The accompanying notes are an integral part of the condensed financial statements

American Bio Medica Corporation

Condensed Statements of Cash Flows

(Unaudited)

The accompanying notes are an integral part of the condensed financial statements

AMERICAN BIO MEDICA CORPORATION

Notes to condensed financial statements (unaudited)

September 30, 2015March 31, 2016

Note A - Basis of Reporting

The accompanying unaudited interim condensed financial statements of American Bio Medica Corporation (the “Company”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Regulation S-X. Accordingly, these unaudited interim condensed financial statements do not include all information and footnotes required by U.S. GAAP for complete financial statement presentation. These unaudited interim condensed financial statements should be read in conjunction with the Company’s audited condensed financial statements and related notes contained in itsthe Company’s Annual Report on Form 10-K for the year ended December 31, 2014.2015. In the opinion of management, the interim condensed financial statements include all normal, recurring adjustments which are considered necessary for a fair presentation of the financial position of the Company at September 30, 2015,March 31, 2016, the results of our operations for the three and nine month periods ended September 30,March 31, 2016 and March 31, 2015, and September 30, 2014, and cash flows for the ninethree month periods ended September 30,March 31, 2016 (the “First Quarter 2016”) and March 31, 2015 and September 30, 2014.(the “First Quarter 2015”).

Operating results for the three and nine months ended September 30, 2015First Quarter 2016 are not necessarily indicative of results that may be expected for the year ending December 31, 2015.2016. Amounts at December 31, 20142015 are derived from the Company’s audited financial statements included in ourthe Company’s Annual Report on Form 10-K for the year ended December 31, 2014.2015. Reclassifications have been made to the audited financial statements for the year ended December 31, 2015 to conform to the presentation of the First Quarter 2016 financial statements.

During the nine months ended September 30, 2015,First Quarter 2016, there were no significant changes to the Company’s critical accounting policies, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.2015.

The preparation of these interim condensed financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates estimates, including those related to product returns, bad debts, inventories, income taxes, warranty obligations, contingencies and litigation. The Company 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.

These unaudited interim condensed financial statements have been prepared assuming that the Company will continue as a going concern and, accordingly, do not include any adjustments that might result from the outcome of this uncertainty. The Company’s independent registered public accounting firm’s report on the financial statements included in itsthe Company’s Annual Report on Form 10-K for the year ended December 31, 2014,2015, contained an explanatory paragraph regarding the Company’s ability to continue as a going concern. As of the date of this report, the Company’s current cash balances, together with cash generated from future operations and amounts available under current credit facilities may not be sufficient to fund operations for the next 12 months if sales levels do not improve. If cash generated from operations is not sufficient to satisfy ourthe Company’s working capital and capital expenditure requirements, the Company will 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.

Recently Adopted Accounting Standards

In April 2015, the FASB issued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs”. This Update is part of its initiative to reduce complexity in accounting standards (the Simplification Initiative). The Board received feedback that having different balance sheet presentation requirements for debt issuance costs and debt discount and premium creates unnecessary complexity. Recognizing debt issuance costs as a deferred charge (that is, an asset) also is different from the guidance in International Financial Reporting Standards (IFRS), which requires that transaction costs be deducted from the carrying value of the financial liability and not recorded as separate assets. Additionally, the requirement to recognize debt issuance costs as deferred charges conflicts with the guidance in FASB Concepts Statement No. 6, Elements of Financial Statements, which states that debt issuance costs are similar to debt discounts and in effect reduce the proceeds of borrowing, thereby increasing the effective interest rate. Concepts Statement 6 further states that debt issuance costs cannot be an asset because they provide no future economic benefit. To simplify presentation of debt issuance costs, the amendments in this Update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this Update. For public business entities, the amendments in this Update are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The Company adopted this ASU in the First Quarter 2016.

In January 2015, the FASB issued ASU No 2015-01, “Income Statement – Extraordinary and Unusual Items”. This ASU is part of FASB’s initiative to reduce complexity in the account standards by eliminating the concept of extraordinary items from GAAP. The amendments eliminate the requirements for reporting entities to consider whether an underlying event or transaction is extraordinary, however, the presentation and disclosure guidance for items that are unusual in nature or occur infrequently is retained and is expanded to include items that are both unusual in nature and infrequently occurring. This update applies to all. entities and is effective for fiscal years, and interim periods within the fiscal year, beginning after December 15, 2015. We adopted this ASU in the First Quarter 2016, and it did not have any impact on our financial statements.

Recent Accounting Standards

Certain reclassificationsIn March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-09, “Improvements to Employee Share-Based Payment Accounting.” This ASU simplifies several aspects of accounting for share-based payment transactions, including the income tax consequences, forfeitures, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods. Early adoption is permitted. An entity that elects early adoption of the amendment under this ASU must adopt all aspects of the amendment in the same period. We are currently evaluating the impact of adopting this ASU.

