FORM 10-KSB

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


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

For the fiscal year ended December 31, 2004

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

For the transition period                to
                          ______________    ___________________

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
     incorporation or organization)           Employer Identification No.)



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


Issuer's telephone number (800) 227-1243

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

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

                         Common Shares, $0.01 Par value

                         Common Share Purchase Warrants

                               Title of each class

      Check  whether the issuer:  (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing  requirements  for the past 90 days.
[ ] Yes [X] 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: $12,241,000

      The  aggregate  market value of  17,810,613  voting  Common Shares held by
non-affiliates of the issuer was approximately  $16,341,237 based on the average
bid and asked prices of the issuer's Common Shares,  $.01 par value, as reported
on the NASDAQ SmallCap Market on March 24, 2005.


<PAGE>


      As of March 24, 2005, the issuer had outstanding 21,284,768 Common Shares,
$.01 par value.

      The aggregate  market value of 1,257,000  Common Share  Purchase  Warrants
held by  non-affiliates  of the issuer was  approximately  $628,500 based on the
average bid and asked price of the issuer's Common Share Purchase  Warrants,  as
reported on the NASDAQ SmallCap Market on March 24, 2005.

      As of March 24, 2005, the issuer had  outstanding  1,269,500  Common Share
Purchase Warrants.

      Documents Incorporated by reference:

      (1)   The Proxy Statement for the Annual Meeting of Shareholders for the
            year ending December 31, 2004 in Part III of this Form 10-KSB

      (2)   Other documents incorporated by reference on this report are listed
            in the Exhibit Reference Table

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


<PAGE>


                         American Bio Medica Corporation

                      Index to Annual Report on Form 10-KSB
                   For the fiscal year ended December 31, 2004


PART I.                                                                     PAGE
-------                                                                     ----

      Item 1.    Description of Business                                      1
      Item 2.    Description of Property                                     17
      Item 3.    Legal Proceedings                                           17
      Item 4.    Submission of Matters to a Vote of Security Holders         17

PART II

      Item 5.     Market for Common Equity and Related
                  Shareholder Matters                                        18
      Item 6.     Management's Discussion and Analysis or Plan of
                  Operations                                                 19
      Item 7.     Financial Statements                                       26
      Item 8.     Changes In and Disagreements With Accountants on
                  Accounting and Financial Disclosure                        26
      Item 8A.    Controls and Procedures                                    26

PART III

      Item 9.     Directors, Executive Officers, Promoters and Control
                  Persons; Compliance with Section 16(a) of the
                  Exchange Act                                               26
      Item 10.    Executive Compensation                                     27
      Item 11.    Security Ownership of Certain Beneficial Owners and
                  Management                                                 27
      Item 12.    Certain Relationships and Related Transactions             27
      Item 13.    Exhibits and Reports on Form 8-K                           27
      Item 14.    Principal Accountant Fees & Services                       27


Signatures                                                                   S-1


<PAGE>


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

PART I

      ITEM 1.     DESCRIPTION OF BUSINESS

Business Development

      Our Company was  incorporated on April 2, 1986 under the laws of the State
of New York under the name American  Micro Media,  Inc. On September 9, 1992, we
filed an  amendment  to our  Articles  of  Incorporation  to change  our name to
American  Bio  Medica  Corporation  ("ABMC"  or "the  Company").  Our  principal
business office is located at 122 Smith Road,  Kinderhook,  New York,  12106. We
also have a research & development  ("R&D") and production  facility  located at
603 Heron Drive, Unit #3, Logan Township, New Jersey, 08085.

      In November  2001, we purchased our facility  located in  Kinderhook,  New
York from Avoba, Inc. for $950,000.  Included in the purchase were the facility,
its contents and 107 acres of land surrounding the facility.  In March 2003, the
Company  sold  approximately  85 acres of land at its  Kinderhook  facility to a
third party.

Our Business

      We  develop,  manufacture  and market  immunoassay  diagnostic  test kits,
primarily for the immediate,  point of collection  screening for drugs of abuse.
Our drugs of abuse  screening  products  offer  health  care,  law  enforcement,
government,  industrial  safety and educational  professionals,  self-contained,
one-step  screening  devices  capable  of  identifying  illicit  drug use within
minutes.  In  addition to our  manufacture  and  distribution  of drugs of abuse
screening  products,  in late  2001  we also  began  performing  contract  strip
manufacturing for other point of collection  diagnostic  companies.  While we do
not  currently  derive a  significant  portion  of our  revenues  from  contract
manufacturing,  we do expect to continue to explore additional  applications for
our technology  and as a result  contract  manufacturing  could become a greater
portion  of our  revenues  in the  future.  The  overall  immunoassay  market is
continually  growing;  in fact it is projected  that by 2006,  the revenues from
immunoassay testing are expected to reach $17.6 billion. Our long-term objective
is to provide an  extensive  product  portfolio  to this  expanding  immunoassay
market.

      Our Products

      Rapid Drug Screen(R): We manufacture the Rapid Drug Screen, or RDS(R), our
primary  product  line.  The Rapid Drug  Screen is a patented,  rapid,  point of
collection  test kit that detects the presence or absence of drugs of abuse in a
urine  specimen.  We market the RDS as easy  to-use,  cost-effective  and highly
reliable.  There have been a number of studies  that have  reported on the Rapid
Drug Screen's  accuracy and  reliability,  including the Rosita  Roadside  Study
conducted in Europe which rated the Rapid Drug Screen  products  "Very Good" for
user friendliness, the highest rating given to any of the products in the study.
In addition,  a study  conducted by the  Department of Health and Human Services
("DHHS")  ranked the Rapid Drug Screen the most accurate  multi-drug  device for
all drugs when compared to GC/MS, a laboratory  test consisting of a combination
of two  microananlytical  techniques:  GC, a  separation  technique,  and MS, an
identification technique.

                                       1
<PAGE>

      We produce several versions (panels) of the Rapid Drug Screen.  Each panel
screens  for  a  specified   number  of  drugs  (up  to  10  classes  of  drugs)
simultaneously.  We can also  custom  produce  panels for the  screening  of any
quantity  or  combination  of the  following  classes  of  drugs:  cocaine,  THC
(marijuana),  opiates,  amphetamine,  PCP,  benzodiazepines,   methamphetamines,
barbiturates,  tricyclic antidepressants,  methadone, MDMA (Ecstasy) (an illegal
designer drug),  oxycodone (a synthetic  opiate found in several  legitimate and
effective pain medications,  including  OxyContin(R),  but is being used by drug
abusers  to  create  a  heroin-like  high)  and  propoxyphene  (a mild  narcotic
analgesic  structurally  related  to  methadone  that can be habit  forming  and
therefore abused).

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

      One of the problems that may occur in point of collection  drug testing is
that of  fraud  or  evasion  practiced  by the  person  being  tested.  The most
prevalent  method of avoiding adverse test results is the  substitution,  by the
person being tested, of a hidden "clean" urine sample, which he or she brings to
the  test.  As a  consequence,  each  of  our  urine  drug  screens  contains  a
temperature  sensor,  which helps  prevent  the  substitution  of another  urine
sample.  A substituted  sample would normally be of a lower  temperature  than a
sample  produced  from the body on the  spot.  In  addition,  both our urine and
saliva-based  drug screens (See  "OralStat"  on page 3) contain a control  line,
designed to assure the test  administrator that the test is working properly and
that the reagents are present and not destroyed by any outside agent. Should the
control line not appear,  the  administrator  is instructed to void the test and
re-test  the  individual  by  obtaining  another  sample.  A positive  result is
normally confirmed by laboratory testing.

      Our Rapid Drug  Screen is  currently  marketed in the  following  standard
configurations:  two different 2-panel tests, three different 3-panel tests, two
different  4-panel tests,  four different  5-panel tests, one 8-panel tests, one
9-panel test and two different 10-panel tests.

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

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

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

      o     Five panel tests, designed for the corporate/workplace  market, that
            screen for the "SAMHSA 5" (SAMHSA stands for the Substance Abuse and
            Mental  Health  Services   Administration,   an  Agency  of  the  US
            Department of Health and Human Services): cocaine, THC, opiates, PCP
            and  amphetamine  and  2  additional  versions  of  this  test  with
            methamphetamines  or  benzodiazepines  replacing PCP. A new standard
            configuration  of  THC,  cocaine,   opiates,   methamphetamines  and
            oxycodone is also available.


                                       2
<PAGE>


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

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

      o     Ten panel  tests,  designed  for  specific  workplace  markets  that
            screens for the drugs of abuse from the eight panel test, as well as
            methadone and propoxyphene or as well as methadone and oxycodone.

      We can also produce, on special order, or if a market demands,  tests that
can  screen for any  quantity  (from two - ten) or  configuration  of classes of
drugs.  In 2004,  we redesigned  the graphics on the front of our RDS cards.  We
removed the drug names from the card and began  printing their  abbreviation  on
the testing strips themselves.  This enables us to produce custom configurations
more efficiently,  more  cost-effectively  and enables us to supply such special
orders to our customers even faster.

      Rapid One(R):  We manufacture the Rapid One product line which consists of
13 single drug tests, each of which screens for the presence or absence of drugs
of abuse in a urine  specimen.  The Rapid One  product  line  utilizes  the same
technology  as the Rapid Drug  Screen.  It  includes a single dip  platform,  an
identification  and date  area,  and does not  require  the use of  pipettes  or
reagents.  The Rapid  One is  designed  for  correctional  facilities  and other
markets  where the person  subject to substance  abuse testing is known to use a
specific  drug.  It can also be used to enhance a Rapid Drug  Screen by means of
allowing screening of an additional drug. The Rapid One product line consists of
the following 13 classes of drugs: cocaine, THC (marijuana),  opiates (available
at  either  300  ng/ml  or  2000  ng/ml),  amphetamine,   PCP,  benzodiazepines,
methamphetamines, barbiturates, tricyclic antidepressants, methadone, oxycodone,
MDMA (Ecstasy) and propoxyphene

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

      o     Rapid Tec-2: screens for THC and cocaine
      o     Rapid Tec-3: screens for THC, cocaine and methamphetamines
      o     Rapid Tec-4: screens for THC, cocaine,  methamphetamines and opiates
            300
      o     Rapid Tec-5: screens for
                  THC, cocaine,  opiates,  amphetamines and benzodiazepines;  or
                  THC, cocaine, amphetamine, PCP and opiates 300

      OralStat(R):  In July 2004, we began  manufacturing  an  oral-fluid  based
point of  collection  device called the OralStat (we had  previously  licensed a
product from ANSYS  Technologies,  Inc. that we also sold under the trademark of
OralStat).  Manufacturing  the  OralStat  enables  us to better  control  costs,
quality and delivery to our  customers.  Our New  OralStat is a  patent-pending,
innovative  point of  collection  testing  system for the  detection of drugs of
abuse in oral fluids.  The  technology of OralStat  provides test results within
minutes with enhanced  sensitivity and detection  comparable to laboratory based
oral  fluids  tests.  OralStat  can  simultaneously  test for six  drugs in each
device.  Currently,  the assays  available  on the  OralStat  are  amphetamines,
methamphetamine, benzodiazepine, cocaine, methadone, opiates, PCP and marijuana.


                                       3
<PAGE>


      The  test  requires  no  messy  saliva  collection  or  handling.  Pending
submission for FDA 510(k)  clearance,  the product is labeled and made available
"for forensic use only", which means for use in legal determinations only; it is
not intended or promoted for a health or medical use or purpose.

      We shipped our first order of our New OralStat in July 2004 and throughout
2004, the New OralStat has been well received by both current and new customers.

      Rapid  Tec  Cup(TM):  In July  2001,  we began  providing  contract  strip
manufacturing to Starplex  Scientific,  Inc.  ("Starplex").  As a result of this
relationship,  in December 2002, we entered into a private-label  agreement with
Starplex   Scientific,   Inc  for  its  point  of  collection   drugs  of  abuse
self-contained  cup. We adopted the trademark of Rapid Tec Cup for this product,
as the strip  utilized  in the  product is the same as in our Rapid Tec  product
line.  Currently  we offer a five (5)  panel cup that  tests  for THC,  cocaine,
opiates, amphetamines and PCP. We expect the Rapid Tec Cup will be useful in the
Corporate/Workplace  and  Corrections/Government  markets where a self-contained
product may be required.

      In April 2004, we ceased  providing  contract  manufacturing  services for
Starplex and discontinued  selling the Rapid Tec Cup product and in July 2004 we
began  marketing  and  selling  our new  all-inclusive  cup  product.  For  more
information on our new product, see "RDS InCup(TM)" on this page.

      Rapid  Reader(TM):  In 2003,  we conceived  the Rapid  Reader,  a compact,
portable device that, when connected to any computer,  captures a picture of the
test results on an ABMC drug screen using a  high-resolution  camera.  The Rapid
Reader's  proprietary  software  analyzes this image and interprets the results.
The information is then sent to a data management system, which enables the user
to interpret,  store, transmit and print the drug test results. The Rapid Reader
system  can only be used to  interpret  and  record  the  results  of ABMC  drug
screens. As this product virtually  eliminates human error in the interpretation
and recording of drug screen  results and allows secure  electronic  sharing and
storing of test results,  the Rapid Reader may alleviate  concerns any potential
customer may have about using point of collection  drug tests.  The Company does
not expect sales of the Rapid Reader alone to materially impact sales, rather it
will enable them to secure the business of customers  that would  otherwise  not
use a point of collection  drug test thereby  increasing  sales of the Company's
drug screens.

      In February  2004, we shipped our first order of Rapid Reader  devices and
since that time,  the Rapid Reader  continues to be well received by current and
new  customers.  Pending  submission  for FDA 510(k)  clearance,  the product is
labeled and made available "for forensic use only", which means for use in legal
determinations  only; it is not intended or promoted for a health or medical use
or purpose.

      RDS  InCup(TM):  In July 2004,  we began  manufacturing  and  shipped  our
initial  order of the RDS InCup,  a new product  for the drugs of abuse  testing
market.  The RDS InCup is an  all-inclusive  point of collection urine drug test
that incorporates  collection and testing of the sample in a single device,  and
is  available  in  configurations  of 2 to 12 drugs per  device.  Once the donor
provides a sample the results  are  available  within a few minutes  without any
manipulation of the sample or the device.

      The RDS InCup is an extension of the Rapid Drug Screen line of tests using
the same FDA Cleared RDS test strips and offers  customers a fast,  accurate and
easy method for determining the drug use status of an individual.

      Since this initial  order from a criminal  justice  agency,  the RDS InCup
continues to be well received by customers in our core markets.

      Contract Manufacturing

      Through the fiscal year ending December 31, 2004, we provided bulk strip
contract manufacturing services to a number of point of collection diagnostic
companies. Currently we manufacture test components for the detection of TB


                                       4
<PAGE>


(Tuberculosis; a highly contagious disease responsible for more deaths than any
other infectious disease according to the World Health Organization), HIV (Human
Immunodeficiency Virus; the virus that causes AIDS) and RSV (Respiratory
Syncytial Virus; the most common cause of lower respiratory tract infections in
children worldwide) for three non-affiliated companies. We do not currently
derive a significant portion of our revenues from contract manufacturing.

