SECURITIES AND EXCHANGE COMMISSION

                             Washington, D. C. 2054
--------------------------------------------------------------------------------


                                  FORM 10-KSBA

     [/]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934. For the fiscal year ended April 30, 1998

                         Commission File Number: 0-28666

                         AMERICAN BIO MEDICA CORPORATION
--------------------------------------------------------------------------------
                 (Name of Small Business Issuer in its charter )

          New York                                       22-3378935
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  (State or other Jurisdiction                   (IRS Employer Identification
of Incorporation or Organization)                         Number)

        300 Fairview Avenue, Hudson, New York               12534
--------------------------------------------------------------------------------
       (Address of principal executive Offices)           (Zip Code)

                   102 Simons Road, Ancramdale, New York 12503
--------------------------------------------------------------------------------
         (Former name or former address, if changed since last report.)

     Issuer's telephone number: (800) 227-1243

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

     Securities registered pursuant to Section 12(g) of the Act:
Common Shares, $.01 par value per share

     Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
     [x] Yes [ ] No

     Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not 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-KSBA or any amendment to this Form 10-KSBA. [x]

     State issuer's revenues for its most fiscal year $2,154,000.

     State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days.

     As of June 14, 1998, there were 9,064,418 common shares held by
non-affiliates ("Common Shares") outstanding having an aggregate market value of
$22,661,045.

     Documents incorporated by reference:

     Proxy Statement for the Annual Meeting of Shareholders  for the 1999 Fiscal
Year.
<PAGE>
Item 7. Financial Statements

     a. Balance Sheet as of April 30, 1998

     b. Statement of Operations for the two years ended April 30, 1997 and 1998

     c. Statement of Cash Flows for the two years ended April 30, 1997 and 1998

     d. Statement of Stockholders' Equity for the two years ended April 30, 1997
        and 1998

     e. Notes to Financial Statements







                                       25
<PAGE>
                        AMERICAN BIO MEDICA CORPORATION

Contents


Page

----
Financial Statements

 Independent auditors' report                                         F-2

 Independent auditors' report                                         F-3

 Balance sheet as of April 30, 1998                                   F-4

 Statements of operations for the years ended April 30, 1998 
   and 1997                                                           F-5

 Statements of changes in stockholders' equity
   for the years ended April 30, 1998 and 1997                        F-6

 Statements of cash flows for the years ended April 30, 1998 
   and 1997                                                           F-7

 Notes to financial statements                                        F-8




                                       F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Stockholders and Board of Directors
   of American Bio Medica Corporation
Hudson, New York


     We have audited the accompanying balance sheet of American Bio Medica
Corporation as of April 30, 1998 and the related statements of operations, cash
flows and changes in stockholders' equity for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of American Bio Medica
Corporation as of April 30, 1998 and the results of its operations and cash
flows for the year then ended, in conformity with generally accepted accounting
principles.



                                    /s/Richard A. Eisner & Company, LLP
                                    Richard A. Eisner & Company, LLP


New York, New York
June 14, 1998

With respect to the second paragraph of Note K[3]
July 23, 1998





                                       F-2
<PAGE>
Independent Auditor's Report

                                THOMAS P. MONAHAN
                           CERTIFIED PUBLIC ACCOUNTANT
                              208 LEXINGTON AVENUE
                           PATERSON, NEW JERSEY 07502


To The Board of Directors and Shareholders
of American Bio Medica Corporation

     I have audited the accompanying balance sheet of American Bio Medica
Corporation as of April 30, 1997 and the related statements of operations, cash
flows and shareholders' equity for the year ended April 30, 1997. These
financial statements are the responsibility of the Company's Management. My
responsibility is to express an opinion on these financial statements based on
my audit.

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

     In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of American Bio Medica
Corporation as of April 30, 1997 and the results of its operations, shareholders
equity and cash flows for the year ended April 30, 1997 in conformity with
generally accepted accounting principles.




                                        /s/Thomas P. Monahan
                                        Thomas P. Monahan, CPA


       May 28, 1997
       Paterson, New Jersey



                                      F-3
<PAGE>
                        AMERICAN BIO MEDICA CORPORATION

                                 Balance Sheet
                                 April 30, 1998

ASSETS
Current assets:
   Cash and cash equivalents .................................     $  3,239,000
   Accounts receivable -
     net of allowance for doubtful accounts of $40,000 .......          712,000
   Inventory .................................................          991,000
   Prepaid expenses and other current assets .................           24,000
                                                                   ------------
      Total current assets ...................................        4,966,000

Property, plant and equipment, net ...........................          147,000
Due from officer .............................................          235,000
Other assets .................................................            8,000

                                                                   ------------
                                                                   $  5,356,000
                                                                   ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable and accrued expenses .....................     $    486,000
                                                                   ------------
Stockholders' equity:
Preferred stock; par value $.01 per share;
  5,000,000 shares authorized; 2,500 shares
   Series D, 8% cumulative, convertible
   issued and outstanding (face value $2,500,000)
Common stock; par value $.01 per share
  30,000,000 shares authorized; 14,282,989 shares
   issued and outstanding ....................................          143,000
Additional paid-in capital ...................................       12,102,000
Subscription receivable ......................................           (9,000)
Unearned portion of compensatory options .....................          (24,000)
Accumulated deficit ..........................................       (7,342,000)

                                                                   ------------
                                                                      4,870,000
                                                                   ------------

                                                                   $  5,356,000
                                                                   ============








                       See notes to financial statements.


