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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-KSB


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


                    For the fiscal year ended April 30, 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                                (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, $.01 par value per share

     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. $7,484,000.

     The aggregate market value of 12,430,843 voting Common Shares held by
non-affiliates of the issuer was approximately $13,425,310 based on the last
reported sale price of the issuer's Common Shares, $.01 par value, as reported
on the Nasdaq SmallCap Market on July 13, 2001.

     As of July 13, 2001, the issuer had outstanding 17,995,548 Common Shares,
$.01 par value.

     Traditional Small Business Disclosure Format: [ ] [X] No


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PART I

         ITEM 1.  DESCRIPTION OF BUSINESS

         SUMMARY

         We develop, manufacture and market biomedical technologies and products
intended for the immediate, onsite screening for drugs of abuse. Our Rapid Drug
Screen(TM) and Rapid One(TM) are urine-based kits that are easy to use,
cost-effective, highly accurate and reliable tests for the presence of drugs of
abuse in individuals. We own several patents that are used in the Rapid Drug
Screen.

         We produce several versions of a drugs of abuse screening test, under
the name Rapid Drug Screen. The Rapid Drug Screen is a one-step test that allows
a small urine sample to be tested simultaneously for the presence or absence of
up to ten drugs of abuse (cocaine, THC, marijuana), opiates, amphetamine, PCP,
benzodiazepines, methamphetamine, barbiturates, tricyclic antidepressants and
methadone).

         The competitively priced test is self-contained. This eliminates
exposure of the test administrator to the urine sample. We believe that the
Rapid Drug Screen product is easier to use than other competitive products
because it requires no mixing of reagents, pipetting or manipulation of the
test. Controlled tests conducted by an independent laboratory compared the Rapid
Drug Screen with results produced by EMIT II, a standard laboratory test, and
found greater than 99% correlation of results.

         Included in our product offerings are ten single tests called Rapid
One, each of which detects one drug of abuse (cocaine, THC, opiates,
amphetamine, PCP, benzodiazepines, methamphetamines, barbiturates, tricyclic
antidepressants and methadone).

         Our tests require marketing clearance from the Food and Drug
Administration, or FDA. Our most recent 510(k) marketing clearance received from
the FDA was for the nine panel test. As a result of the FDA's approval of all
nine drug tests manufactured by us, we can offer a variety of test combinations
to meet customer requirements. We also intend to submit our methadone test to
the FDA for marketing clearance. See "Government Regulation" for a description
of the FDA approval process.

         In January 2000, we licensed the exclusive rights 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. We utilize the trademark
"Drug Detector" for this product. The Drug Detector(TM) tests surfaces for the
presence or absence of residue from marijuana, cocaine, heroin or
methamphetamines without the need for urine, hair or saliva samples.

         PRODUCTS

         Our RAPID DRUG SCREEN product line is currently marketed in two panel,
three panel, four panel, five panel, eight panel and nine panel cards. Each
panel screens for a specified number of drugs at the same time. We can custom
produce other cards for the screening of any combination of drugs of abuse.
Additionally, we market our RAPID ONE product, which tests for the presence of
one drug of abuse. Our patented design for our Rapid Drug Screen consists of a
cup and a test card, which has the panels that test for the desired drugs of
abuse, or several drugs of abuse simultaneously.

         To use our Rapid Drug Screen or Rapid One product, an individual slides
a panel into a self-contained, disposable, urine-filled cup and within minutes
accurate results are shown on the clearly marked 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




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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.

         We have designed two different two panel tests, three different three
panel tests, two different five panel tests, an eight panel test and a nine
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 drugs of
abuse.

         We market the following tests:

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

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

         -    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.

         -    Five panel tests, designed for the corporate/workplace (industry)
              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 methamphetamine replacing PCP.

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

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

         In July 1998, we began marketing the Rapid One, a line of 10 single
drug tests, each of which screens for the presence or absence of a substance of
abuse (cocaine, marijuana (THC), opiates, PCP, amphetamine, benzodiazepines,
methamphetamine, barbiturates, tricyclic antidepressants (TCA) and methadone).
Rapid One 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. 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.

         One of the problems that may occur in on-site 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 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, the Rapid Drug Screen contains 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




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obtaining another urine sample. A positive result is normally confirmed by
laboratory testing, such as by GC/MS (Gas chromatography/Mass spectrometry).

         We market the Drug Detector, an on-site drug detection system that
tests surfaces for the presence or absence of trace and/or residue amounts of
marijuana, crack/cocaine, heroin or methamphetamines. The Drug Detector consists
of an aerosol spray for a specified drug, special collection papers and
instructions. We are currently marketing a retail (over-the-counter) version
that can perform ten tests.

         In April 2001, we entered into a distribution agreement with Eckerd
drug stores to sell 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 to Eckerd. The remaining two Drug
Detector tests may be available for over-the-counter sale at a later date. We
also offer an "industrial" version of the product that can perform either 50 or
100 tests utilizing a larger aerosol can. All four tests are available in this
industrial Drug Detector.

         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.

         PATENTS AND TRADEMARKS

         To date, we have been granted ten patents relating to the Rapid Drug
Screen product line, including a design patent on the multiple drug test card
issued in January 1999 and a utility patent on the drug abuse test kit issued in
November 1999. We have registered "ABM" and its logo in the United States,
Canada, Chile and Mexico and have registered "Rapid Drug Screen" in Mexico,
Canada, Europe and Russia. We have additional trademark applications pending in
the United States, Russia, Philippines and in 15 European countries. We have
applied for various additional patents directly in numerous countries, including
the United States, Canada, Austria, Russia, Switzerland, Hong Kong, Australia,
Argentina, Brazil, China, Japan, Germany, Mexico, Philippines and Poland. Stan
Cipkowski, President, has assigned to us for no consideration, his application
for a utility and design patent in the United States and Canada on the drug
screen kit as an entity. There can be no assurance that patents will be granted
or that, if granted, they will withstand challenge. (See "Risk Factors - Patents
and Trademarks").

         RESEARCH AND DEVELOPMENT

         Our Research and Development, or R&D, efforts have been focused on
methods to efficiently manufacture all test strips in-house. A program of
in-house strip manufacturing was embarked upon in fiscal 1999. In fiscal 2000,
we continued to make a significant investment in this effort and completed our
in-house strip-manufacturing program. We currently manufacture all of our
individual drug testing strips. Our R&D efforts have also been focused on
enhancing strip performance and reliability. In addition, our R&D group is
exploring the potential of a "CLUB-DRUG" panel that could be a useful tool
against the latest drugs of choice. These panels would test for such drugs as
Rohypnol, Ecstasy, Ketamine, Ritalin, GHB, and Methamphetamine. Our R&D
expenditures were $614,000 in fiscal 2001 and $799,000 in fiscal 2000.



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         Sales and Marketing

         Through fiscal 2001, we sold our products primarily through third party
distribution channels whose ultimate customers are the corporate/workplace,
government, corrections and law enforcement agency markets. In April 2001, we
recruited a staff of highly experienced and well-trained sales executives with
drugs of abuse testing expertise. As a result, we now have a two-pronged
distribution strategy that focuses both on growing business through our valued
third party distributors and targeting key customers on a direct basis.

         We will continue to utilize third party distribution for select
markets, including the criminal justice, workplace, drug treatment and clinical
market segments. We intend to enter into an agreement with a multi-national
diagnostics company for sales to the point of care market.

         Target Market Groups

         We sell our products primarily to corporations and government,
corrections and law enforcement agencies, and, to a lesser extent, to
rehabilitation centers; international markets; and the clinical market,
including physicians and hospitals.

         Corporate, Workplace and Industry.

         We have developed a nationwide network of distributors and
administrators of workplace drug testing programs to sell our Rapid Drug Screen
testing kit. Our new direct sales group coordinates all sales efforts in this
market. We believe that the market for pre-employment and random/employee
testing is expanding.

         -    The National Institute of Health reported that alcohol and drug
              abuse cost the economy $246 billion in 1992 (the most recent year
              for which economic data is available), of which $100 billion was
              due solely to drug abuse.

         -    According to the 1999 SAMHSA National Household Survey on Drug
              Abuse, 77% of adults who use illegal drugs are employed.

         -    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.

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

         -    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.

         -    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.

The number of businesses using drug testing to screen job applicants and
employees has increased significantly in the last several years. Most employers
recognize not only the financial benefits of drug testing, but also realize 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



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(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).

         Government, Corrections, and Law Enforcement.

         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. As of February 2000, there were more than 2 million inmates
nationally: 1.38 million in state and federal prisons and 623,000 in local
jails. Of those incarcerated, over 56% of inmates in federal prisons were
sentenced as drug offenders according to the Federal Bureau of Prisons.
According to the Bureau of Justice Statistics, 33% of inmates in state and 22%
of inmates in federal prisons admitted they had committed their crime while
under the influence of drugs. On the local level, 36% of inmates admitted to
committing their crime while under the influence. Almost all persons on
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 Rapid Drug Screen product is aimed at this and other similar markets.

