exercise price in lieu of the Company paying liquidated
damages of $109,000 resulting from the registration statement with respect to
the common shares and the warrants not being declared effective by the SEC by
the negotiated deadline. Denis O'Donnell, M.D., one of the Company's directors,
is a member of Seaside Advisors, LLC, which is the general partner of Seaside
Partners, L.P.

[3]   August 2001 Private Placement:

         On August 22, 2001, the Company raised gross proceeds of $2,549,000,
with net proceeds of $2,332,000 after placement, legal, transfer agent and
accounting fees, in a private placement of its securities to a number of
accredited investors. The private placement consisted of 2,549,000 units. Each
unit consisted of one common share of American Bio Medica Corporation stock, par
value $0.01 per share, at a purchase price of $1.00 per share, and one warrant
to purchase 0.5 common share at an exercise price of $1.05 per share,
exercisable during a 54-month period beginning on February 22, 2002. Therefore,
in connection with the private placement the Company issued 2,549,000 common
shares and 1,274,500 warrants to purchase one common share.

         In consideration of services as placement agents in the August 2001
private placement, we issued 203,920 warrants to purchase one common share at an
exercise price of $1.20 per share, exercisable during a 54 month period
beginning on February 22, 2002 to Brean Murray and Co., Inc. and their
sub-agents.

                                                                           F-17
<PAGE>

AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
December 31, 2001


[4]   Stock Option Plans:

         The Company adopted the Fiscal 1997 Nonstatutory Stock Option Plan (the
"1997 Plan"), the Fiscal 1998 Nonstatutory Plan (the "1998 Plan"), the Fiscal
2000 Nonstatutory Stock Option Plan (the "2000 Plan"), and, the 2001
Nonstatutory Stock Option Plan (the "2001 Plan"). The 1997 Plan provides for the
granting of options to purchase up to 2,000,000 shares of common stock, the 1998
Plan and the 2000 Plan provides for the granting of options to purchase up to
1,000,000 common shares each and the 2001 Plan provides for granting of options
to purchase up to 4,000,000 common shares. These Plans are administered by the
Option Committee of the Board of Directors, which determines the terms of
options exercised, including the exercise price, the number of shares subject to
the option and the terms and conditions of exercise.

[5]   Stock options:

         Stock option activity is summarized as follows:
<TABLE>
<CAPTION>
                                         Eight months
                                       ended December 31,                          Years ended April 30,
                                 ----------------------------  ----------------------------------------------------------
                                               2001                        2001                           2000
                                 ----------------------------  ---------------------------      -------------------------
                                                 Weighted                      Weighted                      Weighted
                                                  Average                       Average                       Average
                                   Shares      Exercise Price    Shares     Exercise Price       Shares    Exercise Price

<S>                            <C>                 <C>           <C>           <C>               <C>            <C>
Options outstanding at
beginning of year                3,620,000           $2.15      2,990,000        $2.63          1,976,000        $3.02
Granted                            966,000            1.05      1,173,000         1.19          1,858,000         2.45
Exercised                                0            0.00              0         0.00            (67,000)        2.96
Cancelled/expired                 (212,000)           2.85       (543,000)        2.88           (777,000)        3.00
                                 ---------                     ----------                       ---------

Options outstanding at end
of year                          4,374,000            1.85      3,620,000         2.15          2,990,000         2.63
                                 =========                      =========                       =========

Options exercisable at end
of year                          2,525,000            2.42      2,418,000         2.54          2,558,000         2.67
                                 =========                      =========                       =========
</TABLE>

         The following table presents information relating to stock options
outstanding at December 31, 2001.
<TABLE>
<CAPTION>
                                                            Options Outstanding                         Options Exercisable
                                                 --------------------------------------------          ---------------------
                                                               Weighted           Weighted                          Weighted
                                                                Average           Average                            Average
                  Range of Exercise                            Exercise          Remaining                          Exercise
                        Price                     Shares         Price          Life in Years            Shares       Price
                  -----------------              ---------     --------         -------------         -----------   ---------
<S>                 <C>     <C>                  <C>             <C>                 <C>                  <C>          <C>
                    $0.85 - $1.99                1,920,500       $0.98               8.59                 229,250      $1.38
                                                 =========                                              =========
                    $2.00 - $3.00                1,992,000       $2.41               4.87               1,859,500      $2.40
                                                 =========                                              =========
                    $3.01 - $3.50                  461,250       $3.03               1.23                 436,250      $3.04
                                                 =========                                              =========
</TABLE>

                                                                           F-18
<PAGE>

AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
December 31, 2001


         As of December 31, 2001, there are no stock options available for
issuance under the 1997 or the 1998 Plan. Pursuant to the plans, as of April 30,
2000 no further options could be issued under the 1997 Plan and as of April 30,
2001, no further options could be issued under the 1998 Plan.