                                       F-4
<PAGE>
                         AMERICAN BIO MEDICA CORPORATION
                            Statements of Operations


                                                       YEAR ENDED APRIL 30,
                                                   ----------------------------
                                                        1998           1997
                                                   ------------    ------------
Net sales ......................................   $  2,154,000    $    611,000
Cost of goods sold .............................      1,051,000         260,000
                                                   ------------    ------------
Gross profit ...................................      1,103,000          351,00
                                                   ------------    ------------
Operating expenses:
   Selling, general and administrative .........      2,739,000         868,000
   Noncash compensation charges ................      2,214,000
   Depreciation and amortization ...............        101,000          96,000
   Research and development ....................        150,000          75,000
   Write-off of bad debts ......................        380,000
                                                   ------------    ------------
                                                      5,584,000       1,039,000
                                                   ------------    ------------
Operating loss .................................     (4,481,000)       (688,000)
                                                   ------------    ------------
Other income:
   Retirement of debt ..........................                        127,000
   Interest income .............................         91,000          56,000
                                                   ------------    ------------
                                                         91,000         183,000
                                                   ------------    ------------
Net loss .......................................   $ (4,390,000)   $   (505,000)

Adjustments:
   Preferred stock beneficial conversion feature       (359,000)
   Preferred stock dividends ...................        (45,000)
                                                   ------------
Net loss attributable to common stockholders ...   $ (4,794,000)
                                                   ============

Basic and diluted loss per common share ........   $       (.35)   $       (.04)
                                                   ============    ============
Weighted average number of shares outstanding
  - basic and diluted ..........................     13,768,000      12,728,000
                                                   ============    ============



                       See notes to financial statements.


                                  F-5
<PAGE>
                         AMERICAN BIO MEDICA CORPORATION
                 Statements of Changes in Stockholders' Equity

<TABLE>
<CAPTION>
                                                                                                                         UNEARNED   
                                              PREFERRED                                 ADDITIONAL                        COMPEN-
                                               STOCK              COMMON STOCK           PAID-IN         SUBSCRIPTION     SATORY    
                                               SHARES        SHARES           AMOUNT     CAPITAL          RECEIVABLE      OPTIONS   
                                             ------------  ------------ -------------- ------------    -------------    ----------- 
<S>                                          <C>           <C>          <C>            <C>             <C>              <C>
Balance - April 30, 1996 .............           --        11,977,357   $    120,000   $  2,636,000          --             --      
Proceeds from exercise of warrants and
 options .............................           --           872,445          9,000      2,258,000          --             --      
Shares issued for conversion of debt .           --           200,666          2,000        148,000          --             --      
Shares issued in private placement ...           --           100,000          1,000         49,000          --             --      
Proceeds from private placement of
 Preferred "A" shares
 (net of costs of $90,000) ...........            150            --             --        1,410,000          --             --      
Preferred "A" shares converted to
 common shares .......................            (60)        229,039          2,000         (2,000)         --             --      
Net loss .............................           --              --             --             --            --             --      
                                             ------------  -----------   ------------   ------------                                
Balance - April 30, 1997 .............             90      13,379,507        134,000      6,499,000          --             --      
Proceeds from exercise of warrants
 and options .........................           --           106,305          1,000        317,000    $   (9,000)          --      
Preferred "A" shares converted to
 common shares .......................            (90)        404,034          4,000         (4,000)         --             --      
Proceeds from private placement of
 Preferred "B" shares
 (net of costs of $48,000) ...........             60            --             --             --            --             --      
Preferred "B" shares converted to
 common shares .......................            (60)        226,037          2,000         (2,000)         --             --      
Cash dividend paid to holders of
 Preferred "B" shares ................           --              --             --             --            --             --      
Proceeds from private placement
 of Preferred "C" shares
 (net of costs of $57,000) ...........           45.5            --             --          398,000          --             --      
Preferred "C" shares converted to
 common shares .......................          (45.5)        160,359          2,000         (2,000)         --             --      
Stock dividend paid to holders of
 Preferred "C" shares ................           --             6,747           --           19,000          --             --
Proceeds from private placement of
 Preferred "D" shares and warrants
 (net of costs of $188,000) ..........          2,500            --             --        2,312,000          --             --      
Purchase of options previously
granted ..............................           --              --             --         (225,000)         --             --      
Issuance of compensatory stock .......           --              --             --        1,896,000          --             --      
Value assigned to compensatory
 stock options .......................           --              --             --          342,000          --     $    (24,000)   
Net loss .............................           --              --             --             --            --             --      
                                         ------------    ------------   ------------   ------------    ----------   ------------    
Balance - April 30, 1998 .............          2,500      14,282,989   $    143,000   $ 12,102,000    $   (9,000)  $    (24,000)   
                                         ============    ============   ============   ============    ==========   ============    

</TABLE>
                                           ACCUMULATED  
                                             DEFICIT          TOTAL
                                         ------------    ------------  
Balance - April 30, 1996 .............   $ (2,402,000)   $    354,000
Proceeds from exercise of warrants and
 options .............................           --         2,267,000
Shares issued for conversion of debt .           --           150,000
Shares issued in private placement ...           --            50,000
Proceeds from private placement of
 Preferred "A" shares
 (net of costs of $90,000) ...........           --         1,410,000
Preferred "A" shares converted to
 common shares .......................           --              --   
Net loss .............................       (505,000)       (505,000)
                                         ------------    ------------         
Balance - April 30, 1997 .............     (2,907,000)      3,726,000
Proceeds from exercise of warrants
 and options .........................           --           309,000
Preferred "A" shares converted to
 common shares .......................           --              --
Proceeds from private placement of
 Preferred "B" shares
 (net of costs of $48,000) ...........           --           552,000
Preferred "B" shares converted to
 common shares .......................           --              --
Cash dividend paid to holders of
 Preferred "B" shares ................        (26,000)        (26,000)
Proceeds from private placement
 of Preferred "C" shares
 (net of costs of $57,000) ...........           --           398,000
Preferred "C" shares converted to
 common shares .......................           --              --
Stock dividend paid to holders of
 Preferred "C" shares ................           --   
Proceeds from private placement of
 Preferred "D" shares and warrants
 (net of costs of $188,000) ..........           --         2,312,000
Purchase of options previously
granted ..............................           --          (225,000)
Issuance of compensatory stock .......           --         1,896,000
Value assigned to compensatory
 stock options .......................           --           318,000
Net loss .............................     (4,390,000)     (4,390,000)
                                         ------------    ------------
Balance - April 30, 1998 .............   $ (7,342,000)   $  4,870,000
                                         ============    ============