         Rehabilitation Centers.

         This market for the Rapid Drug Screen 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 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
July 2001, we had 22 distributors in 29 countries outside the United States.

         Clinics, Physicians, and Hospitals.

         This market includes emergency rooms, physician offices, hospitals and
clinics and rehabilitation facilities associated with hospitals. According to
the Drug Abuse Warning Network, in the first half of 2000, there were close to
300,000 drug related visits to emergency departments in the U.S. 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 and Over-the-Counter.

         In April 2001, we entered into a distribution agreement with Eckerd
drug stores to sell the Drug Detector in its 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.

         Educational Market.

         We currently sell our Rapid Drug Screen to over 100 schools throughout
the United States. We believe the Rapid Drug Screen could be an integral part of
helping schools test due to its ease of use and immediate, accurate results.




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Additional Markets.

         We believe that the Department of Transportation ("DOT") and the
federally regulated markets could be a future market for our Rapid Drug Screen.
Presently, the DOT market is not available to any on-site 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 on-site drug testing devices.

         COMPETITION

         Competition to the Rapid Drug Screen comes from on-site tests developed
by companies including, but not limited to, Roche Diagnostics, Medtox
Scientific, Inc. and Biosite Diagnostics.

         These and many of our other competitors or future competitors have
longer operating histories than we do and significantly greater financial,
technical and marketing resources than us. These competitors can devote
substantially more resources than we can to business development and may adopt
aggressive pricing policies.

         We compete on the following factors:

         -    effectiveness of pricing;

         -    quality of product;

         -    ease and user-friendliness of services; and

         -    timeliness of product delivery.

         Competitive products generally use a collection or delivery method
different than the Rapid Drug Screen. Rapid Drug Screen requires no pipetting of
the specimen, adding or mixing of reagents and no other manipulation of the
device by the user. Other competitive products are on-site tests with platforms
utilizing saliva instead of urine. It is our intention to pursue a relationship
with a manufacturer of saliva-based tests. 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.

         Other available drug testing options, aside from on-site tests offering
immediate results, include 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. These forms of drug testing are more
expensive and take longer to produce results than the Rapid Drug Screen.

         MANUFACTURING

         In September 1999, we moved into a 30,000 square foot facility in
Kinderhook, New York, which houses assembly and packaging of the Rapid Drug
Screen and Drug Detector 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 components. We leased
an R&D and production laboratory facility in Bridgeport, New Jersey in August
1999. In April 2001, we expanded our facilities in New Jersey; nearly




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doubling its size to meet anticipated increased sales volume. This facility
houses research and development and bulk strip manufacturing.

         OUR PLAN OF OPERATIONS

         We have retained four Directors of Business Development, a Director of
Sales & Business Development, and a Director of Global Sales & Business
Development. These representatives call on non-clinical accounts directly and
support our worldwide distribution network. We intend to promote our Rapid Drug
Screen products through intense direct mail campaigns, selected advertising,
participation at high profile trade shows, use of key on-site advocate
consultants and other marketing activities.

         We intend to continue recruiting select third party distribution
partners to service customers in the non-clinical markets (i.e.
workplace/industry, government/corrections/ law enforcement, education, etc.)
and to market our Rapid Drug Screen product line in the clinical market (i.e.
hospitals, physicians, etc.) through a clinical partner. In addition, our newly
formed group of experienced sales executives will focus on select, key accounts
in specific market segments.

         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.

         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
fiscal 2001, we sold approximately 933,000 test kits. Our facilities in
Kinderhook, NY 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 either or both the Rapid Drug Screen and/or Drug Detector increases.

         GOVERNMENT REGULATIONS

         The development, testing, manufacture and sale of our Rapid Drug Screen
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,



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performance data to establish that their device is substantially equivalent to a
predicate device.

         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. Our most recent 510(k) marketing clearance was for
the 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. We also have developed a methadone test that we
intend to submit to the FDA for marketing clearance.

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

         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 drug testing 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 our future revenues and other
operating results, thereby making it difficult for us to manage expectations of
analysts or investors. This possible inability to manage expectations of
analysts or investors could result in a substantial decline of our common stock.

         We Have Incurred Net Losses Since We Were Formed.

         Since inception in 1992, we have incurred net losses. As of April 30,
2001, we had an accumulated deficit of $13.4 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. In the
circumstances, our ability to continue as a going concern is in substantial
doubt.

         We depend on distributors for a majority 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. During fiscal 2001, approximately 74% of our sales were
made to distributors. 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.

         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 derive substantially all of our revenues from sales of a limited
number of drug testing products. The failure of any of our product offerings to
achieve and maintain a meaningful level of market penetration and customer
satisfaction would harm our revenues.



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         In addition, we only began selling our drug testing products 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 has just recently been introduced into the
over-the-counter market. We have no history upon which to base market or
customer acceptance of the product. Introduction of the Drug Detector has
required, and may continue to require, substantial marketing efforts and
expenditure of funds.

         Even if our customers do purchase our products in meaningful
quantities, due to the variety and complexity of the environments in which these
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.

         We are continually seeking to refine and improve the design and
performance of our products. Our efforts remain subject to all of the risks
inherent in product development, including unanticipated technical, regulatory
or other problems that could result in material delays in product development or
commercialization or significantly increase costs. We may be required to commit
considerable additional efforts, time and resources to develop production
versions of additional products. Our success will depend upon new products
meeting targeted product costs and performance, and may also depend upon their
timely introduction into the marketplace. There can be no assurance that
development of our proposed products will be successfully completed on a timely
basis, if at all, that they will meet projected price and performance
objectives, satisfactorily perform all of the functions for which they are being
designed, or prove to be sufficiently reliable in widespread commercial
application. 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 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 our business. If we fail to retain our present
staff or attract additional qualified personnel our business could suffer.




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         We depend on key personnel to manage our business effectively.

         We are dependent on the expertise and experience of our senior
management such as Robert L. Aromando Jr., Chief Executive Officer, Stan
Cipkowski, President, Douglas Casterlin, Vice President of Operations, Martin
Gould, Vice President of Technology and Keith Palmer, Chief Financial Officer,
for our future success. The loss of Messrs. Aromando, Cipkowski, Casterlin,
Gould and/or Palmer could seriously inhibit 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 will adversely affect our operating and financial results.

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

         -    accurately estimate the number of employees we will require and
              the areas in which they will be required;

         -    upgrade and expand our office infrastructure so that it is
              appropriate for our level of activity;

         -    manage expansion into additional geographic areas; and

         -    improve and refine our operating and financial systems.

         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 would have a material adverse effect on our
financial condition and results of operations.

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

         Approval from the FDA is not required for the sale of the Rapid Drug
Screen in the non-clinical market, but is required for the clinical and
over-the-counter markets. Regulatory standards may change in the future and
there is no assurance that if, and when, we apply for additional approvals from
the FDA they will be granted.

         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 ten
patents relating to the Rapid Drug Screen product line. We have applied for
additional patents on the Rapid Drug Screen and for certain trademarks in the
United States, South and Central America, European Common Market and Japan.
Certain trademarks have been registered and others are pending.




                                      -10-
<PAGE>   12

         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 as a result of sales of products similar to ours. We
filed a lawsuit, claiming infringement of our intellectual property rights, to
stop these sales and incurred significant expenses in attempting to enforce our
intellectual property rights. In April 2001, we settled with the defendants in
this lawsuit. (See "Legal Proceedings") 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.

         As part of our sale of 1,408,450 common shares for $2,000,000 ($1.42
per share) in a private placement to Seaside Partners, LLC, ("Seaside") on April
28, 2000, on October 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 also 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. for compensation for their services as a financial advisor.

         The exercise of the Seaside warrant and the Brean Murray warrant and
the sale of such shares could have a significant negative impact on the market
price of the common shares and could materially impair our ability to raise
capital through the future sale of equity securities.

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

         There are 7,329,955 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 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, might depress the market price of
our securities in any market that may develop for such shares.

         We need additional funding for our existing and future operations.

         The Company is in the process of raising additional capital through a
private placement of it's common stock and does not expect to experience certain
costs at the levels sustained in the year ended April 30, 2001.  Such a capital
raise is necessary to fund working capital requirements including an agreement
to settle legal fees and is expected to be sufficient to fund operations for at
least 12 months



                                      -11-
<PAGE>   13

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 the Rapid Drug Screen
product line and Rapid One 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.

         In addition, we will need to secure mortgage financing by September
2001 in order to purchase our facility in Kinderhook, New York. We cannot be
sure we will be able to secure this mortgage financing. If we are unable to do
so, we may be required to vacate this facility. This could have a material
adverse affect on our business and results of operations.

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

         Our 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.