In February 2016, the FASB issued ASU No. 2016-02, “Leases”. This ASU requires a lessee to recognize a lease liability and a right-of-use asset on its balance sheet for all leases, including operating leases, with a term greater than 12 months. Lease classification will determine whether a lease is reported as a financing transaction in the income statement and statement of cash flows. The ASU does not substantially change lessor accounting, but it does make certain changes related to leases for which collectability of the lease payments is uncertain or there are significant variable payments. Additionally, the ASU makes several other targeted amendments including a) revising the definition of lease payments to include fixed payments by the lessee to cover lessor costs related to ownership of the underlying asset such as for property taxes or insurance; b) narrowing the definition of initial direct costs which an entity is permitted to capitalize to include only those incremental costs of a lease that would not have been madeincurred if the lease had not been obtained; c) requiring seller-lessees in a sale-leaseback transaction to recognize the entire gain from the sale of the underlying asset at the time of sale rather than over the leaseback term; and d) expanding disclosures to provide quantitative and qualitative information about lease transactions. The ASU is effective for all annual and interim periods beginning January 1, 2019 and is required to be applied retrospectively to the earliest period presented at the date of initial application, with early adoption permitted. We are currently evaluating the impact of adopting this ASU.

There are no other accounting pronouncements issues during the First Quarter 2016 that are expected to have or that could have a significant impact on our financial position or results of operations.

Reclassifications

Certain items have been reclassified from the prior periodyears to confirmconform to the presentation of the current period.year presentation.

AMERICAN BIO MEDICA CORPORATION

In August 2015, FASB issued Accounting Standards Update (“ASU”) No 2015-14, “Revenue from Contracts with Customers”. This update defers the effective dates of ASU No. 2014-09 (originally issued in June 2014) for public business entities by one year, or until annual reporting periods beginning after December 15, 2017, including interim reporting periods within the reporting period. ASU No. 2014-09 gives entities a single comprehensive model to use in reporting information about the amount and timing of revenue resulting from contracts to provide goods or services to customers. The proposed ASU, which would apply to any entity that enters into contracts to provide goods or services, would supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the Codification. Additionally, the update would supersede some cost guidance included in Subtopic 605-35, Revenue Recognition – Construction-Type and Production-Type Contracts. The update removes inconsistencies and weaknesses in revenue requirements and provides a more robust framework for addressing revenue issues and more useful information to users of financial statements through improved disclosure requirements. In addition, the update improves comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets and simplifies the preparation of financial statements by reducing the number of requirements to which an entity must refer. The Company is continuing to review the provisions of this ASU to determine if there will be any impact on its results of operations, cash flows or financial condition.

Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying unaudited condensed financial statements.

Note B – Inventory

Inventory is comprised of the following:

Note C – Net LossIncome / (Loss) Per Common Share

Basic net lossincome / (loss) per common share is calculated by dividing the net lossincome / (loss) by the weighted average number of outstanding common shares during the period. Diluted net lossincome / (loss) per common share includes the weighted average dilutive effect of stock options and warrants. Potential common shares outstanding as of September 30, 2015March 31, 2016 and 2014:2015:

The number of securities not included in the diluted net loss per common share for the three and nine months ended September 30, 2015 andMarch 31, 2016 was 3,540,000, since the inclusion of such securities would have an anti-dilutive effect because the securities’ exercise prices were greater than the average market price of the common shares.

The number of securities not included in the diluted net loss per share for the three and nine months ended September 30, 2014March 31, 2015 (because the effect would have been anti-dilutive) was 3,820,000 and 5,861,000, respectively.4,551,000.

Note D – LitigationLitigation/Legal Matters

From time to time, the Company is named in legal proceedings in connection with matters that arisearose during the normal course of business. While the ultimate resultoutcome of any such litigation cannot be predicted, if the Company iswe are unsuccessful in defending any such litigation, the resulting financial losses could have an adverse effect on the financial position, results of operations and cash flows of the Company. The Company is notWe are aware of anyno significant litigation loss contingencies for which management believes it is both probable that a liability has been incurred and that the amount of the loss can be reasonably estimated.

Note E – Line of Credit and Debt

AMERICAN BIO MEDICA CORPORATION

Note E – Line of Credit and Debt

The Company’s Line of Credit and Debt consisted of the following as of September 30, 2015 and December 31, 2014:

AMERICAN BIO MEDICA CORPORATION

LOAN AND SECURITY AGREEMENT WITH CHEROKEE FINANCIAL, LLC.LLC

On March 26, 2015, the Company entered into a Loan and Security AgreementLSA with Cherokee Financial, LLC (the “Cherokee LSA”). The purpose of the Cherokee LSA was to refinance, at a better interest rate, the Company’s Series A Debentures and Cantone Asset Management Bridge Loan (both of which matured on February 1, 2015), as well as the Company’s Mortgage Consolidation Loan with First Niagara Bank at a better interest rate.(“First Niagara”). The loan is collateralized by a first security interest in the same assets as the First Niagara Bank loan (i.e. real estate and machinery and equipment).equipment. Under the Cherokee LSA, the Company was provided the sum of $1,200,000 in the form of a 5-year Note at an annual interest rate of 8%. The Company will make interest only payments quarterly on the Cherokee Note, with the first interest payment being due (and paid) on May 15, 2015. The Company will also is also required to make an annual principal reduction payment of $75,000 on each anniversary of the date of the closingclosing; with the first principal reduction payment being duepaid on March 26,February 15, 2016. A final balloon payment is due on March 26, 2020. In addition to the 8% interest, the Company will pay Cherokee Financial, LLC (“Cherokee”) a 1% annual fee (in cash and paid contemporaneously with payment of quarterly interest) for oversight and administration of the loan. The Company can callpay off the Cherokee Note at anytime with no penalty; except that a 1% administration fee would be required to be paid to Cherokee Financial, LLC to close out all participations.