                       See notes to financial statements.


                                      F-6
<PAGE>
                        AMERICAN BIO MEDICA CORPORATION
                            Statements of Cash Flows

                                                        YEAR ENDED APRIL 30,
                                                    ----------------------------
                                                        1998           1997
                                                    ------------    ------------
Cash flows from operating activities:
 Net loss ........................................   $(4,390,000)   $  (505,000)
  Adjustments to reconcile net loss to net
   cash used in operating activities:
    Amortization and depreciation ................       101,000         96,000
    Retirement of debt ...........................          --         (127,000)
    Provision for bad debts ......................        40,000
    Issuance of compensatory stock options .......       318,000
    Issuance of compensatory stock ...............     1,896,000
    Changes in:
     Loan receivable .............................       102,000       (102,000)
     Accounts receivable .........................      (414,000)      (303,000)
     Inventory ...................................      (322,000)      (646,000)
     Prepaid expenses and other current assets ...       (20,000)        (4,000)
     Other assets ................................        (8,000)
     Accounts payable and accrued expenses .......       106,000        347,000
                                                     -----------    -----------
      Net cash used in operating activities ......    (2,591,000)    (1,244,000
                                                     -----------    -----------
Cash flows from investing activities
  Purchase of property, plant and equipment ......       (71,000)      (115,000)
  Purchase of investments ........................          --       (1,053,000)
  Maturity of investments ........................     1,053,000           --
  Patent costs ...................................                       (8,000)
  Loans to officer ...............................      (235,000)          --
                                                     -----------    -----------
    Net cash provided by
      (used in) investing activities .............       747,000     (1,176,000)
                                                     -----------    -----------
Cash flows from financing activities:
  Convertible debenture ..........................          --         (132,000)
  Proceeds from private placements ...............     3,262,000           --
  Proceeds from exercise of warrants and options .       309,000      3,878,000
  Cash dividends paid ............................       (26,000)          --
  Purchase of Company's options ..................      (225,000)          --
                                                     -----------    -----------
    Net cash provided by financing activities ....     3,320,000      3,746,000
                                                     -----------    -----------

Net increase in cash and cash equivalents ........     1,476,000      1,326,000
Cash and cash equivalents - beginning of period ..     1,763,000        437,000
                                                     -----------    -----------
Cash and cash equivalents - end of period ........   $ 3,239,000    $ 1,763,000
                                                     ===========    ===========
Noncash activities:
  Stock dividends paid to
    holders of preferred stock ...................   $    19,000           --
  Conversion of convertible debt
    into common stock ............................          --      $   150,000


                       See notes to financial statements.

                                      F-7
<PAGE>
                        AMERICAN BIO MEDICA CORPORATION

                         Notes to Financial Statements
                                 April 30, 1998

  Note A - The Company and its Significant Accounting Policies

     American Bio Medica Corporation (the "Company") was formed under the laws
of the State of New York on April 10, 1986 and is in the business of acquiring,
developing and marketing biomedical technologies and products. The Company
currently owns two technologies for screening drugs of abuse, a workplace
screening test and a preliminary test for use by laboratories. The Company's
products are manufactured and assembled by outside contract manufacturers. The
Company is also involved in marketing educational books and software to schools
and municipal libraries and audio-visual educational packages to corporations
throughout the United States.

     [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 uses the liability method of accounting for income taxes. The
liability method measures deferred income taxes by applying enacted statutory
rates in effect at the balance sheet date to the differences between the tax
bases of assets and liabilities and their reported amounts in the financial
statements. The resulting asset or liability is adjusted to reflect changes in
the tax law as they occur.

     [4] Depreciation and amortization:

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

     [5] Patents and license agreements:

     Costs incurred to acquire exclusive licenses of patentable technology are
capitalized and amortized over the shorter of a five year period or the term of
the license. The portion of these amounts determined to be attributable to
patents is amortized over their remaining lives and the remainder is amortized
over the estimated period of benefit but not more than 40 years.

     [6] Revenue recognition:

     The Company recognizes revenue when products are shipped or services are
rendered. Revenues from book sales with the right of return, are recognized net
of a provision for estimated returns.

     [7] Research an development:

     Research and development costs are charged to operations when incurred.




                                      F-8
<PAGE>
Note A - The Company and its Significant Accounting Policies (continued)

     [8] Loss per common share:

     The Company adopted Statement of Financial Accounting Standards ("SFAS")
No.128, Earnings Per Share," in the year ended April 30, 1998 and has
retroactively applied the effects thereof for all periods
presented.
Accordingly, the presentation of per share information includes calculations of
basic and dilutive loss per share. The impact on the per share amounts
previously reported (primary and fully diluted) was not significant. The effects
of potential common shares such as warrants, options, and convertible preferred
stock has not been included, as the effect would be antidilutive.