         Item 2. Description of Property

         We currently lease 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, to purchase the building by December
2001 for $1.3 million. In May 2001, we renegotiated the purchase price down to
$950,000. The State of New York, Columbia County and the town of Stuyvesant
agreed to provide incentives of more than $200,000 towards the purchase price.
Financing for the balance of approximately $750,000 is expected to be provided
by both the New York State Industrial Development Agency and a Columbia
County-based bank. We currently have a deposit of $50,000 towards the purchase
price in an escrow account. Closing is scheduled for November 2001. We cannot
assure you that this purchase of the Kinderhook facility will occur or that we
will be able to secure the necessary financing.

         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.

         Item 3. Legal Proceedings

         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 L[4]) 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. 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>   14

         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 previously
and the Company won the case on appeal 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 August 2001, the Company's
motion for summary judgment was denied and the court is currently considering
Davidson's cross-motion for summary judgment. 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. A trial date has been set for October
22, 2001.

         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, is 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 is also charged with
negligence in drafting the Share Exchange Agreement. The Company's lawsuit
demands damages in the amount of $1,000,000. Morris has counterclaimed as a
party to the Share Exchange Agreement and seeks common shares. The basis of all
of Mr. Morris' claims stem from the Friedenberg claim. The Company vigorously
contests the Morris claim. No trial date has been set.

         The Company has been named in legal proceedings in connection with
matters that arose during the normal course of its business. While the ultimate
result of any litigation cannot be determined, it is management's opinion based
upon consultation with counsel, that it has adequately provided for losses that
may be incurred related to these claims.

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

         None.


                                      -13-
<PAGE>   15



PART II

         Item 5. Market for Common Equity and Related Stockholders Matters

         The table below sets forth the range of high and low sale prices for
the fiscal years 2001 and 2000 on the Nasdaq SmallCap Market. As of July 13,
2001 there were approximately 4,000 holders of common shares.

         Fiscal Year Ending April 30, 2001         High                  Low
         ---------------------------------         ----                  ---

              Fourth Quarter                       $1.25                 $0.69
              Third Quarter                        $1.50                 $0.25
              Second Quarter                       $1.50                 $0.97
              First Quarter                        $2.00                 $1.13

         Fiscal Year Ending April 30, 2000         High                  Low
         ---------------------------------         ----                  ---

              Fourth Quarter                       $4.25                 $1.31
              Third Quarter                        $2.50                 $1.06
              Second Quarter                       $2.25                 $1.25
              First Quarter                        $1.96                 $1.25


         As of July 13, 2001 there were outstanding 17,995,548 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 July 13, 2001, the last reported sales price for the common shares
as reported on the Nasdaq Small Cap Market was $1.08 per share. Average daily
trading volume on our common shares during the three-month period from April 13,
2001 to July 13, 2001 was approximately 28,461 shares.


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

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 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.

         Results of Operations for the Fiscal Year Ended April 30, 2001 (The
"2001 Fiscal Year") Compared to the Fiscal Year Ended April 30, 2000 (The "2000
Fiscal Year")

         Net sales were $7,484,000 in fiscal 2001 compared to $7,653,000 in
fiscal 2000. Sales to distributors decreased by $633,000 in fiscal 2001 because
of a decrease in the number of distributors selling our product to 102 in fiscal
2001 from 128 in fiscal 2000. The decrease is a result of some distributors
selling competing products, including a "knock-off"



                                      -14-
<PAGE>   16

product that was the subject of our patent litigation. Decreases in sales to
distributors were offset in part by an increase in sales from our telemarketing
efforts.

         Gross profit for fiscal 2001 was $4,913,000, or 65.6% of net sales, as
compared to $4,051,000, or 52.9% of net sales, for fiscal 2000. Gross profit
increased as a percentage of net sales as a result of manufacturing products in
our own facility in fiscal 2001.

         The following table sets forth the percentage relationship of selling,
general and administrative costs to net sales for both years:


<TABLE>
<CAPTION>
                                                         2001       Percent           2000          Percent
                                                      Fiscal Year   of Sales       Fiscal Year      of Sales
                                                      -----------   --------       -----------      --------
<S>                                                  <C>            <C>            <C>              <C>
Sales salaries and commissions                       $1,289,000       17.2%         $1,033,000        13.5%
Sales travel                                            332,000        4.4             439,000         5.7
Consulting and other selling expenses                   501,000        6.7             936,000        12.2
Marketing and promotion                                 572,000        7.6             265,000         3.5
Investor relations costs                                347,000        4.6             225,000         3.0
Legal fees                                            1,363,000       18.2             951,000        12.4
Accounting fees                                         200,000        2.7              80,000         1.1
Office salaries                                         931,000       12.5             667,000         8.7
Payroll taxes and insurance                             201,000        2.7             174,000         2.3
Telephone                                               137,000        1.8             139,000         1.8
Insurance                                                39,000        0.5              49,000         0.6
Bad debts                                                42,000        0.6              79,000         1.0
Other administrative costs                              612,000        8.2             186,000         2.4
                                                     ==========       ====          ==========       =====
Total selling, general and administrative            $6,566,000       87.7%         $5,223,000        68.2%
costs
</TABLE>


         Selling, general and administrative costs increased to $6,566,000, or
87.7% of net sales, in fiscal 2001 compared to $5,223,000, or 68.2% of net
sales, in fiscal 2000. This increase was primarily due to an increase of
$569,000 in salaries for additional employees in administration and sales and
marketing, sign-on bonuses for new salespeople and our new Chief Executive
Officer and severance costs of terminated employees in sales and marketing and
our former Chief Financial Officer; increased marketing expenses of $240,000
related to the Drug Detector product; additional accounting fees of $120,000
related to our fiscal 2000 audit and costs associated with an SEC filing related
to a financing; and increases in other expenses of $426,000, including directors
and officers insurance, bank fees and executive recruiters. We also incurred
non-cash compensation charges of $289,000 in fiscal 2001 compared to $367,000 in
fiscal 2000 in connection with compensatory stock and stock options. We
completed amortization of these charges in fiscal 2001. These increases in
expenses were offset, in part, by decreases of $107,000 in sales and travel
expenses and $435,000 in consulting and other selling expenses.

         We also incurred legal expenses of $1,363,000 in fiscal 2001 compared
to $951,000 in fiscal 2000. These legal fees related primarily to the patent
litigation that was settled in the fourth quarter of fiscal 2001. We expect our
legal fees to be significantly lower in fiscal 2002 as a result of the
settlement of this litigation.

         We expect selling, general and administrative costs to decline as a
percentage of net sales in fiscal 2002 as a result of expected increases in net
sales.

         Depreciation and amortization expense was $123,000 in fiscal 2001
compared to $106,000 in fiscal 2000. The increase in depreciation and
amortization expense is due to an increase in capital equipment.

         Research and development expenses were $614,000 in fiscal 2001 compared
to $799,000 in fiscal 2000. This decrease resulted from our completed
development and




                                      -15-
<PAGE>   17
production of the drug testing strip for tricyclic antidepressants included in
our nine panel version of the Rapid Drug Screen.

         Net other income was $510,000 in fiscal 2001 compared to net expense of
$59,000. The increase was due to the settlement of our patent litigation and
increased interest income in fiscal 2001.

         Net loss attributable to common shareholders decreased to $1,880,000 in
fiscal 2001 from $2,275,000 in fiscal 2000.

         Liquidity and Capital Resources as of April 30, 2001

         At April 30, 2001 we had cash and cash equivalents of $265,000 and
working capital of $ 624,000. We have historically satisfied our working capital
requirements principally through proceeds from private placements of equity
securities. The Company is in the process of raising additional capital through
a private placement of it's common stock and does not expect to experience
certain costs at the levels sustained in the year ended April 30, 2001. Such a
capital raise is necessary to fund working capital requirements including an
agreement to settle legal fees. The Company has never paid any dividends on its
Common Shares. The Company anticipates that all future earnings, if any, will be
retained for use in the Company's business and it does not anticipate paying any
cash dividends.

         Net cash used in operating activities was $920,000 in fiscal 2001
compared to $846,000 in fiscal 2000. The net cash used in operating activities
in fiscal 2001 was primarily due to the net loss of $1,880,000, an increase in
inventory of $112,000 and an increase in other receivable of $350,000, offset in
part by a decrease in accounts receivable of $145,000, an increase in accounts
payable and accrued expenses of $726,000, non-cash charges related to
amortization and depreciation of $123,000, the amortization of compensatory
stock and stock options of $289,000 and the loss on sale of investments and the
loss on abandonment of $184,000. The net cash used in operating activities in
fiscal 2000 was primarily due to the net loss of $2,136,000 and an increase in
accounts receivable of $197,000, offset in part by a decrease in inventory of
$356,000, the amortization of compensatory stock and stock options of $367,000
and an increase in accounts payable and accrued expenses of $535,000.