Our Markets

      Corporate/Workplace

      We sell all of our products to this market,  primarily  through our direct
sales  force.   We  also  have  a  nationwide   network  of   distributors   and
administrators  of workplace drug testing  programs that sell our drugs of abuse
product line in this market. We believe that the market for utilization of point
of collection drug screens for  pre-employment  and random  employee  testing is
expanding.

      o     The Office of National Drug Control Policy ("ONDCP") reports that in
            2000,  Americans  spent an  estimated  $36 billion on  cocaine,  $11
            billion  on  marijuana,  $10  billion  on  heroin,  $5.4  billion on
            methamphetamine,  and $2.4 billion on other illegal  substances.  In
            addition,  in 1992 the  overall  cost of drug abuse to  society  was
            approximately  $102  billion.  The  projected  overall  cost reached
            $160.7 billion in 2000.

      o     According to the 2003 SAMHSA  National Survey on Drug Use and Health
            (formerly the National Household Survey on Drug Abuse),  released in
            September  2004,  of the 16.7 million  illicit drug users aged 18 or
            older in 2003, 12.4 million (74.3 percent) were employed either full
            or part time.

      o     The  U.S.  Department  of  Labor  estimates  that  drug  use  in the
            workplace costs employers approximately $81 billion annually in lost
            time, accidents, health care and workers' compensation costs.

      According to the American Management  Association ("AMA"), drug testing of
employees  is  performed by 61.8% of the U.S.  firms  surveyed in 2004.  For the
reasons stated above, not only are there financial benefits of drug testing, but
a drug-free  environment is a safer one. Incentives encourage employers to adopt
Drug Free  Workplace  Programs.  Drug testing is an integral part of a Drug Free
Workplace  Program.  In  some  states,  there  are  workman's  compensation  and
unemployment  insurance premium reductions,  tax deductions and other incentives
for adopting  these  programs.  The Drug Free  Workplace Act requires  employers
receiving  federal  contracts of $100,000 or more to enact a Drug Free Workplace
program (the Federal  Acquisition  Streamlining  Act of 1994 ("FASA") raised the
threshold of contracts  covered by the Drug Free  Workplace  Act from $25,000 to
those exceeding $100,000).

      Government, Corrections and Law Enforcement

      Our direct sales team sells our drugs of abuse screening  products in this
market. This market includes federal, state and county level agencies, including
correctional facilities,  pretrial agencies,  probation,  drug courts and parole
departments   at  the  federal  and  state  levels  and  juvenile   correctional
facilities.

      According to the Bureau of Justice Statistics ("BOJ"), 6.9 million people,
or 3.2% of all U.S. adult residents, were on probation, in jail or prison, or on
parole at  year-end  2003.  BOJ also  reported  that  state and  federal  prison
authorities  had under their  jurisdiction  1,470,045  inmates at year end 2003:
1,296,986 under state  jurisdiction and 173,059 under federal  jurisdiction.  In
addition,  local jails held or  supervised  762,672  persons  awaiting  trial or
serving a sentence at mid-year 2003. The Federal Bureau of Prisons reported that
of those inmates in federal prisons, 55.1% were sentenced as drug offenders.


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<PAGE>


      Almost all persons (99%) on parole or probation,  and a significant number
of those individuals within federal, state and local correctional facilities and
jails,  have one or more  conditions to their sentence  required by the court or
probation agency including  periodic drug testing and substance abuse treatment.
Our products are aimed at this and other similar markets.

            Rehabilitation Centers

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

            International Markets

      We sell our products  primarily  through  distributors in this market.  We
have entered into  distribution  agreements with companies in several  countries
and are pursuing a course of multinational  distribution of our products through
both clinical and non-clinical  distribution  companies.  As of January 2005, we
had 33 distributors or customers representing 27 foreign countries.

            Clinics, Physicians, and Hospitals

      This market includes  emergency rooms,  physician  offices,  hospitals and
clinics and rehabilitation  facilities associated with hospitals.  In July 2003,
the Drug  Abuse  Warning  Network  ("DAWN")  estimated  that in 2002  there were
670,307  episodes,  with an  average  of 1.8 drugs  per  episode,  in  emergency
departments in the United States in which drugs were  mentioned.  Our Rapid Drug
Screen nine panel test is used in this market as it provides  fast and  accurate
results  when time is  critical.  We are  continuing  to  negotiate an exclusive
distribution agreement with a multi-national  diagnostics company focused on the
clinical point of collection market.

            Consumer/Over-the-Counter

      Our drugs of abuse screening products are not currently available for sale
in this market,  as we have not yet received the necessary  marketing  clearance
from  FDA.  In  December   2003,   FDA  issued  a  revised  draft  guidance  for
manufacturers  of drug abuse  screening  tests that updated two  previous  draft
guidances  published  in 2000 thereby  clarifying  current FDA thinking for both
laboratory and non-laboratory  (workplace,  sports,  insurance, and home) tests.
The Company is currently evaluating these new guidelines to determine whether to
obtain the required marketing clearance to sell in this market in the future.

            Educational Market

      According to the 2004 University of Michigan  Monitoring the Future study,
15% of 8th  graders,  31% of 10th  graders  and 39% of 12th  graders had used an
illicit  drug within the 12 months  prior to the study.  Furthermore,  the study
reported  that over half (51%) of young people have tried an illicit drug by the
time they finish high school.  We believe our products could be an integral part
of  helping  schools  test  due to  their  ease of use and  immediate,  accurate
results.

      In June 2002, the Supreme Court, ruled that public middle and high schools
can require  drug tests for  students in  extracurricular  activities  including
band, choir, and other activities  without violating their privacy rights.  Drug
tests can be required without any suspicion of drug use, and applies to students
in grades 7 through 12 who sign up for activities  such as  cheerleading,  band,
academic teams, and other extracurricular activities.  Students can be tested at


                                       6
<PAGE>


the start of the school year and then  randomly  throughout  the year. It is our
opinion  that,  with this  decision,  schools will be more likely to implement a
drug-testing  program. We did not focus considerable sales and marketing efforts
in this market in 2004 so therefore sales in this market are currently  minimal.
The  Company may expend more  efforts in the future and may  therefore  see more
significant sales in this market in the future.

            Additional Markets

      We believe that the Department of Transportation ("DOT") and the federally
regulated markets could be a future market for our products.  Presently, the DOT
market is not available to any point of collection drug of abuse testing device.
Federal law requires that anyone with a commercial  driver's 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 point of collection drug testing devices.

            Product Distribution

      We have a two-pronged  distribution  strategy that focuses both on growing
business through our direct sales team and with valued third party  distribution
partners.  We sell our products  primarily through a staff of highly experienced
and well-trained sales professionals with drugs of abuse testing experience.  In
addition we sell through third party distribution channels.

      Our direct sales force  consists of a vice president of sales & marketing,
a  director  of  business  development,  eleven  (11)  domestic  regional  sales
managers,   an  international   sales  manager  and  a  staff  of  inside  sales
representatives.  They call on  non-clinical  accounts  directly and support our
worldwide distribution network. We also employ a marketing manager. We intend to
promote our  products  through  direct  mail  campaigns,  selected  advertising,
participation  at high  profile  trade  shows,  use of key  point of  collection
advocate consultants and other marketing activities.

      We  have  entered  into   non-exclusive,   non-clinical   domestic  market
distribution  agreements,  as well as exclusive and  non-exclusive  non-domestic
market distribution agreement,  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,  except in those  instances  in which  exclusive
distribution  rights may have been granted.  The  agreements  are  cancelable by
either us or the distributor upon 30 days written notice.

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

            Competition

      Competition  to our point of collection  urine-based  products  comes from
point of collection tests developed by companies including,  but not limited to,
Varian  Inc.,  Medtox  Scientific,  Inc.,  Biosite  Diagnostics  and a number of
smaller diagnostic companies.

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


                                       7
<PAGE>


      We compete on the following factors:

            o     effectiveness of pricing;

            o     quality of product;

            o     ease and user-friendliness of services; and

            o     timeliness of product delivery.

      Competitors' point of collection urine tests generally use a collection or
delivery method different than our point of collection urine tests. Our products
do not require pipetting of the specimen,  adding or mixing of reagents or other
manipulation of the device by the user.

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

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

      There are also a number of companies  with products  that are  competitive
with our Rapid Reader device.  These  companies  have also been promoting  their
products  longer and have more  experience  in the drug testing data  management
market.  However,  it is our opinion  that our Rapid  Reader is unrivaled in the
market as not only does it store,  transmit  and print the  results  of our drug
tests  but  it  also  interprets  the  results  of  our  drug  tests,  virtually
eliminating the possibility of human error.

            Manufacturing

      We own a 30,000 square foot facility in Kinderhook, New York, which houses
assembly  and  packaging  of our  products  in addition  to  administration.  We
continue to contract-out the printing and manufacture of specimen cup components
of the Rapid Drug Screen.  We do not manufacture  the Rapid Reader  product.  In
addition to manufacturing  all of our own individual test strips, we manufacture
test strips for HIV, Tuberculosis, and RSV for unaffiliated third parties.

      We  lease  a 9,200  square  foot  R&D and  production  facility  in  Logan
Township,  New  Jersey  that  houses  research  and  development  and bulk strip
manufacturing.

      Our present manufacturing  equipment is sufficient to produce 200,000 drug
test kits per month,  assuming one shift per day,  five days per week. As of the
date of this  report,  we are running two shifts per day, 5 days a week.  In the
fiscal year ending  December 31, 2004,  we sold  approximately  3.2 million test
kits.  Our  facilities in Kinderhook,  New York and Logan  Township,  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 as production  needs  increase.  (See Item 2.  Description  of
Property on page 17).


                                       8
<PAGE>


      We currently have approximately seventy five (75) suppliers who provide us
with the raw materials  necessary to manufacture our drug testing strips and our
drugs of abuse screening products. (See Risk Factors beginning on page 10.)

            Patents and Trademarks/Licenses

      To date,  we have been granted  twenty  three (23) patents  related to the
Rapid Drug Screen and/or Rapid One product lines, including four (4) U.S. design
patents and four (4) utility patents.  We currently have eight (8) United States
patent applications, and four (4) foreign patent applications pending.

      We have registered the "Rapid Drug Screen" trademark in the United States,
Canada,  Mexico, Chile, Europe and Russia. We have also registered Rapid One and
its logo, Rapid TEC and its logo, RDS and OralStat in the United States. We have
eight (8) additional trademark  applications pending in the United States. There
can be no  assurance  that the  additional  patents  and/or  trademarks  will be
granted or that, if granted, they will withstand challenge. (See "Risk Factors -
Intellectual Property Rights" on page 14).

      In connection with the settlement of a patent  infringement  suit we filed
against  numerous  parties  in  April  2001,  we have a  licensing  and  royalty
agreement  with  Phamatech,  Inc.  ("Phamatech"),  under  which  we were  paid a
licensing  fee and will continue to be paid a percentage of revenues on versions
of the Phamatech  product that infringe on our Rapid Drug Screen  patent.  As of
the date of this report, Phamatech no longer sells the versions of their product
that infringe on our Rapid Drug Screen patent.

            Research and Development

      We currently  manufacture all of our individual  drug testing strips.  Our
R&D  efforts  are  continually  focused  on  enhancing  and/or  maintaining  the
performance and reliability of our drug testing strips. In addition, this fiscal
year,  our R&D team  completed  development  of our OralStat oral fluid point of
collection  drug  test  and  completed   development  of  the  RDS  InCup,   our
all-inclusive  point of  collection  device.  The R&D team  also  continues  the
development  process on contract  manufacturing  projects.  Our R&D expenditures
were $606,000 for the fiscal year ending  December 31, 2004 and $639,000 for the
fiscal year ending December 31, 2003.

            Government Regulations

      The  development,  testing,  manufacture  and  sale of our  drugs of abuse
screening products 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 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


                                       9
<PAGE>


Class III to Class II or I, or a device which has been found to be substantially
equivalent  to such a device  through  the 510(k)  process,  or one  established
through  Evaluation  of Automatic  Class III  Definition.  The legally  marketed
device(s) to which  equivalence is drawn is known as the "predicate"  device(s).
Applicants must submit descriptive data and, when necessary, performance data to
establish that their device is substantially equivalent to a predicate device.

      Although FDA clearance is not required for  non-clinical  markets (such as
corporate/workplace  and  government/corrections),  it is required  for clinical
markets (such as hospitals and physicians).  The Company  continues to explore a
relationship  with  a  multi-national  diagnostics  company  to  distribute  our
products in this market.  When such a relationship  is  established,  we believe
that clinical  markets could become a major  marketplace  for our drug screening
products.

      We have received 510(k) clearance for our nine (9) panel Rapid Drug Screen
test.  With this  approval and the approvals  obtained  related to our Rapid One
dipsticks, we can offer a variety of combinations to meet customer requirements,
both in multiple panel tests and individual  Rapid One tests.  In addition,  the
testing  strips  contained in the RDS InCup are the same as those testing strips
contained within the RDS.  Therefore,  the RDS InCup can be offered in a variety
of combinations to meet customer requirements.

      In November  2004, we received our third 510(k)  clearance  related to our
Rapid TEC product line (we  previously  received  clearances  in 2002 and 2003).
With this third  clearance  ABMC can provide  clinical  customers  with  various
configurations  of two (2) to fourteen  (14) classes of drugs of abuse.  Neither
the OralStat nor the Rapid Reader has received 510(k)  clearance from FDA and is
currently available for "forensic use only".

      Furthermore,  in order to sell our products in Canada after November 2003,
the  Company   must   comply  with   ISO13485,   the   International   Standards
Organization's Directive for Quality Systems for Medical Devices (MDD or Medical
Device Directive), and in order to sell our products in the European Union after
November  2003,  the Company  must obtain CE marking  for our  products  (in the
European Union, a "CE" mark is affixed to the product for easy identification of
quality products). Collectively, these standards are similar to the U.S. Federal
Regulations enforced by FDA, and are a reasonable assurance to the customer that
the  manufacturing  of our products is conducted in a consistent  manner to help
ensure that quality,  defect-free  goods are produced.  We received approval and
the right to bear the CE mark on all our products in January 2004,  meaning that
our products comply with the essential  requirements of the In Vitro  Diagnostic
Directive  98/79/EC and may be legally  marketed  within the European  Union and
display the CE Mark.  We  received  our  ISO13485  compliance  certification  in
October  2004 and we are in the  process of  acquiring  the  license to sell our
products in Canada.

      Employees

      Currently, we have approximately 120 employees, of which 102 are full-time
and 18 are part-time. None of our employees are covered by collective bargaining
agreements, and we believe our relations with our employees are good.

      Risk Factors

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

      We began selling our drugs of abuse  screening  products in 1996 and began
providing contract manufacturing services for other companies in late 2001. As a
result, we have only a limited operating history upon which one may evaluate our
business and prospects.  Our limited  operating history may make it difficult or
impossible for analysts or investors to accurately forecast regarding our future
revenues  and other  operating  results  and the price of our  securities  could
decline substantially.


                                       10
<PAGE>


We have a history of incurring net losses since we were formed.

      Since  inception  in 1992  through  the  fiscal  transition  period  ended
December  31,  2001,  we incurred net losses.  We began  earning  profits in the
fiscal year end  December  31, 2002.  In the year ended  December  31, 2004,  we
earned net income of $266,000.  As of December 31, 2004, we have an  accumulated
deficit of $13.1 million. We expect to continue to make substantial expenditures
for sales and marketing,  product development and other purposes. Our ability to
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  products  and  enhanced  versions of our  existing
products into the marketplace. We cannot assure 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.

Our products  are sold in limited  markets and the failure of any one of them to
achieve  widespread  market acceptance would  significantly  harm our results of
operation.

      We offer a number of drugs of abuse  screening  products  that are sold in
limited markets,  and we currently derive most of our revenues from sales of our
drugs  of  abuse  screening  product  line.  To  attain  break-even  results  of
operations,  given current levels of expenses,  we must achieve approximately $3
million in quarterly revenues from our products.  If our products do not achieve
and  maintain  this  level  of  revenue,  our  results  of  operations  would be
significantly harmed.