     When preferred stock is convertible to common stock at a conversion rate
that is the lower of a rate fixed at issuance or a fixed discount from the
common stock market price at the time of conversion, the discounted amount is an
assured incremental yield, the "beneficial conversion feature", to the preferred
shareholders and should be accounted for as an embedded dividend to preferred
shareholders. As such, the loss per common share was adjusted for this feature.

     [9] Use of estimates:

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

     [10] Impairment of long-lived assets:

     The Company adopted SFAS No.121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" during the year
ended April 30, 1998. SFAS 121 establishes accounting standards for the
impairment of long-lived assets, certain identifiable assets, and goodwill
related to those assets. There was no effect of the adoption of SFAS 121 on the
financial statements.

     [11] Financial instruments:

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

     Estimated fair value of financial instruments are determined using
available market information. In evaluating the fair value information,
considerable judgment is required to interpret the market data used to develop
the estimates. The use of different market assumptions and/or different
valuation techniques may have a material effect on the estimated fair value
amounts. Accordingly, the estimates of fair value presented herein may not be
indicative of the amounts that could be realized in a current market exchange.
Due to the related party nature of due from officer the Company is unable to
determine its fair value.

     [12] Stock-based compensation:

     The Financial Accounting Standards Board has issued SFAS No.123,
"Accounting for Stock-Based Compensation", which encourages, but does not
require, companies to record compensation cost for stock-based employee
compensation under a fair value based method. The Company has elected to




                              F-9
<PAGE>
continue to account for its stock-based employee compensation using the
intrinsic value method prescribed by Accounting Principles Board Opinion No.25
("APB No.25"), "Accounting for Stock Issued to Employees" and disclose the pro
forma effects on net loss and loss per share basic and diluted had the fair
value of such compensation been expensed. Under the provisions of APB No.25,
compensation cost for stock options is measured as the excess, if any, of the
quoted market price of the Company's common stock at the date of the grant over
the amount an employee must pay to acquire the stock.


Note A - The Company and its Significant Accounting Policies (continued)

     [13] Concentration of credit risk:

     The Company sells its products primarily to United States distributors.
Credit is extended based on an evaluation of the customer's financial condition,
and generally collateral is not required. The Company establishes an allowance
for doubtful accounts based on factors surrounding the credit risk of specific
customers and other information.

     [14] Recent accounting pronouncements:

     The Financial Accounting Standards Board has recently issued statements of
Financial Accounting Standards No.130, "Reporting Comprehensive Income," and
No.131, "Disclosures about Segments of an Enterprise and Related Information,"
and No.132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits." The above pronouncements will not have a significant effect on the
information presented in the financial statements.

Note B - Investments

     The estimated fair value of available-for-sale investments at April 30,
1997 was $1,053,000 and consisted of certificate of deposits with maturities
greater than three months. The estimated fair value of each investment was
approximately equal to the amortized cost at April 30, 1997 and, therefore,
there were no unrealized gains or losses, at that date. The Company did not hold
any investments at April 30, 1998.

Note C - Inventory

     Inventory is comprised of the following:

             Books held for resale ...............................      $118,000
                                                                        --------
             Workplace drug screening tests:
                Raw materials ....................................       447,000
                Work in process ..................................       148,000
                Finished goods ...................................       278,000
                                                                        --------
             Total workplace drug screening tests ................       873,000
                                                                        --------
                                                                        $991,000
                                                                        ========
Note D - Plant and Equipment

Plant and equipment, at cost, are summarized as follows:

             Office equipment ....................................      $ 60,000
             Manufacturing and warehouse equipment ...............       144,000
                                                                        --------
                                                                         204,000
             Less accumulated depreciation .......................        57,000
                                                                        --------
                                                                        $147,000
                                                                        ========

                                      F-10
<PAGE>
Note E - Due From Officer

     At April 30, 1998 the Company has a note receivable from an officer for
$235,000. The note bears interest at 6% per annum and is payable on demand.

Note F - Income Taxes

     At April 30, 1998 the Company has approximately $4,894,000 of net operating
loss carryforwards expiring through 2013.

     At April 30, 1998 the Company has a deferred tax asset of approximately
$1,883,000 representing the benefits of its net operating loss carryforward and
certain expenses not currently deductible. The Company's deferred tax asset has
been fully reserved by a valuation allowance since realization of its benefit is
uncertain. The difference between the statutory tax rate of 34% and the
Company's effective tax rate of 0% is substantially due to the increase in the
valuation allowance of $986,000 and $172,000 for the years ended April 30, 1998
and 1997, respectively. The Company's ability to utilize its net operating loss
carryforwards may be subject to an annual limitation in future periods pursuant
to Section 382 of the Internal Revenue Code of 1986, as amended.

Note G - Stockholders' Equity

     [1] Preferred stock:

     In October 1996 the Company amended its certificate of incorporation
authorizing the issuance of 5,000,000 Preferred Shares. The board of directors
of the Company has the authority, without further action by the holders of the
outstanding common shares, to issue preferred shares from time to time in one or
more classes or series, to fix the number of shares constituting any class or
series and the stated value thereof, if different from the par value, and to fix
the terms of any such series or class, including dividend rights, dividend
rates, conversion or exchange rights, voting rights, rights and terms of
redemption (including sinking fund provisions,) the redemption price and the
liquidation preference of such class or series.

     During 1996 the Company completed a private placement in which it netted
proceeds of approximately $1,410,000 through the sale of 150 8% Convertible
Series A Preferred Shares for $10,000 per share. Each Preferred Share is
convertible into Common Shares pursuant to the following formula: $10,000
divided by the lesser of $6.07 or 75% of the average of the daily closing bid
prices for the five consecutive trading days ending on the trading day prior to
the day on which the Preferred Shares are converted to Common Shares. All
accrued but unpaid dividends are payable in cash. The Series A Preferred Shares
were converted into an aggregate of 633,073 Common Shares.