         Net cash provided by investing activities was $114,000 in fiscal 2001
compared to $64,000 in fiscal 2000. The net cash provided from investing
activities in fiscal 2001 was primarily due to the sale of our investment in
BioSys, Inc. offset in part by loans to officer/director/shareholder of $120,000
and the purchase of plant, property and equipment of $73,000. The net cash
provided in investing activities in fiscal 2000 was primarily due to the sale
and maturity of investments of $571,000, offset in part by a $280,000 loan to
BioSys, Inc., purchases of plant, property and equipment of $145,000 and
purchase of investments of $73,000.

         Net cash used in financing activities was $136,000 in fiscal 2001. We
had net cash provided by financing activities of $1,858,000 in fiscal 2000. The
net cash used in financing activities in fiscal 2001 was primarily due to the
repayment by us of a loan from a stockholder of $125,000. The net cash provided
by financing activities in fiscal 2000 was due to the sale by us of 1,408,405
shares of Common Stock for $2,000,000 in a private placement to Seaside
Partners, LLC offset in part by repayment by us of a note payable to a
stockholder of $130,000.

         Our primary short-term needs are to fund an agreement to settle legal
fees and increase manufacturing and production capabilities, increase current
inventory levels, continue to support research and development programs, and to
finance sales and marketing promotion in conjunction with our newly reorganized
sales and marketing group, including our direct sale force. We currently plan to
purchase our Kinderhook facility for $950,000. The State of New York, Columbia
County and the town of Stuyvesant agreed to provide incentives of more than
$200,000 towards the purchase price. Financing for the balance of approximately
$750,000 is expected to be provided by both the New York State Industrial
Development Agency and a



                                      -16-
<PAGE>   18

Columbia County-based bank. We currently have a deposit of $50,000 towards the
purchase price in an escrow account. Closing is scheduled for November 2001. We
cannot assure you that this purchase of the Kinderhook facility will occur or
that we will be able to secure the necessary financing. Additionally, we are
currently negotiating to sell 85 of the 107 acres that comprise the property 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 our 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, results of clinical
investigations and competition, and our ability to secure additional financing
on acceptable terms.

         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.
         None.

PART III

         ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

         Directors, Executive Officers, and Senior Officers

         The following sets forth the names of our directors, executive
officers, and senior officers. Our directors are elected annually by the
shareholders and the officers are appointed annually by the Board of Directors.


<TABLE>
<CAPTION>
Name                                    Age        Position                                                 Since
----                                    ---        --------                                                 -----
<S>                                     <C>        <C>                                                      <C>
Stan Cipkowski                          53         President and Director                                   1986
Edmund Jaskiewicz                       78         Secretary and Director                                   1992
Douglas Casterlin                       54         Vice President-Operations                                1997
Gerald Moore                            63         Director                                                 1999
Robert L. Aromando, Jr.                 45         Chairman of the Board of Directors and Chief             2000
                                                   Executive Officer
Denis O'Donnell, M.D.                   47         Director                                                 2000
Keith E. Palmer                         40         Chief Financial Officer, Vice President Finance,         2000
                                                   and Treasurer
Henry J. Wells, Ph.D.                   69         Vice President-Scientific Development                    1995
Martin Gould                            50         Vice President-Technology                                1998

</TABLE>

         STAN CIPKOWSKI founded our predecessor in 1982 and has been an
executive officer and one of our directors since our incorporation in April
1986. He reorganized the Company as American Bio Medica Corporation in 1992 and
is the inventor of the Rapid Drug Screen. From 1982 to 1986, he was sole
proprietor of American Micro Media, our predecessor, which was acquired by the
Company. In addition, from 1983 to 1987, Mr. Cipkowski was a general




                                      -17-
<PAGE>   19

partner of Florida Micro Media, a Fort Lauderdale-based marketer of educational
software and was a principal shareholder and Chief Financial Officer of
Southeast Communications Group, Inc., a publisher of direct response media. In
1982, he was a consultant to Dialogue Systems, Inc., a New York-based developer
of training and communications materials, where he served as Vice-President of
Sales and Marketing. From 1977 to 1982, Mr. Cipkowski was employed by
Prentice-Hall Publishing Company, reaching the position of National Sales
Manager. Prior to 1977 he was employed as an accountant for the New Seabury
Corporation and as Mid-West Area Manager for the Howard Johnson Company. Mr.
Cipkowski attended Mater Christi Seminary and St. Louis University from 1965 to
1969.

         EDMUND JASKIEWICZ has been one of our directors since 1992. Mr.
Jaskiewicz is a lawyer-engineer. He has practiced international patent and
corporate law as a sole practitioner since 1963, and served as our Chairman of
the Board of Directors from 1992 until 1999. He currently serves as our
Secretary. From 1953 to 1963, Mr. Jaskiewicz was associated with Toulmin and
Toulmin, Attorneys-at-Law, Washington, D.C. From 1960 to 1962, he resided in
Frankfurt, Germany managing that firm's local office. From 1952 to 1953 he was
with the Patent Section of the Bureau of Ordinance of the Department of the Navy
working on patent infringement and licensing matters. He received his J.D. in
1952 from George Washington University Law School and his B.S. in Engineering
from the University of Connecticut in 1947.

         DOUGLAS CASTERLIN joined us in 1997 as our Vice President and General
Manager and became our Executive Vice President of Operations in May 2001. From
1979 to 1997, Mr. Casterlin was General Manager of Coarc, Inc., our former
product assembling, packaging and shipping contractor. In that capacity, he
developed a contract manufacturing business involving plastic injection molding
and clean room assembly and packaging of FDA - regulated medical products. He
also negotiated a joint venture with a major German healthcare product
manufacture to establish its United States operations and established a
professional-format videocassette re-manufacturing business serving the
television broadcast industry. From 1976 to 1979, Mr. Casterlin was Workshop
Director, Putnam Industries, Inc., and Production Manager, from 1973 to 1976, of
Occupatics, Inc. From 1966 to 1970, Mr. Casterlin served as an Air Force
Intelligence Officer and was honorably discharged as Sergeant. He studied
Engineering at Lehigh University from 1965 to 1966 and received his B.A. degree
in Psychology in 1973 from the State University of New York at New Paltz.

         GERALD MOORE has been one of our directors since May 1999. Mr. Moore
currently serves as President and CEO of Med-Ox Diagnostics of Canada and
President of BioSys, Inc. From 1990 to 1998, Mr. Moore was President of UNIPATH
(North America) when he reached parent company Unilever's mandatory retirement
age. Brooke Bond, Inc took a majority equity position in Med-Ox in 1978 and
renamed it Oxoid. In 1980, Mr. Moore opened Oxoid US in Columbus, Maryland and
was appointed President and Chief Executive Officer of both Oxoid CANADA and
Oxoid USA. Unilever acquired all of Oxoid International's holdings and
subsidiaries in 1984 and changed its name to UNIPATH in 1990. Mr. Moore is a
member of the Board of Directors of the Canadian Assoc. of Clinical Microbiology
and Infectious Diseases (CACMID); a Director of the Canadian Clinical Standards
Organization, serves on the National Committee for Clinical Laboratory Standards
(NCCLS), a member of the NCCLS Committee for Antimicrobial Susceptibility
testing and Veterinary Diagnostics, is an advisor to the NCCLS Committee on
Culture Media, and is a liaison to the Board of Exhibitors of the Interscience
Conference on Antimicrobial Agents and Chemotherapy (ICAAC) of the American
Society of Microbiology. Mr. Moore received his degree in chemistry and
mathematics from Strathclyde University in Glascow, Scotland in 1961.

         ROBERT L. AROMANDO JR. became our Chairman and Chief Executive Officer
in January 2001 and has been one of our directors since May 2000. Mr. Aromando
has over 20 years experience in sales and marketing. From 1999 until 2001, he
was the Director of Global Marketing of Covance, Inc., a global clinical
research organization. From 1992 until



                                      -18-
<PAGE>   20

1999, Mr. Aromando was Director of Global Marketing of Roche Diagnostics. In
this capacity, he had the responsibility for the business development and
marketing for Roche Diagnostics' global on-site drugs of abuse business. From
1988 until 1992, he was Product Manager for American Home Products, where he
organized a new infectious disease business unit. From 1984 to 1988, he was
Director of Sales & Marketing at Diagnostic Technology Inc. where he reorganized
the hematology sales and marketing department. From 1978 to 1984, Mr. Aromando
was a Regional Sales Manager for Litton Bionetics, responsible for a field sales
district. Mr. Aromando received his BS from Mercy College in 1978.