The Company issued 1.8 million restricted shares of the Company’s common stock to Cherokee Financial LLC. Thefor payment of fees. In addition, if the loan was not repaid in full as of March 19, 2016, the Company will alsowas required to issue an additional 0.5another 600,000 restricted shares of the Company’s common stock or 600,000 restricted shares, to Cherokee Financial LLC on March 26, 2016, however, if theCherokee. The Company has repaid the Cherokee Note in full prior to this date, the Company is not obligateddid instruct its transfer agent to issue these additional shares.shares in March 2016 as required.

As placement agent for the transaction, CRICantone Research, Inc. (“CRI”) received a 5% cash fee on the $1.2 million, or $60,000, and 200,000 restricted shares of the Company’s common stock. The. In addition, if the loan was not repaid in full as of March 19, 2016, the Company will alsowas required to issue an additionalanother 196,000 restricted shares of the Company’s common stock to CRI on March 26, 2016 as an additional placementCRI. The Company did instruct its transfer agent fee and expense allowance, however, if the Company has repaid the Cherokee Note in full prior to this date, the Company is not obligated to issue these additional shares. in March 2016 as required.

The Company received net proceeds of $80,000 after $1,015,000 of debt payments, $60,000 in placement agent fees, $19,000 in legal fees, $19,000 in expenses, $3,000 in state filing fees and $4,000 in interest expense (for 8% interest on $511,000 in new participations received from February 24, 2015 through March 25, 2015). With the adoption of ASU No. 2015-03 in the First Quarter 2016, these transaction costs (with the exception of the interest expense,expense) are now being deducted from the Company will be amortizing these expensesbalance on the Cherokee LSA as of March 31, 2016, and are being amortized over the term of the Cherokee LSA, or 5 years as deferred finance and debt issuance costs. debt.

From these net proceeds, in April 2015, the Company also paid $15,000 in interest expense related to 15% interest on $689,000 in Series A Debentures and CAM Bridge Loan for the period of February 1, 2015 through March 25, 2015.

The nine months ended September 30, 2015 includes $39,000 in expense related to the Cherokee LSA, and the nine months ended September 30, 2014 includes $0 in expense. The three months ended September 30, 2015 includes $17,000 in expense related to the Cherokee LSA, and the three months ended September 30, 2014 includes $0 in expense.

The Company recognized $48,000 in interest expense in the nine months ended September 30, 2015, and $0 in interest expense in the nine months ended September 30, 2014. The CompanyWe recognized $24,000 in interest expense in the three months ended September 30, 2015,First Quarter 2016 related to the Cherokee LSA and $0 in interest expense in the three months ended September 30, 2014. At September 30, 2015, the Companywe had $13,000 in accrued interest expense at March 31, 2016.

The Company recognized $1,000 in interest expense in the First Quarter of 2015 related to the Cherokee LSA.LSA, and we had $10,000 in accrued interest expense at March 31, 2015.

As of September 30,March 31, 2016, the balance on the Cherokee LSA is $1,125,000, however the discounted balance is $758,000. As of December 31, 2015, the balance on the Cherokee LSA was $1,200,000.

AMERICAN BIO MEDICA CORPORATION$1,200,000, however the discounted balance was $909,000.

LINE OF CREDIT WITH CRESTMARK BANK (“CRESTMARK”)

On June 29, 2015 (the “Closing Date”), the Company entered into a three-year Loan and Security Agreement (“LSA”) with Crestmark, Bank (“Crestmark”), a new Senior Lender, to refinance the Company’s Line of Credit with Imperium Commercial Finance, LLC (“Imperium”). The Crestmark Line of Credit is used for working capital and general corporate purposes.

Under the LSA, Crestmark is providing the Company with a Line of Credit of up to $1,500,000 (“Maximum Amount”) with a minimum loan balance requirement of $500,000. The Line of Credit is secured by a first security interest in the Company’s inventory, and receivables and security interest in all other assets of the Company (in accordance with permitted prior encumbrances).

The Maximum Amount is subject to an Advance Formula comprised of: 1) 90% of Eligible Accounts Receivables (excluding, receivables remaining unpaid for more than 90 days from the date of invoice and sales made to entities outside of the United States), and 2) up to 40% of eligible inventory plus up to 10% of Eligible Generic Packaging Components not to exceed the lesser of $500,000 (“Inventory Sub-Cap Limit”), or 100% of the Eligible Accounts Receivable. The Inventory Sub-Cap Limit is being reduced by $10,000 per month starting August 1, 2015 until the Inventory Sub-Cap Limit is permanently reduced to $350,000.