      In  addition,  we only began  selling our drugs of abuse  product  line in
1996, and cannot yet predict  whether they will gain further  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 Rapid TEC was introduced  into the
non-clinical  markets in March 2002,  our Rapid Reader was  introduced  into the
non-clinical  markets  in early  2004 and our new  OralStat  and RDS InCup  were
introduced into the  non-clinical  markets in July 2004. We have no history upon
which to base market or customer  acceptance of these products.  Introduction of
the Rapid TEC, Rapid Reader,  our new OralStat and RDS InCup have required,  and
may continue to require substantial marketing efforts and expenditure of funds.

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

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

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


                                       11
<PAGE>


We rely on third parties for raw materials  used in our drugs of abuse  products
and in our contract manufacturing processes.

      We currently have approximately seventy five (75) suppliers who provide us
with the raw materials  necessary to manufacture our drug testing strips and our
drugs of abuse screening  products.  The loss of one or more of these suppliers,
the  non-performance  of  one  or  more  of  their  materials  or  the  lack  of
availability of raw materials could suspend our manufacturing process related to
our drugs of abuse  products.  This  interruption of the  manufacturing  process
could  impair our ability to fill  customers'  orders as they are placed,  which
would put us at a competitive disadvantage.

      Furthermore,  we rely on a number of third  parties  for supply of the raw
materials  necessary  to  manufacture  the test  components  we  supply to other
diagnostic companies under contract manufacturing agreements. The loss of one or
more of these suppliers could suspend the strip  manufacturing  process and this
interruption  could  impair  our  ability  to  perform  contract   manufacturing
services.

We have a significant  amount of raw material and "work in process" inventory on
hand  that  may  not  be  used  in  the  next  twelve  months  if  the  expected
configuration of sales orders are not received at our projected levels.

      We currently have  approximately  $2.2 million in raw material  components
for the  manufacture  of our  product,  and $2 million of  manufactured  testing
strips,  or "work in process"  inventory at December 31, 2004.  The raw material
components may be retained and used in production indefinitely,  however, we may
be required to dispose of unused manufactured  testing strips during the year if
sales orders are not received for devices containing these manufactured  testing
strips. Even with a significant  increase in sales during 2005, we still may not
be able to use all of the raw materials or strips within twelve  months,  if the
sales orders received are not for devices that would utilize these  manufactured
testing  strips or raw  material  components.  We have  established  a  $100,000
reserve  in 2004 for  obsolete  or slow  moving  inventory  but  there can be no
assurance  that this  reserve  will be adequate for 2005 and/or that it will not
have to be increased.

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

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

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

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


                                       12
<PAGE>


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

      We face competition  from other  manufacturers of drugs of abuse screening
products such as Varian, Inc., Medtox Scientific,  Inc. and Biosite Diagnostics.
These competitors are more well known and have far greater  financial  resources
than us. The markets for drugs of abuse screening  products 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 our drugs of
abuse  product  line.  We expect  other  companies  to develop  technologies  or
products, which will compete with our products.

Possible inability to hire and retain qualified personnel.

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

We depend on key personnel to manage our business effectively.

      We are dependent on the expertise and experience of our senior  management
such  as Stan  Cipkowski,  Chief  Executive  Officer,  Keith  E.  Palmer,  Chief
Financial Officer,  Martin Gould, Chief Scientific Officer and Todd Bailey, Vice
President,  Sales &  Marketing  for our  future  success.  The  loss of  Messrs.
Cipkowski,  Palmer, Gould and/or Bailey could negatively impact our business and
results of  operations.  We do not  maintain  key man  insurance  for any of our
management  employees.   Our  Chief  Scientific  Officer  and  other  scientific
personnel are not bound by employment or non-competition agreements.

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

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

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

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

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

            o     manage  expansion  into  additional  geographic  areas;  and

            o     improve and refine our operating and financial systems.

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

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

      Approval from FDA is not  currently  required for the sale of our products
in non-clinical  markets,  but is required in the clinical and  over-the-counter
("OTC") markets.  Although our drugs of abuse products have met FDA requirements
for professional use, we have not obtained OTC clearance from FDA. The workplace
market is one of our primary  markets  and if any  additional  FDA  clearance(s)
is/are  required to sell in this market,  this  additional  cost may cause us to


                                       13
<PAGE>


raise the price of our products  making it difficult to compete with other point
of collection products or laboratory based testing, thereby negatively impacting
our revenues.  Furthermore, there can be no assurance that if we are required to
apply for additional FDA clearances they will be granted.  If such  clearance(s)
is/are not  granted,  we would be unable to sell our  products in the  workplace
market and our revenues would be negatively impacted.  Although we are currently
unaware of any changes in regulatory  standards  related to the clinical and OTC
markets, if regulatory  standards were to change in the future,  there can be no
assurance that FDA will grant us the  approvals,  if and when we apply for them,
required to comply with the changes.

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

      We rely on a combination of patent, copyright,  trademark and trade secret
laws,  confidentiality  procedures  and  contractual  provisions  to protect our
proprietary technology, products and services. We also believe that factors such
as  the  technological  and  creative  skills  of  our  personnel,  new  product
developments,  frequent product  enhancements and name recognition are essential
to establishing and maintaining our technology  leadership  position.  Our Chief
Scientific Officer and other scientific personnel are not bound by employment or
non-competition   agreements.   All  personnel   are  bound  by   non-disclosure
agreements.  If  personnel  leave  our  employment,  in some  cases  we would be
required  to protect our  intellectual  property  rights  pursuant to common law
theories,   which  may  be  less   protective  than  provisions  of  employment,
non-competition or non-disclosure agreements.

      We seek to  protect  our  proprietary  products  under  trade  secret  and
copyright laws, which afford only limited protection.  We currently have a total
of twenty three (23) U.S. and foreign patents  relating to the Rapid Drug Screen
and/or Rapid One product line. We have additional patent applications pending in
the United States, and other countries,  related to our drugs of abuse products.
We have trademark  applications pending in the United States. Certain trademarks
have been registered in the United States and in other countries.

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

      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 the value of our securities.

      In  connection  with our sale of 1,408,450  common  shares for  $2,000,000
($1.42 per share) in a private placement to Seaside Partners,  L.P.  ("Seaside")
on April 28,  2000,  we issued a 5-year  warrant to Seaside to purchase  953,283
common shares of our stock at an exercise price of $1.17 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 $1.17 to $0.95 in


                                       14
<PAGE>


February  2001. In November 2003, the Seaside  warrant was  transferred  and the
common shares  underlying the exercise of the warrants and respective rights and
obligations  under the Common Stock  Purchase  Agreement were assigned to Steven
Grodko  ("Grodko").  Throughout the fiscal year ended 2004,  Grodko  exercised a
total of 553,283 warrants, leaving a balance of 400,000 warrants.

      In May 2001, we issued a 5-year warrant to purchase  200,000 common shares
of our stock at an exercise price of $1.50 per share to Brean Murray & Co., Inc.
("Brean Murray") as compensation for their services as a financial advisor.

      On August 22, 2001, we issued  warrants  ("Private  Placement  Warrants"),
exercisable  during a 54 month period  beginning  February 22, 2002, to purchase
1,274,500  common shares of our stock at an exercise price of $1.05 per share in
connection with the private  placement of 2,549,000  shares of common stock (the
1,274,500  warrants issued in connection with the August 2001 private  placement
trade on the National  Association of Securities  Dealers  Automated  Quotations
("NASDAQ")  SmallCap  Market and may be  hereafter  referred to as the  "trading
warrants").  We also issued, on August 22, 2001, warrants,  exercisable during a
54 month period  beginning  February  22,  2002,  to purchase a total of 203,920
common  shares of our stock at an  exercise  price of $1.20 per share,  of which
warrants  to purchase  152,940  common  shares  were  issued to Brean  Murray as
compensation  for their  services as  placement  agent and  warrants to purchase
12,745 common shares were issued to Axiom Capital Management,  Inc., warrants to
purchase  5,735  common  shares  were  issued to Jeffrey  Goldberg,  warrants to
purchase  16,250  common  shares were  issued to Barry  Zelin,  and  warrants to
purchase  16,250  common  shares were issued to David L. Jordon,  each for their
services as  sub-agents  of Brean  Murray.  In the fiscal year end  December 31,
2004,  2,500  trading  warrants were  exercised,  leaving a balance of 1,272,000
trading warrants.

      On November 15, 2001, we issued a 4-year warrant to purchase 20,000 common
shares  at an  exercise  price of $1.00 to  Hudson  River  Bank & Trust  Company
("HRBT") in  connection  with the  purchase of our facility in  Kinderhook,  New
York.

      On  December  2, 2003,  we issued a warrant,  exercisable  during a 5 year
period  beginning  December 2, 2003,  to purchase  300,000  common shares of our
stock at an exercise price of $1.15 per share to Brean Murray as compensation as
our financial  advisor.  In June 2004, we amended the December 2, 2003 Financial
Advisory Agreement with Brean Murray and Brean Murray surrendered 150,000 of the
300,000 warrants to purchase common stock (a copy of this amendment was filed as
Exhibit  10.19.1  to the  Company's  Form 10QSB for the  quarter  ended June 30,
2004).

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


                                       15
<PAGE>


Potential  issuance  and  exercise of new options  and  exercise of  outstanding
options could adversely affect the value of our securities.

      The Board of Directors  of the Company has adopted  four (4)  Nonstatutory
Stock  Option  Plans  providing  for  the  granting  of  options  to  employees,
directors,  and consultants (see Note H[2]). As of December 31, 2004, there were
4,149,830 options issued and outstanding under all four plans combined, of which
2,706,500 were  exercisable.  As of December 31, 2004,  there were 9,500 options
available for issuance under the Fiscal 2000 Plan and 971,920 options  available
for  issuance  under the Fiscal 2001 Plan.  There are no options  available  for
issuance  under either the Fiscal 1997 Plan or the Fiscal 1998 Plan.  As options
expire or are cancelled under these latter two plans, they are not re-issued.

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

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

      There are 4,293,155  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,  may depress the market  price of our  Company's
securities in any market that may develop for such shares.

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

      The Company  believes that its current cash  balances,  and cash generated
from operations will be sufficient to fund operations for the next twelve months
however,  this  estimate  is based on  certain  assumptions  and there can be no
assurance  that  unanticipated  costs  will  not  be  incurred.  Future  events,
including  the  problems,   delays,  expenses  and  difficulties  which  may  be
encountered  in  establishing  and  maintaining  a  substantial  market  for our
products,  could  make cash on hand  insufficient  to fund  operations.  If cash
generated  from  operations is  insufficient  to satisfy the  Company's  working
capital and  capital  expenditure  requirements,  the Company may be required to
sell  additional   equity  or  debt  securities  or  obtain   additional  credit
facilities.  There can be no assurance  that such financing will be available or
that the Company will be able to complete financing on satisfactory terms, if at
all. Any financing may result in further dilution to existing shareholders.


                                       16
<PAGE>


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

      Our common  shares  trade on the NASDAQ  SmallCap  Market under the symbol
"ABMC",  and our common stock  purchase  warrants  trade on the NASDAQ  SmallCap
Market under the symbol  "ABMCW".  In the event that the market  makers cease to
function as such, public trading in our securities will be adversely affected or
may cease entirely.

If we fail to meet the continued  listing  requirements  of the NASDAQ  SmallCap
Market, our securities could be delisted.

      Our securities are listed on the NASDAQ SmallCap Market.  The NASDAQ Stock
Market's  Marketplace  Rules impose  requirements  for  companies  listed on the
NASDAQ  SmallCap  Market to maintain  their listing  status,  including  minimum
common  share bid price of $1.00,  and  $2,500,000  in  shareholders'  equity or
$500,000  in net income in the last fiscal  year.  As of the date of this report
our common shares are trading below the minimum bid  requirement  and our common
shares have traded at levels lower than the minimum bid  requirement  within the
last twelve months.

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

      ITEM 2.     DESCRIPTION OF PROPERTY

      In November 2001, we purchased our  Kinderhook,  New York facility and the
surrounding  107 acres.  We obtained a mortgage  from Hudson  River Bank & Trust
Company  ("HRBT")  in the amount of  $360,000,  a loan in the amount of $240,000
from the New York State  Business  Development  Corporation  and a loan from the
Columbia Economic  Development  Corporation in the amount of $120,000.  On March
31,  2003 the  Company  sold  approximately  85 acres of land at its  Kinderhook
headquarters for $150,000.

      On August 20, 2002, we combined a lease for 4,000 square feet of space and
a lease  for  5,200  square  feet of space  into one  lease  for our New  Jersey
facility. The total average monthly cost of the combined spaces is $5,300, which
includes a base rental of $4,317 along with taxes and additional occupant costs.

      ITEM 3.     LEGAL PROCEEDINGS

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

      ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      None.


                                       17
<PAGE>


PART II

      ITEM 5.     MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS

      Our common shares trade on the National Association of Securities Dealers
Automated Quotation System Small Cap Market (NASDAQ SmallCap) under the symbol
ABMC and our common stock purchase warrants ("warrants") trade on the NASDAQ
SmallCap under the symbol ABMCW. The following table sets forth the high and low
sale prices of our securities as reported by the NASDAQ SmallCap Market for the
periods indicated.

      Common Shares


      Fiscal year ending December 31, 2004        High            Low
      ------------------------------------        ----            ---

           Quarter ending December 31, 2004       $1.25           $0.85
           Quarter ending September 30, 2004      $1.19           $0.90
           Quarter ending June 30, 2004           $1.28           $0.90
           Quarter ending March 31, 2004          $2.14           $1.15


      Fiscal year ending December 31, 2003        High            Low
      ------------------------------------        ----            ---

           Quarter ending December 31, 2003       $1.66           $1.06
           Quarter ending September 30, 2003      $1.40           $1.01
           Quarter ending June 30, 2003           $1.29           $0.82
           Quarter ending March 31, 2003          $1.28           $0.95


      Warrants
      --------


      Fiscal year ending December 31, 2004        High             Low
      ------------------------------------        ----             ---

           Quarter ending December 31, 2004       $0.32            $0.09
           Quarter ending September 30, 2004      $0.38            $0.15
           Quarter ending June 30, 2004           $1.28            $0.12
           Quarter ending March 31, 2004          $1.21            $0.04


      Fiscal year ending December 31, 2003        High            Low
      ------------------------------------        ----            ---

           Quarter ending December 31, 2003       $0.90           $0.39
           Quarter ending September 30, 2003      $0.53           $0.50
           Quarter ending June 30, 2003           $0.63           $0.60
           Quarter ending March 31, 2003          $0.68           $0.63


      As of March 24,  2005,  there  were  approximately  4,500  holders  of our
securities. As of March 24, 2005 there were outstanding 21,284,768 common shares
and 1,269,500 warrants. The Company has not declared any dividends on our common
shares and does not expect to do so in the foreseeable future.

      On March 24, 2005,  the last  reported sale price for our common shares as
reported on the NASDAQ SmallCap Market was $0.85 per share and the last reported
sale price of our warrants was $0.46 per warrant.  Average daily trading  volume
on our common shares and warrants  during the  three-month  period from December


                                       18
<PAGE>

24,  2004 to March 24,  2005 was  approximately  157,699  common  shares and 691
warrants respectively.