         DENIS O'DONNELL, M.D. has served as one of our directors since May 2000
and is currently a Managing Director of Seaside Partners, L.P., the firm that
purchased $2,000,000 of our common shares in a private placement on April 28,
2000. Since 1986, Dr. O'Donnell has been a Clinical Instructor of Health Science
at Northeastern University. From 1984 to 1985 he was a Resident in Surgery at
Tufts New England Medical Center. From 1986 to 1991 he served a Director of the
Clinical Research Center of Medical and Technical Research Associates, Inc. From
1991 through 1995 he was Vice President of IGI, Inc. From 1995 until 1997 he was
President of Novavax, Inc., a company in which he still holds the seat of
Chairman of the Board. In addition to the Novavax, Inc. board seat, Dr.
O'Donnell is currently a director of ELXSI Corporation (NASDAQ:ELXS), Columbia
Laboratories, Inc. (AMEX:COB), Ampersand Medical Corporation (NASDAQ:AMPM), and
is also a member of the Associates of Clinical Pharmacology Scientific Advisory
Board. He has written and contributed to numerous medical manuscripts,
abstracts, and papers. Dr. O'Donnell graduated from Harvard University
(A.B./Biology) in 1976 and from AUC Medical School (M.D.) in 1984.

         KEITH E. PALMER joined us in October 2000 as our Vice President,
Finance, Chief Financial Officer and Treasurer. He is a Certified Public
Accountant with over 15 years experience in accounting, finance, strategic
planning, and merger and acquisitions. From 1998 until joining us, Mr. Palmer
was Director of Finance and Controller of Matthew Bender, a division of Lexis
Publishing, a legal publisher. At Matthew Bender he was responsible for
management of financial reporting and analysis, accounting and control,
strategic planning and numerous Finance and Operational integration efforts.
From 1993 until 1998, he was the Director of Finance & Controller for Matthew
Bender & Company, Inc., a wholly owned subsidiary of the Times Mirror Corp.
During that time he spearheaded the acquisition and/or integration, and assumed
responsibility for financial reporting and analysis, of four businesses,
including Shepard's, a legal citations publisher in Colorado Springs, Co.,
Capsoft, an electronic legal forms software firm in Provo, Utah, Mosby Medical
Publishing in St. Louis, Missouri, and Michie, a legal publisher in
Charlottesville, VA. In addition to integrating financial and operational
functions, Mr. Palmer assisted on the integration and implementations of several
financial, manufacturing and fulfillment systems, during this time. Prior to
joining Matthew Bender, he was a Vice President of Marine Midland Bank, a
commercial bank, and from 1983 until 1987, he was an auditor and senior
consultant at the public accounting firm of Ernst & Whinney. Palmer received his
MBA in Finance from Sage Colleges in 1995 and his BBA in Accounting from Siena
College in 1983.

         HENRY J. WELLS, PH.D. joined us as a contract chemist in 1995. In 1998
he became a full-time employee as our Vice President of Product Development.
From 1990 to 1998, Mr. Wells worked as a contract chemist with the title of Vice
President Science and Technology for New Horizons Diagnostics, Inc. where he
adapted immuno-chemical technologies for detection of infectious diseases. From
1989 to 1990, he was director of production for Espro, Inc., a producer of
in-vivo pesticides. From 1985 to 1989, Dr. Wells was Vice President Science and
Technology for Keystone Diagnostics, Inc. From 1984 to 1985, he was Director of
Research and Development for Hill-Wells Research Corporation, a developer of
diagnostics products. From 1981 to 1984, he was Vice President Research and
Development of Hematec Corporation. From 1979 to 1981, Dr. Wells was Director of
Biochemistry for Helena




                                      -19-
<PAGE>   21

Laboratories. From 1973 to 1979, he was Manager of Chemical Chemistry at Smith
Kline Diagnostics. Dr. Wells earned his Ph.D. in Biochemistry from the
University of Pittsburgh in 1966, his M.A. from University of Pennsylvania in
1972 (honorary) and his B.S. in Chemistry from the University of Pittsburgh in
1958.

         MARTIN GOULD became our Vice President, Technology in 1998. Mr. Gould
is a biomedical scientist with more than 24 years of experience in the
diagnostic and chemical fields. He has an extensive background in research and
development, manufacturing, quality control/assurance, as well as business
development and sales and marketing. His experience is in the areas of clinical
chemistry, serology, immunology, hematology, dyes and stains, chromatography,
reagent chemical and food diagnostics, specifically rapid microbiological
testing. From 1973 to 1987, Mr. Gould worked for E. Merck, Inc. in various
positions of increasing responsibilities within the product management, research
and development, and quality assurance/control departments. In 1987, he founded
Ampcor Diagnostics, Inc., which he grew until 1994 when it was acquired by
Neogen Corp. (NASDAQ:NEOG). Mr. Gould continued to serve as Vice President and
General Manager of Neogen Corp. until 1997. Mr. Gould was an independent
consultant after leaving Neogen Corp. in 1997 until joining us in 1998. Mr.
Gould is an accomplished researcher with numerous publications in a variety of
fields, including rapid immunoassay tests to detect food pathogens such as
e-coli, salmonella, listeria, shigella, and campylobacter. Mr. Gould established
a patent in composition for stabilization of diagnostics reagents, three
separate patents for immunoassay diagnostics kits, as well as a patent
concerning a growth media that resuscitates injured bacteria, such as
salmonella, that was recently issued. Mr. Gould received a Masters in Biomedical
Science and Biomedical Engineering from Drexel University in 1982, and a BS
degree from Delaware Valley College in 1973.



                                      -20-
<PAGE>   22
         Item 10. Executive Compensation

         The following table sets forth for the fiscal year ended April 30,
2001, the compensation received by the Company's executive officers based on
salary and bonus for the fiscal year ended April 30, 2001 (the "named executive
officers").


<TABLE>
<CAPTION>
                                   Annual Compensation                           Long-Term Compensation
                                                                                         Awards
                                                                                       Securities
                                                                                       Underlying
Name and Principal Position         Year         Salary             Bonus               Options
---------------------------         ----         ------            ---------     ----------------------
<S>                                 <C>         <C>                <C>            <C>
Stan Cipkowski                      2001        $200,000            $      0           100,000
 President                          2000          96,000              77,010           100,000
                                    1999          96,000              64,992                 0


Robert L. Aromando, Jr.             2001        $ 28,000(1)         $ 25,000(2)        300,000
 Chief Executive Officer


Douglas Casterlin                   2001        $140,000            $      0           200,000
 Executive Vice-President           2000          84,000              67,010           100,000
 Operations                         1999          84,000              64,992                 0


Keith E. Palmer                     2001        $ 56,000(3)         $      0           100,000
 Chief Financial Officer
 Executive Vice
 President
 Finance

Jay Bendis(4)                       2001        $ 82,000            $ 36,000            50,000(5)
 Vice-President Sales               2000          84,000              77,010           100,000(5)
 and Marketing                      1999          84,000              64,992                 0
</TABLE>




(1)  Mr. Aromando was hired by the Company on February 26, 2001 at an annual
     salary of $180,000.
(2)  Sign-on bonus.
(3)  Mr. Palmer was hired by the Company on October 1, 2000 at an annual salary
     of $100,000.
(4)  Mr. Bendis is no longer employed by the Company effective April 20, 2001.
(5)  Pursuant to a severance agreement with the Company, these options will
     continue to vest and may be exercised according to the terms of the
     original underlying option agreements.




                                      -21-
<PAGE>   23


Item 11. Security Ownership of Certain Beneficial Owners and Management

         As of July 13, 2001, there were 17,995,548 common shares outstanding.
The following table sets forth, as of July 13, 2001, the beneficial ownership of
the Company's common shares by (i) each director, (ii) each of the executive
officers named in the Summary Compensation Table, (iii) all of the directors and
officers of the Company as a group; and (iv) each shareholder, known to
management of the Company, to beneficially own more than five percent of the
outstanding common shares.


                                        Number of
Beneficial Owner                      Common Shares       Percent of Total
----------------                      -------------       ----------------
Stan Cipkowski                         2,513,600(1)            13.7%
122 Smith Road
Kinderhook, New York 12106

Edmund Jaskiewicz                      2,078,155(2)            11.4%
1730 M Street, NW
Washington, DC 20036

Douglas Casterlin                        314,500(3)             1.7%

Gerald Moore                              34,000(4)              *

Robert L. Aromando, Jr                    14,000(5)              *

Denis O'Donnell, M.D.                     14,000(6)              *

Keith E. Palmer                                0                 *

Seaside Partners, L.P.                 2,361,733(7)            11.6%
623 Ocean Avenue
Sea Girt, New Jersey 08750

Directors and executive officers
as a group (7 persons)                 4,968,255(8)            26.4%

---------
*    Less than one percent (1%).