So long as any obligations are due to Crestmark, the Company must comply with a minimum Tangible Net Worth (“TNW”) Covenant. Under the LSA, as of June 30, 2015 and at all times thereafter,amended, the Company must maintain a TNW of at least $1,650,000.$650,000. Additionally, if a quarterly net income is reported, the TNW covenant will increase by 50% of the reported net income. If a quarterly net loss is reported, the TNW covenant will remainsremain the same as the prior quarter’s covenant amount. TNW is defined as: Total Assets less Total Liabilities less the sum of (i) the aggregate amount of non-trade accounts receivables, including accounts receivables from affiliated or related persons, (ii) prepaid expenses, (iii) deposits, (iv) net lease hold improvements, (v) goodwill and (vi) any other asset that would be treated as an intangible asset under GAAP; plus Subordinated Debt. For purposesSubordinated Debt means any and all indebtedness presently or in the future incurred by the Company to any creditor of the TNW covenant calculation, the Company’s MortgageCompany entering into a written subordination agreement with Cherokee Financial LLC is considered to be subordinated debt given Crestmark’s first security interest in inventory and receivables is not affected by Cherokee Financial LLC’s security interest in other Company assets.Crestmark.

If the Company terminates the LSA prior to its 3 year term, an early exit fee is due as follows: 3% of the Maximum Amount (plus any additional amount owed to Crestmark at time of termination) if terminated in year 1, and 2% if terminated in year 2 or anytime thereafter.

In the event of a default of the LSA, which includes but is not limited to, failure of the Company to make any payment when due and non-compliance with the TNW covenant, permits Crestmark to charge an Extra Rate. The Extra Rate is the Company’s then current interest rate plus 12.75% per annum.

Under the LSA, interest on the Crestmark Line of Credit is at a variable rate based on the Wall Street Journal Prime Rate plus 2% with a floor of 5.25%. As of the date of this report, the interest rate on the Crestmark Line of Credit is 5.25%. In addition to the interest rate, on the Closing Date and on each one-year anniversary date thereafter, the Company will pay Crestmark a Loan Fee of 0.50%, or $7,500, and a Monthly Maintenance Fee of 0.30% of the actual average monthly loan balance from the prior month will be paid to Crestmark. When these additional fees are considered, the rate on the Crestmark is 9.35% annually (the Imperium Line of Credit rate was 12% when all fees were considered).

In addition to the Loan Fee paid to Crestmark on the Closing Date, the Company had to pay a Success Fee (i.e. early termination fee) to Imperium in the amount of $50,000 on the Closing Date, and a Broker’s Fee of 5%, or $75,000, to Landmark Pegasus Inc. Prior to the Closing, the Company paid $12,000 in due diligence fees to Crestmark. The Company also incurred $3,000 of its own legal costs related to the Crestmark Line of Credit. TheseWith the exception of the early term fee ($50,000) paid to Imperium (which was expensed fully in the year ended December 31, 2015), these expenses are all being amortized over the term of the Crestmark Line of Credit, or three years. The Company recognized $6,000$8,000 of these coststhis expense in the three months ended September 30, 2015,First Quarter 2016 and $8,000 of these costs in the nine months ended September 30, 2015. The Company recognized $0 of costs in the three and nine months ended September 30, 2014.

AMERICAN BIO MEDICA CORPORATIONFirst Quarter 2015 (as the Crestmark Line of Credit was not in place until June 2015.

The Company recognized $21,000$15,000 in interest expense related to the Crestmark Line of Credit in the nine months ended September 30, 2015,First Quarter 2016 and $0 in interest expense in the nine months ended September 30, 2014. The Company recognized $21,000 in interest expense related to the Crestmark Line of Credit in the three months ended September 30, 2015, and $0 in interest expense in the three months ended September 30, 2014.First Quarter 2015. Given the nature of the administration of the Crestmark Line of Credit, at September 30, 2015,March 31, 2016, the Company had $0 in accrued interest expense related to the Crestmark Line of Credit, and there is $0 in additional availability under the Crestmark Line of Credit.

As of September 30,March 31, 2016, the balance on the Crestmark Line of Credit was $621,000, and as of December 31, 2015, the balance on the Crestmark Line of Credit was $931,000.$777,000.

PRIOR DEBT INSTRUMENTS AFFECTING PRIOR PERIOD

FIRST NIAGARA: MORTGAGE CONSOLIDATION LOAN

On April 28, 2014,The Company refinanced the Company entered into a Third Amendment to the Loan Agreement (the “Third Mortgage Consolidation Loan Amendment”)mortgage consolidation loan with First Niagara Bank.in March 2015. The Mortgage Consolidation Loan continued to be secured by the Company’s facility in Kinderhook, New York as well as various pieces of machinery and equipment. Under the Third Mortgage Consolidation Loan Amendment, the Mortgage Consolidation Loan was recast into a 3-year fully amortizing note through May 1, 2017. The interest rate of the amended facility was decreased from 9.25% to 8.25%, and the monthly payment was reduced from $14,115 to $13,199. The Company was required to pay First Niagara a renewal fee of 1% of the principal balance as of April 1, 2014, or $4,200. No principal reduction payment was required. All other terms of the Mortgage Consolidation Loan remained unchanged, including compliance with a covenant. The Mortgage Consolidation Loan was satisfied in full on March 27,Quarter 2015 via a refinancing with Cherokee Financial, LLC.

Interest expense recognized wasdid include $5,000 in the nine months ended June 30, 2015, and $24,000 in the nine months ended September 30, 2014. Interest expense recognized was $0 in the three months ended September 30, 2015, and $8,000 in the three months ended September 30, 2014. The balance on the Mortgage Consolidation Loan was $0 at September 30, 2015 and $348,000 at December 31, 2014, respectively.