[6]   Warrants

         On May 2, 2001, the Company issued a 5 year warrant immediately
exercisable and non-forfeitable, to purchase 200,000 common shares of American
Bio Medica Corporation stock at an exercise price of $1.50 per share to Brean
Murray & Co., Inc. as compensation for its future services as a financial
advisor to the Company. The warrants were valued at $134,000 using the Black
Scholes pricing model and the following assumptions, dividend yield of 0%,
volatility of 95%, risk free interest rate 4.8% and expected life of 5 years and
has been recorded as a charge to operations in the transition period ending
December 31, 2001. The closing price of American Bio Medica common shares on May
2, 2001, as listed on The Nasdaq SmallCap Market, was $.95 per share.

         On August 22, 2001, the Company issued 54-month warrants, exercisable
beginning on February 22, 2002 and non-forfeitable, to purchase 1,274,500 common
shares of American Bio Medica Corporation stock at an exercise price of $1.05
per share to a number of accredited investors who purchased common shares in the
Company's August 2001 private placement of the Company's securities. The value
of these warrants was accounted for as a cost of the financing.

         On October 2, 2001, the Company issued warrants, exercisable beginning
February 22, 2002 and non-forfeitable, to purchase 135,500 common shares of
American Bio Medica Corporation stock at an exercise price ranging from $.86 to
$1.20 per share to two distributors and several financial advisors in
consideration for their services. The warrants are valued at $119,000 using the
Black Scholes pricing model and the following assumptions, dividend yield of
0.0%, volatility 92.0%, risk free interest rate of 5.3% and expected life of 10
years and has been recorded as a charge of operations in the transition period
ending December 31, 2001. The closing price of American Bio Medica Corporation
common shares on October 2, 2001, as listed on the Nasdaq SmallCap Market, was
$0.85 per share.


         On November 15, 2001, the Company issued a 4 year warrant, immediately
exercisable and non-forfeitable, to purchase 20,000 common shares of American
Bio Medica Corporation stock at an exercise price of $1.00 per share to Hudson
River Bank & Trust Company in connection with the Company's purchase of its
facility located in Kinderhook, New York. The warrants are valued at $10,000
using the Black Scholes pricing model and the following assumptions, dividend
yield of 0.0%, volatility of 90.8%, risk free interest rate of 5.1% and expected
life of 5 years. The closing price of American Bio Medica Corporation common
shares on November 15, 2001, as listed on the Nasdaq SmallCap Market, was $0.85
per share.

                                                                           F-19

<PAGE>

AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
December 31, 2001


[7]   Stock-based compensation:

         The Company applies APB No. 25 in accounting for its stock option plans
and, accordingly, recognizes employee compensation expense for the difference
between the fair value of the underlying common shares and the exercise price of
the option at the date of grant. The effect of applying SFAS No. 123 on pro
forma net loss as stated below is not necessarily representative of the effects
on reported net loss for future years due to, among other things (1) the vesting
period of the stock options and (2) the fair value of additional stock options
in future years. The weighted average fair value of options granted during the
transition period and fiscal years 2001 and 2000 was approximately $0.84, $0.94
and $1.06, respectively. The following pro forma information gives effect to
fair value of the options on the date of grant using the Black-Scholes
option-pricing model with the following assumptions: dividend yield of 0%,
volatility ranging from 91% to 92% for the transition period, 92% for 2001 and
85% for 2000, risk free interest rates of ranging from 4.88% - 5.62% for the
transition period, 5.29% - 6.22% for 2001 and 5.81% - 6.60% for 2000 expected
life of 10 years for the transition period and three years for the years ended
April 30, 2001 and 2000.
<TABLE>
<CAPTION>
                                             Eight months ended December 31,         Year Ended April 30,
                                                          2001                      2001              2000
                                                          ----                      ----              ----

<S>                                                  <C>                       <C>               <C>
      Net Loss:
          As reported                                  $(1,631,000)             $(1,880,000)       $(2,136,000)
          Pro forma                                    $(2,325,000)              (2,144,000)        (3,684,000)