      Recent sales of unregistered securities

      None

      ITEM 6.     MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

      The  Private  Securities  Litigation  Reform  Act of 1995  provides a safe
harbor for forward-looking  statements. In order to comply with the terms of the
safe harbor,  the Company  notes that except for the  description  of historical
facts  contained  herein,  this Form  10-KSB  contains  certain  forward-looking
statements that involve risks and uncertainties as detailed herein and from time
to time in the Company's filings with the Securities and Exchange Commission and
elsewhere.  Such statements are based on Management's  current  expectations and
are subject to a number of factors and  uncertainties  which could cause  actual
results  to  differ  materially  from  those  described  in the  forward-looking
statements.  These factors include, among others: (a) the Company's fluctuations
in sales and operating results,  risks associated with international  operations
and regulatory,  competitive and contractual risks and product development;  (b)
the ability to achieve strategic  initiatives,  including but not limited to the
ability  to  achieve  sales  growth  across  the  business  segments  through  a
combination of enhanced sales force, new products, and customer service; and (c)
acquisitions.

Critical Accounting Policies and Estimates

      American Bio Medica  Corporation's  ("ABMC's")  discussion and analysis of
its  financial  condition  and  results  of  operations  are based  upon  ABMC's
financial  statements,  which have been prepared in accordance  with  accounting
principles  generally accepted in the United States of America.  The preparation
of these financial statements requires ABMC to make estimates and judgments that
affect the reported amounts of assets,  liabilities,  revenues and expenses, and
related  disclosure of contingent assets and liabilities.  On an on-going basis,
ABMC evaluates its estimates,  including those related to customer  programs and
incentives,  product returns, bad debts,  inventories,  income taxes,  financing
operations,  warranty obligations,  and contingencies and litigation. ABMC bases
its estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making  judgments  about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.

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


                                       19
<PAGE>


      The Company currently  accounts for share-based  payments to our employees
using the intrinsic  value method;  therefore our results of operations have not
included  the  recognition  of  compensation  expense for the  issuance of stock
option awards.  In December  2004, the FASB issued SFAS No. 123 (revised  2004),
Share-Based Payment, ("SFAS No. 123(R)"),  which amends SFAS No. 123, Accounting
for Stock-Based Compensation,  and supersedes APB Opinion No. 25, Accounting for
Stock Issued to Employees.  SFAS No. 123(R) requires  compensation expense to be
recognized  for all  share-based  payments  made to employees  based on the fair
value  of the  award at the  date of  grant,  eliminating  the  intrinsic  value
alternative allowed by SFAS No. 123. Generally, the approach to determining fair
value under the  original  pronouncement  has not  changed.  However,  there are
revisions to the  accounting  guidelines  established,  such as  accounting  for
forfeitures,  which will change our  accounting  for  stock-based  awards in the
future.

      SFAS No.  123(R)  must be  adopted in the first  interim or annual  period
beginning after December 15, 2005. We currently plan to adopt SFAS No. 123(R) on
January 1, 2006. Had we applied the fair-value criteria  established by SFAS No.
123(R) to previous stock option grants,  the impact to our results of operations
would  have  approximated  the  impact of  applying  SFAS No.  123,  which was a
reduction to net income of  approximately  $995,000 in 2004,  $1,018,000 in 2003
and  $881,000  in 2002.  The impact of applying  SFAS No. 123 to previous  stock
option  grants  for the year  ended  December  31,  2005  will be  approximately
$589,000.  We currently expect the recognition of compensation expense for stock
options  issued and  outstanding  at  December  31,  2004 to reduce our 2006 net
income by approximately $149,000.


      SFAS No. 123(R) also requires the benefits of tax  deductions in excess of
recognized  compensation  cost to be reported as a financing  cash flow,  rather
than as an  operating  cash flow as  required  under  current  literature.  This
requirement  will reduce our net  operating  cash  inflows and  increase our net
financing cash flows in periods after  adoption.  The impact that this change in
reporting  will have on future periods cannot be determined at this time because
the benefit  recognized is dependent upon  attributes  that vary for each option
exercise.

Results of operations  for the twelve months ended December 31, 2004 as compared
to the twelve months ended December 31, 2003

      Net sales  declined to $12.2 million for the twelve months ended  December
31, 2004 as compared to $12.5 million for the twelve  months ended  December 31,
2003,  representing  a decrease of $300,000  or 2.4%.  The decline is  partially
attributable to reduced demand in the government sector during 2004, as compared
to 2003.  However,  one of the most significant  government accounts impacted by
cuts in funding  during 2004 notified the Company in early 2005 that funding had
been  restored  through  April of 2006.  To address  the  decline in sales,  the
Company  added three new regional  sales or sales support  professionals  during
2004 intended to increase  geographic coverage of domestic sales territories and
has entered into several  distribution  agreements  in South  America and Europe
intended to increase  international sales. Direct sales represented 67% of sales
in 2004 compared to 65% in 2003.  Continued growth in direct,  telemarketing and
international sales more than offset the decline in sales to distributors during
2004.  During the twelve months ended December 31, 2004,  the Company  continued
its program to market and distribute its primary product, the Rapid Drug Screen,
together with its saliva test (OralStat) and its Rapid Tec series.

      During 2004,  the Company  introduced  several new products to the market.
Included in these were the new the Oralstat(R)  oral fluids (saliva) drug screen
and the RDS(R) InCup(TM),  an all inclusive urine drug screen.  The Company also
shipped  its first  order of Rapid  Reader(TM)  devices,  a  portable  unit that
interprets and records results of ABMC's drug testing products and continued its


                                       20
<PAGE>


contract  manufacturing  operations  by  developing  and  producing  a point  of
collection  test for HIV  which is  currently  being  evaluated  by the FDA.  In
addition,  the Company completed  development of and manufactured a test for the
detection  of  Respiratory  Syncytial  Virus  ("RSV"),  a  juvenile  respiratory
disease.  The RSV  contract  accounted  for  approximately  $309,000 in revenues
during the third and fourth quarters of 2004.

      Cost of goods sold for the twelve months ended  December 31, 2004 was $5.6
million or 47% of net sales as compared to $5.5  million or 44% of net sales for
the twelve  months ended  December  31, 2003.  Included in cost of sales for the
year ended December 31, 2004 is a $100,000  reserve for slow moving and obsolete
inventory.  This  reserve  was  established  in  response  to a build  up of raw
materials  and work in process in  anticipation  of  increased  sales during the
fourth quarter of 2004.  Costs of raw materials  remained  relatively  unchanged
during 2004,  however with the  introduction of several new products,  component
costs have  increased  in the  aggregate.  Labor and  overhead  associated  with
manufacturing have increased  moderately during the twelve months ended December
31, 2004 but pricing has remained relatively  consistent to allow the Company to
be competitive in the marketplace.  The increase in labor stems from the greater
diversity and complexity of the new products.  Further, overhead costs increased
with the addition of manufacturing space in the Company's New Jersey facility.

      Operating  expenses  for the year ended  December  31, 2004  increased  by
$120,000  compared to 2003.  Increases of $34,000 in Selling and  Marketing  and
$240,000 of employee  severance  costs were offset by  decreases  of $121,000 in
General and  Administrative  expense and  $33,000 in  Research  and  Development
expense.  Included in 2004 operating  expenses is $225,000 of professional  fees
(accounting and legal) related to the Company's  investigation  into allegations
identified in an anonymous  letter  received by its  independent  accountants in
February of 2004. As part of ABMC's response,  an independent  counsel performed
an  internal  investigation  and  found  no  evidence  to  support  any  of  the
allegations in the anonymous letter.  The employee severance costs included cash
payments  totaling  $210,000  to 5  employees,  one of whom was an  officer  and
non-cash charges of $30,000 related to the retention of options by an officer of
the Company that resigned in January 2004. The professional  fees related to the
investigation are included in General and Administrative expenses and pertain to
incremental legal and accounting fees.

      Other  income in 2004 is  primarily  due to $15,000 of income from a grant
received  by the  Company in 2002.  The  original  grant was  received  from the
Columbia Economic Development Corporation in two parts and totaled $75,000 as of
December 31, 2004. The Company is awaiting a final installment of $25,000, which
is expected to be received in the first quarter of 2005.  Under the terms of the
grant the Company is  obligated to return a portion of the grant if the employee
levels in the Kinderhook facility fall below 45 employees at any time during the
year. The portion of the grant to be repaid declined from 100% in 2002 to 90% in
2003 and 80% in 2004,  and is  expected to decline an  additional  10% each year
until 2013.  The  employment  at the  Kinderhook  facility did not drop below 45
employees  at any time during 2003 or 2004.  Other  income in 2003 is due to the
reversal of a royalty accrual  resulting from an agreement reached with a former
manufacturing partner and is non-recurring.

Research and development

      Research and  development  ("R&D")  expenses  for the twelve  months ended
December 31, 2004 were $606,000 or 5% of net sales compared to $639,000 or 5% of
net sales for the twelve months ended December 31, 2003. The decrease in expense
is due primarily to labor and overhead manufacturing  efficiencies.  The Company
has  historically   transferred  to  R&D,   efficiencies  or  inefficiencies  in
manufacturing  labor and overhead costs.  The amount of expense  transferred was
based upon an average cost to produce a single strip.  Under  typical  operating
circumstances  employees  were expected to perform  manufacturing  operations to
meet increases in demand for product and R&D functions when demand declined. The


                                       21
<PAGE>


premise for this  practice was the limited  space and number of employees in the
facility.  The Company will discontinue this practice commencing January 1, 2005
as the R&D functions have become more formalized and the allocation of resources
between the  manufacturing  and R&D  departments  have become more defined.  The
additional  expense  incurred  in  manufacturing  based  upon  output was offset
between  manufacturing  and R&D.  During 2003 this  resulted in additions to R&D
expense totaling $136,000 and in 2004 due to increased production,  R&D expenses
were reduced by $110,000,  resulting in a $246,000  decrease  year over year. In
addition  consulting  fees,  utilities  expense,   supplies  and  materials  all
increased  in 2004  related to new  product  development.  .  Finally,  2003 R&D
expense was reduced by $80,000 for amounts received from unrelated  entities for
R&D work performed on their behalf. This did not recur in 2004.

Selling and marketing

      Selling and marketing expense was $2.9 million for 2004, or 24% of revenue
compared to $2.8 million in 2003, or 22% of revenue.  The increase in expense is
primarily due to increases in salaries and benefits  resulting from the addition
of sales personnel, travel and entertainment expense, marketing consulting fees,
marketing supplies, sales support materials, and depreciation expense related to
equipment and software  additions  and  upgrades.  Increases in these areas were
offset by decreases in advertising  and promotion,  and  commissions,  resulting
from a change to the  commission  structure  implemented  in 2004.  The  Company
continued to expand its sales force  during 2004.  At the end of 2003 there were
five  active   regional  sales  managers   focusing  on  domestic   sales,   two
international sales representatives,  and three in-house  telemarketers.  At the
end of 2004 the domestic  regional  sales managers were increased to eight while
international  and  in-house  telemarketing  remained  unchanged.  In the  first
quarter of 2005 three  additional  domestic  regional  sales managers were added
bringing the total to eleven and providing sales coverage in geographic areas in
which the Company had previously  been unable to focus.  Further,  a director of
clinical sales and contract manufacturing development was added in January 2005.
We currently have an international  regional sales manager focusing on South and
Central  American sales and an  international  sales  representative  supporting
distributors in the United Kingdom,  Australia, New Zealand, Spain, Portugal and
Malaysia and the Company is currently in  negotiations  to add a distributor  in
Germany.   There  remain  three  in-house  sales  representatives   focusing  on
telemarketing efforts with plans to increase to six during 2005.

General and administrative

      General and  administrative  expense decreased $121,000 to $2.6 million in
the twelve  months of 2004  compared  to the same period in 2003.  Driving  this
decrease  in expense  were  savings  in  salaries  and  wages,  travel and meals
expense,  postage,  repairs  and  maintenance,  and bad debt  expense  offset by
increases  in  insurance,  accounting  fees,  legal  fees,  director's  fees and
expenses,  outside service fees relating to information technology and technical
support,  and non-cash  compensation  stemming from a transaction  with a former
employee.  Included in general and administrative expense in 2004 is $225,000 of
professional fees (accounting and legal) related to the Company's  investigation
into  allegations  identified in an anonymous letter received by its independent
accountants  in February of 2004.  As part of ABMC's  response,  an  independent
counsel performed an internal investigation and found no evidence to support any
of the  allegations  in the  anonymous  letter.  Also  included  in general  and
administrative  expense in 2004 are  non-cash  service fees  totaling  $199,000,
stemming from a contract  entered into in the fourth  quarter of 2003 with Brean
Murray & Co.,  Inc.  This  contract  provided for the  performance  of financial
advisory  services  by Brean  Murray & Co.,  Inc. in  exchange  for  warrants to
purchase  300,000  shares of common stock and a monthly cash payment.  A copy of
this  agreement  was filed as an  Exhibit to the  Company's  10-KSB for the year
ending  December 31, 2003.  In June 2004,  at the request of the Company,  Brean
Murray & Co., Inc. agreed to surrender  150,000 of the  aforementioned  warrants
and require no monthly  cash  payment in  conjunction  with the  agreement.  The
Company  released Brean Murray & Co., Inc. from any further  financial  advisory
services  obligations  (a copy of this  agreement was filed as an Exhibit to the
Company's 10-QSB for the period ended June 30, 2004).


                                       22
<PAGE>


      Management  believes that the amount of research and development,  selling
and  marketing  costs and general and  administrative  costs may increase as the
Company creates the necessary  infrastructure  to promote the achievement of the
Company's   worldwide  drug  test  marketing  and  sales  goals,   furthers  its
penetration of the direct sales market,  leverages new product initiatives,  and
institutes changes necessary to comply with financial and disclosure controls as
necessitated by new regulatory requirements.

LIQUIDITY AND CAPITAL RESOURCES AS OF DECEMBER 31, 2004

      The Company's  cash  requirements  depend on numerous  factors,  including
product development  activities,  penetration of the direct sales market, market
acceptance of its new products,  and effective management of inventory levels in
response to sales forecasts.  The Company expects to devote capital resources to
continue its product  development,  expand  manufacturing  capacity and continue
research and  development  activities.  The Company  will  examine  other growth
opportunities  including strategic alliances and expects such activities will be
funded from existing cash and cash equivalents, issuance of additional equity or
additional  borrowings,  subject to market  and other  conditions.  The  Company
believes  that its  current  cash  balances,  and  cash  generated  from  future
operations will be sufficient to fund operations for the next twelve months.  If
cash  generated  from  operations  is not  sufficient  to satisfy the  Company's
working  capital  and  capital  expenditure  requirements,  the  Company  may be
required to sell additional equity or obtain additional credit facilities. There
is no assurance  that such  financing will be available or that the Company will
be able to complete financing on satisfactory terms, if at all.

      The Company's  working  capital  increased 18% to $4.7 million at December
31, 2004,  as compared to $4.0  million at December  31,  2003.  The Company has
historically  satisfied its net working capital  requirements  through cash with
proceeds  from  private  placements  of  equity  securities  with  institutional
investors.  In 2004, the Company generated $134,000 from operations  compared to
$684,000  in  2003.  The  primary  uses of cash  during  2004  were to  purchase
inventory  components  for all product  lines and the purchase of  approximately
$600,000 of property,  plant and  equipment.  Offsetting  these uses of cash was
cash  provided by net income of $366,000 and the  proceeds  from the exercise of
warrants and options totaling $581,000. The Company has never paid any dividends
on its common shares and anticipates that all future  earnings,  if any, will be
retained for use in the Company's business.

      At December 31, 2004 and 2003,  the Company had cash and cash  equivalents
of $995,000 and $942,000,  respectively.  In addition the Company has a $350,000
revolving  line of credit bearing an interest rate of prime plus .25% secured by
all of the assets and personal property of the Company,  wherever  located,  now
owned or hereafter acquired,  including accounts, accounts receivable,  contract
rights, health care insurance receivables,  chattel paper, inventory, equipment,
instruments, including promissory notes, investment property, documents, deposit
accounts,  general  intangibles,  including  payment  intangibles and supporting
obligations.  At  December  31, 2004 and 2003,  the  Company had no  outstanding
balance on this line of credit.