DEBENTURE FINANCING/BRIDGE LOAN

In August 2008, the Company completed an offering of Series A Debentures (“Series A Debentures”) and received gross proceeds of $750,000. The Series A Debentures’ original interest rate was 8% and the original maturity date was August 1, 2012. In 2012, $645,000 in Series A Debentures were extended to August 2013 at an increased interest rate of 15%. In 2013, $634,500 in Series A Debentures were extended to August 2014 at the same interest rate of 15%. Throughout the extensions indicated previously, certain holders did not wish to extend their investment. Given this, the Company entered into bridge loans with Cantone Asset Management, LLC (CAM), one for $150,000 in 2012 and another for $200,000 in 2013. Both bridge loans were at an interest rate of 15% (however, the interest on the 2013 bridge loan was paid in advance in the form of 300,000 restricted common shares of ABMC stock). The Company incurred $87,000 in costs related to the 2013 debenture extension, as well as $76,000 in expense related to warrants issued to debenture holder who extended for another 12 months. The Company amortized $0 in costs and warrant expense in the nine months ended September 30, 2015, and $65,000 in costs and $44,000 in warrant expense in the nine months ended September 30, 2014. The Company amortized $0 in costs and warrant expense in the three months ended September 30, 2015, and $21,000 in costs and $3,000 in warrant expense in the three months ended September 30, 2014. As of September 30, 2015, there was $0 in unrecognized costs and warrant expense with 0 months remaining.First Niagara loan.

On February 7, 2014, the Company paid $91,000 to certain Debenture Holders; bringing the balance due to Debenture Holders to $543,000. The Series A Debentures and the 2013 bridge loan matured on August 1, 2014 and the Company was unable to pay back the Series A Debentures principal of $543,000 and/or the $200,000 related to the 2013 Bridge Loan (together the “Debenture Debt”). The Company was however able to continue to make interest payments on the Debenture Debt. All but one of the 27 Series A Debenture holders agreed to forbear from exercising remedies of default related to the non-payment of principal until February 1, 2015. The Company repaid the principal of $20,000 to this one Series A Debenture holder bringing the balance on the Debentures to $523,000. The maturity of the 2013 bridge loan was also extended to February 1, 2015.

AMERICAN BIO MEDICA CORPORATION

Throughout the course of the debenture financings, the Company utilized Cantone Research, Inc (“CRI”) as the placement agent and also used CRI’s assistance in obtaining forbearance agreements from debenture holders. CRI received placement agent fees, expense allowance fees and other fees for these services and these fees were recognized throughout 2008 and 2013. The last fee (in 2014; for assisting the Company in obtaining forbearance agreements from the holders) was 2% of the forbearing amount and was paid with $7,000 in cash and 1% in 58,575 restricted shares of the Company’s common stock. A stock price of $0.12 per share was used to determine the number of restricted shares to be issued to CRI. The Company also reimbursed CRI’s legal fees of $1,000. The Company amortized these costs (totaling $15,000) over the course of the forbearance period, or over 6 months. The Company recognized $0 in expense in the nine months ended September 30, 2015, and $85,000 in expense in the nine months ended September 30, 2014. The Company recognized $0 in expense in the three months ended September 30, 2015, and $28,000 in expense in the 3 months ended September 30, 2014. As of September 30, 2015, there is $0 in unrecognized expense with 0 month remaining.DEBENTURE FINANCING/BRIDGE LOAN

The Company refinanced the Series A Debentures and associated bridge loan in March 2015. The First Quarter 2015 did include $22,000 in interest expense related to the debenture financing/bridge loan.

Line of Credit with Imperium

The Company refinanced its line of credit with Imperium in June 2015. The Company recognized $22,000$34,000 in debt issuance costs in the First Quarter 2015, and $27,000 in interest expense in the nine months ended September 30, 2015, and $85,000 in interest expense in the nine months ended September 30, 2014. The Company recognized $0 in interest expense in the three months ended September 30, 2015, and $28,000 in interest expense in the three months ended September 30,First Quarter 2015. The Company had $0 in accrued interest expense at September 30, 2015. As of September 30, 2015, the balance on the Debenture Debt is $0.

LINE OF CREDIT WITH IMPERIUM COMMERCIAL FINANCE, LLC (“IMPERIUM”)

On January 16, 2013 (the “Imperium Closing Date”), the Company entered into a 3-year Loan and Security Agreement (“LSA”) with Imperium, a Senior Lender.

Under the LSA, the Company was provided with a revolving loan facility (the “Imperium Line of Credit”), which was secured by a first security interest in all receivables, inventory, and intellectual property rights along with a second security interest in machinery and equipment (together the “Collateral”). On March 6, 2014, Imperium amended the Borrowing Base of the Imperium Line of Credit. More specifically, the amount available under the Imperium Line of Credit was capped to the lower of (i) $1,000,000, or (ii) 100% of the eligible outstanding accounts receivable. The Imperium facility also originally included a supplemental advance that was a discretionary facility secured by the same Collateral as the Imperium Line of Credit.

