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, 2003

[_] 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 Employer Identification No.)
 incorporation or organization)


                 122 SMITH ROAD                                      12106
           KINDERHOOK, NEW YORK 12106                              (Zip Code)
    (Address of principal executive offices)


Issuer's telephone number (800) 227-1243

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

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

                         COMMON SHARES, $0.01 PAR VALUE

                         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. [ ]

      State issuer's revenues for its most recent fiscal year: $12,484,000

      The  aggregate  market value of  17,574,848  voting  Common Shares held by
non-affiliates of the issuer was approximately  $17,574,848 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 May 4, 2004.


<PAGE>


      As of May 4, 2004, the issuer had  outstanding  21,282,268  Common Shares,
$.01 par value.

      The aggregate  market value of 1,259,500  Common Share  Purchase  Warrants
held by  non-affiliates  of the issuer was approximately $0 based on the average
bid and asked price of the issuer's Common Share Purchase Warrants,  as reported
on the NASDAQ  SmallCap  Market on May 4, 2004 (there  were no recorded  bids or
asks for the Company's Common Share Purchase Warrants on this date).

      As of May 4, 2004,  the  issuer had  outstanding  1,272,000  Common  Share
Purchase Warrants.

      Documents Incorporated by reference:

      (1)   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, 2003

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

PART II

            Item 5.  Market for Common Equity and Related Shareholder                 16
                     Matters
            Item 6.  Management's Discussion and Analysis or Plan of                  17
                     Operations
            Item 7.  Financial Statements                                             20
            Item 8.  Changes In and Disagreements With Accountants on                 20
                     Accounting and Financial Disclosure
            Item 8A. Controls and Procedures                                          21

PART III

            Item 9.  Directors, Executive Officers, Promoters and Control Persons;    22
                     Compliance with Section 16(a) of the Exchange Act
            Item 10. Executive Compensation                                           24
            Item 11. Security Ownership of Certain Beneficial Owners and              27
                     Management
            Item 12. Certain Relationships and Related Transactions                   29
            Item 13. Exhibits and Reports on Form 8-K                                 29
            Item 14. Principal Accountant Fees & Services                             29

SIGNATURES                                                                            S-1
</TABLE>


<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. 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 our 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. Our long-term  objective is to provide an
extensive product portfolio to the expanding $6 billion immunoassay market.

      OUR PRODUCTS

            RAPID DRUG  SCREEN(R):  We  manufacture  the Rapid Drug  Screen,  or
RDS(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),  Oxycodone
and Propoxyphene.

      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 test, one
9-panel test and one 10-panel test. We can also produce, on special order, or if
a market  demands,  tests that can screen for any  quantity  (from two - ten) or
configuration of classes of drugs. Our standard configurations are:

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

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

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

      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.


                                       2
<PAGE>


      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     A ten panel test,  designed  for  specific  workplace  markets  that
            screens for the drugs of abuse from the eight panel test, as well as
            methadone and propoxyphene.

      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
(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), MDMA (Ecstasy),  an illegal designer drug, and Propoxyphene,
mild  narcotic  analgesic  structurally  related to methadone  that can be habit
forming and therefore abused.

      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.  In the year ended
December 31, 2003, the Company developed 3 new additional  versions of the Rapid
Tec. 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; or

               THC, cocaine and opiates

      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 2000; or

               THC, cocaine, amphetamine, PCP and opiates 300

      RAPID DRUG SCREEN  SCAN-R(R):  In August  2001,  we  introduced a software
system that provides a rapid,  clear and convenient  method to document point of
collection drug screening  results.  Subsequent to the launch,  and prior to any
sales of the Rapid Drug Screen Scan-R,  and throughout the year ending  December
31,  2002,  we  continued  to make  modifications  to this  product.  Additional
modifications made in 2003 resulted in a substantially different product and the
original Rapid Drug Screen Scan-R product was abandoned. For more information on
the new product see "Rapid Reader" on page 4.

      ORALSTAT(R):  In August 2001, we signed a licensing  agreement  with ANSYS
Technologies,  Inc., to market a point of collection saliva-based test for drugs
of abuse.  The  licensing  agreement  allows us to market  this  product  to the
criminal  justice,  workplace and drug treatment  sectors.  We sell this product
under  an  ABMC-owned  registered  trademark  of  OralStat.   The  OralStat  can
simultaneously  test for six  classes  of drugs:  THC,  opiates,  cocaine,  PCP,
amphetamines and methamphetamines. Utilizing a simple saliva sample, it delivers
easy-to-read  positive  or  negative  results  within  10-15  minutes.  The test
requires  no  reader  and  no  messy  saliva  collection  or  handling.  Pending
submission for FDA 510(k)


                                       3
<PAGE>


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.

      Since its introduction, the OralStat has been increasingly accepted in the
workplace/corporate markets,  particularly in the temporary staffing segment. In
May 2002,  we entered  into a contract  to provide  the  OralStat  to one of the
leading providers of staffing services in the world.

      RAPID  TEC  CUP(TM):  In July  2001,  we began  providing  contract  strip
manufacturing to Starplex Scientific, Inc. 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 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.

      RAPID  READER(TM).  As previously  noted in the section titled "Rapid Drug
Screen  Scan-R",  as a result of  modifications  to the Rapid Drug Screen Scan-R
product,  a new device was  created,  the Rapid  Reader.  The Rapid  Reader is 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.

    CONTRACT MANUFACTURING

      Through the fiscal year ending  December 31, 2003,  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
tuberculosis,  drugs of abuse and HIV for 4 non-affiliated  companies. We do not
currently   derive  a   significant   portion  of  our  revenues  from  contract
manufacturing.

    OUR MARKETS

      CORPORATE/WORKPLACE

      We sell primarily in this market  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     In September  2001,  the Office of National Drug Control Policy (the
            "ONDCP")  reported  that between 1992 and 1998,  the overall cost of
            drug abuse to society increased at a rate of 5.9% annually. By 1998,
            the societal cost of drug abuse was $143.4 billion.

      o     According to the 2002 SAMHSA  National Survey on Drug Use and Health
            (formerly the National Household Survey on Drug Abuse),  released in
            Sept


                                       4
<PAGE>


            2003,  74.6% of adults who use illegal  drugs are  employed,  either
            full or part-time.

      o     Studies reported by the Institute for a Drug-Free Workplace show:

            o     Of all workplace drug users who test  positive,  52% are daily
                  users

            o     Employees  who test positive for drugs were 60% more likely to
                  be  responsible  for plant  accidents,  used a third more sick
                  leave and have many more unexcused absences.

      According to the American Management  Association ("AMA"), drug testing is
performed by 65% of major U.S. firms.  For the reasons,  stated above,  not only
are there financial benefits of drug testing,  but a drug-free  environment is a
safer one. Incentives encourage employers to adopt Drug Free Workplace Programs.
Drug  testing is an  integral  part of a Drug Free  Workplace  Program.  In some
states,  there are workman's  compensation  and unemployment  insurance  premium
reductions, tax deductions and other incentives for adopting these programs. The
Drug Free  Workplace  Act  requires  employers  receiving  federal  contracts of
$100,000 or more to enact a Drug Free Workplace program (the Federal Acquisition
Streamlining Act of 1994 (FASA) raised the threshold of contracts covered by the
Drug Free Workplace Act from $25,000 to those exceeding $100,000).

      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"),  as of
December 31, 2002,  there were 2.03 million  inmates in State or Federal prisons
and local jails. Through 2002, approximately 54.7% of inmates in federal prisons
were sentenced as drug offenders according to the Federal Bureau of Prisons. The
BOJ also reported  that as of December 31, 2002,  over 4.7 million adult men and
women were under  Federal,  State,  or local  probation or parole  jurisdiction;
approximately  3,995,200 on probation and 753,100 on parole.  Almost all persons
(99%) on parole  or  probation  have one or more  conditions  to their  sentence
required by the court or probation  agency  including  periodic drug testing and
substance  abuse  treatment.  Our products  are aimed at this and other  similar
markets.

      REHABILITATION CENTERS

      We utilize our 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 February 2004, we
had 18  distributors or customers  representing 30 countries  outside the United
States.

      CLINICS, PHYSICIANS, AND HOSPITALS

      This market includes  emergency rooms,  physician  offices,  hospitals and
clinics and rehabilitation  facilities associated with hospitals.  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


                                       5
<PAGE>


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 if we will
obtain the required marketing clearance to sell in this market in the future.

      EDUCATIONAL MARKET

      According to the 2003 University of Michigan  Monitoring the Future study,
9.7% of 8th graders, 19.5% of 10th graders and 24.1% of 12th graders had used an
illicit  drug  within  the  prior 30 days of being  interviewed  for the  study.
Furthermore,  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 by a 5-4 vote 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 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.  However,  because the decision
came  after  many  schools'  annual  district  budgeting  was  complete  for the
following year, any increased in our sales to the educational market will not be
realized until fiscal year ending December 31, 2004.

      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  driving  license be randomly
tested  for use of drugs of abuse  and that  certified  laboratories  be used in
these testing situations.  We believe that there is potential for growth in this
market as the regulatory  agencies are considering  implementing  new guidelines
that will permit the use of 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 also sell through third party distribution channels.

      Our direct sales force  consists of a Vice  President of Sales & Marketing
and  6  regional  sales  managers,  in  addition  to 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  and an
international  marketing  manager.  We intend to promote  our  products  through
direct mail campaigns, selected advertising, participation at


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<PAGE>


high profile trade shows,  use of key point of collection  advocate  consultants
and other marketing activities.

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

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

      COMPETITION

      Competition  to our 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. and Biosite Diagnostics.

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

      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.  Also,  many of our  competitors  have
products,  which combine the testing mechanism with the collection device, which
increases  the potential of tampering  with the testing  mechanism by the person
being  tested.  With our  products,  the testing  mechanism  is not given to the
person being tested, but is held by the test administrator.

      Aside from 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


                                       7
<PAGE>


promoting their products longer and therefore, have more experience in marketing
saliva-based products to the appropriate segment(s).

    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  OralStat  product.  In
addition to manufacturing  all of our own individual test strips, we manufacture
the test  strips in the Rapid Tec Cup  product,  as well as  manufacturing  test
strips for HIV and Tuberculosis for third parties.

      We  lease  a 9,000  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.  In the
fiscal year ending December 31, 2003, we sold approximately 2,878,000 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 16).

      We currently have  approximately  fifty  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 page10.)

    PATENTS AND TRADEMARKS/LICENSES

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

      We have registered "ABM" and its logo in the United States, Canada, Chile,
Mexico and Europe.  We have registered the "Rapid Drug Screen"  trademark in the
United States,  Puerto Rico,  Mexico,  Canada,  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  additional  trademark  applications  pending in the
United States and 3 other foreign countries.  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 13).