      The Company received  proceeds  totaling $279,000 from the sale of 225,000
shares of treasury stock during the twelve months ended December 31, 2003. There
were no shares of treasury stock available for sale during 2004.

      During the year ended December 31, 2003, the Company sold approximately 85
acres  of  land at its  Kinderhook  facility  for  $150,000  to a  third  party,
recognizing a gain on the sale of $30,000,  which was reported as a reduction to
2003 general and administrative expense.

      The Company's  primary  expected  short-term  capital and working  capital
needs  are:  to  make   improvements   to  its   manufacturing   and  production
capabilities,  maintenance  of  adequate  inventory  levels to support  expected
sales,  continued support of its research and development programs,  seeking new
distribution  opportunities and focusing sales efforts on high potential sectors
of the drugs of abuse testing market.


                                       23
<PAGE>


Effect of Recent Accounting Pronouncements

      In December 2003, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 132R ("FAS
132R"), "Employers' Disclosures about Pensions and Other Postretirement
Benefits". The statement provides disclosures requirements for defined benefit
pension plans and other post-retirement benefit plans. The statement was
effective for annual financial statements with fiscal years ending after
December 15, 2003, and for interim periods beginning after December 15, 2003.
The Company adopted FAS 132R during the year ended December 31, 2004. The
adoption of FAS 132R did not have any impact on the Company's operating results
or financial position.

      In December 2003, the FASB published a revision to Interpretation  No. 46,
"Consolidation  of Variable  Interest  Entities" ("FIN 46R"), to clarify some of
the provisions of the original  interpretation,  and to exempt certain  entities
from its requirements. Under the revised guidance, there are new effective dates
for companies that have interests in structures that are commonly referred to as
special-purpose  entities.  The rules are effective in financial  statements for
periods  ending  after  March 15,  2004.  FIN 46R did not impact  the  Company's
operating  results or financial  position  because the Company does not have any
variable interest entities.

      In March 2004, the Emerging Issues Task Force ("EITF") reached a consensus
on Issue No. 03-1,  "The  Meaning of  Other-Than-Temporary  Impairments  and Its
Application  to  Certain  Investments"  ("EITF  03-1").  EITF  03-1  provides  a
three-step   impairment   model  for   determining   whether  an  investment  is
other-than-temporarily  impaired  and  requires  the Company to  recognize  such
impairments  as  an  impairment  loss  equal  to  the  difference   between  the
investment's  cost and  fair  value  at the  reporting  date.  The  guidance  is
effective for the Company  during the first quarter of fiscal 2005.  The Company
does not believe that the adoption of EITF 03-1 will have a  significant  effect
on its financial statements.

      In May  2004,  the FASB  issued  Staff  Position  106-2,  "Accounting  and
Disclosure  Requirements Related to the Medicare Prescription Drug,  Improvement
and  Modernization  Act of 2003"  ("FAS  106-2),  providing  final  guidance  on
accounting for the Medicare Prescription Drug, Improvement and Modernization Act
of 2003 ("the Act").  The Company adopted the provisions of FAS 106-2 during the
year ended  December  31,  2004.  FASB Staff  Position  106-2 did not impact the
Company's operating results or financial position.

      In November  2004,  the FASB issued  SFAS No. 151  "Inventory  Costs -- An
Amendment of ARB No. 43, Chapter 4" ("FAS 151"). FAS 151 clarifies that abnormal
amounts of idle facility expense, freight, handling costs and spoilage should be
expensed as incurred  and not included in  overhead.  Further,  FAS 151 requires
that allocation of fixed and production  facilities overhead to conversion costs
should be based on normal capacity of the production facilities.  The provisions
in FAS 151 are  effective  for  inventory  costs  incurred  during  fiscal years
beginning after June 15, 2005. The Company does not believe that the adoption of
FAS 151 will have a significant effect on its financial statements.

      In November  2004,  the FASB issued SFAS No. 153 "Exchanges of Nonmonetary
Assets -- An  Amendment of APB Opinion No. 29" ("FAS 153").  The  provisions  of
this statement are effective for nonmonetary asset exchanges occurring in fiscal
periods  beginning after June 15, 2005. This statement  eliminates the exception
to fair value for exchanges of similar  productive assets and replaces it with a
general  exception  for  exchange  transactions  that  do  not  have  commercial
substance  --  that  is,  transactions  that  are  not  expected  to  result  in
significant  changes in the cash flows of the reporting entity. The Company does
not believe that the adoption of FAS 153 will have a  significant  effect on its
financial statements.


                                       24
<PAGE>


      In  November  2004,  the  FASB's  Emerging  Issues  Task  Force  reached a
consensus on Issue No. 03-13,  "Applying the  Conditions in Paragraph 42 of FASB
Statement  No. 144 in  Determining  Whether to Report  Discontinued  Operations"
("EITF  03-13").  The guidance should be applied to a component of an enterprise
that is either  disposed  of or  classified  as held for sale in fiscal  periods
beginning  after  December  15,  2004.  The Company  does not  believe  that the
adoption  of  EITF  03-13  will  have a  significant  effect  on  its  financial
statements.

      In  December   2004,  the  FASB  issued  Staff  Position  No.  FAS  109-2,
"Accounting  and  Disclosure  Guidance  for the  Foreign  Earnings  Repatriation
Provision  within the American Jobs Creation Act of 2004" ("FAS  109-2").  Staff
Position  No. FAS 109-2  requires  the Company to disclose  the total  effect on
income tax expense (or benefit) for amounts that have been recognized  under the
repatriation  provision.  For annual financial statements,  any effect should be
shown  separately in the same place (either on the face of the income  statement
or in the  footnotes)  that the  amounts  of  current  and  deferred  taxes  are
disclosed  for the period.  The Company  does not believe  that the  adoption of
Staff  Position No. FAS 109-2 will have a  significant  effect on its  financial
statements.

      In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based
Payment,  ("SFAS  No.  123(R)"),  which  amends  SFAS No.  123,  Accounting  for
Stock-Based  Compensation,  and  supersedes  APB Opinion No. 25,  Accounting for
Stock Issued to Employees.  SFAS No. 123(R) requires  compensation expense to be
recognized  for all  share-based  payments  made to employees  based on the fair
value  of the  award at the  date of  grant,  eliminating  the  intrinsic  value
alternative allowed by SFAS No. 123. Generally, the approach to determining fair
value under the  original  pronouncement  has not  changed.  However,  there are
revisions to the  accounting  guidelines  established,  such as  accounting  for
forfeitures,  which will change our  accounting  for  stock-based  awards in the
future.


      SFAS No.  123(R)  must be  adopted in the first  interim or annual  period
beginning after December 15, 2005. The statement  allows  companies to adopt its
provisions using either of the following transition alternatives:


      (i)   The modified prospective method, which results in the recognition of
      compensation  expense using SFAS 123(R) for all share-based awards granted
      after the effective date and the recognition of compensation expense using
      SFAS  123  for all  previously  granted  share-based  awards  that  remain
      unvested at the effective date; or


      (ii)  The modified  retrospective  method,  which  results in applying the
      modified prospective method and restating prior periods by recognizing the
      financial statement impact of share-based  payments in a manner consistent
      with the pro forma  disclosure  requirements of SFAS No. 123. The modified
      retrospective  method  may be applied to all prior  periods  presented  or
      previously reported interim periods of the year of adoption.


      We  currently  plan to adopt SFAS No.  123(R) on January 1, 2006 using the
modified  prospective  method.  Because we  currently  account  for  share-based
payments to our  employees  using the  intrinsic  value  method,  our results of
operations  have not included the  recognition of  compensation  expense for the
issuance  of  stock  option  awards.  Had we  applied  the  fair-value  criteria
established by SFAS No. 123(R) to previous  stock option  grants,  the impact to
our results of operations  would have  approximated  the impact of applying SFAS
No. 123, which was a reduction to net income of approximately  $995,000 in 2004,
$1,018,000 in 2003 and $881,000 in 2002.  The impact of applying SFAS No. 123 to
previous  stock  option  grants for the year  ended  December  31,  2005 will be
approximately  $589,000.  We currently  expect the  recognition of  compensation
expense for stock options issued and  outstanding at December 31, 2004 to reduce
our 2006 net income by approximately $149,000.


                                       25
<PAGE>

      SFAS No. 123(R) also requires the benefits of tax  deductions in excess of
recognized  compensation  cost to be reported as a financing  cash flow,  rather
than as an  operating  cash flow as  required  under  current  literature.  This
requirement  will reduce our net  operating  cash  inflows and  increase our net
financing cash flows in periods after  adoption.  The impact that this change in
reporting  will have on future periods cannot be determined at this time because
the benefit  recognized is dependent upon  attributes  that vary for each option
exercise.


      ITEM 7.  FINANCIAL STATEMENTS

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


      ITEM 8.  CHANGES IN AND  DISAGREEMENTS  WITH ACCOUNTANTS ON ACCOUNTING AND
               FINANCIAL DISCLOSURE

      On  August  10,   2004,   PricewaterhouseCoopers   LLP   resigned  as  the
Registrant's  independent registered public accounting firm. (See Form 8-K filed
August 10, 2004, as amended and incorporated herein by reference.)

      On  October  14,  2004  the  Registrant  engaged  UHY LLP to  serve as the
Registrant's  independent  registered public accounting firm for the fiscal year
ending December 31, 2004. (See Form 8-K filed October 18, 2004, and incorporated
herein by reference.)

      ITEM 8A. CONTROLS AND PROCEDURES

      On February  11,  2005,  American  Bio Medica  Corporation  carried out an
evaluation,  under  the  supervision  and with the  participation  of the  Chief
Financial Officer and the Chief Executive Officer, to evaluate the effectiveness
of the disclosure  controls and  procedures (as defined in Rule 13a-15(e)  under
the Securities Exchange Act of 1934, as amended ("Exchange Act")). Based on that
evaluation,  the Chief Financial  Officer and the Chief  Executive  Officer have
concluded  that  American  Bio  Medica  Corporation's  disclosure  controls  and
procedures as of December 31, 2004,  are effective  for  recording,  processing,
summarizing, and reporting information that is required to be disclosed in their
reports under the Exchange Act, as amended, within the time periods specified in
the Securities and Exchange Commission's rules and forms.

      There were no  changes  in  American  Bio  Medica  Corporation's  internal
controls over financial reporting during the fourth quarter that have materially
affected,  or are reasonably  likely to materially  affect,  American Bio Medica
Corporation's  internal control over financial  reporting.  The Company plans to
hire  additional  finance  personnel in 2005 to assist with ensuring  compliance
with the  internal  control and  financial  reporting  requirements  of Sarbanes
Oxley Act of 2002.

PART III

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

      The information required by this item is contained in our definitive Proxy
Statement with respect to our Annual Meeting of Shareholders for the fiscal year
ending December 31, 2004, under the captions  "Security  Ownership of Management
and  Certain  Beneficial  Owners",  "Directors,  Executive  Officers  and Senior
Management", "Audit Committee", "Audit Committee Financial Expert", "Election of
Directors--Nominees", "Section 16(a) Beneficial Ownership Reporting Compliance",
and "Code of Ethics" and is incorporated herein by reference.


                                       27
<PAGE>

      ITEM 10. EXECUTIVE COMPENSATION

      The information required by this item is contained in our definitive Proxy
Statement with respect to our Annual Meeting of Shareholder  for the fiscal year
ending December 31, 2004,  under the caption  "Executive  Compensation",  and is
incorporated herein by reference.


      ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      The information required by this item is contained in our definitive Proxy
Statement with respect to the Annual Meeting of Shareholders for the fiscal year
ending December 31, 2004,  under the caption  "Security  Ownership of Management
and Certain Beneficial Owners", and is incorporated herein by reference.

      ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      The information required by this item is contained in our definitive Proxy
Statement with respect to the Annual Meeting of Shareholder  for the fiscal year
ending December 31, 2004, under the caption "Certain  Relationships  and Related
Transactions", and is incorporated herein by reference.


      ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

      (a)   Exhibits

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


      (b)   Reports on Form 8-K

            On October 18, 2004,  the Company filed a current report on Form 8-K
      related  to the  appointment  of  UHY  LLP to  serve  as the  Registrant's
      independent  registered  public accounting firm for the fiscal year ending
      December 31, 2004.

            On November 5, 2004,  the Company filed a current report on Form 8-K
      related to a notice from the Nasdaq  Stock  Market  informing  the Company
      that for the  last 30  consecutive  business  days,  the bid  price of the
      Company's  common  stock  has  closed  below the  minimum  $1.00 per share
      requirement for continued inclusion under Marketplace Rule 4310(c)(4).


      ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

            The information required by this item is contained in our definitive
      Proxy  Statement with respect to the Annual Meeting of Shareholder for the
      fiscal year  ending  December  31,  2004,  under the caption  "Independent
      Accountants", and is incorporated herein by reference.


                                       28
<PAGE>

AMERICAN BIO MEDICA CORPORATION

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/ Keith E. Palmer
                                               ---------------------------------
                                               Keith E. Palmer
                                               Chief Financial Officer
                                               (Principal Accounting Officer)
                                               Executive Vice President, Finance

Date: March 31, 2005


      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 March 31, 2005:

/s/ Stan Cipkowski                    Chief Executive Officer & Director
------------------------------
Stan Cipkowski                        (Principal Executive Officer)

/s/ Edmund Jaskiewicz                 Chairman and President
------------------------------
Edmund Jaskiewicz

/s/Richard P. Koskey                  Director
------------------------------
Richard P. Koskey

/s/ Daniel W. Kollin                  Director
------------------------------
Daniel W. Kollin

/s/ Anthony G. Costantino             Director
------------------------------
Anthony G. Costantino

/s/ Carl A. Florio                    Director
------------------------------
Carl A. Florio

/s/ Keith E. Palmer                   Chief Financial Officer
------------------------------
Keith E. Palmer                       (Principal Financial Officer)
                                      Executive Vice President, Finance


                                       S-1
<PAGE>

AMERICAN BIO MEDICA CORPORATION




INDEX

                                                                            PAGE
                                                                            ----


FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm                      F-2

Report of prior Independent Registered Public Accounting Firm                F-3

Balance sheets                                                               F-4

Statements of operations                                                     F-5

Statements of changes in stockholders' equity                                F-6

Statements of cash flows                                                     F-7

Notes to financial statements                                                F-8




                                       F-1


<PAGE>

            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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 December 31, 2004,  and the related  statements of operations,
changes in  stockholders'  equity  and cash flows for the year then ended  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

We conducted our audit in accordance  with the auditing  standards of the Public
Company Accounting Oversight Board (United States). 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
audit provides a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of American Bio Medica Corporation
as of December 31, 2004,  and the results of its  operations  and its cash flows
for the year then  ended in  conformity  with  accounting  principles  generally
accepted in the United States of America.


/s/ UHY LLP
-----------------

Albany, New York
February 11, 2005

                                      F-2
<PAGE>

            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

In our opinion,  the 2003 financial  statements listed in the accompanying index
present fairly, in all material respects, the financial position of American Bio
Medica  Corporation  at December 31, 2003, and the results of its operations and
its cash flows for the year then ended in conformity with accounting  principles
generally accepted in the United States of America.  These financial  statements
are the  responsibility of the Company's  management;  our  responsibility is to
express  an  opinion  on  these  financial  statements  based on our  audit.  We
conducted our audit of these  statements in accordance with the standards of the
Public Company  Accounting  Oversight  Board (United  States).  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,  assessing the  accounting  principles
used and  significant  estimates made by management,  and evaluating the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.