Under the LSA, so long as any obligations were due to Imperium, the Company was required to maintain certain minimum EBITDA (Earnings Before Interest, Taxes Depreciation and Amortization) requirements. The Company did not comply with this covenant starting in the First Quarter of 2013. The Company received a waiver from Imperium for the three months ended March 31, 2013 (for which the Company paid a fee of $10,000). No further formal waivers were issued, but no notice of default was received either.

The Company incurred $435,000 in costs related to the Imperium Line of Credit, and these costs were being amortized over the term of the facility (3 years). On June 29, 2015, all indebtedness due to Imperium was paid in full and Imperium’s security in the Company’s assets was terminated. The Company was required to pay fee of $50,000 to Imperium in the form of an early termination fee.

The Company recognized $137,000 in costs in the nine months ended September 30, 2015 (of which $69,000 was accelerated costs due to the early termination of the line of credit), and $103,000 in costs in the nine months ended September 30, 2014. The three months ended September 30, 2015 included $0 in costs and the three months ended September 30, 2014 included $34,000 in costs.

The Company incurred $39,000 in interest expense in the nine months ended September 30, 2015, and $76,000 in interest expense in the nine months ended September 20, 2014. The Company incurred $0 in interest expense in the 3 months ended September 30, 2015, and $25,000 in interest expense in the three months ended September 30, 2014. As of September 30, 2015, the Company had $0 in accrued interest related to the Imperium Line of Credit, and the balance of the Imperium Line of Credit was $0.

NoteNOTE F -– Stock Options / Warrant Grants

Stock Optionsand Warrants

The Company currently has threetwo non-statutory stock option plans, the Fiscal 2000 Non-statutory Stock Option Plan (the “2000 Plan”), the Fiscal 2001 Non-statutory Stock Option Plan (the “2001 Plan”) and the 2013 Equity Compensation Plan (the “2013 Plan”).

AMERICAN BIO MEDICA CORPORATION Both plans have been adopted by our Board of Directors and approved by our shareholders. Both the 2001 Plan and the 2013 Plan have options available for future issuance. Any common shares issued as a result of the exercise of stock options would be new common shares issued from our authorized issued shares.

During the nine months ended September 30, 2015, the Company issued options (all under the 2001 Plan) to purchase 90,000 shares of common stock to its board members and an option to purchase 250,000 common shares to stock to the Company’s CEO Melissa Waterhouse as compensation for her execution of a Validity Guarantee (“VG”) required under the Crestmark Line of Credit. All options were issued with an exercise price based on the closing price of the Company’s common shares on the date of grant. The Board member options vest 100% on the 1-year anniversary of the date of the grant and the Waterhouse VG stock option vests over the terms of the Crestmark Line of Credit, or over 3 years. During the nine months ended September 30, 2014,First Quarter 2016, the Company issued options to purchase 80,000750,000 shares of common stock to employees and directors under the Fiscal 2001 Plan.

Plan to its Chief Executive Officer/Principal Financial Officer Melissa A. Waterhouse. During the three months ended September 30,First Quarter 2015, the Company issued 0options to purchase 10,000 shares of common stock options. Duringunder the three months ended September 30, 2014,2001 Plan to its President and former Chairman of the Company issued 0 stock options.Board.

Stock option activity for the nine months ended September 30, 2015,First Quarter 2016 and the nine months ended September 30, 2014First Quarter 2015 is summarized as follows:follows (the figures contained within the tables below have been rounded to the nearest thousand):

The following table summarizes weighted-average assumptions using the Black-Scholes option-pricing model used on the date of the grants issued during the nine months ended September 30, 2014First Quarter 2016 and 2013:the First Quarter 2015:

The Company recognized $19,000 in share based payment expense in the First Quarter 2016, and $11,000 in share based payment expense in the First Quarter 2015. As of September 30, 2015,March 31, 2016, there was approximately $40,000$104,000 of total unrecognized compensation cost related to vested and non-vested stock options, which vest over time. That cost is expected to be recognized over a period ranging from 52 to 3226 months.

Warrants

Warrant activity for the nine months ended September 30, 2015First Quarter 2016 and the nine months ended September 30, 2014First Quarter 2015 is summarized as follows:

AMERICAN BIO MEDICA CORPORATION

TheIn the First Quarter 2016, the Company recognized $100,000 and $50,000$0 in debt issuance and deferred finance costs related to the issuance of the above warrants outstanding inoutstanding. In the nine months ended September 30,First Quarter 2015, and September 30, 2014, respectively. Thethe Company recognized $0 and $25,000 in debt issuance and deferred finance costs related to the issuance of the above warrants outstanding in the three months ended September 30, 2015 and September 30, 2014, respectively.