      In connection with the settlement of a patent  infringement  suit we filed
against  numerous  parties  in  April  2001,  we have a  licensing  and  royalty
agreement  with  Phamatech,  Inc.,  under which we were paid a licensing fee and
will  continue to be paid a percentage  of revenues 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
Research and Development,  or R&D, efforts have been focused on enhancing and/or
maintaining  the  performance  and  reliability of our drug testing  strips.  In
addition,  this fiscal year, our R&D team developed  additional  versions of the
Rapid Tec,  and  continued  the  development  process on contract  manufacturing
projects.  The R&D team  continues  to consider the  potential of a  "CLUB-DRUG"
panel that could be a useful tool  against the latest  drugs of choice,  such as


                                       8
<PAGE>


Rohypnol,  Ecstasy,  Ketamine,  Ritalin, GHB, Methamphetamines and Methaqualone.
Our R&D expenditures  were $639,000 for the fiscal year ending December 31, 2003
and $297,000 for the fiscal year ending December 31, 2002.

    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
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
industry  and  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 panel test.  With this  approval,  we can offer a
variety of  combinations to meet customer  requirements,  both with our multiple
panel tests and our individual  Rapid One tests. In May 2003, we received 510(k)
clearance to market the Rapid One  Propoxyphene  Test, which can also be used in
our Rapid Drug Screen Nine panel test. The OralStat has not yet 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  on January 6, 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.  In order to prove  compliance  to ISO13485,  the
Company will be audited and its technical  documentation reviewed by a Registrar
approved by Canada.  This audit process is expected to be completed in the first
half of 2004.


                                       9
<PAGE>

    EMPLOYEES

      Currently,  we have approximately 104 employees, of which 98 are full-time
and 6 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 you may evaluate our
business and prospects.  Our limited  operating history may make it difficult or
impossible for analysts or investors to accurately forecast regarding our future
revenues  and other  operating  results  and the price of our  securities  could
decline substantially.

WE HAVE A HISTORY OF INCURRING NET LOSSES SINCE WE WERE FORMED.

      Since  inception in 1992 through the transition  period ended December 31,
2001, we incurred net losses. In the year ended December 31, 2003, we earned net
income of $1,031,000. As of December 31, 2003, we have an accumulated deficit of
$13.4 million. We expect to continue to make substantial  expenditures for sales
and marketing,  product development and other purposes.  Our ability to 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 you that we will be able to increase our revenues
at a rate that equals or exceeds expenditures.  Our failure to do so will result
in our incurring additional losses.

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.  The OralStat was introduced  into the
forensic markets in October 2001, the Rapid Tec into the non-clinical markets in
March 2002, the Rapid Tec Cup into the non-clinical markets in December 2002 and
the Rapid Reader into the non-clinical markets in early 2004. We have no history
upon which to base market or customer acceptance of these products. Introduction
of the OralStat,  Rapid Tec, Rapid Tec Cup and Rapid Reader 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.


                                       10
<PAGE>


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.

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  fifty  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 DEPEND ON OUR RESEARCH &  DEVELOPMENT  ("R&D")  TEAM FOR PRODUCT  DEVELOPMENT
AND/OR PRODUCT ENHANCEMENT.

      Product  development  and/or  enhancement  are  performed by our R&D team.
There can be no  assurance  that our R&D team can  successfully  develop  and/or
complete the enhancement of our current products and/or 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.

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


                                       11
<PAGE>


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 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. 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
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
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, and when, 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


                                       12
<PAGE>


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.   Some  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   provision  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 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  foreign  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  foreign
countries.

      Despite  our  efforts  to protect  our  proprietary  rights,  unauthorized
parties may  attempt to copy  aspects of our  products or to obtain  information
that we regard as proprietary. For example, our sales were adversely affected in
fiscal 2000 and fiscal 2001 (year ending April 30, 2001) as a result of sales of
products  similar to ours.  In April of 1999,  we filed suit in a federal  court
against Phamatech,  Inc. of California,  a former supplier of ours, and numerous
other parties to stop these sales.  We incurred  significant  legal fees of $1.6
million  attempting  to enforce  our  patents.  In April 2001,  we settled  with
Phamatech and all other  defendants in this lawsuit.  The  settlement  agreement
established  a  license  and  royalty  arrangement  under  which we were  paid a
licensing  fee and will  continue  to be paid a  percentage  of  revenues of the
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
February 2001.

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


                                       13
<PAGE>


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). We also issued, on August 22, 2001,  warrants,  exercisable during a 54
month period beginning  February 22, 2002, to purchase a total of 203,920 common
shares of our stock at an exercise  price of $1.20 per share,  of which warrants
to purchase  152,940  common  shares were issued to Brean Murray & Co.,  Inc. as
compensation  for their  services as  placement  agent and  warrants to purchase
12,745 common shares were issued to Axiom Capital Management,  Inc., warrants to
purchase  5,735  common  shares  were  issued to Jeffrey  Goldberg,  warrants to
purchase  16,250  common  shares were  issued to Barry  Zelin,  and  warrants to
purchase  16,250  common  shares were issued to David L. Jordon,  each for their
services as sub-agents of Brean Murray & Co., Inc.

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

      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 & Co., Inc ("Brean
Murray") as compensation as our financial advisor.

      If the Seaside warrant,  the Brean Murray Warrants,  the Private Placement
Warrants and the HRBT warrants are  exercised,  the common shares issued will be
freely  tradable,  increasing  the  total  number of common  shares  issued  and
outstanding.  If these  shares are  offered for sale in the public  market,  the
sales could  adversely  affect the  prevailing  market price by lowering the bid
price of our  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 Seaside  warrants,  a sale of our common shares,  or a security
convertible  into  common  shares,  for  consideration  per share  less than the
exercise price of the warrants.

POTENTIAL  ISSUANCE  AND  EXERCISE OF NEW OPTIONS  AND  EXERCISE OF  OUTSTANDING
OPTIONS COULD ADVERSELY AFFECT 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, 2003, there were
4,722,084 options issued and outstanding under all four plans combined, of which
3,072,780 were  exercisable.  As of December 31, 2003, there were 19,000 options
available  for  issuance  under  the  Fiscal  2000  Plan and  1,493,500  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


                                       14
<PAGE>


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.

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.  Although as of the date of this
report our common  shares are trading at, or higher than,  levels of the minimum
bid requirement,  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


                                       15
<PAGE>


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 3,900 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

      None.

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

      None.

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, 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


            FISCAL YEAR ENDING DECEMBER 31, 2002           HIGH          LOW
            ------------------------------------           ----          ---

                 Quarter ending December 31, 2002          $1.48         $0.86
                 Quarter ending September 30, 2002         $1.45         $0.89
                 Quarter ending June 30, 2002              $1.69         $0.82
                 Quarter ending March 31, 2002             $1.09         $0.77


                                       16
<PAGE>


            WARRANTS
            --------

            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


            FISCAL YEAR ENDING DECEMBER 31, 2002           HIGH          LOW
            ------------------------------------           ----          ---

                 Quarter ending December 31, 2002          $0.74         $0.46
                 Quarter ending September 30, 2002         $0.94         $0.00
                 Quarter ending June 30, 2002*             $0.00         $0.00


      * Our warrants  began  trading on the NASDAQ  SmallCap  Market on June 17,
2002;  however,  there was no trading  activity on this security  until July 18,
2002.

      As of May 4,  2004,  there  were  approximately  4,500  holders  of our
securities.  As of May 4, 2004 there were outstanding 21,282,268 common shares
and 1,272,000 warrants. The Company has not declared any dividends on our common
shares and does not expect to do so in the foreseeable future.

      On May 4, 2004,  the last  reported  sale  price for our common  shares as
reported on the NASDAQ SmallCap Market was $0.98 per share and the last reported
sale price of our warrants was $0.36per warrant. Average daily trading volume on
our common shares and warrants  during the  three-month  period from February 4,
2004 to May 4, 2004 was approximately  133,010common  shares and 14,485 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,


                                       17
<PAGE>


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.

RESULTS OF OPERATIONS  FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2003 AS COMPARED
TO THE TWELVE MONTHS ENDED DECEMBER 31, 2002

      Net sales were $12.5 million for the twelve months ended December 31, 2003
as compared to $10.3  million for the twelve  months  ended  December  31, 2002,
representing  an increase of $2.2 million or 21%. The Company's  stated strategy
of focusing  its  resources in direct sales  efforts  continued in 2003.  Direct
sales efforts grew steadily representing 59% of revenues in 2003 compared to 54%
in 2002. Continued growth in direct,  telemarketing and international sales more
than offset the  decline in  distributor  sales for the year.  During the twelve
months ended December 31, 2003, 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.

      The  Company  continued  its focus on its core  business,  the sale of the
Rapid Drug Screen and other drugs of abuse test kits, and continued research and
development of diagnostic  tests or components using  immunoassay  technology to
diversify  its product  line into the areas of  veterinary  medicine,  mycotoxin
detection, tuberculosis and HIV testing.

      Cost of goods sold for the twelve months ended  December 31, 2003 was $5.5
million or 44% of net sales as compared to $4.5  million or 43% of net sales for
the twelve months ended  December 31, 2002.  Costs of raw  materials,  labor and
overhead  associated with  manufacturing  have increased  moderately  during the
twelve  months  ended  December  31, 2003 but pricing  has  remained  relatively
consistent to allow the Company to be competitive in the marketplace.

      While revenues increased 21% in the twelve months ended December 31, 2003,
research  and  development  costs more than  doubled  to  $639,000  compared  to
$297,000 in 2002 or a 115% increase,  selling and marketing  expenses  increased
$427,000 or 18%, and general and administrative costs increased $272,000 or 11%.
Total  operating  expenses  were


                                       18
<PAGE>


$6.1 million or 49% of net sales for the twelve  months ended  December 31, 2003
compared  to $5.1  million  or 49% of net  sales  for the  twelve  months  ended
December 31, 2002.

      Other income was comprised of an insurance settlement received relating to
damage to an HVAC 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.

RESEARCH AND DEVELOPMENT

      Research and  development  ("R&D")  expenses  for the twelve  months ended
December 31, 2003 were $639,000 or 5% of net sales compared to $297,000 or 3% of
net sales for the twelve months ended December 31, 2002. The increase in expense
and  associated  percentage  of net sales is due primarily to salaries and wages
and related costs resulting from the addition of a senior director of R&D and an
R&D  Technician  hired in early 2003 for the  purpose of focusing on several new
product developments.