/s/ PricewaterhouseCoopers LLP
------------------------------

Albany, New York
May 7, 2004

                                      F-3
<PAGE>

AMERICAN BIO MEDICA CORPORATION


Balance Sheets

<TABLE>
<CAPTION>
                                                      December 31,    December  31,
                                                          2004             2003
                                                      ------------    ------------
<S>                                                   <C>             <C>
               ASSETS
Current assets
  Cash and cash equivalents                           $    995,000    $    942,000
  Accounts receivable - net of allowance for
   doubtful accounts of $105,000 at December 31,
   2004 and 2003                                         1,108,000       1,253,000
  Other receivables                                                          8,000
  Inventory - net of reserve for slow moving and
   obsolete inventory of $100,000 and $0 at
   December 31, 2004 and 2003 respectively               4,338,000       3,049,000
  Prepaid expenses                                          70,000          78,000
                                                      ------------    ------------
  Total current assets                                   6,511,000       5,330,000

Property, plant and equipment, net                       1,859,000       1,441,000
Other assets                                                 5,000           7,000
                                                      ------------    ------------

   Total Assets                                       $  8,375,000    $  6,778,000
                                                      ============    ============
        LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
  Accounts payable                                    $  1,358,000    $    737,000
  Accrued expenses                                         176,000         153,000
  Wages payable                                            243,000         375,000
  Current portion of long term debt                         71,000          25,000
  Current portion of unearned grant                          6,000           8,000
                                                      ------------    ------------
  Total current liabilities                              1,854,000       1,298,000

Long-term debt                                             629,000         651,000
Unearned grant                                              54,000          67,000
                                                      ------------    ------------
  Total liabilities                                      2,537,000       2,016,000

  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;
    50,000,000 shares authorized; 21,282,268 shares
    issued and outstanding at December 31, 2004 and
    20,664,151 shares issued and outstanding at
    December 31, 2003                                      213,000         207,000
  Additional paid-in capital                            18,763,000      17,959,000
  Accumulated deficit                                  (13,138,000)    (13,404,000)
                                                      ------------    ------------

    Total stockholders' equity                           5,838,000       4,762,000
                                                      ------------    ------------

    Total liabilities and stockholders' equity        $  8,375,000    $  6,778,000
                                                      ============    ============
</TABLE>


The accompanying notes are an integral part of the financial statements


                                      F-4
<PAGE>

AMERICAN BIO MEDICA CORPORATION


Statements of Operations

                                                For the Year       For the Year
                                                   Ended              Ended
                                               December 31,        December 31,
                                                   2004                2003
                                               ------------        ------------

Net sales                                      $ 12,241,000        $ 12,484,000

Cost of goods sold                                5,647,000           5,477,000
                                               ------------        ------------

Gross profit                                      6,594,000           7,007,000
                                               ------------        ------------

Operating expenses:
  Research and development                          606,000             639,000
  Selling and marketing                           2,818,000           2,784,000
  General and administrative                      2,584,000           2,705,000
  Employee severance                                240,000
                                               ------------        ------------

Operating income                                    346,000             879,000
                                               ------------        ------------

Other income (expense):
  Other income                                       14,000             198,000
  Interest income                                     8,000              32,000
  Interest expense                                  (53,000)            (78,000)
                                               ------------        ------------


Income before tax                                   315,000           1,031,000

Income tax                                           49,000
                                               ------------        ------------

Net income after tax                           $    266,000        $  1,031,000
                                               ============        ============

Basic and diluted income per common            $        .01        $        .05
                                               ============        ============
share


Weighted average number of shares
  outstanding - basic                            21,187,000          20,624,000
Dilutive effect of stock options and
  warrants                                          556,000             644,000
                                               ------------        ------------
Weighted average number of shares
  outstanding -diluted                           21,743,000          21,268,000
                                               ============        ============


The accompanying notes are an integral part of the financial statements


                                      F-5
<PAGE>

AMERICAN BIO MEDICA CORPORATION



Statements of Changes in Stockholders' Equity

<TABLE>
<CAPTION>
                                          Common Stock                             Additional
                                  ----------------------------       Treasury        Paid-in       Accumulated
                                      Shares         Amount           Stock          Capital         Deficit           Total
                                  ------------    ------------    ------------     -----------    ------------     -----------
<S>                                 <C>           <C>             <C>              <C>            <C>              <C>
Balance-December 31, 2002           20,609,548    $    206,000    $   (239,000)    $17,788,000    $(14,435,000)    $ 3,320,000

Stock Option / Warrant
  Exercise                              54,603           1,000                          61,000                          62,000
Treasury shares sold                                                   239,000          40,000                         279,000
Non-cash compensation                                                                   70,000                          70,000
Net Income                                                                                           1,031,000       1,031,000
                                  --------------------------------------------------------------------------------------------
Balance-December 31, 2003           20,664,151    $    207,000    $          0     $17,959,000    $(13,404,000)    $ 4,762,000
                                  --------------------------------------------------------------------------------------------
Stock Option / Warrant
  Exercise                             618,117           6,000                         575,000                         581,000
Warrants issued for financial
  advisory services                                                                    199,000                         199,000
Non-cash compensation                                                                   30,000                          30,000
Net Income                                                                                             266,000         266,000
                                  --------------------------------------------------------------------------------------------
Balance-December 31, 2004           21,282,268    $    213,000    $          0     $18,763,000    $(13,138,000)    $ 5,838,000
                                  ============================================================================================
</TABLE>


The accompanying notes are an integral part of the financial statements


                                      F-6
<PAGE>

AMERICAN BIO MEDICA CORPORATION


Statements of Cash Flows

<TABLE>
<CAPTION>
                                                         Year Ended      Year Ended
                                                        December 31,    December 31,
                                                            2004            2003
                                                        -----------     -----------
<S>                                                     <C>             <C>
Cash flows from operating activities:
 Net Income                                             $   266,000     $ 1,031,000
 Adjustments to reconcile net income:
    Depreciation                                            269,000         168,000
    Provision for bad debts                                  51,000          61,000
    Provision for slow moving and obsolete inventory        100,000
    Compensatory stock and stock options                    229,000         106,000
    Unearned grant                                          (15,000)
    Gain on sale of land                                                    (30,000)
    Changes in:
       Accounts receivable                                   94,000        (239,000)
       Other receivables and other assets                     9,000          22,000
       Inventory                                         (1,389,000)       (254,000)
       Prepaid expenses                                       8,000         (25,000)
       Accounts payable                                     621,000        (171,000)
       Accrued expenses                                      23,000        (147,000)
       Wages payable                                       (132,000)        162,000
                                                        -----------     -----------
          Net cash provided by operating activities         134,000         684,000
                                                        -----------     -----------

Cash flows from investing activities:
 Purchase of property, plant and equipment                 (601,000)       (272,000)
 Proceeds from sale of land                                                 150,000
                                                        -----------     -----------

          Net cash used in investing activities            (601,000)       (122,000)
                                                        -----------     -----------

Cash flows from financing activities:
 Proceeds from convertible grant                                             25,000
 Proceeds from sale of treasury stock                                       279,000
 Proceeds from stock option exercise                         53,000          26,000
 Proceeds from warrant exercise                             528,000
 Payments on debt financing                                 (61,000)       (171,000)
 Repayment of capital lease obligations                                     (10,000)
                                                        -----------     -----------
          Net cash provided by financing activities         520,000         149,000
                                                        -----------     -----------

          Net increase in cash and cash equivalents          53,000         711,000
Cash and cash equivalents - beginning of period             942,000         231,000
                                                        -----------     -----------
Cash and cash equivalents - end of period               $   995,000     $   942,000
                                                        ===========     ===========

Supplemental disclosures of cash flow information:
 Cash paid during the year for:

     Interest                                           $    74,000     $    78,000

Noncash activities:
  Note payable for purchase of equipment                     85,000
</TABLE>


The accompanying notes are an integral part of the financial statements


                                      F-7
<PAGE>


AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
December 31, 2004

NOTE A - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES

The Company:

      American Bio Medica Corporation ("ABMC" or 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.

      For the years ended  December 31, 2004 and 2003 the Company had net income
of $266,000 and $1,031,000  respectively  and had net cash provided by operating
activities of $134,000 in 2004 and $684,000 in 2003. The Company  increased cash
balances  by $53,000  during the  twelve  months  ended  December  31,  2004 and
increased cash balances by $711,000  during the twelve months ended December 31,
2003.  Though sales  decreased  slightly in 2004 compared to 2003,  control over
expenses enabled the Company to improve its liquidity.  However,  as of December
31, 2004, the Company had an accumulated deficit of ($13,138,000). Historically,
the Company has been largely  dependent on its ability to sell additional shares
of its common stock to fund its operations.

      The Company  believes that its current cash  balances,  and cash generated
from future operations will be sufficient to fund operations for the next twelve
months.  If cash  generated  from  operations  is  insufficient  to satisfy  the
Company's working capital and capital expenditure requirements,  the Company may
be required to sell additional equity or obtain  additional  credit  facilities.
There is no assurance  that such financing will be available or that the Company
will be able to complete financing on satisfactory terms, if at all.

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]   Accounts Receivable:

      Accounts  receivable  consists of trade receivables due from customers for
the sale of our products.  Payment  terms vary on a customer by customer  basis,
and  generally  range from cash on  delivery to net,  90 days.  Receivables  are
considered past due when it has exceeded its payment terms.  Accounts receivable
have been reduced by an estimated  allowance for doubtful accounts.  We estimate
our allowance for doubtful accounts based on facts,  circumstances and judgments
regarding each  receivable.  Customer  payment history and patterns,  historical
losses, economic and political conditions,  trends and individual  circumstances
are  among  the items  considered  when  evaluating  the  collectibility  of the
receivables. Accounts are reviewed regularly for collectability and those deemed
uncollectable are written off.


[3]   Inventory:

      Inventory is stated at the lower of cost or market. Labor and overhead
are determined on an average cost basis and raw materials are determined on a
first-in-first-out method. A $100,000 reserve for slow moving and obsolete
inventory was established at December 31, 2004.

[4]   Income taxes:

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


                                      F-8
<PAGE>

AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
December 31, 2004

[5]   Depreciation:

      Property,  plant and equipment are depreciated on the straight-line method
over their  estimated  useful  lives;  3-5 years for  equipment and 30 years for
buildings.  Leasehold improvements and capitalized lease assets are amortized by
the straight-line method over the shorter of their estimated useful lives or the
term of the lease.

[6]   Revenue recognition:

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

[7]   Shipping and handling:

      Shipping and handling fees charged to customers are included in net sales,
and shipping and handling  costs incurred by the Company are included in cost of
sales.


[8]   Research and development:

      Research and  development  ("R&D")  costs are charged to  operations  when
incurred. These costs include salaries, benefits, travel, supplies, depreciation
of R&D equipment and other miscellaneous expenses.

[9]   Income per common share:

      Basic income per common share is  calculated by dividing net income by the
weighted average number of outstanding  common shares during the period. For the
year ended  December 31, 2004 diluted net income per share includes the dilutive
effect of 2,684,000  stock  options and 1,695,000  warrants.  For the year ended
December 31, 2003,  diluted net income per share includes the dilutive effect of
2,151,000 stock options and 2,248,000 warrants.

      Potential common shares outstanding as of December 31, 2004 and 2003:


                                 December 31, 2004    December 31, 2003
                                 -----------------    -----------------

                 Warrants            2,245,920           2,951,703
                 Options             4,149,830           4,722,084

      For the twelve months ended December 31, 2004 the number of securities not
included in the diluted EPS,  because the effect would have been  anti-dilutive,
were  2,016,920.  For the twelve  months  ended  December 31, 2003 the number of
securities  not included in the diluted EPS,  because the effect would have been
anti-dilutive,  were  3,274,920.  The securities  would have been  anti-dilutive
because the exercise price of the securities was greater than the average market
price of the Company's common shares for each of the fiscal years ended December
31, 2004 and 2003.


[10]  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 affect the reported amounts of
assets and  liabilities  and disclosure of contingent  assets and liabilities at


                                      F-9
<PAGE>

AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
December 31, 2004

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.

[11]  Impairment of long-lived assets:

      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.

[12]  Financial Instruments:

      The carrying amounts of cash and cash equivalents,  accounts  receivable -
net, other  receivables,  accounts payable,  accrued expenses  approximate their
fair value based on the short term nature of those items.

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

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

[13]  Accounting for stock-based compensation:


      ABMC has accounted for our  stock-based  compensation  using the intrinsic
value method  prescribed by APB Opinion No. 25,  Accounting  for Stock Issued to
Employees,  as amended.  Pursuant to APB Opinion No. 25, we have not  recognized
compensation cost for our stock options because the number of shares potentially
issuable and the exercise price,  which is equal to the fair market value of the
underlying  stock on the date of grant,  are fixed.  In accordance with SFAS No.
123 (revised 2004), Share Based Payment, we will begin to recognize compensation
expense for stock options on January 1, 2006. The weighted average fair value of
options  granted  during the twelve months ended  December 31, 2004 and 2003 was
approximately $.98 and $0.91, respectively.

      The  following  schedule  reflects  the pro forma impact on net income and
earnings per common share of  accounting  for our stock option grants using SFAS
No. 123,  Accounting  for  Stock-Based  Compensation,  which would result in the
recognition  of  compensation  expense for the fair value of stock option grants
(in millions, except per share amounts):



                                            Year ended        Year ended
                                           December 31,      December 31,
                                              2004              2003
                                           ------------------------------

      Net Income/(loss):
           As reported                     $ 266,000         $1,031,000
           Pro forma                        (729,000)            13,000

      Basic and fully
      diluted income/(loss) per share

         As reported                       $     .01         $      .05
          Pro forma                        $    (.03)        $      .00



                                      F-10
<PAGE>

AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
December 31, 2004


                                         Year ended       Year ended
                                        December 31,     December 31,
                                           2004             2003
                                        -----------------------------

      Net Income, as reported           $  266,000       $1,031,000
       Stock-based employee
       compensation expense,
       determined under fair value
       based method for all awards      $  995,000       $1,018,000

      Proforma net income/(loss)        $ (729,000)      $   13,000

      The fair value of our stock option grants in the table above was estimated
utilizing the Black-Scholes option-pricing model. The following weighted average
assumptions were used: dividend yield of zero percent; risk-free interest rates,
which vary for each grant,  ranging  from 4.35% to 6.04%;  expected  life of ten
years  for all  grants;  and stock  price  volatility  ranging  from 79% to 92%.
Black-Scholes  is a formula that  calculates an estimated value of stock options
based on appreciation and interest rate assumptions.  Therefore,  the fair value
calculation of a stock option using Black-Scholes is not necessarily  indicative
of the actual value of a stock option.

      We are in the  process  of  assessing  the  impact  of a  recently  issued
accounting pronouncement,  FAS 123(R) on our accounting for share-based payments
to employees. In accordance with the new accounting pronouncement, ABMC plans to
begin recognition of compensation expense beginning January 1, 2006.

[14]  Concentration of credit risk:

      The Company  sells its drug testing  products  primarily to United  States
customers  and  distributors.  Credit is extended  based on an evaluation of the
customer's  financial  condition.  At December 31, 2003, one customer represents
11% of gross  accounts  receivable.  No  customer  represents  more  than 10% of
accounts  receivable-net  at  December  31,  2004.  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.

[15]  Reporting comprehensive income:

      The Company reports comprehensive income 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.  For the years ended December 31,
2004 and 2003 comprehensive income was the same as net income.