(1)  Includes 388,500 common shares subject to stock options exercisable within
     60 days of July 13, 2001.
(2)  Includes 161,500 common shares subject to stock options exercisable within
     60 days of July 13, 2001.
(3)  Includes 200,000 common shares subject to stock options exercisable within
     60 days of July 13, 2001.
(4)  Includes 34,000 common shares subject to stock options exercisable within
     60 days of July 13, 2001.
(5)  Includes 14,000 common shares subject to stock options exercisable within
     60 days of July 13, 2001.
(6)  Includes 14,000 common shares subject to stock options exercisable within
     60 days of July 13, 2001.
(7)  Includes 953,283 common shares subject to warrants exercisable within 60
     days of July 13 2001. Dr. O'Donnell may be deemed to indirectly
     beneficially own 1,408,450 Common shares and the 953,283 Common shares
     subject to the warrants because he is a member of Seaside Advisors, LLC
     which is the general partner of Seaside Partners, L.P. Dr. O'Donnell
     specifically disclaims beneficial ownership of these securities.
(8)  Includes an aggregate of 812,000 common shares subject to stock options
     exercisable within 60 days of July 13, 2001. Does not include the 1,408,450
     common shares or the 953,283 Common shares subject to warrants beneficially
     owned by Seaside Partners, L.P. which Dr. O'Donnell may be deemed to
     indirectly beneficially own.



                                      -22-
<PAGE>   24

         Item 12. Certain Relationships and Related Transactions

         During fiscal 1999, 2000 and the first quarter of 2001, the Company
advanced funds to Stan Cipkowski, the Company's President and one of its
directors. Mr. Cipkowski was the Company's Chairman of the Board and Chief
Executive Officer until January 2001. These advances are partially evidenced by
a note and bear interest at the rate of 11.5% per annum. The loan is payable on
demand. Each quarter, interest accrued on the loan is added to the outstanding
principal balance of the loan. Mr. Cipkowski has pledged 1,000,000 of the
Company's common shares to the Company as collateral. On November 30, 2000, the
Company's Board of Directors and Mr. Cipkowski agreed to a structured repayment
of this loan through the regular periodic redemption by the Company of common
shares owned by Mr. Cipkowski. Under the program, Mr. Cipkowski will redeem at
least 25,000 common shares, after the release of financial results, each quarter
with a value to be determined by the closing price of the common shares on the
second business day following the release of the quarterly or annual financial
results. Mr. Cipkowski also has the right to redeem a greater number of common
shares each quarter. As of April 30, 2001, Mr. Cipkowski has redeemed 50,000
common shares representing payment of $38,000 and the loan balance was
approximately $472,000. Other than the accrued interest, which is added to the
outstanding principal balance of the loan on a quarterly basis and paid pursuant
to the share redemption program, the Company does not intend to make any
additional loan to Mr. Cipkowski.

         The Company has collateralized a bank loan and a corporate credit card
aggregating $107,000 as of April 30, 2001 for Mr. Cipkowski with certificates of
deposit aggregating $146,000. In July 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.

         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 $0.95 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.


         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

               There were no reports on Form 8-K during the fourth quarter of
         Fiscal Year 2001.



                                      -23-
<PAGE>   25


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/ Stan Cipkowski
                                             -----------------------------------
                                             Stan Cipkowski, President and
                                             Director


DATE:  August 13, 2001


         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 August 13, 2001:


/s/ Robert L. Aromando, Jr.              Chairman and Chief Executive Officer
-----------------------------------
Robert L. Aromando, Jr.


/s/ Stan Cipkowski                       President and Director
-----------------------------------
Stan Cipkowski


/s/ Edmund Jaskiewicz                    Director
-----------------------------------
Edmund Jaskiewicz


/s/ Gerald Moore                         Director
-----------------------------------
Gerald Moore


/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


<PAGE>   26
AMERICAN BIO MEDICA CORPORATION

<Table>
<Caption>

CONTENTS

                                                                                                               PAGE
<S>                                                                                                            <C>
FINANCIAL STATEMENTS

   Independent auditors' report                                                                                 F-2

   Balance sheet as of April 30, 2001                                                                           F-3

   Statements of operations for the years ended April 30, 2001 and 2000                                         F-4

   Statements of changes in stockholders' equity for the years ended April 30, 2001 and 2000                    F-5

   Statements of cash flows for the years ended April 30, 2001 and 2000                                         F-6

   Notes to financial statements                                                                                F-7
</Table>




                                                                             F-1

<PAGE>   27
INDEPENDENT AUDITORS' 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 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 and Note L[5]
July 23, 2001

With respect to the last paragraph of Note J[3]
July 18, 2001


                                                                             F-2

<PAGE>   28
AMERICAN BIO MEDICA CORPORATION


Balance Sheet
April 30, 2001

<Table>
<Caption>

<S>                                                                                                            <C>
ASSETS
Current assets:
   Cash and cash equivalents                                                                                   $        265,000
   Accounts receivable - net of allowance for doubtful accounts of $86,000                                            1,010,000
   Inventory                                                                                                         1,444,000
   Other receivables                                                                                                   270,000
   Prepaid expenses and other current assets                                                                             41,000
                                                                                                               ----------------
      Total current assets                                                                                            3,030,000

Property, plant and equipment, net                                                                                      348,000
Restricted cash                                                                                                         146,000
Other receivables                                                                                                        80,000
Other assets                                                                                                             36,000
                                                                                                               ----------------
                                                                                                               $      3,640,000
                                                                                                               ================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable and accrued expenses                                                                       $      2,381,000
   Current portion of capital lease obligations                                                                          25,000
                                                                                                               ----------------

      Total current liabilities                                                                                       2,406,000

Long-term portion of capital lease obligations                                                                           21,000
                                                                                                               ----------------

      Total liabilities                                                                                               2,427,000
                                                                                                               ----------------

Commitments and contingencies

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; 30,000,000 shares authorized; 17,995,548 shares
      issued and outstanding                                                                                            180,000
   Additional paid-in capital                                                                                        15,052,000
   Unearned compensation                                                                                               (19,000)
                                                                                                                         (5,000)
   Subscription receivable
   Due from officer/director/shareholder (collateralized by 1,000,000 shares of the                                    (472,000)
      Company's common stock)
   Accumulated deficit                                                                                             (13,523,000)
                                                                                                               ----------------

                                                                                                                      1,213,000
                                                                                                               ----------------

                                                                                                               $      3,640,000
                                                                                                               ================
</Table>


See notes to financial statements                                            F-3


<PAGE>   29

AMERICAN BIO MEDICA CORPORATION


Statements of Operations
<Table>
<Caption>

                                                                                                     Year Ended April 30,
                                                                                              --------------------------------
                                                                                                    2001              2000
                                                                                              ---------------   --------------
<S>                                                                                            <C>              <C>
Net sales                                                                                      $    7,484,000   $    7,653,000
Cost of goods sold                                                                                  2,571,000        3,602,000
                                                                                              ---------------   --------------

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

Operating expenses:
   Selling, general and administrative (including equity related charges of
      $289,000 in 2001 and $367,000 in 2000)                                                        6,566,000        5,223,000
   Depreciation and amortization                                                                      123,000          106,000
   Research and development                                                                           614,000          799,000
                                                                                              ---------------   --------------

                                                                                                    7,303,000        6,128,000
                                                                                              ---------------   --------------

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

Other income (expense):
   Loss on sale of investments                                                                       (124,000)        (122,000)
   Loss on abandonment of book sales business assets                                                  (60,000)
   Licensing and royalty income                                                                       604,000
   Interest income                                                                                    106,000           84,000
   Interest expense                                                                                   (16,000)         (21,000)
                                                                                              ---------------   --------------

                                                                                                      510,000          (59,000)
                                                                                              ---------------   --------------

NET LOSS                                                                                           (1,880,000)      (2,136,000)

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

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS                                                   $   (1,880,000)  $   (2,275,000)
                                                                                               ==============   ===============

BASIC AND DILUTED LOSS PER COMMON SHARE                                                              $(.10)            $(.15)
                                                                                              ---------------   --------------

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED                                  18,034,000        15,481,000
                                                                                               ==============   ===============
</Table>



See notes to financial statements                                            F-4



<PAGE>   30

AMERICAN BIO MEDICA CORPORATION
Statements of Changes in Stockholders' Equity

<Table>
<Caption>



                                 PREFERRED         COMMON STOCK        ADDITIONAL                        DUE FROM
                                   STOCK       ---------------------    PAID-IN       SUBSCRIPTION   OFFICER/DIRECTOR
                                  SHARES        SHARES      AMOUNT       CAPITAL       RECEIVABLE      SHAREHOLDER
                                 ----------    ----------  ---------    -----------   -------------  -----------------
<S>                              <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       (1,647)    1,445,759     14,000        (14,000)
  to common shares
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                           17,649
 options
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     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
Net loss
Due from officer/director/
  shareholder repayable with
  common stock                                                                                                (472,000)

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    $15,052,000        $(5,000)          $(472,000)
                                 ==========    ==========  =========    ===========   =============  =================




                                                                   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)  $   2,973,000

Preferred "D" shares converted                                                                               0
  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                                                                              83,000
  stock options

Common shares issued in a
 private placement                                                                                   2,000,000
Exercise of common stock                                                                                     0
 options
Common stock and common stock
  options issued to
  consultants, net
  of amortization                                      (452,000)                                       272,000
Cancellation of common stock