SELLING AND MARKETING

      Selling and  marketing  expense was $2.8 million for 2003 compared to $2.4
million in 2002  representing an increase of $400,000.  This is primarily due to
increased  commissions  resulting from the 21% increase in sales in 2003 as well
as increases in travel and entertainment, marketing and promotion and trade show
expenses.

GENERAL AND ADMINISTRATIVE

      General and  administrative  expense increased $272,000 to $2.7 million in
the twelve  months of 2003  compared  to the same period in 2002.  Driving  this
increase  in  expense  were  increases  in costs  for all  types  of  insurance,
accounting  fees,  outside  service fees relating to information  technology and
technical support,  non-cash  compensation stemming from two transactions with a
current  employee and a former  employee,  quality  assurance  increases  due to
additional  personnel,  and an increase in bad debt  expense.  Offsetting  these
increases were savings in legal fees, consulting fees, and telephone expense.

      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 and leverages new product initiatives.

LIQUIDITY AND CAPITAL RESOURCES AS OF DECEMBER 31, 2003

      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 has working  capital of $4.0 million at December 31, 2003,  as
compared to $2.6  million at December  31,  2002.  The Company has  historically
satisfied its net


                                       19
<PAGE>


working capital  requirements through cash with proceeds from private placements
of  equity  securities  with  institutional  investors.  In  2003,  the  Company
generated  $684,000 from  operations  compared to net cash used in operations of
$400,000 in 2002.  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, 2003 and 2002,  the Company had cash and cash  equivalents
of $942,000 and $231,000,  respectively.  In addition the Company has a $350,000
revolving line of credit bearing an interest rate of prime plus 1.75% secured by
its accounts  receivable.  At December 31, 2003,  the Company had no outstanding
balance on this line of credit.

      The  following  table lists the future  payments  required on debt and any
other contractual obligations of the Company:

             ---------------------------------------------------------------
                                    FUTURE DEBT PAYMENTS
             -------------------------------- ------------------------------
             <1 year                          180,000
             -------------------------------- ------------------------------
             1-3 years                        249,000
             -------------------------------- ------------------------------
             4-5 years                        180,000
             -------------------------------- ------------------------------
             > 5 years                        799,000
             -------------------------------- ------------------------------


      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
are no shares held in treasury stock as of December 31, 2003.

      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.

      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.

EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS

      In January 2003,  the FASB issued FASB  Interpretation  No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities". In December 2003, the FASB issued
a revision to FIN 46 to clarify some of the  provisions of FIN 46, and to exempt
certain  entities from its  requirements.  FIN 46 gives guidance that determines
whether  consolidation  of a Variable  Interest  Equity is  required.  FIN 46 is
effective now for certain Special Purpose Entity relationships and for all other
entity  relationships  after March 15,  2004.  The  Company  does not expect the
adoption of FIN 46 to have a material effect on its financial statements.

      ITEM 7. FINANCIAL STATEMENTS

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

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

      None.


                                       20
<PAGE>


      ITEM 8A. CONTROLS AND PROCEDURES

      On February  27,  2004,  American  Bio Medica  Corporation  carried out an
evaluation,  under  the  supervision  and with the  participation  of the  Chief
Financial  Officer and the  President,  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 President have concluded that
American  Bio Medica  Corporation's  disclosure  controls and  procedures  as of
December 31, 2003, 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 ("SEC") 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.  However,  due to the
small size of the  accounting  department  there is an  absence  of  appropriate
segregation  of duties at December 31, 2003.  During the first  quarter of 2004,
the Company hired a controller.

PART III

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

      The following table sets forth the names,  ages,  positions/offices  held,
the term of the positions/offices held of our directors, executive officers, and
senior management.

<TABLE>
<CAPTION>
                     NAME              AGE              POSITION/OFFICE                            SERVED SINCE
                     ----              ---              ---------------                            ------------
<S>                                    <C>     <C>                                                 <C>
Stan Cipkowski(1)                       55     Director                                                1986

Edmund Jaskiewicz(1),(2)                80     President/Director                                      1992

Martin R. Gould(3)                      52     CSO, Exec Vice Pres., Technology                        1998

Donal V. Carroll                        56     Director                                                2003

Keith E. Palmer                         43     CFO, Exec. Vice Pres. Finance, Treasurer                2000

Richard P. Koskey(1)                    64     Director                                                2003

Daniel W. Kollin(1)(4)                  62     Director                                                2004

Anthony Costantino(1)(5)                44     Director                                             Nominated

Todd Bailey(6)                          33     Vice President, Sales & Marketing                       2001

Dr. Henry J. Wells, Ph.D.               73     Vice President, Product Development                     1998
</TABLE>


      (1)   Nominee for election to the Board of Directors.

      (2)   Mr. Jaskiewicz was appointed President on September 5, 2003.

      (3)   Mr.  Gould was  appointed  Executive  Vice  President on October 23,
            2003.

      (4)   Mr. Kollin previously served on the Board of Directors from February
            2003 until September 2003 and was reappointed in January 2004.

      (5)   Dr.  Costantino  previously served on the Company's Science Advisory
            Board from April 1998 until November 2003.

      (6)   Mr.  Bailey was  appointed  Vice  President,  Sales &  Marketing  on
            September 29, 2003.

      STAN  CIPKOWSKI  founded our  predecessor in 1982. He has been a member of
our Board of Directors since our  incorporation in April 1986 and was one of our
executive officers until July 2003, and is currently an employee of the Company.
He reorganized the Company as American Bio Medica Corporation in 1992 and is the
inventor of the Rapid Drug Screen(R).  From 1982 to 1986, he was sole proprietor
of American Micro Media, our predecessor,  which was acquired by the Company. In
addition,  from 1983 to 1987,  Mr.  Cipkowski  was a general  partner of Florida
Micro Media, a Fort Lauderdale-based  marketer


                                       21
<PAGE>


of  educational  software and was a principal  shareholder  and Chief  Financial
Officer of Southeast  Communications Group, Inc., a publisher of direct response
media. In 1982, he was a consultant to Dialogue Systems,  Inc., a New York-based
developer  of  training  and  communications  materials,   where  he  served  as
Vice-President  of Sales and  Marketing.  From 1977 to 1982,  Mr.  Cipkowski was
employed by Prentice-Hall Publishing Company,  reaching the position of National
Sales  Manager.  Prior  to 1977 he was  employed  as an  accountant  for the New
Seabury Corporation and as Mid-West Area Manager for the Howard Johnson Company.
Mr. Cipkowski attended Mater Christi Seminary and St. Louis University from 1965
to 1969.  Mr.  Cipkowski  is  currently  a member of the Board of  Directors  of
Premier Mortgage Resources, Inc. (OTCPK: PMRS.PK)

      EDMUND  JASKIEWICZ  has  been  one of our  directors  since  1992  and was
appointed  President in September 2003. Mr. Jaskiewicz is a lawyer-engineer.  He
has practiced  international  patent and  corporate  law as a sole  practitioner
since 1963, and served as our Chairman of the Board of Directors from 1992 until
1999. From 1953 to 1963, Mr. Jaskiewicz was associated with Toulmin and Toulmin,
Attorneys-at-Law,  Washington,  D.C. From 1960 to 1962, he resided in Frankfurt,
Germany  managing  that firm's local  office.  From 1952 to 1953 he was with the
Patent  Section of the Bureau of Ordinance of the Department of the Navy working
on patent  infringement and licensing matters. He received his J.D. in 1952 from
George  Washington  University Law School and his B.S. in  Engineering  from the
University of Connecticut in 1947.

      MARTIN  GOULD  joined us in 1998.  He was  appointed  our  Executive  Vice
President,  Technology in 2003 and currently  also services as our Chief Science
Officer (he was promoted to Chief Scientific Officer in 2002). Prior to becoming
our CSO, he was our Vice  President  of  Technology.  Mr.  Gould is a biomedical
scientist  with more than 30 years of experience in the  diagnostic and chemical
fields.   He  has  an  extensive   background   in  research  and   development,
manufacturing,  quality  control/assurance,  as well as business development and
sales and  marketing.  His  experience  is in the areas of  clinical  chemistry,
serology,  immunology,  hematology,  dyes and  stains,  chromatography,  reagent
chemical and food diagnostics,  specifically rapid microbiological testing. From
1973 to 1987,  Mr.  Gould  worked for E.  Merck,  Inc. in various  positions  of
increasing   responsibilities  within  the  product  management,   research  and
development,  and quality  assurance/control  departments.  In 1987,  he founded
Ampcor  Diagnostics,  Inc.,  which he grew  until 1994 when it was  acquired  by
Neogen Corp.  (NASDAQ:NEOG).  Mr. Gould continued to serve as Vice President and
General  Manager  of Neogen  Corp.  until  1997.  Mr.  Gould was an  independent
consultant  after leaving  Neogen Corp.  in 1997 until  joining us in 1998.  Mr.
Gould is an accomplished  researcher with numerous  publications in a variety of
fields,  including  rapid  immunoassay  tests to detect food  pathogens  such as
e-coli, salmonella, listeria, shigella, and campylobacter. Mr. Gould established
a patent  in  composition  for  stabilization  of  diagnostics  reagents,  three
separate  patents  for  immunoassay  diagnostics  kits,  as  well  as  a  patent
concerning  a  growth  media  that  resuscitates   injured  bacteria,   such  as
salmonella, that was recently issued. Mr. Gould received a Masters in Biomedical
Science and  Biomedical  Engineering  from Drexel  University in 1982,  and a BS
degree from Delaware Valley College in 1973.

      DONAL V. CARROLL was appointed to our Board of Directors in June 2003 will
serve as a member of the Board until June 2004.  He was appointed CEO in October
2003 and  subsequently  removed from the office in January 2004. Mr. Carroll has
founded and  developed  several  finance and wholesale  merchandising  companies
during the past 30 years.  Mr.  Carroll  graduated  from  University  College of
Dublin with a degree in law.

      KEITH E. PALMER joined us in October 2000 as our Vice President,  Finance,
Chief Financial Officer and Treasurer and will serve as a member of our Board of
Directors from October 2003 until June 2004. He is a Certified Public Accountant
with over 20 years experience in accounting,  finance,  strategic planning,  and
merger and acquisitions.  From 1998 until joining us, Mr. Palmer was Director of
Finance and  Controller of Matthew  Bender,  a division of Lexis  Publishing,  a
legal  publisher.  At  Matthew  Bender  he was  responsible  for  management  of
financial reporting and analysis, accounting and control,


                                       22
<PAGE>


strategic  planning and numerous  Finance and Operational  integration  efforts.
From 1993 until 1998,  he was the Director of Finance &  Controller  for Matthew
Bender & Company,  Inc.,  a wholly  owned  subsidiary  of the Times Mirror Corp.
During that time he spearheaded the acquisition and/or integration,  and assumed
responsibility  for  financial  reporting  and  analysis,  of  four  businesses,
including  Shepard's,  a legal  citations  publisher in Colorado  Springs,  Co.,
Capsoft,  an electronic legal forms software firm in Provo,  Utah, Mosby Medical
Publishing  in  St.  Louis,   Missouri,   and  Michie,   a  legal  publisher  in
Charlottesville,  VA. In  addition  to  integrating  financial  and  operational
functions, Mr. Palmer assisted on the integration and implementations of several
financial,  manufacturing  and fulfillment  systems,  during this time. Prior to
joining  Matthew  Bender,  he was a Vice  President  of Marine  Midland  Bank, a
commercial  bank,  and from  1983  until  1987,  he was an  auditor  and  senior
consultant at the public accounting firm of Ernst & Whinney. Palmer received his
MBA in Finance from Sage Colleges in 1995 and his BBA in  Accounting  from Siena
College in 1983.