[16]  Reclassifications:

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

[17]  New accounting pronouncements:

      In December 2003, the Financial Accounting Standards Board ("FASB") issued
Statement  of Financial  Accounting  Standards  ("SFAS") No. 132R ("FAS  132R"),
"Employers' Disclosures about Pensions and Other Postretirement  Benefits".  The
statement  provides  disclosures  requirements for defined benefit pension plans
and other post-retirement  benefit plans. The statement was effective for annual
financial  statements  with fiscal years ending after December 15, 2003, and for
interim periods  beginning after December 15, 2003. The Company adopted FAS 132R
during the year ended  December 31, 2004.  The adoption of FAS 132R did not have


                                      F-11
<PAGE>

AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
December 31, 2004

any impact on the Company's operating results or financial position.

      In December 2003, the FASB published a revision to Interpretation  No. 46,
"Consolidation  of Variable  Interest  Entities" ("FIN 46R"), to clarify some of
the provisions of the original  interpretation,  and to exempt certain  entities
from its requirements. Under the revised guidance, there are new effective dates
for companies that have interests in structures that are commonly referred to as
special-purpose  entities.  The rules are effective in financial  statements for
periods  ending  after  March 15,  2004.  FIN 46R did not impact  the  Company's
operating  results or financial  position  because the Company does not have any
variable interest entities.

      In March 2004, the Emerging Issues Task Force ("EITF") reached a consensus
on Issue No. 03-1,  "The  Meaning of  Other-Than-Temporary  Impairments  and Its
Application  to  Certain  Investments"  ("EITF  03-1").  EITF  03-1  provides  a
three-step   impairment   model  for   determining   whether  an  investment  is
other-than-temporarily  impaired  and  requires  the Company to  recognize  such
impairments  as  an  impairment  loss  equal  to  the  difference   between  the
investment's  cost and  fair  value  at the  reporting  date.  The  guidance  is
effective for the Company  during the first quarter of fiscal 2005.  The Company
does not believe that the adoption of EITF 03-1 will have a  significant  effect
on its financial statements.

      In May  2004,  the FASB  issued  Staff  Position  106-2,  "Accounting  and
Disclosure  Requirements Related to the Medicare Prescription Drug,  Improvement
and  Modernization  Act of 2003"  ("FAS  106-2),  providing  final  guidance  on
accounting for the Medicare Prescription Drug, Improvement and Modernization Act
of 2003 ("the Act").  The Company adopted the provisions of FAS 106-2 during the
year ended  December  31,  2004.  FASB Staff  Position  106-2 did not impact the
Company's operating results or financial position.

      In November  2004,  the FASB issued  SFAS No. 151  "Inventory  Costs -- An
Amendment of ARB No. 43, Chapter 4" ("FAS 151"). FAS 151 clarifies that abnormal
amounts of idle facility expense, freight, handling costs and spoilage should be
expensed as incurred  and not included in  overhead.  Further,  FAS 151 requires
that allocation of fixed and production  facilities overhead to conversion costs
should be based on normal capacity of the production facilities.  The provisions
in FAS 151 are  effective  for  inventory  costs  incurred  during  fiscal years
beginning after June 15, 2005. The Company does not believe that the adoption of
FAS 151 will have a significant effect on its financial statements.

      In November  2004,  the FASB issued SFAS No. 153 "Exchanges of Nonmonetary
Assets -- An  Amendment of APB Opinion No. 29" ("FAS 153").  The  provisions  of
this statement are effective for nonmonetary asset exchanges occurring in fiscal
periods  beginning after June 15, 2005. This statement  eliminates the exception
to fair value for exchanges of similar  productive assets and replaces it with a
general  exception  for  exchange  transactions  that  do  not  have  commercial
substance  --  that  is,  transactions  that  are  not  expected  to  result  in
significant  changes in the cash flows of the reporting entity. The Company does
not believe that the adoption of FAS 153 will have a  significant  effect on its
financial statements.

      In  November  2004,  the  FASB's  Emerging  Issues  Task  Force  reached a
consensus on Issue No. 03-13,  "Applying the  Conditions in Paragraph 42 of FASB
Statement  No. 144 in  Determining  Whether to Report  Discontinued  Operations"
("EITF  03-13").  The guidance should be applied to a component of an enterprise
that is either  disposed  of or  classified  as held for sale in fiscal  periods
beginning  after  December  15,  2004.  The Company  does not  believe  that the
adoption  of  EITF  03-13  will  have a  significant  effect  on  its  financial
statements.

      In  December   2004,  the  FASB  issued  Staff  Position  No.  FAS  109-2,
"Accounting  and  Disclosure  Guidance  for the  Foreign  Earnings  Repatriation
Provision  within the American Jobs Creation Act of 2004" ("FAS  109-2").  Staff
Position  No. FAS 109-2  requires  the Company to disclose  the total  effect on
income tax expense (or benefit) for amounts that have been recognized  under the
repatriation  provision.  For annual financial statements,  any effect should be
shown  separately in the same place (either on the face of the income  statement
or in the  footnotes)  that the  amounts  of  current  and  deferred  taxes  are


                                      F-12
<PAGE>

AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
December 31, 2004

disclosed  for the period.  The Company  does not believe  that the  adoption of
Staff  Position No. FAS 109-2 will have a  significant  effect on its  financial
statements.

      In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based
Payment,  ("SFAS  No.  123(R)"),  which  amends  SFAS No.  123,  Accounting  for
Stock-Based  Compensation,  and  supersedes  APB Opinion No. 25,  Accounting for
Stock Issued to Employees.  SFAS No. 123(R) requires  compensation expense to be
recognized  for all  share-based  payments  made to employees  based on the fair
value  of the  award at the  date of  grant,  eliminating  the  intrinsic  value
alternative allowed by SFAS No. 123. Generally, the approach to determining fair
value under the  original  pronouncement  has not  changed.  However,  there are
revisions to the  accounting  guidelines  established,  such as  accounting  for
forfeitures,  which will change our  accounting  for  stock-based  awards in the
future.

      SFAS No.  123(R)  must be  adopted in the first  interim or annual  period
beginning after December 15, 2005. The statement  allows  companies to adopt its
provisions using either of the following transition alternatives:

      (i)   The modified prospective method, which results in the recognition of
            compensation  expense using SFAS 123(R) for all  share-based  awards
            granted after the effective date and the recognition of compensation
            expense using SFAS 123 for all previously granted share-based awards
            that remain unvested at the effective date; or


      (ii)  The modified  retrospective  method,  which  results in applying the
            modified   prospective   method  and  restating   prior  periods  by
            recognizing the financial  statement impact of share-based  payments
            in a manner consistent with the pro forma disclosure requirements of
            SFAS No. 123.  The modified  retrospective  method may be applied to
            all prior periods  presented or previously  reported interim periods
            of the year of adoption.

      We  currently  plan to adopt SFAS No.  123(R) on January 1, 2006 using the
modified  prospective  method.  Because we  currently  account  for  share-based
payments to our  employees  using the  intrinsic  value  method,  our results of
operations  have not included the  recognition of  compensation  expense for the
issuance  of  stock  option  awards.  Had we  applied  the  fair-value  criteria
established by SFAS No. 123(R) to previous  stock option  grants,  the impact to
our results of operations  would have  approximated  the impact of applying SFAS
No. 123, which was a reduction to net income of approximately  $995,000 in 2004,
$1,018,000 in 2003 and $881,000 in 2002.  The impact of applying SFAS No. 123 to
previous  stock  option  grants for the year  ended  December  31,  2005 will be
approximately  $589,000.  We currently  expect the  recognition of  compensation
expense for stock options issued and  outstanding at December 31, 2004 to reduce
our 2006 net income by approximately $149,000.

      SFAS No. 123(R) also requires the benefits of tax  deductions in excess of
recognized  compensation  cost to be reported as a financing  cash flow,  rather
than as an  operating  cash flow as  required  under  current  literature.  This
requirement  will reduce our net  operating  cash  inflows and  increase our net
financing cash flows in periods after  adoption.  The impact that this change in
reporting  will have on future periods cannot be determined at this time because
the benefit  recognized is dependent upon  attributes  that vary for each option
exercise.


                                      F-13
<PAGE>

AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
December 31, 2004

NOTE B - INVENTORY

      Inventory is comprised of the following:


                                                  December 31,   December 31,
                                                     2004            2003
                                                  ------------   ------------

      Raw Materials                               $ 2,189,000    $ 1,680,000
      Work In Process                               1,967,000      1,072,000
      Finished Goods                                  282,000        297,000
      Reserve for slow moving and obsolete
        inventory                                    (100,000)
                                                  -----------    -----------

                                                  $ 4,338,000    $ 3,049,000
                                                  ===========    ===========

NOTE C - PROPERTY, PLANT AND EQUIPMENT

      In December 2001, the Company  purchased its previously leased facility in
Kinderhook,  N.Y. for $950,000,  including a building and 107 acres of land. The
Company  partially  financed the purchase through mortgage loans with the Hudson
River  Bank  and  Trust  Company  for  $360,000,  the New  York  State  Business
Development  Corporation  for $240,000,  and the Columbia  Economic  Development
Corporation for $120,000.  On March 31, 2003 the Company sold  approximately  85
acres of land at its Kinderhook  headquarters for $150,000 recognizing a gain of
$30,000.

      In April 2004, the Company  entered  executed an $85,000 note payable with
one of it's  manufacturing  suppliers  for the partial cost of a mold to produce
the pieces  needed for the New  Oralstat  product.  The note is a two-year  note
bearing  a fixed  interest  rate of 5% paid  monthly.  The mold is  included  in
property, plant and equipment with a value of $115,000.

      During  2004  the  Company  disposed  of  $14,000  of  fully   depreciated
equipment.

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

                                     December 31,  December 31,
                                         2004          2003
                                     ------------  ------------

      Land                            $  102,000   $  102,000
      Buildings and improvements       1,043,000      911,000
      Manufacturing and warehouse
      equipment                        1,228,000      751,000
      Office equipment                   333,000      269,000
                                      ----------   ----------
                                       2,706,000    2,033,000
      Less accumulated depreciation      847,000      592,000
                                      ----------   ----------
                                      $1,859,000   $1,441,000
                                      ==========   ==========

      Depreciation expense was $269,000 and $168,000 for the year ended December
31, 2004, and the year ended December 31, 2003, respectively.

NOTE D - DUE FROM OFFICER/DIRECTOR/SHAREHOLDER

      At   December   31,   2001,   the   Company   had  a  loan   due  from  an
officer/director/shareholder,  Stan Cipkowski, for $437,000, partially evidenced
by a note bearing interest at 11.5% per annum and payable on demand.  In October
2002, the Board of Directors accepted 200,000 shares of stock from Mr. Cipkowski
in full  satisfaction  of the then  outstanding  loan balance of  $248,000.  The


                                      F-14
<PAGE>

AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
December 31, 2004

closing  stock  price  on the  date of  surrender  was  $1.03  resulting  in the
forgiveness of accrued interest totaling $42,000,  including $30,000 in 2002 and
$12,000 from prior periods. Mr. Cipkowski  surrendered a total of 500,000 shares
between  December 2000 and October 2002, of which 100,000 shares were cancelled.
During 2002 the Company sold 175,000 treasury shares for $235,000. The remaining
225,000 shares surrendered were sold in 2003 for $279,000.

      Mr.  Cipkowski had provided  1,000,000 common shares as collateral for the
loan and was  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 ended December 31, 2002, a
total of 375,000  shares  were  surrendered  completely  satisfying  all amounts
outstanding  on the loan to Mr.  Cipkowski.  Such loan had been reflected in the
Company's financial statements as a reduction of stockholder's equity.

NOTE E - LONG TERM DEBT

      Long term debt at December 31, 2004 and December 31, 2003 consisted of the
following:

                                                    December 31,   December 31,
                                                        2004           2003
                                                    ------------   ------------
      Hudson River Bank and Trust Co.:
         Mortgage payable in equal monthly
         installments of $3,209 including
         interest at 8.00% through January 1,
         2012 with a final lump sum payment of
         $255,000 at maturity, collateralized by
         the building and land                       $ 337,000      $ 347,000
      New York Business Development Corporation:
         Mortgage payable in equal monthly
         installments of $1,996 including
         interest at 7.92% through January 1,
         2012 with a final lump sum payment of
         $164,000 at maturity, collateralized by
         the building and land, equipment, and
         furnitures and fixtures                       224,000        230,000
      Columbia Economic Development Corporation:
         Mortgage payable in equal monthly
         installments of $1,159 including
         interest at 3.00% collateralized by
         building and land through January 1,
         2012                                           88,000         99,000
      Modern Mold and Tool:
         Note payable in equal monthly
         installments of $3,729 including
         interest at 5.00% through
         February 1, 2006                               51,000              0
                                                     ---------      ---------
                                                       700,000        676,000
      Less current portion                             (71,000)       (25,000)
                                                     ---------      ---------
      Non-current portion                            $ 629,000      $ 651,000
                                                     =========      =========

      At December 31, 2004,  the following are the  maturities of long-term debt
for each of the next five years:


                                 2005            $ 71,000
                                 2006              36,000
                                 2007              30,000
                                 2008              33,000
                                 2009              35,000
                           Thereafter             495,000
                                                 --------
                                                 $700,000
                                                 ========

      The  Company  signed an  uncollateralized  note  payable  for  $150,000 on
December 31, 2002 to Fortius Capital.  In June 2003, Donal Carroll,  a principal
at Fortius Capital joined the board of directors and later that year, in October
2003, Mr. Carroll was appointed Chief Executive Officer of ABMC. Mr. Carroll was
subsequently  removed  from the  position  of Chief  Executive  Officer  and his


                                      F-15
<PAGE>

AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
December 31, 2004

employment was terminated in January 2004. He remained a member of the Company's
Board of Directors  until his  resignation  in June 2004. The funds were used to
settle a litigation that had been  outstanding  since 1999. The note was payable
in equal monthly  installments of $12,996 including  interest at a rate of 7.25%
per annum through  December 31, 2003.  The note was satisfied in full during the
year ended December 31, 2003.

NOTE F - INCOME TAXES

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


                                               Year Ended         Year Ended
                                           December 31, 2004   December 31, 2003
                                           -----------------   -----------------
      Tax  (benefit)/expense  at federal
        statutory rate                            34%                34%
      State tax (benefit)/expense,  net
        of federal tax effect                      5                  5
      Minimum taxes and other                     16                  0
      Valuation allowance                        (39)               (39)
                                                 ---                ---
      Effective income tax rate                   16%                 0%
                                                 ===                ===


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

                                            December 31,      December 31,
                                                2004              2003
                                            ------------      ------------

      Inventory                             $    28,000       $    21,000
      Inventory reserve                          39,000
      Stock based compensation                  461,000           461,000
      Allowance for doubtful accounts            41,000            41,000
      Property, plant, and equipment           (171,000)         (132,000)
      Capital losses                             46,000            73,000
      Accrued expenses                                             94,000
      Net operating loss carry-forward        3,489,000         3,549,000
                                            -----------       -----------
      Total gross deferred tax assets         3,933,000         4,107,000
      Less valuation allowance               (3,933,000)       (4,107,000)
                                            -----------       -----------
      Net deferred tax assets               $        --       $        --
                                            ===========       ===========


      The  valuation  allowance  for deferred tax assets as of December 31, 2004
and 2003 was  $3,972,000  and  $4,107,000,  respectively.  The net change in the
valuation  allowance was a decrease of $135,000 for the year ended  December 31,
2004.

      At  December  31,  2004 the  Company  has  Federal  and New York state net
operating  loss  carry  forwards  for  income  tax  purposes  of   approximately
$9,046,000,  which begin to expire in 2009. The Company has federal and New York
state capital losses of approximately $118,000, which begin to expire in 2005.