     During September 1997 the Company completed a private placement in which it
netted proceeds of approximately $950,000 through the sale of 60.8% Series B
Convertible Preferred Shares and 45.5 Shares of Series C Convertible Preferred
Shares for $10,000 per share. Each Preferred Share was convertible into Common
Shares pursuant to the following formula: $10,000 divided by lesser of $3.50 or
75% of the average of the daily closing bid prices for the twenty consecutive
trading days ending on the trading day prior to the day on which the Preferred
Shares are converted to Common Shares. Dividends were payable in cash or shares
of common stock at the election of the Company on the date the Preferred Shares
are converted to common shares. The Series B Preferred Shares and the Series C
Preferred Shares were converted into an aggregate of 226,037 and 160,359 Common
Shares respectively.



                                      F-11
<PAGE>
Note G - Stockholders' Equity (continued)

     [1] Preferred stock: (continued)

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

     [2] Stock option plans:

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

     [3] Other stock options:

     During March 1996 the Company entered into an agreement with a public
relations and communications firm to serve as the Company's liaison and
spokesman to the financial and investment community. Under the agreement the
Company granted under Regulation D of the Securities Act of 1933, to the public
relations firm the right to receive 100,000 common shares at a value of $0.65
per share for a total consideration of $65,000 in lieu of an initial payment,
monthly retainers or expense reimbursement, including communications and mailing
for a period of one year. In addition, the Company granted 550,000 common shares
valued at $0.325 per share representing one-half the market price of the common
shares at March 14, 1996, the date of the contract. The valuation reflected the
receipt of unregistered common shares and the market risk of the holding period
until they may be sold publicly. Of the 550,000 shares, 50,000 shares were
allocated to expense reimbursement and 500,000 shares allocated to public
relations consulting. The Company also granted 500,000 options exercisable at
$1.00 through March 15, 1999 and 500,000 options exercisable at $2.00 through
March 15, 1999. During March 1998 the Company purchased from the public
relations firm 75,000 options exercisable at $1.00 per common share and 75,000
options exercisable at $2.00 per common share for $225,000. The remaining
850,000 options cannot be exercised until a registration statement relating to
the common shares underlying the options is effective.



                                      F-12
<PAGE>
Note G - Stockholders' Equity (continued)

     [4] Stock options:

     Stock option activity is summarized as follows:

                                                YEAR ENDED APRIL 30,
                            ---------------------------------------------------
                                             1998                        1997
                                           WEIGHTED                    WEIGHTED
                                            AVERAGE                     AVERAGE
                                           EXERCISE                    EXERCISE
                               SHARES       PRICE        SHARES         PRICE
                             ----------    ----------   ---------     ----------
Options outstanding
  at beginning of year ...    2,174,000    $     2.31    1,000,000    $     1.50
Granted ..................      567,000    $     3.25    1,802,000    $     3.00
Exercised ................      (81,000)   $     3.00     (628,000)   $     3.00
Canceled .................     (150,000)   $     1.50
                             ----------                  ---------
Options outstanding
  at end of year .........    2,510,000    $     2.55    2,174,000    $     2.31
                             ==========                 ==========
Options exercisable
  at end of year .........    1,439,000    $     3.05    1,123,000    $     3.00
                             ==========                 ==========

     The  following  table  presents   information  relating  to  stock
options outstanding at April 30, 1998.

                          OPTIONS OUTSTANDING                OPTIONS EXERCISABLE
                    ------------------------------------    --------------------
                               WEIGHTED       WEIGHTED                  WEIGHTED
                               AVERAGE        AVERAGE                    AVERAGE
     RANGE OF                  EXERCISE      REMAINING                  EXERCISE
 EXERCISE PRICE     SHARES      PRICE       LIFE IN YEAR    SHARES        PRICE
 --------------     ------     --------     ------------    -------     --------
 $1.00 - $2.00       850,000    $1.50           .87              .0        $   0
 $3.00 - $4.00     1,660,000    $3.09          1.76       1,439,000        $3.05
                   ---------                              ---------
                   2,510,000    $2.55          1.46       1,439,000        $3.05
                   =========                              =========

     As of April 30, 1998 48,000 options are available for future grant under
the 1997 Plan, 583,000 options are available for future grant under the 1998
Plan.

     [5] Warrants:

     In connection with the Private Placement of the Series A Convertible
Preferred Shares the Company granted 24,712 common share warrants entitling the
holder to purchase one share of common stock at a price of $3.00 per share. The
warrants were exercised during the fiscal year ended April 30, 1998.

     In connection with the Private Placement of the 8% Series D Convertible
Preferred Shares the Company granted 107,355 common share purchase warrants
entitling the holder to purchase one share of common stock at a price of
$4.81 per share until April 24, 2001. 100,000 of the purchase warrants were
issued to preferred stockholders and 7,355 of the purchase warrants were issued
to the selling agent as additional commission. The weighted average fair value
of warrants granted during the year ended April 30, 1998 was $1.67 on the date
of grant using the Black-Scholes option-pricing model using the following
assumptions: dividend yield 0%; volatility of 59%, risk free rate of 5.61% and
expected life of three years.