      RICHARD P. KOSKEY was appointed to our Board of Directors in October 2003.
Mr.  Koskey brings over 30 years of financial  experience as a Certified  Public
Accountant.  Since, 1975, he has been a managing principal of Pattison,  Koskey,
Howe & Bucci,  P.C., a regional  accounting  firm. Mr. Koskey  received his B.A.
from Duke University in 1963. He also serves on the Board of Directors of Hudson
River Bank & Trust (NASDAQ:HRBT).

      DANIEL W. KOLLIN was  re-appointed  to our Board of  Directors  in January
2004. He previously served on our Board of Directors from February 2003 until he
resigned in September 2003. Since 1990, Mr. Kollin has been Managing Director of
BioMed  Capital  Group,  Ltd.  He has over 20  years  experience  in  investment
banking,  venture  capital and  corporate  management.  Prior to joining  BioMed
Capital  Group,   Mr.  Kollin  was  Vice   President,   Health  Care  Group  for
Prudential-Bache  Capital  Funding from 1987 to 1990.  Prior to 1987, Mr. Kollin
was a partner of Whale  Securities  Corp.  He received  his MBA from The Wharton
School of The University of  Pennsylvania.  He currently  serves on the Board of
Directors of IsoTis Orthobiologics (TORONTO:ISO).

      ANTHONY G. COSTANTINO,  PH.D. Dr. Costantino is a nominee for our Board if
Directors.  Since September  2002, he has served as Vice  President,  Laboratory
Operations for National Medical Services,  Inc. From September 1991 until August
2002, he held various positions within American Medical Laboratories, Inc., with
the most recent being Sr. Vice  President  and Director  until August 2002.  Dr.
Costantino  received his Ph.D.,  in Forensic  Toxicology  from the University of
Maryland, School of Medicine in 1991, his M.S. in Pharmacology/Toxicology,  from
Duquesne University in 1984 and his B.S. in Pharmacy from Duquesne University in
1983. Dr.  Costantino  sits on the Board of Directors of the Society of Forensic
Toxicology. He has authored and co-authored a number of publications,  abstracts
and  presentations  in the clinical  chemistry and toxicology  fields since 1986
through the present.

      TODD BAILEY joined us in April 2001 as a Director of Business  Development
and subsequently  promoted to Director of National Accounts.  In September 2003,
he was appointed Vice  President of Sales & Marketing.  Prior to joining us, Mr.
Bailey was Substance  Abuse Account  Manager for Roche  Diagnostics  Corporation
where he was responsible for territory  sales of  point-of-collection  tests for
drugs of abuse to Fortune 500 manufacturers and state agencies.  From March 1994
through July 1999, he held various sales and  management  positions  with Paxar,
Hunt-Wesson,  and Frito-Lay  Inc. Mr. Bailey  received a B.S. in  communications
from St. Cloud University in 1994.

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


                                       23
<PAGE>


of Research and Development for Hill-Wells Research Corporation,  a developer of
diagnostics  products.  From 1981 to 1984,  he was Vice  President  Research and
Development of Hematec Corporation. From 1979 to 1981, Dr. Wells was Director of
Biochemistry  for  Helena  Laboratories.  From 1973 to 1979,  he was  Manager of
Chemical  Chemistry at Smith Kline  Diagnostics.  Dr. Wells earned his Ph.D.  in
Biochemistry from the University of Pittsburgh in 1966, his M.A. from University
of Pennsylvania in 1972 (honorary) and his B.S. in Chemistry from the University
of Pittsburgh in 1958.

AUDIT COMMITTEE/AUDIT COMMITTEE FINANCIAL EXPERT

      The  Company  has  a  separately   designated   standing  Audit  Committee
established  in  accordance  with Section  3(a)(58)(a)  of the Exchange Act. The
Company's Audit Committee is presently comprised of Richard P. Koskey and Daniel
W. Kollin,  both of whom are  independent as defined in the applicable  rules of
the Nasdaq  Small Cap  Market.  The Board has  determined  that Mr.  Koskey is a
financial expert as the term is defined under Item 401(e)(1) of Regulation S-B.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

      Section  16(a) of the 1934 Act requires the Company's  executive  officers
and directors,  and persons who own more than ten percent of a registered  class
of the Company's equity securities,  to file reports of ownership and changes in
ownership  with  the  Securities  and  Exchange  Commission  ("SEC").  Executive
officers,  directors and greater than ten percent  shareholders  are required by
SEC  regulations  to furnish the Company with copies of all Section  16(a) forms
they file.

      Based  solely on a review of the  copies of such  forms  furnished  to the
Company as of the date of this  report,  in January 2004 Donal V.  Carroll,  the
Company's former CEO and a current Director, failed to file a Form 4, containing
one transaction, with the SEC on a timely basis. Based solely upon the copies of
such forms furnished to the Company,  as of the date of this report, Mr. Carroll
has still failed to file this report.

      Based  upon this same  review of  copies of such  forms  furnished  to the
Company, as of the date of this report, all other executive officers,  directors
and greater than ten percent  beneficial  holders have complied with all Section
16(a) requirements.

CODE OF ETHICS

      The Company has  adopted a code of ethics that  applies to all  employees,
including  but  not  limited  to  the  principal  executive  officer,  principal
financial  officer,   principal  financial  officer  or  controller,  or  person
performing  similar  functions.  A copy of the  company's  Code of Ethics can be
found  on  its  website  located  at  WWW.ABMC.COM,   under  the  section  title
"Corporate", "Governance".

    ITEM 10. EXECUTIVE COMPENSATION

      The  following  table sets forth for fiscal years ended  December 31, 2003
and  December  31,  2002,  the  compensation  paid by the  Company  to its Chief
Executive  Officer(s) and any other  executive  officers who earned in excess of
$100,000 (the "Named Officers") based on salary and bonus.


                                       24
<PAGE>


<TABLE>
<CAPTION>
                                                               SUMMARY COMPENSATION TABLE
                                                               --------------------------

                                                                                                            Long Term Compensation
                                                                     Annual Compensation                           Awards
                                                                                           Other Annual      Securities Underlying
Name and Principal Position                 Year           Salary ($)       Bonus ($)     Compensation ($)      Options/SARs (#)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>           <C>              <C>            <C>                 <C>
Keith E. Palmer                            12/31/03      $135,000(1)      $10,000        $        0              50,000
Chief Financial Officer                    12/31/02      $124,615(2)      $     0        $    3,750(3)          --------
Executive Vice President Finance
------------------------------------------------------------------------------------------------------------------------------------
Douglas Casterlin(4)                       12/31/03      $145,384(5)      $10,000        $        0             -------
Executive Vice-President Operations        12/31/02      $140,000         $     0        $    5,250(3)          -------
------------------------------------------------------------------------------------------------------------------------------------
Martin R. Gould(6)                         12/31/03      $109,154(7)      $     0        $        0             150,000
Chief Science Officer
Executive Vice President Technology
------------------------------------------------------------------------------------------------------------------------------------
Stan Cipkowski(8)                          12/31/03      $186,923(9)      $     0        $        0             -------
Executive Vice President                   12/31/02      $190,764         $     0        $   45,000(10)         300,000
------------------------------------------------------------------------------------------------------------------------------------
Donal V. Carroll(11)                       12/31/03      $ 32,000(12)     $     0        $    3,000(13)         329,000
Chief Executive Officer
------------------------------------------------------------------------------------------------------------------------------------
Gerald A. Moore(14)                        12/31/03      $170,000(15)     $10,000        $    7,500(3)           75,000(16)
Chief Executive Officer                    12/31/02      $165,000(17)     $     0        $   18,000(18)         810,000(16)
------------------------------------------------------------------------------------------------------------------------------------
Robert L. Aromando(19)                     12/31/02      $ 17,294(20)     $     0          --------             -------
Chief Executive Officer
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


(1)   Mr.  Palmer's  actual annual salary in 2003 was $130,000.  The  additional
      amount in this figure is due to timing of pay periods within the year.

(2)   In July 2002,  Mr.  Palmer's  annual salary was increased to $130,000 from
      $120,000.

(3)   Car allowance.

(4)   Mr.  Casterlin  subsequently  resigned  as the  Company's  Executive  Vice
      President in January 2004.

(5)   Mr. Casterlin's actual annual salary in 2003 was $140,000.  The additional
      amount in this figure is due to timing of pay periods within the year.

(6)   Mr. Gould was appointed Executive Vice President in October 2003.

(7)   Mr. Gould's actual annual salary through August 2003 was $102,000.  It was
      increased in September 2003 to $114,000.

(8)   Mr.  Cipkowski  resigned from his position of Executive  Vice President in
      July 2003.

(9)   Mr. Cipkowski's actual annual salary is $180,000. The additional amount in
      this figure is due to timing of pay periods within the year.

(10)  Includes a car allowance of $3,000 and the forgiveness of accrued interest
      on a loan  provided  to Mr.  Cipkowski  by the  Company,  of $42,000  (See
      "Certain Relationships and Related Transactions").

(11)  Mr.  Carroll was  appointed CEO in October 2003 and  subsequently  removed
      from the position of CEO in January 2004.

(12)  The  Company has not yet paid this  amount to Mr.  Carroll  however it has
      been accrued on the books of the Company.

(13)  This amount is for Mr.  Carroll's  attendance  at meetings of the Board of
      Directors as an independent board member, before he was appointed CEO.

(14)  Mr.  Moore  resigned  as the  Company's  Chairman,  President  and  CEO in
      September 2003 and was paid for his services through August 2003.


                                       25
<PAGE>


(15)  Mr. Moore's actual annual salary in 2003 was $180,000.  Mr. Moore was paid
      through  August 2003.  This amount also includes  $50,000 that was paid to
      Mr. Moore in 2003 for a portion of his 2002 salary that was deferred.