Amortization of compensatory                             11,000                                         11,000
  stock options
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
Net loss                            $ (1,880,000)                                   (1,880,000)     (1,880,000)
Due from officer/director/
  shareholder repayable with
  common stock
                                                                                                      (472,000)
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
                                   =============   =============  ============    ============   =============



</Table>

See notes to financial statements                                            F-5
<PAGE>   31


AMERICAN BIO MEDICA CORPORATION

   Statements of Cash Flows

<Table>
<Caption>
                                                                                                    YEAR ENDED APRIL 30,
                                                                                              -------------------------------
                                                                                                   2001              2000
                                                                                              --------------   --------------
  <S>                                                                                         <C>              <C>
  CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                                                   $   (1,880,000)  $   (2,136,000)
   Adjustments to reconcile net loss to net cash used in operating activities:
      Amortization and depreciation                                                                  123,000          106,000
      Penalty charge for late registration                                                            26,000
      Allowance for note receivable                                                                                   105,000
      Provision for bad debts                                                                         (5,000)          11,000
      Amortization of compensatory stock and stock options                                           289,000          367,000
      Accrued interest on due from officer/director/shareholder                                      (55,000)         (23,000)
      Loss on sale of investments / loss on abandonment                                              184,000           14,000
      Changes in:
        Accounts receivable                                                                          145,000         (197,000)
        Other receivable                                                                            (350,000)
        Inventory                                                                                   (112,000)         356,000
        Prepaid expenses and other current assets                                                      5,000           51,000
        Restricted cash                                                                              (34,000)
        Other assets                                                                                  18,000          (35,000)
        Accounts payable and accrued expenses                                                        726,000          535,000
                                                                                              --------------   --------------

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

  CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property, plant and equipment                                                         (73,000)        (145,000)
   Purchase of investments                                                                                            (73,000)
   Proceeds from sales and maturity of investments                                                   407,000          571,000
   Collections on note receivable                                                                                      23,000
   Loan to BioSys, Inc.                                                                             (100,000)        (280,000)
   Loans to officer/director/shareholder                                                            (120,000)         (32,000)
                                                                                              --------------   --------------

           Net cash provided by investing activities                                                 114,000           64,000
                                                                                              --------------   --------------

  CASH FLOWS FROM FINANCING ACTIVITIES:
   Repayment of capital lease obligations                                                            (11,000)         (11,000)
   Proceeds from private placement                                                                                  2,000,000
   Cash dividends paid                                                                                                 (1,000)
   Repayment of note payable to shareholder                                                        (125,000)         (130,000)
                                                                                              --------------   --------------

            Net cash (used in) provided by financing activities                                     (136,000)       1,858,000
                                                                                              --------------   --------------

            NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                    (942,000)       1,076,000
  Cash and cash equivalents - beginning of period                                                  1,207,000          131,000
                                                                                              --------------   --------------
  Cash and cash equivalents - end of period                                                   $      265,000   $    1,207,000
                                                                                              ==============   ==============

  SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
    Cash paid during the year for:
      Interest                                                                                $       16,000   $        8,000

  NONCASH ACTIVITIES:
   Common stock issued in connection with stock dividends to holders of
      preferred stock                                                                                          $      111,000
   Acquisition of property under capital leases                                               $       10,000
   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 officer/director/shareholder               $       38,000
     Conversion of equity investment in BioSys, Inc.                                          $      380,000
     Non-employee options granted fully vested                                                $      165,000

</Table>

See notes to financial statements                                            F-6


<PAGE>   32
AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
April 30, 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 G).

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 year
ended April 30, 2001 the Company sustained a net loss of $1,880,000 and had net
cash outflows from operating activities of $920,000. During the prior fiscal
year and continuing throughout this fiscal year, the Company commenced
implementing programs to improve its financial prospects including entering into
national and international distribution agreements with a number of
distributors, completing an in-house strip manufacturing program to reduce costs
and other measures to enhance profit margins.

The Company is in the process of raising additional capital through a private
placement of it's common stock and does not expect to experience certain costs
at the levels sustained in the year ended April 30, 2001.  Such a capital raise
is necessary to fund working capital requirements including an agreement to
settle legal fees.  Accordingly substantial doubt exist about the Company's
ability to continue as a going concern.  The financial statements do not include
any adjustments relating to the recoverability or classification of recorded
asset amounts or the amount and classification of liabilities that might be
necessary as a result of this uncertainty.

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.

[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 which are not expected to be realized. The
     effect on deferred tax assets and liabilities of a change in tax rates is
     recognized in the period that such tax rate changes are enacted.

[4]  Depreciation and amortization:

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



                                                                             F-7

<PAGE>   33

AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
April 30, 2001


NOTE A - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

[5]  Revenue recognition:

     The Company recognizes revenue when products are shipped. However, revenue
     from consignment sales are 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.

     Potential common shares outstanding as of April 30, 2001 and 2000 are as
     follows:

                                            2001    2000
                                            ----    ----

                            Warrants         0       0
                            Options          0       0

     Assuming the shares held as collateral are retired at April 30, 2001 in
     satisfaction of the officer/director/shareholder obligation to the Company,
     the pro forma number of shares outstanding at April 30, 2001 would be
     17,482,504.

[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 are 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.


                                                                             F-8

<PAGE>   34

AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
April 30, 2001


NOTE A - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

[10] Financial Instruments (continued):

     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.

[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. Comprehensive loss
     for the year ended April 30, 2000 is the unrealized loss on investments
     available for sales.

[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 two certificates of deposit aggregating $146,000
accruing interest at 5.35%, which are collateral for a bank loan, that is
payable on demand and a corporate credit card aggregating $107,000, to a Company
Officer/Director/Shareholder as of April 30, 2001. 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.

NOTE C - LICENSING AND ROYALTY INCOME

On April 3, 2001, the Company settled the patent infringement lawsuit (see Note
L[4]) 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. Under
the



                                                                             F-9

<PAGE>   35

AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
April 30, 2001

NOTE C - LICENSING AND ROYALTY INCOME (CONTINUED)

terms of the settlement, each party has agreed not to disclose to any third
parties the terms and conditions of this agreement.

NOTE D - INVENTORY

Inventory is comprised of the following:

Drug screening tests:
   Raw materials                                       $     571,000
   Work in process                                           373,000
   Finished goods (including $199,000 held on
    consignment)                                            500,000
                                                       -------------
                                                       $   1,444,000
                                                       =============




NOTE E - PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, at cost, are as follows:

          Leasehold Improvements                                     $   62,000
          Office equipment, including $60,000 under capital leases      255,000
          Manufacturing and warehouse equipment, including
            $23,000 under capital lease                                 378,000
                                                                     ---------

                                                                       695,000
                         Less accumulated depreciation                 347,000
                                                                     ---------

                                                                     $ 348,000
                                                                     =========

Depreciation expense was $123,000 and $106,000 for the years ended April 30,
2001 and 2000 respectively.

NOTE F - DUE FROM OFFICER/DIRECTOR/SHAREHOLDER

At April 30, 2001, the Company has a loan due from an
officer/director/shareholder for $472,000. The note bears interest at 11.5% per
annum and is 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 years ended April 30, 2001 and 2000 was $55,000 and $23,000,
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 year,
50,000 common shares valued at $38,000 were redeemed to pay down the loan. Such
loan is reflected in the Company's financial statements as a reduction of
stockholder's equity.


                                                                            F-10

<PAGE>   36

AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
April 30, 2001


NOTE G - 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
through April 30, 2000. In April 2001, the $60,000 carrying value of the assets
of the book business was impaired and was written off.



                                                                            F-11

<PAGE>   37

AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
April 30, 2001


NOTE H - CAPITAL LEASE OBLIGATIONS

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

          Year Ending
           April 30,
          ------------
            2002                                          $    27,000
            2003                                               22,000
            2004                                                5,000
                                                           ----------

          Total future minimum loan payments                   54,000
          Less amount representing interest                    (8,000)
                                                           ----------

          Present value of minimum lease payments              46,000
          Less current portion of capital lease payments      (25,000)
                                                           ----------

          Long-term portion of capital lease obligations   $   21,000
                                                           ==========


NOTE I - INCOME TAXES

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

                                                       Year Ended April 30
                                                         2001     2002

       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%
                                                         ===      ===

Significant components of the Company's deferred tax assets are:


                         Net operating loss                       $ 3,762,000
                         Allowance for doubtful accounts               34,000
                         Inventory                                     16,000
                                                                  -----------
                         Valuation allowance                       (3,812,000)
                                                                  -----------
                                                                  $         0
                                                                  ===========


The valuation allowance increased $312,000 during the year ended April 30, 2001.

The Company's deferred tax asset has been fully reserved by a valuation
allowance since realization of its benefit is uncertain. The Company has a tax
operating loss carry forward of approximately $9,645,000 expiring through the
year 2021.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.