The increase in costs from an annual comparison perspective is relatedoutstanding. As of March 31, 2016, there was $0 of total unrecognized expense due to the accelerated amortizationacceleration of the expense due to the early termination ofwhen the Imperium Lineline of Credit. As of September 30, 2015, there is $0credit was refinanced in total unrecognized expense associated with the issuance of the above warrants outstanding.June 2015.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

The following discussion and analysis provides information, which we believe is relevant to an assessment and understanding of our financial condition and results of operations. The discussion should be read in conjunction with the Interim Condensed Financial Statements contained herein and the notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q. Certain statements contained in this Quarterly Report on Form 10-Q, including, without limitation, statements containing the words “believes”, “anticipates”, “estimates”, “expects”, “intends”, “projects”, and words of similar import, are forward-looking as that term is defined by the Private Securities Litigation Reform Act of 1995 (“1995 Act”), and in releases issued by the United State Securities and Exchange Commission (the “Commission”). These statements are being made pursuant to the provisions of the 1995 Act and with the intention of obtaining the benefits of the “Safe Harbor” provisions of the 1995 Act. We caution that any forward-looking statements made herein are not guarantees of future performance and that actual results may differ materially from those in such forward-looking statements as a result of various factors, including, but not limited to, any risks detailed herein, in our “Risk Factors” section of our Form 10-K for the year ended December 31, 2014,2015, in our most recent reports on Form 10-Q and Form 8-K and from time to time in our other filings with the Commission, and any amendments thereto. Any forward-looking statement speaks only as of the date on which such statement is made, and we are not undertaking any obligation to publicly update any forward-looking statements. Readers should not place undue reliance on these forward-looking statements.

Overview/Plan of Operations

Sales in the nine and three months ended September 30, 2015March 31, 2016 (“First Quarter 2016) decreased when compared to sales in the nine and three months ended September 30, 2014. March 31, 2015 (“First Quarter 2015”).

During the nine months ended September 30, 2015,First Quarter 2016, we recorded an operating loss of $39,000$91,000 and a net lossincome of $130,000; this compares to an operating profit of $39,000 and a net loss of $212,000 in the nine months ended September 30, 2014. During the three months ended September 30, 2015, we recorded an operating profit of $43,000 and a net loss of $2,000; this compares to an operating loss of $124,000 and a net loss of $211,000 in the three months ended September 30, 2014.$1,000. We had cash provided by operating activities of $105,000$172,000 in the First Quarter 2016. This compares to an operating loss of $53,000 and $204,000 fornet loss of $45,000 in the nine months ended September 30,First Quarter 2015 and September 30, 2014, respectively.cash provided by operating activities of $177,000 in the First Quarter 2015.

AMERICAN BIO MEDICA CORPORATION

In the fourth quarter of 2014, we partially consolidated some of our manufacturing operations. More specifically, we closed down 2 of the 3 units we were leasing in Logan Township, New Jersey and we moved certain manufacturing operations up to our (owned) facility in Kinderhook, New York. The manufacturing operations moved are consistent with operations already occurring in the New York facility. The 1 remaining unit in New Jersey continues to house bulk strip manufacturing and research and development. The cost of the partial consolidation was approximately $92,000 and most of this expense was incurred in the fourth quarter of 2014. We began to see savings (in site costs, shipping, etc) on January 1, 2015. We expect to see a 100% return on this investment by the end of the year ending December 31, 2015. The nine months ended September 30, 2015 includes increased manufacturing efficiency resulting in better profit margins, as a result of this partial consolidation.

We continuously examine all expenses in efforts to achieve profitability (if(when/if sales levels improve) or to minimize losses going forward (if sales continue to decline). The salary and commission deferral program, (started in August 2013) continued throughoutin the nine months ended September 30, 2015.First Quarter 2016. The deferral program consists of a 20% salary deferral for our executive officer (Melissa Waterhouse), and our non-executive VP Operations, as well as a 20% commission deferral for a sales consultant, and a 25% commission deferral of employee commissions (the deferral of employee commissions was reduced from 50% to 25% in July 2015.consultant. As of September 30, 2015,March 31, 2016, we havehad total deferred salary compensation owed of $50,000 and deferred commision owed of $96,000.$207,000. Over the course of the program, we have repaid portions of the deferred salaries and commissionscompensation (with $0 in payments totaling $96,000 in the nine months ended September 30, 2015,First Quarter 2016 and $49,000$52,000 in payments in the nine months ended September 30, 2014)First Quarter 2015). As cash flow from operations allows, we intend to continue to make paybacks, however the deferral program is continuing and we expect it will continue for up to another 12 months.

In addition, as part of our debt restructuring initiatives, in the nine monthsyear ended September 30,December 31, 2015, we refinanced substantially all of our existing debt in efforts to decrease our interest costs, improve working capital and increase cash flow. In March 2015, we entered into a $1,200,000 LoanThe interest rate on our loan and Security Agreementsecurity agreement with Cherokee Financial, LLC (the “Cherokee LSA”(“Cherokee”) is 9% (with all fees considered) while the majority of the debt refinanced by the Cherokee loan was at 15% (some of the debt refinanced was at 8.25%). The Cherokee LSA refinanced our Series A Debentures, CAM Bridge Loan and our Mortgage Consolidation Loan with First Niagara Bank. The interest rate on the Cherokee loan facilityline of credit with Crestmark is 8% with a 1% oversight fee9.35% (with all fees), while the interest rate on the Series A Debentures and CAM Bridge Loan was 15%, and the interest rate on the Fist Niagara loan was 8.25%. In June 2015, we entered into an up to $1,500,000 Loan and Security Agreement with Crestmark Bank that refinanced our line of credit with Imperium. The annual all-in rate (including interest and fees) on the Crestmark Line of Credit is currently 9.35% (the interest rate component is variable based on WSJ prime). The Imperium line of credit annual all-in rate was 12%.