(16)  These  option  grants  were  subsequently  cancelled  by  the  company  in
      September 2003.

(17)  Mr.  Moore's  actual  annual  salary was $180,000 in 2002.  $50,000 of Mr.
      Moore's  salary  in 2002  was  deferred  upon  mutual  agreement  with the
      Company.  (see footnote 15), therefore actual salary payments to Mr. Moore
      in 2002 were $115,000.

(18)  Other compensation  consists of $15,000 Mr. Moore received as compensation
      for his services as interim  President & CEO for the month of January 2002
      and $3,000 in a car allowance.

(19)  Mr. Aromando resigned as the Company's President & CEO in January 2002.

(20)  Mr.  Aromando was paid as the  Company's  President & CEO through  January
      2003 in connection with his severance agreement.

OPTION GRANTS IN FISCAL YEAR ENDED DECEMBER 31, 2003

The following table sets forth information concerning the grant of stock options
to the named executive officers during the fiscal year ended December 31, 2003.

<TABLE>
<CAPTION>
                                                        INDIVIDUAL GRANTS

                                                                                                  POTENTIAL REALIZABLE
                                                                                                    VALUE AT ASSUMED
                                                     % OF TOTAL                                      ANNUAL RATES OF
                                                      OPTIONS                                         STOCK PRICE
                                NUMBER OF SHARES     GRANTED TO   EXERCISE                            APPRECIATION
                               UNDERLYING OPTIONS    EMPLOYEES    PRICE PER    EXPIRATION           FOR OPTION TERM(1)
  NAME                             GRANTED           IN YEAR(2)    SHARE          DATE              5%             10%
---------------------------------------------------------------------------------------------------------------------------
<S>                           <C>                  <C>           <C>           <C>             <C>            <C>
Gerald A. Moore(3)                  75,000(4)           7.0%     $     1.04     4/23/13(5)     $   48,750     $  124,500

Stan Cipkowski(6)                        0                0%             --             --             --             --

Douglas Casterlin(7)                     0                0%             --             --             --             --

Keith E. Palmer                     50,000(8)           4.6%     $     1.04        4/23/13     $   32,500     $   83,000

Donal V. Carroll(9)                 29,000(10)          2.7%     $     1.03        6/30/13     $   18,850     $   47,560
                                   300,000(11)         27.8%     $     1.15       10/23/13     $  216,000     $  549,000

Martin R. Gould(12)                100,000)             9.3%     $     1.02        4/22/13     $   64,000     $  163,000
                                    50,000[13]          4.6%     $     1.04        4/23/13     $   32,500     $   83,000
</TABLE>

(1)   Potential realizable value is based on an assumption that the price of the
      common shares  appreciates at the annual rate shown (compounded  annually)
      from the date of grant until the end of the option term. These numbers are
      calculated  based  on the  requirements  of the  Securities  and  Exchange
      Commission and do not reflect the Company's estimate of future stock price
      performance.

(2)   The  Company  granted  options  representing  1,078,500  common  shares to
      employees in the year end December 31, 2003.

(3)   Mr. Moore resigned as the Company's Chairman, President & CEO on September
      5, 2003.

(4)   Option grants vested over 4 years (i.e.  25% each year on the  anniversary
      of the grant date of 4/24/03).

(5)   Option grant was subsequently cancelled by the Company on 9/11/03.


                                       26
<PAGE>

(6)   Mr. Cipkowski resigned as Executive Vice President on July 1, 2003.

(7)   Mr. Casterlin resigned as Executive Vice President on January 30, 2004.

(8)   Option grant vests over 4 years (i.e. 25% each anniversary of 4/23/03).

(9)   Mr. Carroll was removed from the office of CEO on January 21, 2004.

(10)  Option granted in connection  with Mr.  Carroll's  services as a member of
      the Board of Directors.  Option grant vests 100% on the 1 year anniversary
      of June 30, 2003.

(11)  Entire  option  grant was  subsequently  cancelled by the Company upon Mr.
      Carroll's removal as CEO.

(12)  Mr. Gould was appointed Executive Vice President, Technology on 10/23/03.

(13)  Option grant vests over 4 years (i.e. 25% each anniversary of 4/23/03).


AGGREGATED OPTION EXERCISE IN THE FISCAL YEAR ENDED DECEMBER 31, 2003 AND FISCAL
YEAR-END OPTION VALUES

The  following  table sets forth  information  concerning  the exercise of stock
options  during the fiscal year ended  December 31, 2003 by the named  executive
officers, and their options outstanding at fiscal year end.

<TABLE>
<CAPTION>
              AGGREGATE OPTION/SAR EXERCISES IN FISCAL YEAR AND TP-END OPTION/SAR VALUES

                           Shares Acquired on    Value Realized       Number of Securities Underlying
     Name                      Exercise (#)           ($)          Unexercised Options/SARs at FY-End (#)
                                                                     Exercisable        Unexercisable
------------------------------------------------------------------------------------------------------------
<S>                        <C>                   <C>               <C>                  <C>
  Gerald A. Moore(2)               0                  $ 0            -----------(3)      -----------(3)

  Stan Cipkowski(4)                0                  $ 0                587,500             251,000

  Douglas Casterlin(4)             0                  $ 0                275,000              25,000

  Keith E. Palmer                  0                  $ 0                 50,000             100,000

  Donal V. Carroll(6)              0                  $0                       0           329,000(7)

  Martin R. Gould(9)               0                  $0                 145,000             215,000
</TABLE>

<TABLE>
<CAPTION>

AGGREGATE OPTION/SAR EXERCISES IN FISCAL YEAR AND TP-END OPTION/SAR VALUES

                              Value of Unexercised In-the Money
     Name                        Options/SARs at FY-End ($)(1)
                                Exercisable       Unexercisable
-------------------------------------------------------------------
<S>                           <C>                 <C>
  Gerald A. Moore(2)             ---------         ---------

  Stan Cipkowski(4)              $ 77,850          $ 127,150

  Douglas Casterlin(4)           $ 15,000          $   15,000

  Keith E. Palmer                $ 30,000          $   55,000

  Donal V. Carroll(6)            $      0          $ 131,790(8)

  Martin R. Gould(9)             $ 14,350          $ 113,250
</TABLE>

      (1)  Value of  Unexercised  In-The-Money  Options  at  Fiscal  Year End is
      calculated  by using the high sale price of the common  shares on December
      31, 2003,  which was $1.54,  less the exercise  price of the  in-the-money
      exercisable  options  which is then  multiplied  by the  number  of common
      shares covered under the option(s).

      (2) Mr. Moore resigned as Chairman, President & CEO on September 5, 2003.

      (3) Any and all options  previously  granted to Mr. Moore in both his role
      as a Director and Chairman, President & CEO were cancelled by the Company.
      (i.e.  615,000 were  cancelled  on 9/11/03 and 473,000  were  cancelled on
      12/3/03).

      (4) Mr. Cipkowski resigned as Executive Vice President on July 1, 2003.

      (5) Mr. Casterlin resigned as Executive Vice President on January 30, 2004

      (6) Mr. Carroll was removed from the office of CEO on January 21, 2004.

      (7) Of this amount,  300,000 were subsequently cancelled by the Company on
      January 30, 2004 as a

      result o of Mr. Carroll's removal as CEO.

      (8) Of this amount,  $117,000 is related to the 300,000  options that were
      cancelled by the Company on January 30, 2004 as a result of Mr.  Carroll's
      removal as CEO.

      (9) Mr.  Gould was  appointed  Executive  Vice  President,  Technology  on
      October 23, 2003.

      ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS

      As of May 3, 2004,  there were  21,282,268  common shares  outstanding  of
which 21,282,268 common shares are entitled to vote at the Annual Meeting.  Each
Common  Share is  entitled  to one vote on each of the matters to be voted on at
the Annual  Meeting.  The



                                       27
<PAGE>


following table sets forth,  as of May 3, 2004, the beneficial  ownership of the
Company's  common shares by (i) each  director,  (ii) each nominee for director,
(iii) each of the executive  officers named in the Summary  Compensation  Table;
(iv) all  directors and  executive  officers of the Company as a group;  and (v)
each shareholder,  known to management of the Company,  to beneficially own more
than five percent (5%) of the outstanding common shares.

      The number and percentage of shares beneficially owned is determined under
the rules of the U.S. Securities and Exchange Commission, and the information is
not necessarily  indicative of beneficial ownership for any other purpose. Under
such rules,  beneficial ownership includes any shares as to which the individual
has sole or shared  voting power or  investment  power and also any shares which
the  individual  has the  right to  acquire  within 60 days  after May 3,  2004,
through the exercise of any stock  option,  exchange of  Exchangeable  Shares or
other  right.  Unless  otherwise  indicated,  each  person  has sole  voting and
investment  power (or shares such powers with his or her spouse) with respect to
the shares shown as beneficially owned.

<TABLE>
<CAPTION>
                                NAME AND ADDRESS                    NUMBER OF SECURITIES
 TITLE OF CLASS                OF BENEFICIAL OWNER                   BENEFICIALLY OWNED*          PERCENT OF CLASS
---------------------------------------------------------------------------------------------------------------------
<S>                   <C>                                           <C>                           <C>
     Common           Edmund Jaskiewicz
                      1730 M Street, NW, Suite 400
                      Washington, DC 20036                              2,068,155(1)                   9.7 %
---------------------------------------------------------------------------------------------------------------------
     Common           Stan Cipkowski
                      122 Smith Road
                      Kinderhook, NY 12106                              2,105,500(2)                   9.6 %
---------------------------------------------------------------------------------------------------------------------
     Common           Douglas Casterlin
                      122 Smith Road
                      Kinderhook, NY 12106                               402,000(3)                     1.9%
---------------------------------------------------------------------------------------------------------------------
     Common           Martin R. Gould
                      122 Smith Road
                      Kinderhook, NY 12106                              287,500(4)                     1.3%
---------------------------------------------------------------------------------------------------------------------
     Common           Donal V. Carroll
                      1 Palace Pier Court, Suite 303
                      Toronto, Ontario
                      Canada M8V 3W9                                   172,265(5)                       **
---------------------------------------------------------------------------------------------------------------------
     Common           Keith E. Palmer
                      122 Smith Road
                      Kinderhook, NY 12106                              125,000(6)                      **
---------------------------------------------------------------------------------------------------------------------
     Common           Richard P. Koskey
                      502 Union Street
                      Hudson, NY 12534                                  10,000                          **
---------------------------------------------------------------------------------------------------------------------
     Common           Daniel W. Kollin
                      C/O 122 Smith Road
                      Kinderhook, NY 12106                               19,750(7)                      **
---------------------------------------------------------------------------------------------------------------------
     Common           Anthony G Costantino
                      C/O 122 Smith Road
                      Kinderhook, New York 12106                         6,000(8)                       **
---------------------------------------------------------------------------------------------------------------------
     Common           Directors and Executive Officers
                      as a group (11 persons)                           5,196,170(9)                   22.8%
---------------------------------------------------------------------------------------------------------------------
</TABLE>

------------------

*     The number of shares noted for each  individual is based upon  information
      obtained   from  their  Section  16(a)  filings  with  the  United  States
      Securities and Exchange Commission.