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

      The Company's  ability to utilize the operating loss carry forwards may be
subject to an annual limitation in future periods pursuant to Section 382 of the


                                      F-16
<PAGE>

AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
December 31, 2004

Internal Revenue Code of 1986, as amended, if future changes in ownership occur.

NOTE G - OTHER INCOME


      Other  income for the year ended 2004 is  primarily  comprised  of amounts
earned from a grant of $75,000 received from the Columbia  Economic  Development
Corporation  during 2002 and 2003. The grant is convertible to a loan based upon
a percentage of the grant  declining  from 90% of the grant amount in 2003 to 0%
in 2013. The grant is convertible to a loan only if the employment levels in the
Kinderhook  facility  drop below 45 employees  at any time during the year.  The
employment levels in the Kinderhook facility were 74 and 68 at December 31, 2004
and 2003  respectively.  Other  income  in 2003 was  comprised  of an  insurance
settlement  received  relating  to  damage  to a  heating,  ventilating  and air
conditioning  unit at the  Kinderhook  facility  and the  reversal  of a royalty
accrual resulting from an agreement reached with a manufacturing  partner.  Both
amounts are non-recurring.


NOTE H - STOCKHOLDERS' EQUITY

[1]   Stock option plans:

      The Company  adopted the Fiscal 1997  Nonstatutory  Stock Option Plan (the
"1997 Plan"),  the Fiscal 1998 Nonstatutory  Plan (the "1998 Plan"),  the Fiscal
2000 Nonstatutory Stock Option Plan (the "2000 Plan"), and the 2001 Nonstatutory
Stock Option Plan (the "2001 Plan").  The 1997 Plan provides for the granting of
options to purchase up to 2,000,000  shares of common  stock,  the 1998 Plan and
the 2000 Plan  provide 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  granted,  including the exercise price, the number of shares subject to
the option and the terms and conditions of exercise.  Options  granted under the
1997 and 1998  Plans  have  lives of 5 years and vest over  periods  from 0 to 4
years.  Options granted under the 2000 and 2001 Plans have lives of 10 years and
vest over periods from 0 to 4 years.

[2]   Stock options:

      During the year ended  December  31, 2004,  the Company  issued a total of
1,022,000  options to purchase  shares of common  stock,  of which  724,000 were
issued to employees and 298,000 were issued to Board members.


                                      F-17
<PAGE>

AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
December 31, 2004


      Stock option activity is summarized as follows:

                                           Year Ended            Year Ended

                                          December 31,          December 31,

                                              2004                  2003
                                     -------------------------------------------
                                                 Weighted              Weighted

                                                  Average               Average

                                                 Exercise              Exercise

                                       Shares     Price      Shares     Price
      Options outstanding at
      beginning of year              4,722,000    $1.60    5,299,000    $1.62
      Granted                        1,022,000    $1.26    1,217,000    $1.08
      Exercised                        (62,000)   $0.85      (96,000)   $0.87
      Cancelled/expired             (1,532,000)   $2.08   (1,698,000)   $1.33
                                    ----------    -----   ----------
      Options  outstanding  at
      end of year                    4,150,000    $1.36    4,722,000    $1.60
                                    ==========    =====   ==========
      Options exercisable
      at end of year                 2,707,000    $1.49    3,073,000    $1.92
                                    ==========    =====   ==========

      The  following  table  presents  information  relating  to  stock  options
outstanding as of December 31, 2004:



                                  Options Outstanding        Options Exercisable
                           --------------------------------  -------------------
                                                  Weighted
                                      Weighted     Average             Weighted
                                      Average     Remaining            Average
      Range of Exercise               Exercise     Life in             Exercise
           Price           Shares      Price        Years      Shares   Price
      -----------------    ------     --------    ---------    ------  --------

      $0.85 - $0.99      1,041,000     $0.89       6.11       878,000   $0.88
      $1.00 - $1.49      1,833,000      1.09       8.13       703,000    1.10
      $1.50 - $1.99        317,000      1.64       7.34       167,000    1.51
      $2.00 - $3.50        959,000      2.32       4.65       959,000    2.32
                         ---------                          ---------
          TOTAL          4,150,000                          2,707,000
                         =========                          =========


      As of December 31, 2003, 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.  As of December 31, 2004,
under the 1997 Plan,  1,218,625  options have been returned to the plan and will
not be re-issued, and under the 1998 Plan, 705,750 options have been returned to
the plan and will not be re-issued.

[3]   Warrants:

      In  connection  with our sale of 1,408,450  common  shares for  $2,000,000
($1.42 per share) in a private placement to Seaside Partners,  L.P.  ("Seaside")
on April 28,  2000,  we issued a 5-year  warrant to Seaside to purchase  953,283
common shares of our stock at an exercise price of $1.17 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 $1.17 to $0.95 in
February  2001. In November 2003, the Seaside  warrant was  transferred  and the
common shares  underlying the exercise of the warrants and respective rights and
obligations  under the Common Stock  Purchase  Agreement were assigned to Steven
Grodko ("Grodko"). Throughout the fiscal year end 2004, Grodko exercised a total


                                      F-18
<PAGE>

AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
December 31, 2004

of 553,283 warrants, leaving a balance of 400,000 warrants.

      On  May  2,  2001,  the  Company  issued  a  5  year  warrant  immediately
exercisable and  non-forfeitable,  to purchase 200,000 common shares of American
Bio Medica  Corporation  stock at an exercise  price of $1.50 per share to Brean
Murray & Co.,  Inc.  as  compensation  for its future  services  as a  financial
advisor to the  Company.  The warrants  were valued at $134,000  using the Black
Scholes  pricing  model and the  following  assumptions,  dividend  yield of 0%,
volatility of 95%, risk free interest rate 4.8% and expected life of 5 years and
has been  recorded as a charge to  operations  in the  transition  period ending
December 31, 2001. The closing price of American Bio Medica Corporation's common
shares on May 2,  2001,  as listed on The  National  Association  of  Securities
Dealers Automated Quotations ("NASDAQ") SmallCap Market, was $0.95 per share.

      On August 22, 2001, we issued  warrants  ("Private  Placement  Warrants"),
exercisable  during a 54 month period  beginning  February 22, 2002, to purchase
1,274,500  common shares of our stock at an exercise price of $1.05 per share in
connection with the private  placement of 2,549,000  shares of common stock (the
1,274,500  warrants issued in connection with the August 2001 private  placement
trade on the NASDAQ  SmallCap  Market and may be  hereafter  referred  to as the
"trading warrants").  We also issued, on August 22, 2001, warrants,  exercisable
during a 54 month period  beginning  February  22, 2002,  to purchase a total of
203,920 common shares of our stock at an exercise  price of $1.20 per share,  of
which  warrants to purchase  152,940 common shares were issued to Brean Murray &
Co., Inc. ("Brean Murray") as compensation for their services as placement agent
and  warrants  to purchase  12,745  common  shares were issued to Axiom  Capital
Management,  Inc.,  warrants  to  purchase  5,735  common  shares were issued to
Jeffrey Goldberg, warrants to purchase 16,250 common shares were issued to Barry
Zelin,  and warrants to purchase  16,250  common  shares were issued to David L.
Jordon,  each for their  services as sub-agents  of Brean Murray.  In the fiscal
year end December 31, 2004,  2,500 trading  warrants were  exercised,  leaving a
balance of 1,272,000 trading warrants.

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

      On December 2, 2003,  we issued a 5 year warrant  immediately  exercisable
and  non-forfeitable,  to purchase 300,000 common shares at an exercise price of
$1.15 to Brean  Murray as  compensation  for its future  services as a financial
advisor to the Company.  In June 2004, we amended the December 2, 2003 Financial
Advisory Agreement with Brean Murray and Brean Murray surrendered 150,000 of the
300,000 warrants to purchase common stock (a copy of this amendment was filed as
Exhibit  10.19.1  to the  Company's  Form 10QSB for the  quarter  ended June 30,
2004).  The warrants  were valued at $281,000  using the Black  Scholes  pricing
model and the  following  assumptions,  dividend  yield of 0.0%,  volatility  of
80.6%, risk free interest rate 5.2% and expected life of 5 years and $23,000 was
recognized as a charge to operations  in the year ended  December 31, 2003.  The
total value of these  warrants was  initially to be charged  ratably over twelve
months from December 2003 through  November 2004,  the term of the contract.  An
additional  $70,000  was  expensed  in the first  quarter of 2004.  However,  in
conjunction  with the surrender of 150,000 warrants in June 2004, ABMC and Brean
Murray  agreed  that no further  services  would be provided  and all  remaining
expense associated with the valuation of the warrants,  $129,000, was recognized
during the quarter ended June 30, 2004. The closing price of American Bio Medica
Corporation's  common  shares on  December  2,  2003,  as  listed on The  NASDAQ
SmallCap Market, was $1.33 per share.


NOTE I - COMMITMENTS, CONTINGENCIES AND OTHER MATTERS

[1]   Operating leases:

      The Company leases office and  R&D/production  facilities  under operating
leases  expiring  through  August 2007. At December 31, 2004, the future minimum


                                      F-19
<PAGE>

AMERICAN BIO MEDICA CORPORATION
Notes to Financial Statements
December 31, 2004

rental payments under these operating leases are $51,800 per year or $138,000.

      Rent expense was $63,000 for 2004 and $63,000 for 2003.

[2]   Employment agreements:

      The company has  employment  agreements  with two officers  providing  for
aggregate  annual  salaries of $310,000.  The agreement with the Chief Executive
Officer  provides  for  $180,000  salary,   is  for  a  term  of  one  year  and
automatically  renews unless either side gives  advance  notice of 60 days.  The
agreement  with the Chief  Financial  Officer  provides for $130,000  salary and
expires on April 30, 2005 and is automatically  renewed unless either side gives
advance notice of 60 days.

[3]   Legal:

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


NOTE J - RELATED PARTY DISCLOSURES

      During the fiscal years ended December 31, 2004 and December 31, 2003, the
Company  paid an  aggregate  of $113,000  and $63,000  respectively,  in fees to
Edmund  Jaskiewicz,  the  Company's  President  and  Chairman  of the  Board  of
Directors,  in consideration of his services as patent and trademark  counsel to
the Company.

      During the fiscal year ended December 31, 2003,  the Company  entered into
an agreement  with Altius  Marketing  related to marketing  services.  The Chief
Financial  Officer of Altius  Marketing is the son of the Company's former Chief
Executive  Officer,  Donal V.  Carroll.  The Company paid an aggregate of $0 and
$13,300 to Altius Marketing in the fiscal years ended December 31, 2004 and 2003
respectively.


NOTE K - GEOGRAPHIC INFORMATION

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


                                            Year ended           Year ended
                                           December 31,         December 31,
                                               2004                 2003
                                           ------------         ------------
               United States               $11,360,000          $11,479,000
               North America (not
               domestic)                       621,000              832,000
               Europe                          191,000               90,000
               Asia/Pacific Rim                 24,000               54,000
               South America                    45,000               29,000
                                           -----------          -----------
                                           $12,241,000          $12,484,000
                                           ===========          ===========


                                      F-20
<PAGE>


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

 3.5         Bylaws(1)
 3.50        Amended and Restated Bylaws(5)
 3.6         Fifth amendment to the Certificate of Incorporation (filed as
             Exhibit 3.6 to the Company's Form SB-2 filed on November 21, 1996
             and incorporated herein by reference)
 3.7         Sixth amendment to the Certificate of Incorporation(5)
 4.2         Investor Registration Rights Agreement, dated August 22, 2001,
             among American Bio Medica Corporation and the investors(4)
 4.3         Placement Agent Registration Rights Agreement, dated August 22,
             2001, among American Bio Medica Corporation and the placement
             agent and its sub-agents(4)
 4.4         Form of Warrant Agreement and Warrant among American Bio Medica
             Corporation and the investors(4)
 4.5         Form of Warrant Agreement and Warrant among American Bio Medica
             Corporation and the placement agent and its sub-agents(4)
 4.6         Fiscal 1997 Nonstatutory Stock Option Plan (filed as part of the
             Company's Proxy Statement for its Fiscal 1997 Annual Meeting and
             incorporated herein by reference) (a)
 4.14        Fiscal 1998 Nonstatutory Stock Option Plan (filed as part of the
             Company's Proxy Statement for its Fiscal 1998 Annual Meeting and
             incorporated herein by reference) (a)
 4.15        Fiscal 2000 Nonstatutory Stock Option Plan (filed as part of the
             Company's Proxy Statement for its Fiscal 2000 Annual Meeting and
             incorporated herein by reference) (a)
 4.16        Common Stock Purchase Agreement dated April 28, 2000 by and
             between the Company and Seaside Partners, L.P.(2)
 4.17        Fiscal 2001 Nonstatutory Stock Option Plan (filed as part of the
             Company's Proxy Statement for its Fiscal 2002 Annual Meeting and
             incorporated herein by reference) (a)
 10.6        Contract of Sale dated May 19, 1999/Kinderhook, New York
             facility(2)
 10.7        Agreement of Lease dated May 13, 1999/Kinderhook, New York
             facility(2)
 10.8        Lease dated August 1, 1999/New Jersey facility(2)
 10.9        Amendment dated March 23, 2001 to Lease dated August 1, 1999/New
             Jersey facility(3)
 10.10       Amended Contract of Sale dated May, 2001/Kinderhook, New York
             facility(3)
 10.11       Financial Advisory Agreement dated May 2, 2001 by and between
             Brean Murray & Co., Inc. and the Company(3)
 10.12       Employment contract between the Company and Robert L. Aromando,
             Jr. (a)(3)
 10.13       Employment contract between the Company and Stan Cipkowski (a)(3)
 10.14       Employment contract between the Company and Douglas Casterlin
             (a)(3)
 10.15       Employment contract between the Company and Keith E. Palmer (a)(3)
 10.16       Warrant Agreement dated November 15, 2001 by and between the
             Company and Hudson River Bank & Trust Company(5)
 10.17       Amendment No.3 dated August 20, 2002/New Jersey facility(6)
 10.18       Employment contract between the Company and Gerald A. Moore (a)(6)
 10.19       Financial Advisory Agreement dated December 2, 2003 by and between
             Brean Murray & Co., Inc and the Company(7)
 10.19.1     Settlement letter dated June 21, 2004 by and between Bran Murray &
             Co., Inc and the Company(8)
 10.20       Contract of Sale/land-Kinderhook, NY facility(7)
 10.21       Employment contract between the Company and Stan Cipkowski(a),(7)
 10.22       Employment contract between the Company and Stan Cipkowski(a),(9)
 32.1        Section 1350 Certification of the Chief Executive Officer
 32.2        Section 1350 Certification of the Chief Financial Officer


                                      E-1
<PAGE>


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

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

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

(3) Filed as the exhibit number listed to the Company's Form 10-KSB filed on
    August 13, 2001 and incorporated herein by reference.

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

(5) Filed as the exhibit number listed to the Company's Form 10-KSB filed on
    April 15, 2002 and incorporated herein by reference.

(6) Filed as the exhibit number listed to the Company's Form 10-KSB filed on
    March 31, 2003 and incorporated herein by reference.

(7) Filed as the exhibit number listed to the Company's Form 10-KSB filed on May
    10, 2004 and incorporated herein by reference.

(8) Filed as the exhibit number listed to the Company's Form 10-QSB filed August
    10, 2004 and incorporated herein by reference.

(9) Filed as the exhibit number listed to the Company's Form 10-QSB filed on
    November 12, 2004 and incorporated herein by reference.


                                      E-2