                                      F-13
<PAGE>
Note G - Stockholders' Equity  (continued)

     [6] Stock-based compensation:

     The Company applies APB No. 25 in accounting for its stock option plans
and, accordingly, recognizes compensation expense for the difference between the
fair value of the underlying common stock and the exercise price of the option
at the date of grant. The effect of applying SFAS No. 123 on pro forma net loss
as stated above is not necessarily representative of the effects on reported net
loss for future years due to, among other things (1) the vesting period of the
stock options and (2) the fair value of additional stock options in future
years. The average fair value of options granted during the year was
approximately $1.78. The following pro forma information gives effect to fair
value of the options on the date of grant using the Black-Scholes option-pricing
model with the following assumptions: dividend yield of 0%, volatility of 59%,
risk free interest rates of ranging from 5.38% - 6.40% and expected life of 3
years.

                Net loss:
                   As reported                              $   (4,390,000)
                   Pro forma                                    (4,755,000)

                Basic and diluted loss per share:
                   As reported                                      ($0.35)
                   Pro forma                                        ($0.37)

     During the year ended April 30, 1998 the Company granted 260,000 options to
employees at exercise prices less than the fair value ($342,000) of the
underlying common stock at the dates of grant. The Company recorded a one-time
noncash charge of $318,000 and the difference of $24,000 as unearned
compensation which is being amortized over the shorter of the vesting period or
period of employment.

     During the year ended April 30, 1998 the Company granted 89,000 options as
compensation for consulting and professional services. The Company determined
the fair value of these options to be approximately $139,000 and a one-time
noncash charge was recorded.


Note H - 12% Convertible Subordinated Debentures

     During the year ended April 30, 1997 the Company converted $150,000 of
convertible debentures into 200,666 shares of common stock.


Note I - Loan Receivable

     During December 1996 the Company entered into a promissory note receivable
with a public relations and communications firm. The principal amount of
$100,000 and accrued interest at 6% were satisfied through the performance of
services. The amount of $102,000 (including interest) was charged to expense
during the year ended April 30, 1998.



                                      F-14
<PAGE>
Note J - Secured Loan

     On March 9, 1990, the Company entered into a security agreement with a
finance company to borrow money secured by the Company's receivables evidenced
by invoices. At the time, the Company was engaged in selling educational books
to municipal school districts and public libraries throughout the United States.
The finance company agreed to lend an amount equal to 60% of the net value of
all the Company's accounts receivable. Accounts receivable funding ceased as of
July 31, 1990.

     The Company instituted a lawsuit against the finance company on November
26, 1990 for damages due to its failure to lend to the 60% credit limit based on
its calculations and for forgiveness of the loan based on the finance company's
charging, based on its own billings, at an interest rate in excess of the rate
of 25% per annum as prescribed in the sections dealing with usury in New York
Penal State Law. Although company counsel had opined that the Company would
prevail in the action and that all indebtedness incurred in the principal amount
$126,500 plus interest and fees would be voided by reason of the finance
company's violation of the usury provisions of the Penal Law, by agreement
between the Company and the finance company, the lawsuit was withdrawn without
prejudice as the Company, at that time, lacked the resources for protracted
litigation. In April 1996, the obligation, if any, to the finance company became
barred by New York State's six-year statute of limitations. The Company wrote
off the obligation during the second quarter of fiscal 1997.


Note K - Commitments and Contingencies

     [1] Operating leases:

     The Company leases office and warehouse facilities under an operating lease
expiring in March 2000. At April 30, 1998, the future minimum rental payments
under the operating lease are as follows:

                 1999                            $     46,000
                 2000                                  55,000
                                                 ------------
                                                 $    101,000
                                                 ============

     Rent expense was $37,000 and $13,000 for the years ended April 30, 1998 and
1997, respectively.

     [2] Employment agreements:

     On November 3, 1995, the Company entered into a three year employment
agreement with its President. Under the agreement, the President received an
annual salary of $36,000 per year until April 30, 1996 and $60,000 thereafter.
The base annual salary was increased to $72,000 when the Company generated
aggregate gross revenues from the sale of biomedical products of $500,000.

     On November 3, 1995, the Company entered into a three year employment
agreement with its Executive Vice-President. The agreement provided for an
annual salary of $24,000 until April 30, 1996 and $48,000 thereafter. The base
annual salary was increased to $60,000 when the Company generated aggregate
gross revenues from the sale of biomedical products of $500,000.



                                      F-15
<PAGE>
Note K - Commitments and Contingencies (continued)

     [2] Employment agreements: (continued)

     On November 3, 1995 the Company entered into a three year employment
agreement with its Vice-President of Marketing. Under the agreement the
Vice-President received an annual salary of $24,000 until April 30, 1996 and
$48,000 thereafter. The base annual salary was increased to $60,000 when the
Company generated aggregate gross revenues from the sale of biomedical products
of $500,000. In consideration of past services valued at $125,000 or $0.25 per
share the Vice-President received the right to receive 500,000 common shares.
Upon execution of the agreement the Vice President of Marketing received 100,000
shares. Certificates representing 400,000 common shares were being held by the
Company subject to the following vesting:

     100,000 shares upon the Company's achieving $1,000,000 in gross revenues
from sales of biomedical products; 100,000 shares upon the Company's achieving
$2,000,000 in gross revenues from sales of biomedical products 100,000 shares
upon the Company's achieving $3,000,000 in gross revenues from sales of
biomedical products; 100,000 shares upon the Company's achieving $4,000,000 in
gross revenues from sales of biomedical products.

     During the year ended April 30, 1998 the Vice President of Marketing
received 200,000 shares upon the Company achieving $2,000,000 in gross revenues
of biomedical products. Additionally in April 1998, the Board of Directors voted
to remove the vesting restrictions on the remaining 200,000 shares. In
connection therewith, the Company recorded a noncash charge of $1,356,000. The
amount of the charge was based on the closing price of the common stock on the
date the milestones were achieved and the date the Board of Directors voted to
remove the vesting restrictions.