**    Less than one percent (1%).

(1)   Includes 151,500 common shares subject to stock options exercisable within
      60 days of May 3, 2004.

(2)   Includes 612,500 common shares subject to stock options exercisable within
      60 days of May 3, 2004.

(3)   Includes 287,500 common shares subject to stock options exercisable within
      60 days of May 3, 2004.

(4)   Includes 282,500 common shares subject to stock options exercisable within
      60 days of May 3, 2004.

(5)   Includes 29,000 common shares subject to stock options  exercisable within
      60 days of May 3, 2004.

(6)   Includes 87,500 common shares subject to stock options  exercisable within
      60 days of May 3,  2004 and  12,500  common  shares  subject  to  warrants
      exercisable within 60 days of May 3, 2004.

(7)   Includes 19,750 common shares subject to stock options  exercisable within
      60 days of May 3, 2004.


                                       28
<PAGE>


(8)   Includes 6,000 common shares subject to stock options  exercisable  within
      60 days of May 3, 2004.

(9)   Includes an aggregate of 1,488,750  common shares subject to stock options
      or warrants exercisable within 60 days of May 3, 2004.

      ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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

      During fiscal 1999, 2000 and the first quarter of fiscal 2001, the Company
advanced funds to Stan Cipkowski,  the Company's former President and one of its
directors.  Mr.  Cipkowski  was the  Company's  Chairman  of the Board and Chief
Executive  Officer  until  January 2001 and an Executive  Vice  President of the
Company until July 2003.  These advances were partially  evidenced by a note and
beared interest at the rate of 11.5% per annum.  The loan was payable on demand.
Each  quarter,  interest  accrued  on the  loan  was  added  to the  outstanding
principal  balance of the loan. Mr. Cipkowski pledged 1,000,000 of the Company's
common shares to the Company as collateral.  On November 30, 2000, the Company's
Board of Directors and Mr.  Cipkowski  agreed to a structured  repayment of this
loan through the regular  periodic  redemption  by the Company of common  shares
owned by Mr.  Cipkowski.  Under the  program,  Mr.  Cipkowski  redeemed at least
25,000 common shares, after the release of financial results each quarter,  with
the value  determined  by the closing  price of the common  shares on the second
business day following the release of the quarterly or annual financial results.
Mr.  Cipkowski  also  retained  the right to  redeem a greater  number of common
shares each quarter.  In October 2002,  the Board of Directors  agreed to accept
200,000  shares of stock from Mr.  Cipkowski  in full  satisfaction  of the then
outstanding  loan  balance of $248,000.  The 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.  During the
fiscal 2002 the Company sold 175,000 treasury shares for $235,000. The remaining
225,000 shares  surrendered  were sold in fiscal 2003 for $280,000.  The Company
does not intend to make any additional loans to Mr. Cipkowski.

      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 $13, 300
in the fiscal year ended December 31, 2003.

      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

            None.

      ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

      AUDIT FEES

      The aggregate fees billed by PricewaterhouseCoopers  LLP to the Company in
the fiscal years ended December 31, 2003 and December 31, 2002, for professional
services rendered for the audit of the Company's annual financial statements and
review of  financial  statements  included  in the  Company's  Form  10-QSB,  or
services that were normally


                                       29
<PAGE>


provided  by  PricewaterhouseCoopers   LLP  in  connection  with  statutory  and
regulatory  filings or  engagements  for these  fiscal  years,  were  $94,150and
$106,550, respectively.

AUDIT RELATED FEES

There were no Audit  Related  Fees billed by  PricewaterhouseCoopers  LLP to the
Company in the fiscal years ended December 31, 2003 and December 31, 2002.

TAX FEES

      The aggregate fees billed by PricewaterhouseCoopers  LLP to the Company in
the fiscal years ended December 31, 2003 and December 31, 2002 for  professional
services  related to tax compliance,  tax advice,  and tax planning were $19,011
and  $11,705,  respectively.  These  fees  were  for  services  related  to  the
preparation and filing of the Company's tax returns.

ALL OTHER FEES

      There  were no Other  Fees  billed  by  PricewaterhouseCoopers  LLP in the
fiscal years ended December 31, 2003 and December 31, 2002.


                                       30
<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:  May 10, 2004

      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 May 10 2004:


/S/ EDMUND JASKIEWICZ                         President & Director
------------------------------------          [Principal Executive Officer]
 Edmund Jaskiewicz


/S/ STAN CIPKOWSKI                            Director
------------------------------------
 Stan Cipkowski


/S/RICHARD P. KOSKEY                          Director
------------------------------------
 Richard P. Koskey


/S/ DANIEL W. KOLLIN                          Director
------------------------------------
 Daniel W. Kollin


/S/ KEITH E. PALMER                           Chief Financial Officer & Director
------------------------------------          (Principal Financial Officer)
Keith E. Palmer                               Executive Vice President, Finance


                                      S-1

<PAGE>

AMERICAN BIO MEDICA CORPORATION



INDEX

                                                                        PAGE
                                                                        ----
FINANCIAL STATEMENTS

   Report of Independent Auditors                                       F-2

   Balance sheets                                                       F-3

   Statements of operations                                             F-4

   Statements of changes in stockholders' equity                        F-5

   Statements of cash flows                                             F-6

   Notes to financial statements                                        F-7


                                      F-1

<PAGE>
REPORT OF INDEPENDENT AUDITORS

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

In our  opinion,  the  financial  statements  listed in the  accompanying  index
present fairly, in all material respects, the financial position of American Bio
Medica  Corporation  at  December  31,  2003 and 2002,  and the  results  of its
operations  and its cash  flows  for the years  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 audits.  We conducted  our audits of these  statements  in  accordance  with
auditiing  standards  generally accepted in the United States of America,  which
require that we plan and perform the audit to obtain reasonable  assurance about
whether the financial  statements  are free of material  misstatement.  An audit
includes  examining,  on a test  bases,  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  audits  provide  a
reasonable basis for our opinion.


/s/ PricewaterhouseCoopers LLP

Albany, New York
May 7, 2004



                                      F-2

<PAGE>

AMERICAN BIO MEDICA CORPORATION


BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                  DECEMBER 31,    DECEMBER 31,
                                                                      2003            2002
                                                                  ------------    ------------
                              ASSETS
<S>                                                               <C>             <C>
Current assets
   Cash and cash equivalents                                      $    942,000    $    231,000
   Accounts receivable - net of allowance for doubtful accounts
    of $105,000 at December 31, 2003 and $70,000 at 2002             1,253,000       1,075,000
   Other receivables                                                     8,000          30,000
   Inventory                                                         3,049,000       2,795,000

   Prepaid expenses                                                     78,000          53,000
                                                                  ------------    ------------
   Total current assets                                              5,330,000       4,184,000

Property, plant and equipment, net                                   1,441,000       1,457,000
Other assets                                                             7,000           7,000
                                                                  ------------    ------------

    Total Assets                                                  $  6,778,000    $  5,648,000
                                                                  ============    ============

               LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
    Accounts payable                                              $    737,000    $    908,000
    Accrued expenses                                                   153,000         300,000
    Wages payable                                                      375,000         213,000
    Current portion of capital lease obligations                                        10,000
    Current portion of long term debt                                   25,000         174,000
    Current portion of unearned grant                                    8,000
                                                                  ------------    ------------
    Total current liabilities                                        1,298,000       1,605,000

Long-term debt                                                         651,000         673,000
Unearned grant                                                          67,000          50,000
                                                                  ------------    ------------
    Total liabilities                                                2,016,000       2,328,000

    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; 20,664,151 shares issued and outstanding  at
      December 31, 2003 and
      20,609,548 issued at December 31, 2002                           207,000         206,000
    Treasury stock, at cost, no shares at December 31, 2003 and
      225,000 shares at December 31, 2002                                             (239,000)
    Additional paid-in capital                                      17,959,000      17,788,000
    Accumulated deficit                                            (13,404,000)    (14,435,000)
                                                                  ------------    ------------

    Total stockholders' equity                                       4,762,000       3,320,000
                                                                  ------------    ------------

    Total liabilities and stockholders' equity                    $  6,778,000    $  5,648,000
                                                                  ============    ============
</TABLE>


The accompanying notes are an integral part of the financial statements

                                       F-3
<PAGE>

AMERICAN BIO MEDICA CORPORATION


STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                     FOR THE YEAR ENDED    FOR THE YEAR ENDED
                                                        DECEMBER 31,          DECEMBER 31,
                                                            2003                  2002
                                                     ------------------    ------------------
<S>                                                     <C>                   <C>
Net sales                                               $ 12,484,000          $ 10,312,000

Cost of goods sold                                         5,477,000
                                                                                 4,476,000
                                                        ------------          ------------

Gross profit                                               7,007,000             5,836,000
                                                        ------------          ------------

Operating expenses (income):
   Research and development                                  639,000               297,000
   Selling and marketing                                   2,784,000             2,357,000
    General and administrative                             2,705,000             2,433,000
                                                        ------------          ------------

Operating income                                             879,000               749,000
                                                        ------------          ------------

Other income (expense):
   Other income/(expense)                                    198,000                (6,000)
   Interest income                                            32,000                34,000
    Interest expense                                         (78,000)              (58,000)
                                                        ------------          ------------

NET INCOME                                              $  1,031,000          $    719,000
                                                        ============          ============

BASIC AND DILUTED INCOME PER COMMON SHARE               $        .05          $        .03
                                                        ============          ============

Weighted average number of shares outstanding - basic     20,624,000            20,610,000
Dilutive effect of stock options and warrants                644,000               716,000
                                                        ------------          ------------
Weighted average number of shares
outstanding -diluted                                      21,268,000            21,326,000
                                                        ============          ============
</TABLE>


The accompanying notes are an integral part of the financial statements

                                       F-4
<PAGE>

AMERICAN BIO MEDICA CORPORATION


STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                  COMMON STOCK                                ADDITIONAL
                                       ------------------------------        TREASURY          PAID IN
                                           SHARES           AMOUNT            STOCK            CAPITAL
                                       ------------      ------------     ------------      ------------
<S>                                      <C>             <C>              <C>               <C>
BALANCE-DECEMBER 31, 2001                20,609,548      $    206,000     $    (23,000)     $ 17,766,000