                                                                            F-12

<PAGE>   38

AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
April 30, 2001


NOTE J - STOCKHOLDERS' EQUITY

[1]  Preferred stock:

     During April 1998, the Company completed a private placement in which it
     netted proceed 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 is 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 are 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.

     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
     $0.95 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.


                                                                            F-13

<PAGE>   39
AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
April 30, 2001


NOTE J - STOCKHOLDERS' EQUITY (CONTINUED)


[2]  Common stock purchase agreement (continued):

[3]  Stock option plans:

     The Company adopted the Fiscal 1997 Non-statutory Stock Option Plan (the
     "1997 Plan"), the Fiscal 1998 Non-statutory Plan (the "1998 Plan"), the
     Fiscal 2000 Non-statutory Stock Option Plan (the "2000 Plan"), and, subject
     to shareholder approval at the upcoming annual meeting, the 2001
     Non-statutory 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.

     Accordingly, the Company will have to measure the intrinsic value of the
     678,000 options (granted in fiscal 2001) and 500,000 (granted in fiscal
     2002) if and when the shareholders approve the 2001 plan. Such measurement
     may result in a substantial charge to operations. For SFAS 123 disclosure
     purposes the 678,000 options granted under the 2001 Plan have been included
     in the April 30, 2001 financial results.

[4]  Stock options:

     Stock option activity is summarized as follows:


<TABLE>
<CAPTION>
                                                                                Year Ended April 30,
                                                                   ---------------------------------------------------------
                                                                            2001                            2000
                                                                   ---------------------------------------------------------
                                                                                  Weighted                         Weighted
                                                                                   Average                          Average
                                                                                  Exercise                         Exercise
                                                                     Shares         Price           Shares           Price
                                                                    ---------  -----------         --------       ----------
<S>                                                                 <C>             <C>            <C>            <C>
              Options outstanding at beginning of year              2,990,000       $2.63          1,976,000      $3.02
              Granted                                               1,173,000        1.19          1,858,000       2.45
              Exercised                                                   (0)        0.00            (67,000)      2.96
              Cancelled/expired                                      (543,000)       2.88           (777,000)      3.00
                                                                    ---------                      ---------

              Options outstanding at end of year                    3,620,000        2.15          2,990,000       2.63
                                                                    ---------                      ---------

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



                                                                            F-14

<PAGE>   40

AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
April 30, 2001


NOTE J - STOCKHOLDERS' EQUITY (CONTINUED)


[4]  Stock options (continued):

     The following table presents information relating to stock options
     outstanding at April 30, 2001.


<TABLE>
<CAPTION>
                                                     Options Outstanding                        Options Exercisable
                                           ---------------------------------------------       --------------------------
                                                         Weighted             Weighted                           Weighted
                                                          Average              Average                           Average
                                                          Exercise            Remaining                          Exercise
                Range of Exercise Price     Shares         Price            Life in Years         Shares          Price
                -----------------------    ---------     ---------          -------------       --------          -----
<S>                  <C>     <C>              <C>          <C>                  <C>                <C>         <C>
                     $0.90 - $1.99            956,000      $1.02                2.80               15,000      $1.17
                     $2.00 - $3.00          2,629,000      $2.54                1.17            2,370,000      $2.54
                     $3.01 - $3.50             35,000      $3.46                3.93               33,000       $3.46
</TABLE>


     As of April 30, 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. There are
     90,000 options available for issuance under the 2000 Plan and 3,322,000
     under the 2001 Plan.

[5]  Warrants:

     On June 4, 2001, the Company issued a 5 year warrant vesting immediately 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 Sholes 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 will be
     recorded as a charge to operations in the following fiscal year.

[6]  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 above 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 2001 and 2000 was
     approximately $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 of 92% and 85% for 2001 and
     2000, respectively, risk free interest rates of ranging from 5.29% - 6.22%
     and 5.81% - 6.60% for 2001 and 2000, respectively and expected life of 3
     years.


                                                                            F-15

<PAGE>   41

AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
April 30, 2001


NOTE J - STOCKHOLDERS' EQUITY (CONTINUED)


[6]  Stock-based compensation(continued):


                                                      Year Ended April 30,
                                               -------------------------------
                                                  2001              2000
                                               -----------       --------------
 Net loss:
   As reported                                  $(1,880,000)     $  (2,136,000)
   Pro forma                                     (2,144,000)        (3,684,000)

Basic and diluted loss per share:
   As reported                                      $(.10)            $(.15)
   Pro forma                                        $(.11)            $(.24)

     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 $466,000 and amortized
     over one year. The options were valued at $255,000 on December 15, 1999 and
     were being amortized over the consulting period. 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
     5 years and adjusted paid-in-capital by $165,000.

     During the year ended April 30, 2000, the Company has 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
     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 Sholes 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 year and are being amortized over the
     consulting term of 1 year.

NOTE K - LOAN TO BIOSYS, INC.

     Through April 30, 2000, the Company had advanced $280,000 to BioSys, Inc.
     ("BioSys"), (the 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.


                                                                            F-16

<PAGE>   42

AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
April 30, 2001


NOTE L - COMMITMENTS, CONTINGENCIES AND OTHER MATTERS

[1]  Operating leases:

     The Company leases office and warehouse facilities under operating leases
     expiring through August 2002. At April 30, 2001, the future minimum rental
     payments under the operating lease are as follows:


                   2002              $   110,000
                   2003                   17,000
                                     -----------

                                     $   127,000
                                     ===========


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

[2]  Purchase agreement:

     In June 2001, the Company entered into an agreement to acquire one of the
     leased facilities for $950,000 subject to environment assessment and
     structural inspection. The Company anticipates the purchase to be financed
     through a mortgage loan. At April 30, 2001, the Company has made a deposit
     of $50,000 towards this purchase.

[3]  Employment agreements:

     The Company has employment agreements with four officers, of which 2 are
     directors and 2 are shareholders, providing for aggregate annual salaries
     of $625,000. These agreements expire on April 30, 2002 and provide for the
     issuance of bonuses and the granting of options.

[4]  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 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. 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 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
     previously and the Company won the case on appeal 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 August 2001, the Company's motion for summary judgment was
     denied and the court is currently considering Davidson's cross-motion for
     summary judgment. Management believes based on consultation with counsel,


                                                                            F-17

<PAGE>   43

AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
April 30, 2001


NOTE L - COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (CONTINUED)

[4]  Litigation (continued):

     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. A trial date has been set for October 22, 2001.

     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, is
     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 is also charged with negligence in drafting the Share Exchange
     Agreement. The Company's lawsuit demands damages in the amount of
     $1,000,000. Morris has counterclaimed as a party to the Share Exchange
     Agreement and seeks common shares. The basis of all of Mr. Morris' claims
     stem from the Friedenberg claim. The Company vigorously contests the Morris
     claim. No trial date has been set.

     The Company has been named in legal proceedings in connection with matters
     that arose during the normal course of its business. While the ultimate
     result of any litigation cannot be determined, it is management's opinion
     based upon consultation with counsel, that it has adequately provided for
     losses that may be incurred related to these claims.

[5]  Restricted cash:

     The Company has collateralized a bank loan and a corporate credit card
     aggregating $107,000 as of April 30, 2001 for an
     officer/director/shareholder with certificates of deposit aggregating
     $146,000. In July 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.

NOTE M - GEOGRAPHIC INFORMATION

     Information concerning net sales by principal geographic is as follows:


                                                     Year Ended April 30,
                                               -------------------------------
                                                    2001             2000
                                               --------------   --------------

               United States                   $    6,312,000   $    7,073,000
               North America (not domestic)           867,000          276,000
               Europe                                 150,000          155,000
               Asia/Pacific Rim                        55,000           11,000
               South America                          100,000          138,000
                                               --------------   --------------

                                               $    7,484,000   $    7,653,000
                                               ==============   ==============


                                                                            F-18

<PAGE>   44


AMERICAN BIO MEDICA CORPORATION
Index to Exhibits
April 30, 2001



Number                                 Description of Exhibits
------                                 -----------------------

3.5       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)

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.**

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**

10.7      Agreement of Lease dated May 13, 1999/Kinderhook, New York facility**

10.8      Lease dated August 1, 1999/New Jersey facility**

10.9      Amendment dated March 23, 2001 to Lease dated August 1, 1999/New
          Jersey facility

10.10     Amended Contract of Sale dated May, 2001/Kinderhook, New York facility

10.11     Financial Advisory Agreement dated May 2, 2001 by and between Brean
          Murray & Co., Inc. and the Company

10.12     Employment contract between the Company and Robert L. Aromando, Jr.
          (a)

10.13     Employment contract between the Company and Stan Cipkowski (a)

10.14     Employment contract between the Company and Douglas Casterlin (a)

10.15     Employment contract between the Company and Keith E. Palmer (a)

23.1      Consent of Independent Auditors

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

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

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



                                                                             E-1