      Basic and diluted loss per share
          As reported                                      $(.08)                   $(.10)              $(.15)
          Pro forma                                        $(.12)                   $(.11)              $(.24)
</TABLE>

         In December 1999, the Company entered into a one year consulting
agreement with an individual knowledgeable in the medical diagnostic testing
area. In connection therewith, the Company issued 300,000 common shares and
granted options to purchase 200,000 common shares at $2 per share, vesting as of
December 15, 2000. The common shares were valued at $466,000and amortized over
one year. These shares were fully vested and nonforfeitable when issued. The
options were valued at $255,000 on December 15, 1999 using the Black-Scholes
pricing model and were being expensed ratably over 12 months (the estimated
period of benefit). In December 2000, on vesting, the Company revalued the
options at $90,000 using the Black-Scholes pricing model and the following
assumptions, dividend yield of 0%, volatility of 84%, risk free interest of
5.49% and expected life of 9 years and adjusted paid-in-capital by $165,000.
This decrease was debited to paid in capital to recognize the cost of the
transaction. The arrangement resulted in a charge to operations of $90,000 for
the services.

         During the year ended April 30, 2000, the Company granted options to
distributors and consultants to purchase 97,250 common shares. The options can
be exercised through January 2005 at exercise prices ranging from $2.50 to $3.00
per share. In connection therewith, the Company recorded a charge of $83,000 for
the year ended April 30, 2000.

         During the year ended April 30, 2001, the Company granted 1,148,000
options to employees and directors at exercise prices greater than or equal to
fair market value of the underlying common shares at dates of grant. In
addition, during the year ended April 30, 2001, the Company granted 25,000
options to consultants at fair market value. The options granted to consultants
were valued at $19,000 using the Black Scholes pricing model and the following
assumptions, dividend yield of 0%, volatility of 95%, risk free interest rate of
5.79% and expected life of 5 years and are being amortized over the consulting
term of 1 year. During the transition period ended December 31, 2001, the
Company granted 708,000 options to employees and directors at exercise prices
greater than or equal to fair value of the underlying common shares at dates of
grant. In addition, during the transition period ended December 31, 2001, the
Company granted 158,000 options to consultants at fair market value and 100,000
options at fair market value to a former employee as part of a severance
agreement. The options granted to consultants were valued at $47,000 using the
Black Scholes pricing model and the following assumptions, dividend yield of
0.0%, volatility of 92.3%, risk free interest rate of 5.3% and expected life of
10 years. The options granted to the former employee as part of a severance
agreement were valued using the Black Scholes pricing model and the following
assumptions dividend yield of 0.0%, volatility of 93.6%, risk free interest rate
of 5.7% and expected life of 5 years.

                                                                           F-20
<PAGE>

AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
December 31, 2001



NOTE M- INVESTMENTS

         Through April 30, 2000, the Company had advanced $280,000 to BioSys,
Inc. (BioSys), (the former President of BioSys is a director of the Company) and
advanced an additional $100,000 to BioSys during the year ended April 30, 2001.

         The terms of the loan provided for converting the loan into common
stock of BioSys based on the percentage of funds provided by the Company
compared to the total amount of capital obtained by BioSys within a two-year
period commencing on July 14, 1999, limited to a maximum of 20% in exchange for
an aggregate contribution of $400,000.

         In October 2000, the Company converted the loan balance of $380,000
into BioSys common stock and in January 2001, sold the common stock for net
proceeds of $360,000.

         The Company sold marketable equity securities valued at approximately
$119,000 in April 2001 for $15,000, realizing a loss on the sale of
approximately $104,000.

NOTE N - COMMITMENTS, CONTINGENCIES AND OTHER MATTERS

[1]         Operating leases:

         The Company leases office and laboratory facilities under operating
leases expiring through August 2002. At December 31, 2001, the future minimum
rental payments under the operating lease are $42,000.

         Rent expense was $116,000, $141,000 and $139,000 for the transition
period and fiscal years ended April 30, 2001 and 2000, respectively.

[2]         Employment agreements:

         The Company has employment agreements with three officers, of which one
is a director and all are shareholders, providing for aggregate annual salaries
of $460,000. These agreements expire on April 30, 2002 and provide for the
issuance of bonuses and the granting of options.

[3]         Litigation:

         In April 1999, the Company initiated a lawsuit against Phamatech, Inc.,
(Phamatech) and other defendants claiming patent infringement, trademark
dilution and unfair competition. In August 2000, the Company amended its lawsuit
to add additional defendants.