Shares received as payment on loan                                            (425,000)
Forgiveness of debt
Treasury shares sold                                                           209,000            26,000
Write off receivable                                                                              (5,000)
Net Income
                                       ------------      ------------     ------------      ------------
BALANCE-DECEMBER 31, 2002                20,609,548      $    206,000     $   (239,000)     $ 17,788,000

Stock Option / Warrant Exercise              54,603             1,000                             61,000
Treasury shares sold                                                           239,000            40,000
Non-cash compensation                                                                             70,000
Net Income
                                       ------------      ------------     ------------      ------------
BALANCE-DECEMBER 31, 2003                20,664,151      $    207,000     $          0      $ 17,959,000
                                       ============      ============     ============      ============
</TABLE>

<TABLE>
<CAPTION>
                                                            DUE FROM
                                       SUBSCRIPTION     OFFICER/DIRECTOR   ACCUMULATED
                                        RECEIVABLE        SHAREHOLDER        DEFICIT            TOTAL
                                       ------------      ------------      ------------      ------------
<S>                                    <C>               <C>               <C>               <C>
BALANCE-DECEMBER 31, 2001              $     (5,000)     $   (437,000)     $(15,154,000)     $  2,353,000

Shares received as payment on loan                            425,000
Forgiveness of debt                                            12,000                              12,000
Treasury shares sold                                                                              235,000
Write off receivable                          5,000                                                     0
Net Income                                                                      719,000           719,000
                                       ------------      ------------      ------------      ------------
BALANCE-DECEMBER 31, 2002              $          0      $          0      $(14,435,000)     $  3,320,000

Stock Option / Warrant Exercise                                                                    62,000
Treasury shares sold                                                                              279,000
Non-cash compensation                                                                              70,000
Net Income                                                                    1,031,000         1,031,000
                                       ------------      ------------      ------------      ------------
BALANCE-DECEMBER 31, 2003              $          0      $          0      $(13,404,000)     $  4,762,000
                                       ============      ============      ============      ============
</TABLE>


The accompanying notes are an integral part of the financial statements

                                       F-5

<PAGE>

AMERICAN BIO MEDICA CORPORATION


STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                YEAR ENDED    YEAR ENDED
                                                               DECEMBER 31,   DECEMBER 31,
                                                                   2003          2002
                                                               -----------    -----------
<S>                                                            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net Income                                                    $ 1,031,000    $   719,000
 Adjustments to reconcile net income:
    Depreciation                                                   168,000        154,000
    Provision for bad debts                                         35,000
    Compensatory stock and stock options                           106,000
    Gain on sale of land                                           (30,000)
    Forgiveness of shareholder debt                                                12,000
    Changes in:
      Accounts receivable                                         (213,000)      (193,000)
      Other receivables                                             22,000        141,000
      Inventory                                                   (254,000)      (708,000)
      Prepaid expenses                                             (25,000)        37,000
      Accounts payable                                            (171,000)      (156,000)
      Accrued expenses                                            (147,000)      (262,000)
      Customer advance deposits                                                  (243,000)
      Wages payable                                                162,000         99,000
                                                               -----------    -----------

         Net cash provided by (used in) operating activities       684,000       (400,000)
                                                               -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Restricted cash                                                                 106,000
  Purchase of property, plant and equipment                       (272,000)      (156,000)
  Proceeds from sale of land                                       150,000
                                                               -----------    -----------

         Net cash used in investing activities                    (122,000)       (50,000)
                                                               -----------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from debt financing                                     150,000
  Proceeds from convertible grant                                   25,000         50,000
  Proceeds from sale of treasury stock                             279,000        235,000
  Proceeds from stock option exercise                               26,000
  Payments on debt financing                                      (171,000)       (23,000)
  Repayment of capital lease obligations                           (10,000)       (19,000)
                                                               -----------    -----------
          Net cash provided by financing activities                149,000        393,000
                                                               -----------    -----------
          NET INCREASE (DECREASE) IN CASH AND CASH
            EQUIVALENTS                                            711,000        (57,000)

Cash and cash equivalents - beginning of period                    231,000        288,000
                                                               -----------    -----------
Cash and cash equivalents - end of period                      $   942,000    $   231,000
                                                               ===========    ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
 Cash paid during the year for:
    Interest                                                   $    78,000    $    53,000

NONCASH ACTIVITIES:
 Common stock received in repayment of loan from                                  425,000
     officer/director/shareholder
</TABLE>


The accompanying notes are an integral part of the financial statements

                                      F-6
<PAGE>

AMERICAN BIO MEDICA CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003


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,  2003 and 2002 the  Company had net
income of  $1,031,000  and $719,000  respectively  and had net cash  provided by
operating  activities  of  $684,000  in 2003  and  net  cash  used in  operating
activities of $400,000 in 2002. The Company  increased cash balances by $711,000
during the twelve  months  ended  December 31, 2003 as compared to a decrease of
$57,000  for the twelve  months of 2002.  Increases  in sales and  control  over
expenses  have  enabled  the Company to improve its  liquidity.  However,  as of
December  31, 2003,  the Company had an  accumulated  deficit of  ($13,404,000).
Historically,  the Company  has been  largely  dependent  on its ability to sell
additional  shares  of its  common  stock to fund its  operations.  The  Company
continues  to examine  and refine its  in-house  strip-manufacturing  program to
reduce costs and enhance profit margins.

         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] INVENTORY:

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

[3] INCOME TAXES:

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

[4] DEPRECIATION:

         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.

[5] 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


                                      F-7
<PAGE>

AMERICAN BIO MEDICA CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003


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.

[6] 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.

[7] 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,  2003,  diluted net income per share  includes the
dilutive effect of 2,151,000 stock options and 2,248,000 warrants.  For the year
ended  December  31,  2002,  diluted net income per share  includes the dilutive
effect of 2,699,000 stock options and 2,452,000 warrants.

         Potential common shares outstanding as of December 31, 2003 and 2002

                                 DECEMBER 31, 2003      DECEMBER 31, 2002
                                 -----------------      -----------------
               WARRANTS              2,951,703               2,651,703
               OPTIONS               4,722,084               5,298,750

         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. For the twelve months ended December 31, 2002 the
number of securities  not included in the diluted EPS,  because the effect would
have  been  anti-dilutive,  were  3,004,170.  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, 2003 and 2002.

[8] USE OF ESTIMATES:

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

[9] IMPAIRMENT OF LONG-LIVED ASSETS:

         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.

[10] 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.


                                      F-8
<PAGE>

AMERICAN BIO MEDICA CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003


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

[11] ACCOUNTING FOR STOCK-BASED COMPENSATION:

         The Company accounts for its stock-based  compensation  plans using the
intrinsic value method under  Accounting  Principles Board Opinion (APB) No. 25,
Accounting  for Stock  Issued to  Employees  and  related  interpretations.  The
Financial  Accounting  Standards  Board  issued  SFAS No.  123,  Accounting  for
Stock-Based  Compensation,  which  establishes  a  fair  value-based  method  of
accounting  for  stock-based  compensation  plans.  The  Company has adopted the
disclosure-only  alternative  under SFAS No.  123,  as amended by SFAS No.  148,
which requires disclosure of the pro forma effects on net income per share as if
stock-based  employee  compensation  was measured under SFAS No. 123, as well as
certain other information.  The Company accounts for stock-based compensation to
non-employees using the fair value method in accordance with SFAS No. 123.

[12] CONCENTRATION OF CREDIT RISK:

         The Company sells its drug testing products  primarily to United States
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  receivables.  The Company  establishes  an allowance for
doubtful  accounts  based on factors  surrounding  the credit  risk of  specific
customers and other information.

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

[13] REPORTING COMPREHENSIVE 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, 2003 and 2002 comprehensive income was the same as net income.

[14] RECLASSIFICATIONS:

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

[15] NEW ACCOUNTING PRONOUNCEMENTS:

In  January  2003,  the FASB  issued  FASB  Interpretation  No.  46 ("FIN  46"),
"Consolidation of Variable Interest Entities". In December 2003, the FASB issued
a revision to FIN 46 to clarify some of the  provisions of FIN 46, and to exempt
certain  entities from its  requirements.  FIN 46 gives guidance that determines
whether  consolidation  of a Variable  Interest  Equity is  required.  FIN 46 is
effective now for certain Special Purpose Entity relationships and for all other
entity  relationships  after March 15,  2004.  The  Company  does not expect the
adoption of FIN 46 to have a material effect on its financial statements.


NOTE B - INVENTORY

         Inventory is comprised of the following:

                                        December 31, 2003     December 31, 2002
                                        -----------------     -----------------
         Raw Materials                     $  1,680,000          $ 1,393,000
         Work In Process                      1,072,000            1,004,000
         Finished Goods                         297,000              398,000
                                           ------------          -----------
                                           $  3,049,000          $ 2,795,000
                                           ============          ===========


                                      F-9
<PAGE>

AMERICAN BIO MEDICA CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003


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.

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

                                                   December 31,   December 31,
                                                       2003           2002
                                                  -------------   ------------
          Land                                       $ 102,000      $ 222,000
          Buildings and improvements                   911,000        835,000
          Manufacturing and warehouse equipment        751,000        597,000
          Office equipment                             269,000        227,000
                                                  -------------   ------------
                                                     2,033,000      1,881,000
          Less accumulated depreciation                592,000        424,000
                                                  -------------   ------------
                                                    $1,441,000     $1,457,000
                                                  =============   ============


         Depreciation  expense  was  $168,000  and  $154,000  for the year ended
December 31, 2003, and the year ended December 31, 2002, 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
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 $280,000.