     In addition, the above agreements provide for bonuses based on graduated
rates at specified levels of gross revenues in the aggregate as follows: 6% of
gross revenues of the Company of $1,000,000 per fiscal year until such revenues
reach $3,000,000, 4.5% of gross revenues between $3,000,000 and $5,000,000 per
year and 3% thereafter.

     On May 26, 1997 the Company entered into a three year employment agreement
with its Vice-President/General Manager. The employment agreement provides for a
base annual salary of $84,000 per annum and a bonus of 1% of net sales after
gross revenue of $1,000,000 per fiscal year. Additionally the employee shall
receive 150,000 options at $3.00 per share vesting immediately. The President of
the Company gave the Vice-President/General Manager 150,000 shares of the
Company's common stock vesting as follows: 25% upon effective date of employment
and 25% additional upon each of the three subsequent anniversaries of
employment. During the year ended April 30, 1998 the Board of Directors voted to
remove the vesting restrictions. In connection therewith, the Company recorded a
noncash charge of $540,000 during the year ended April 30, 1998. The amount of
the charge was based on the closing price for the common stock for the shares
received on the effective date and the shares received when the vesting
restrictions were removed.

     During the year ended April 30, 1998 the Company recorded approximately
$80,000 in bonuses based on revenue in accordance with employment
agreements.



                                      F-16
<PAGE>
Note K - Commitments and Contingencies (continued)

[3]     Litigation

     In February 1994, Robert Freidenberg, as owner of the two medical
technology companies, MDI and Gendex, acquired by the Company, in the name of
these corporations, filed suit to have a Share Exchange Agreement rescinded on
the grounds of breach of contract. In order to preserve a claim for damages, the
Company filed a third-party claim against Dr. Freidenberg, for breach of the
Share Exchange Agreement. In November 1995, after a trial, the court dismissed
Dr. Friedenberg's lawsuit and allowed the Company's third-party claim to proceed
to trial.In September, 1996, Dr. Friedenberg died. A pretrail hearing was held
in December 1996 which set a trial date of April 28, 1997.

     That trial was decided by a jury on May 5, 1997. The verdict determined
that Dr. Friedenberg breached various contracts, including the Share Exchange
Agreement, when he failed to deliver technology to the Company. The jury also
found in favor of the Company on two of the three fraud claims against Dr.
Friedenberg and awarded the Company approximately $321,000 in damages. Dr.
Friedenberg's estate, just prior to the jury trial, filed a supplemental claim
for the shares of the Company's stock which he would have received under the
Share Exchange Agreement which the trial judge took under advisement. The trial
judge, on July 17, 1998 ruled that the estate of Dr. Friedenberg is entitled to
5,907,154 common shares of the Company. Management of the Company in
consultation with counsel is of the opinion that the trial judge's award of the
shares to Dr. Friedenberg's estate will be reversed on appeal.

      In June 1995, the Company filed a lawsuit against Mr. Morris, Dr.
Friedenberg's counsel, for the breach of attorney-client relationship and his
fiduciary duty and negligence in representing the Company in matters relating to
Dr. Friedenberg and in the preparation of the Share Exchange Agreement. The
Company's lawsuit demands damages in the amount of $1,000,000. Mr. Morris has
counterclaimed for common shares. No trial date has been set. The Company is
vigorously contesting the Morris claim.

Note L - Reclassification

     Certain amounts at April 30, 1997 have been reclassified to conform to the
current year presentation.


                                      F-17
<PAGE>
Note M - Condensed Restated quarterly financial Information (Unaudited)

The Company is recording adjustments which effect prior interim accounting
 periods of the fiscal year ended April 30, 1998 as indicated below.
<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED
                                                     JULY 31,1997
                                         ----------------------------------------
                                                     ADJUSTMENTS
                                         -----------------------------------------------------------
                             AS            BOOK         COMPEN-    GROSS PROFIT                             AS
                          REPORTED       SALES (1)     SATION (2)  PERCENTAGE (3)           OTHER        ADJUSTED
                        ---------------------------------------------------------      ---------------------------
<S>                        <C>           <C>                                           <C> <C>           <C>    
Revenues ............      817,000       (79,000)         --           --              (4) (72,000)      666,000

                              --            --            --           --              (4) (32,000)         --
                              --            --            --           --              (5) (53,000)         --
Cost Of Sales .......      356,000       (12,000)                    117,000           (6)  (7,000)      369,000
                        ----------                                                                     ----------
Gross Profit ........      461,000          --            --           --                                297,000
                        ----------                                                                     ----------

Selling, General &
Administrative
Expenses ............      414,000          --         622,000                         (5) 53,000           --
                              --            --            --           --              (6)  6,000      1,095,000
                        ----------                                                                     ----------
Income (Loss) from
operations ..........       47,000          --            --           --                    --         (798,000)
                        ==========                                                                     ==========

Net Income (Loss) per
share ...............         0.01          --            --           --                    --            (0.06)
                        ==========                                                                     ==========

<CAPTION>
                                                  THREE MONTHS ENDED
                                                    OCTOBER 31,1997
                                         ------------------------------------
                                                      ADJUSTMENTS
                                         ------------------------------------------------
                             AS          BOOK       COMPEN-    GROSS PROFIT                       AS
                          REPORTED     SALES (1)   SATION (2)  PERCENTAGE (3)     OTHER        ADJUSTED
                        -----------------------------------------------------  ---------------------------
Revenues ...............   457,000     (97,000)       --         --            (4) (1,000)       359,000  