         On April 3, 2001, the Company settled the patent infringement lawsuit
(see Note C) against Phamatech Inc. (Phamatech) and other defendants. The
agreement establishes a license and royalty arrangement under which Phamatech
will continue to market its line of products for drugs-of-abuse testing, and the
Company will be paid a percentage of revenues from this product. In return, the
Company dismissed the lawsuit against Phamatech and the other defendants. Under
the terms of the settlement, each party has agreed not to disclose to any third
parties the terms and conditions of this agreement.

         In June 1999, Richard Davidson filed a lawsuit against the Company in
New York. Davidson claims that two placement memoranda dated September 15, 1992
and February 5, 1993, obligates the Company to issue him 1,155,601 ABMC common
shares. He claims he is entitled to the common shares in consideration of
brokering the acquisitions subject to the Share Exchange Agreement with Dr.
Robert Friedenberg (Friedenberg also filed suit against the Company and the case
was dismissed in September 1999). In addition, Davidson is claiming a finder's
fee of 5% of the funds raised by the September 1992 private placement. He
alleges that a sum of $1 million was raised. He also claims he is entitled to a
consulting fee of $24,000. Management denies the claims and is vigorously
contesting the suit. A trial date was set for November 2000; however, the

                                                                           F-21

<PAGE>

AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
December 31, 2001



Company filed a motion for summary judgment against Davidson and Davidson
cross-moved for summary judgment. In July 2001, the Company's motion for summary
judgment was denied. In August 2001 the Company filed a Notice of Appeal related
to the court's denial of the Company's motion for summary judgment. The court is
currently considering Davidson's cross-motion for summary judgment, which the
Company opposed in September 2001. The Company filed its brief to appeal the
denial of the Company's summary judgment on March 15, 2002. At the same time, a
trial date has been set for May 6, 2002. Management believes based on
consultation with counsel, that it has substantial and compelling defenses to
Davidson's claims and there is a reasonable chance that the Company would
prevail if the matter were to go to trial.

         In June 1995 the Company filed a lawsuit against Jackson Morris, the
lawyer engaged to draft and advise the Company on the Share Exchange Agreement
with Dr. Robert Friedenberg. Morris, who had been recommended to the Company by
Dr. Friedenberg and whose fees were paid by the Company, was alleged to have
breached his fiduciary duty to the Company in several ways, including by later
advising Friedenberg, individually, on how to rescind the Share Exchange
Agreement as well as testifying for Friedenberg over the Company's objections
and in violation of his obligations to the Company. Morris was also charged with
negligence in drafting the Share Exchange Agreement. The Company's lawsuit
demanded damages in the amount of $1,000,000. Morris counterclaimed as a party
to the Share Exchange Agreement and sought common shares. The basis of all of
Mr. Morris' claims stemmed from the Friedenberg claim. On July 27, 2001, the
Company settled the lawsuit against Mr. Morris. The Company has issued 115,000
shares of the Company's common stock to Mr. Morris as settlement of all
outstanding claims. The Company has agreed to file a registration statement
related to these shares no later than June 1, 2002.


NOTE O - TRANSITION PERIOD COMPARATIVE DATA:

         The following table presents certain financial information for the 8
months ended December 31, 2001 and 2000 respectively.

<TABLE>
<CAPTION>
                                         Eight Months Ended
                                         December 31, 2001           December 31, 2000
                                                                        (unaudited)
                                                                        -----------
<S>                                         <C>                         <C>
        Revenues                            $ 4,055,000                 $ 5,192,000
                                            ===========                 ===========
        Gross profit                        $ 2,331,000                 $ 3,464,000
                                            ===========                 ===========
        Loss before extraordinary items      (1,890,000)                 (1,274,000)
        Loss per common share before
          extraordinary items                      (.09)                       (.07)
        Extraordinary items                     259,000                           -
                                            -----------                 -----------
        Net Income                          $(1,631,000)                $(1,274,000)
                                            ===========                 ===========
        Loss per common share                     $(.08)                     $ (.07)
                                            -----------                 -----------
        Weighted average common shares
          outstanding                        19,345,000                  18,044,000
                                            -----------                 -----------
</TABLE>

                                                                           F-22

<PAGE>

AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
December 31, 2001



NOTE P - GEOGRAPHIC INFORMATION

         Information concerning net sales by principal geographic location is as
follows:

<TABLE>
<CAPTION>

                                                 December 31, 2001     December 31, 2000   April 30, 2001    April 30, 2000
                                                                          (unaudited)
                                                                          -----------
<S>                                                <C>                   <C>                <C>               <C>
                   United States                   $   3,505,000         $   4,561,000      $   6,312,000     $   7,073,000
                   North America (not                    397,000               449,000            867,000           276,000
                   domestic)
                   Europe                                123,000                98,000            150,000           155,000
                   Asia/Pacific Rim                       23,000                18,000             55,000            11,000
                   South America                           8,000                66,000            100,000           138,000
                                                    ------------         -------------      -------------      ------------
                                                    $  4,055,000         $   5,192,000      $   7,484,000      $  7,653,000
                                                    ============         =============      =============      ============
</TABLE>




                                                                         F-23

<PAGE>


<TABLE>
<CAPTION>

 Number                                                 Description of Exhibits
 ------                                                 -----------------------
<S>                 <C>
 3.5               Bylaws(1)
 3.50              Amended and Restated Bylaws
 3.6               Fifth amendment to the Certificate of Incorporation (filed as Exhibit 3.6 to the Company's Form
                   SB-2 filed on November 21, 1996 and incorporated herein by reference)
 3.7               Sixth amendment to the Certificate of Incorporation
 4.2               Investor Registration Rights Agreement, dated August 22, 2001, among American Bio Medica
                   Corporation and the investors(4)
 4.3               Placement Agent Registration Rights Agreement, dated August 22, 2001, among American Bio Medica
                   Corporation and the placement agent and its sub-agents(4)
 4.4               Form of Warrant Agreement and Warrant among American Bio Medica Corporation and the investors(4)
 4.5               Form of Warrant Agreement and Warrant among American Bio Medica Corporation and the placement
                   agent and its sub-agents(4)
 4.6               Fiscal 1997 Nonstatutory Stock Option Plan (filed as part of the Company's Proxy Statement for
                   its Fiscal 1997 Annual Meeting and incorporated herein by reference) (a)
 4.14              Fiscal 1998 Nonstatutory Stock Option Plan (filed as part of the Company's Proxy Statement for
                   its Fiscal 1998 Annual Meeting and incorporated herein by reference) (a)
 4.15              Fiscal 2000 Nonstatutory Stock Option Plan (filed as part of the Company's Proxy Statement for
                   its Fiscal 2000 Annual Meeting and incorporated herein by reference) (a)
 4.16              Common Stock Purchase Agreement dated April 28, 2000 by and between the Company and Seaside
                   Partners, L.P.(2)
 4.17              Fiscal 2001 Nonstatutory Stock Option Plan (filed as part of the Company's Proxy Statement for
                   its Fiscal 2002 Annual Meeting and incorporated herein by reference) (a)
 10.6              Contract of Sale dated May 19, 1999/Kinderhook, New York facility(2)
 10.7              Agreement of Lease dated May 13, 1999/Kinderhook, New York facility(2)
 10.8              Lease dated August 1, 1999/New Jersey facility(2)
 10.9              Amendment dated March 23, 2001 to Lease dated August 1, 1999/New Jersey facility(3)
 10.10             Amended Contract of Sale dated May, 2001/Kinderhook, New York facility(3)
 10.11             Financial Advisory Agreement dated May 2, 2001 by and between Brean Murray & Co., Inc. and the
                   Company(3)
 10.12             Employment contract between the Company and Robert L. Aromando, Jr. (a)(3)
 10.13             Employment contract between the Company and Stan Cipkowski (a)(3)
 10.14             Employment contract between the Company and Douglas Casterlin (a)(3)
 10.15             Employment contract between the Company and Keith E. Palmer (a)(3)
 10.16             Warrant Agreement dated November 15, 2001 by and between the Company and Hudson River Bank &
                   Trust Company
 23.1              Consent of Independent Auditors
</TABLE>

     (a) indicates an employee benefit plan, management contract or compensatory
plan or arrangement in which a named executive officer participates.

(1) Filed as the exhibit number listed to the Company's Form 10-SB filed on
    November 21, 1996 and incorporated herein by reference.

(2) Filed as the exhibit number listed to the Company's Form 10-KSB filed on
    August 11, 2000 and incorporated herein by reference.

(3) Filed as the exhibit number listed to the Company's Form 10-KSB filed on
    August 13, 2002 and incorporated herein by reference.

(4) Filed as the exhibit number listed to the Company's Form S-3 filed on
    September 26, 2001 and incorporated herein by reference.



                                                                            E-1