         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, 2003 and December 31, 2002  consisted of
the following:

                                                      December 31,  December 31,
                                                         2003          2002
                                                       ---------    ---------
   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        $ 347,000     $ 354,000




                                      F-10
<PAGE>

AMERICAN BIO MEDICA CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003


   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           230,000       234,000

   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                           99,000       109,000
                                                       ---------     ---------
                                                         676,000       697,000
   Less current portion                                  (25,000)      (24,000)
                                                       ---------     ---------
   Non-current portion                                 $ 651,000     $ 673,000
                                                       =========     =========

         At December 31, 2003,  the  following  are the  maturities of long-term
debt for each of the next five years:

                      2004                      $  25,000
                      2005                         27,000
                      2006                         29,000
                      2007                         30,000
                      2008                         33,000
                      Thereafter                  532,000
                                                ---------
                                                $ 676,000
                                                =========

         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
employment  was terminated in January 2004. He remains a member of the Company's
Board of  Directors.  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:

<TABLE>
<CAPTION>
                                                     YEAR ENDED           YEAR ENDED
                                                 DECEMBER 31, 2003    DECEMBER 31, 2002
                                                 --------------------------------------
<S>                                                      <C>                  <C>
  Tax (benefit)/expense at federal statutory
    rate                                                 34%                  34%
  State tax (benefit)/expense, net of federal
    tax effect                                            5                    5
  Valuation allowance                                   (39)                 (39)
                                                 --------------------------------------
  Effective income tax rate                               0%                   0%
                                                 ======================================
</TABLE>


                                      F-11
<PAGE>

AMERICAN BIO MEDICA CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003


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

<TABLE>
<CAPTION>
                                                 DECEMBER 31, 2003    DECEMBER 31, 2002
                                               -----------------------------------------
<S>                                                    <C>                  <C>
        Inventory                                      $    21,000          $    21,000
        Stock based compensation                           461,000              477,000
        Allowance for doubtful accounts                     41,000               27,000
        Property, plant, and equipment                   (132,000)             (72,000)
        Capital losses                                      73,000               73,000
        Accrued expenses                                    94,000               34,000
        Net operating loss carry-forward                 3,549,000            3,964,000
                                               -----------------------------------------
        Total gross deferred tax assets                  4,107,000            4,524,000
        Less valuation allowance                        (4,107,000)          (4,524,000)
                                               -----------------------------------------
        Net deferred tax assets                        $        --          $        --
                                               =========================================
</TABLE>

         The valuation allowance for deferred tax assets as of December 31, 2003
and 2002 was  $4,107,000  and  $4,524,000,  respectively.  The net change in the
valuation  allowance was a decrease of $417,000 for the year ended  December 31,
2003.

         At  December  31,  2003 the  Company has Federal and New York state net
operating  loss  carry  forwards  for  income  tax  purposes  of   approximately
$9,099,000,  which begin to expire in 2009. The Company has federal and New York
state capital losses of approximately $186,000, which begin to expire in 2005.

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

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

NOTE G - OTHER INCOME

         Other income was comprised of an insurance settlement received relating
to damage to an HVAC  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 exercised, 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.


                                      F-12
<PAGE>

AMERICAN BIO MEDICA CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003


[2] STOCK OPTIONS:

         During the year ended  December 31, 2003, the Company issued a total of
1,217,000  options to purchase  shares of common stock,  of which 1,079,000 were
issued to employees and 138,000 were issued to Board members.

         Stock option activity is summarized as follows:

<TABLE>
<CAPTION>
                                                     YEAR ENDED                     YEAR ENDED
                                                    DECEMBER 31,                   DECEMBER 31,
                                                        2003                           2002
                                                 -----------------------------------------------------
                                                               WEIGHTED                       WEIGHTED
                                                               AVERAGE                        AVERAGE
                                                               EXERCISE                       EXERCISE
                                                  SHARES         PRICE          SHARES          PRICE
                                                 ---------     --------       ---------       --------
<S>                                              <C>             <C>          <C>              <C>
         Options outstanding at
         beginning of year                       5,299,000       $1.62        4,374,000        $1.85
         Granted                                 1,217,000        1.08        1,409,000         0.96
         Exercised                                  96,000        0.87                0         0.00
         Cancelled/expired                      (1,698,000)       1.33         (484,000)        1.71
                                                 ---------                    ---------
         Options outstanding at end of year      4,722,000        1.60        5,299,000         1.62
                                                 =========                    =========
         Options exercisable
         at end of year                          3,073,000        1.92        3,047,000         2.11
                                                 =========                    =========
</TABLE>

          The following  table  presents  information  relating to stock options
outstanding as of December 31, 2003:

<TABLE>
<CAPTION>
                                            OPTIONS OUTSTANDING                      OPTIONS EXERCISABLE
                                  --------------------------------------------     ------------------------
                                                   WEIGHTED         WEIGHTED                       WEIGHTED
                                                   AVERAGE          AVERAGE                         AVERAGE
          RANGE OF EXERCISE                        EXERCISE        REMAINING                       EXERCISE
                PRICE                SHARES         PRICE        LIFE IN YEARS        SHARES         PRICE
          ------------------      -----------     ---------      -------------     ------------    --------
<S>                                 <C>             <C>               <C>               <C>          <C>
            $0.85 - $0.99           1,120,000       $0.89             7.07              644,000      $0.88
            $1.00 - $1.99           1,626,000        1.14             8.35              455,000       1.28
            $2.00 - $2.99           1,966,000        2.40             2.96            1,964,000       2.40
            $3.00 - $3.50              10,000        3.38             6.21               10,000       3.38
                                  -----------                                      -----------
                TOTAL               4,722,000                                        3,073,000
                                  ===========                                      ===========
</TABLE>

         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,
2003,  under the 1997 Plan,  400,125  options have been returned to the plan and
will not be  re-issued,  and under the 1998 Plan,  483,250 have been returned to
the plan and will not be re-issued.

[3] WARRANTS:

         In connection  with our sale of 1,408,450  Common share 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  953,282
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 registration statement we adjusted the
exercise price of the 953,283 warrant shares from $1.17 to $0.95 in February
2001.

         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%,


                                      F-13
<PAGE>

AMERICAN BIO MEDICA CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003


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 NASDAQ  SmallCap  Market,  was $0.95 per
share.

         On August 22, 2001, the Company issued 54-month  warrants,  exercisable
beginning on February 22, 2002 and non-forfeitable, to purchase 1,274,500 common
shares of American Bio Medica  Corporation  stock at an exercise  price of $1.05
per share to a number of accredited investors who purchased common shares in the
Company's August 2001 private placement of the Company's securities and 54-month
warrants  exercisable  beginning  February  22,  2002  and  non-forfeitable,  to
purchase  203,920 common shares of American Bio medics  Corporation  stock at or
exercise  price of $1.20  per  share to five  firms as  compensation  for  their
services  as  placement  agents  and  sub-agents  in this  August  2001  private
placement.  The  value  of these  warrants  was  accounted  for as a cost of the
financing.

         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 & Co., Inc as  compensation  for its future  services as a
financial advisor to the Company. 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 has been  recorded as a charge to operations in the year ended
December 31, 2003.  The total value of these  warrants  will be charged  ratably
over twelve  months from December 2003 through  November  2004,  the term of the
contract.  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

[4] STOCK-BASED COMPENSATION:

         SFAS No. 123,  Accounting for  Stock-Based  Compensation,  requires the
measurement of the fair value of stock options or warrants  granted to employees
to be included in the statement of operations  or,  alternatively,  disclosed in
the  notes to  consolidated  financial  statements.  The  Company  accounts  for
stock-based  compensation  of  employees  under the  intrinsic  value  method of
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees,  and related  interpretations  and has  elected  the  disclosure-only
alternative  under  SFAS  No.  123.  The  Company  has  adopted  the  disclosure
requirements of SFAS No. 148, Accounting for Stock-Based Compensation-Transition
and  Disclosure,  in its discussion of stock-based  employee  compensation.  The
alternative  transition  options  made  available  by the standard are not being
implemented.  The  weighted  average  fair value of options  granted  during the
twelve months ended December 31, 2003 and 2002 was approximately $.91 and $0.96,
respectively.  The following pro forma information gives effect to fair value of
the options on the date of grant using the  Black-Scholes  option-pricing  model
with the following  assumptions:  dividend yield of 0%, volatility  ranging from
82% to 85% for 2003 and 87% to 90% for 2002, risk free interest rates of ranging
from 4.35% to 5.25% for 2003 and 4.98% - 6.04% for 2002, and an expected life of
10 years for both 2003 and 2002.


                                      F-14
<PAGE>

AMERICAN BIO MEDICA CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003


                                           YEAR ENDED        YEAR ENDED
                                          DECEMBER 31,      DECEMBER 31,
                                              2003             2002
                                          ------------      ------------
Net Income/(loss):
      As reported                          $1,031,000       $  719,000
      Pro forma                                13,000       $ (162,000)

Basic and fully diluted income/(loss)
 per share
     As reported                           $      .05       $      .03
     Pro forma                             $      .00       $     (.01)


                                           YEAR ENDED        YEAR ENDED
                                          DECEMBER 31,      DECEMBER 31,
                                              2003             2002
                                          ------------      ------------
Net Income, as reported                    $1,031,000       $  719,000
    Stock-based employee compensation
    expense, determined under fair value
    based method for all awards
                                           $1,108,000       $  881,000

Proforma net income/(loss)                 $   13,000       $ (162,000)


         During the year ended December 31, 2002, the Company granted  1,409,500
options to employees and directors/board members at exercise prices greater than
or equal to the fair market value of the  underlying  common  shares at dates of
grant.

         During the year ended December 31, 2003, the Company granted  1,216,500
options to employees and directors/board members at exercise prices greater than
or equal to the fair market value of the  underlying  common  shares at dates of
grant.

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, 2003, the future minimum
rental payments under these operating leases are $51,800 per year or $190,000.

         Rent  expense was $63,000 for 2003.  Rent  expense was $12,000 for 2002
including a recovery of $53,000  resulting  from the favorable  settlement of an
outstanding  dispute with a former landlord of property rented from 1999 to 2000
in Boca Raton, Florida.

[2] EMPLOYMENT AGREEMENTS:

         The  Company  has  employment  agreements  with  one  officer  and  one
employee/director  providing  for  aggregate  annual  salaries of $230,000.  The
agreement  with the  officer  expires  on April 30,  2004 and  provides  for the
issuance  of  bonuses  and the  granting  of  options.  The  agreement  with the
employee/director is at will.


                                      F-15
<PAGE>

AMERICAN BIO MEDICA CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003


NOTE J - RELATED PARTY DISCLOSURES:

         During the fiscal years ended  December 31, 2003 and December 31, 2002,
the Company paid an aggregate  of $63,000 and $65,000  respectively,  in fees to
Edmund  Jaskiewicz,  the  Company's  President  and a  member  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 $13, 300
and $0 to Altius  Marketing in the fiscal years ended December 31, 2003 and 2002
respectively.

NOTE K - GEOGRAPHIC INFORMATION

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

                                         YEAR ENDED            YEAR ENDED
                                        DECEMBER 31,          DECEMBER 31,
                                            2003                  2002
                                      -------------------------------------
         United States                  $ 11,479,000         $  9,352,000
         North America (not                  832,000              647,000
         domestic)
         Europe                               90,000              197,000
         Asia/Pacific Rim                     54,000               62,000
         South America                        29,000               54,000
                                      -------------------------------------
                                        $ 12,484,000         $ 10,312,000
                                      =====================================



                                      F-16
<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

10.20    Contract of Sale/land-Kinderhook, NY facility

10.21    Employment contract between the Company and Stan Cipkowski

32.1     Section 1350 Certification of the President

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.




                                      E-2