                              --          --          --         --            (5)(58,000)          --
Cost Of Sales ..........   145,000     (15,000)       --        58,000         (6) (6,000)       124,000
                         ---------                                                              --------
Gross Profit ...........   312,000        --          --         --                  --          235,000
                         ---------                                                              --------

                             --           --          --         --            (5) 58,000           --
                                                                               (7) 53,000           --      
                                                                               (8) 18,000           --
Selling, General &                                                             (9) 17,000
Administrative
Expenses ...............   425,000        --        46,000       --            (6)  3,000        620,000
                         ---------                                                              --------
Loss from operations ...  (113,000)       --          --         --                  --         (385,000)
                         =========                                                              ========                            

Net  Loss  per share ...     (0.01)       --          --         --                  --            (0.03)
                         =========                                                              ========                            
</TABLE>
                                      F-18
<PAGE>
<TABLE>
<CAPTION>
                                                    SIX MONTHS ENDED
                                                    OCTOBER 31,1997
                                         ------------------------------------
                                                      ADJUSTMENTS
                                         ------------------------------------------------
                             AS          BOOK       COMPEN-    GROSS PROFIT                       AS
                          REPORTED     SALES (1)   SATION (2)  PERCENTAGE (3)     OTHER        ADJUSTED
                        -----------------------------------------------------  -------------------------
<S>                      <C>          <C>                                          <C>         <C>         
Revenues ............... 1,274,000    (176,000)       --         --                73,000      1,025,000   

Cost Of Sales ..........   501,000     (27,000)       --       175,000           (156,000)       493,000
                         ---------                                                             ---------
Gross Profit ...........   773,000        --          --         --                  --          532,000
                         ---------                                                             ---------

Selling, General & 
Administrative
Expenses ...............   839,000        --       668,000       --               208,000      1,715,000
                         ---------                                                             ---------
Loss from operations ...   (66,000)       --          --         --                  --       (1,183,000)
                         =========                                                             =========                            

Net  Loss  per share ...     (0.00)       --          --         --                  --            (0.09)
                         =========                                                             =========                            
<CAPTION>
                                                  THREE MONTHS ENDED
                                                    JANUARY 31,1998
                                         ------------------------------------
                                                      ADJUSTMENTS
                                         ------------------------------------------------
                             AS         BOOK        COMPEN-    GROSS PROFIT                       AS
                          REPORTED     SALES (1)   SATION (2)  PERCENTAGE (3)     OTHER        ADJUSTED
                        -----------------------------------------------------  -------------------------
Revenues ...............   500,000    (120,000)       --         --                  --          380,000   

Cost Of Sales ..........   174,000     (18,000)       --         66,000         (5) (51,000)     171,000
                         ---------                                                             ---------
Gross Profit ...........   326,000        --          --         --                  --          209,000
                         ---------                                                             ---------

                             --           --          --         --            (5) 51,000           --
                             --           --          --         --            (7) 69,000           --
                             --           --          --         --            (8) 25,000           --
                             --           --          --         --            (9) 17,000           --
                             --           --          --         --           (10)(48,000)          --
Selling, General &           --           --          --         --           (11) 20,000           --
Administrative             959,000        --        54,000       --            (6)  3,000      1,150,000
Expenses ...............    48,000        --          --         --           (10) 48,000         96,000
                         ---------                                                             ---------
Loss from operations ...  (681,000)       --          --         --                  --       (1,037,000)
                         =========                                                             =========                            

Net  Loss  per share ...     (0.05)       --          --         --                  --            (0.07)
                         =========                                                             =========                            
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                   NINE MONTHS ENDED
                                                    JANUARY 31,1998
                                         ------------------------------------
                                                      ADJUSTMENTS
                                         ------------------------------------------------
                             AS          BOOK       COMPEN-    GROSS PROFIT                       AS
                          REPORTED     SALES (1)   SATION (2)  PERCENTAGE (3)     OTHER        ADJUSTED
                        -----------------------------------------------------  ---------------------------
<S>                      <C>          <C>                                                      <C>         
Revenues ............... 1,774,000    (296,000)       --         --               (73,000)     1,405,000   

Cost Of Sales ..........   675,000     (45,000)       --        241,000          (207,000)       664,000
                         ---------                                                             ---------
Gross Profit ........... 1,099,000        --          --         --                  --          741,000
                         ---------                                                             ---------

Selling, General &   
Administrative           1,798,000        --       722,000       --               345,000      2,865,000
Expenses ...............    48,000        --          --         --                48,000         96,000
                         ---------                                                             ---------
Loss from operations ...  (747,000)       --          --         --                  --       (2,220,000)
                         =========                                                             =========                            
Net  Loss  per share ...     (0.05)       --          --         --                  --            (0.16)
                         =========                                                             =========                            
</TABLE>
The following explains the principal adjustments:

(1) A revenue recognition adjustment to provide an allowance for book sales
     which are subject to customer acceptance and its related effect on cost of 
     sales.
(2) Adjustments to recognize  non-cash employee and consulting compensation
     charges in the period earned. The expenses represent the issuance of 
     equity instruments at fair value in accordance with employment agreements.
     (see note K [2] )
(3) The gross profit percentages have been recalculated to correspond with
     inventory adjustments, drug test samples and the timing of revenue 
     recognition.
(4) Adjustment to reverse consignment sale of drug test kits and related cost
     of sales.
(5) Reclassification of drug test samples from cost of sales to Selling
     Expense. 
(6) Other minor adjustments 
(7) Write-off of investor relations supplies and expense 
(8) Earned employee bonuses 
(9) Allocation of bad debt accrual
(10) Reclassification of research & development costs 
(11) Write-off of patent & license costs

                              F-20