General and Administrative expense in the nine months ended September 30, 2015 does include increased debt issuance costs and deferred finance costs as a results of accelerated amortization of expenses associated with the Imperium Line of Credit. Since the Imperium Line of Credit was terminated early, we were required to record (with all of the expense (approximately $69,000) in the second quarter of 2015 when it was originally going to be amortized until January 2016.fees).

We continue to believe that new products and our ability to sell those marketsproducts in new markets will be the primary future growth driver indriver. In the year ended December 31, 2015, and beyond. We continue to take stepswe began the process to receive a marketing clearance from the U.S. Food and Drug AdministrationFDA to sell an all-inclusive, urine based, drug testing cupsdrug-testing cup to customers requiring a CLIA waived product.product, and we expect to receive a decision from FDA in the near future. In earlyDecember 2015, we also begancompleted development on a new assay that is now nearly complete and barring any unexpected issues; product launch is expected in late 2015.for K2, or synthetic marijuana. We also have a number of new assays planned in research and development. We remain focused on selling our point of collection drugs of abuse tests, and growing our business through direct sales and select distributors. We

Starting in July 2016, we expect our contract manufacturing sales to decrease on an annual basis due to manufacturing shift with one of our contract customers. More specifically, as a result of a tech transfer with one of our customers (for which we received a $300,000 tech transfer fee based on the achievement of certain milestones), we recognized other income in the first and second quarters of 2015, as well as the First Quarter 2016. Beginning in July 2016, the customer will become their own primary supplier with ABMC moving into a position of back up or secondary supplier. Although contract manufacturing is not considered a material portion of our net sales, given this expected change, we are also making efforts to identify and secure new contract work and possible diversification alternatives.

Our continued existence is dependent upon several factors, including our ability to raise revenue levels and control costs to generate positive cash flows, maintaining our current credit facilities or refinancing our current credit facilities if necessary, and if needed, the ability to obtain working capital by selling additional shares of our common stock.

Results of operations for the First Quarter 2016 compared to the First Quarter 2015

NET SALES:

Net sales for the First Quarter 2016 decreased 2.1% when compared to net sales in the First Quarter 2015. The decrease in sales is primarily from an increase in contract manufacturing sales in the First Quarter 2016 when compared to the First Quarter 2015. This increase in contract manufacturing sales was due to a surplus in the customer’s inventory in the First Quarter 2015 that did not re-occur in the First Quarter 2016. Government sales improved when comparing the First Quarter 2016 with the First Quarter 2015 (due to our all-inclusive drug test cup launched in the First Quarter 2015), however international (primarily in Latin and South America) and other market sales declined. Our primary markets continue to be extremely price-competitive. However, we remain hopeful that when/if over-the-counter clearance is received by FDA for our all-inclusive drug testing cup, we will be able to garner new sales in clinical markets (such as pain management and drug treatment) because although price is always a factor, quality and accuracy are equally important in these clinical markets.

In addition, late in the First Quarter 2016, we entered into an independent agent agreement with a company that offers a toxicology management service. We believe a number of our current customers will find this offering complimentary to the drug testing products we provide and that new customers will also desire this service. We expect to receive compensation under this agreement starting in the second quarter of 2016. The First Quarter 2016 does not include any revenue from this new relationship.

GROSS PROFIT:

Gross profit decreased to 42.9% of net sales in the First Quarter 2016 from 46.6% of net sales in the First Quarter 2015. The decrease is gross profit stems primarily from the fact that we produced less testing strips in the First Quarter 2016, thereby decreasing manufacturing efficiencies.

AMERICAN BIO MEDICA CORPORATION

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015

COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2014

NET SALES:OPERATING EXPENSES:Net sales Operating expenses decreased 4.2% in the nine months ended September 30, 2015 declined 13.3% when compared to net sales in the nine months ended September 30, 2014.

Government sales declined in the nine months ended September 30, 2015 whenFirst Quarter 2016, compared to the nine months ended September 30, 2014 primarily due to the loss of two state contracts (both of which switched to using a product manufactured outside of the United States). In addition, contract-manufacturing sales declined as a result of an inventory surplus at one of our contract-manufacturing customers. The surplus has been used and contract-manufacturing levels have returned to a level more in line with historical sales. While we have had periods in which government sales improve, price competition with foreign manufacturers remains. Early indications are that our urine-based, all-inclusive drug test (launched in the first quarter of 2015) is allowing us to be more cost competitive in this market.

International sales were also down in the nine months ended September 30, 2015 when compared to the nine months ended September 30, 2014. Increased European sales were offset by an increase in sales in Latin America and other part of the world in the nine months ended September 30, 2015 when compared to the nine months ended September 30, 2014.

COST OF GOODS SOLD/GROSS PROFIT: Cost of goods decreased to 52.3% of net sales in the nine months ended September 30, 2015 from 57.3% of net sales in the nine months ended September 30, 2014. Gross profit increased to 47.73% of net sales in the nine months ended September 30, 2015 from 42.7% of net sales in the nine months ended September 30, 2014. Expense reductions and the partial consolidation of manufacturing operations have enabled us to somewhat overcome the continued price pressures in our markets, resulting in increased gross profit from sales. We continuously monitor manufacturing and inventory levels to ensure they are appropriate to meet current and anticipated sales demands.

OPERATING EXPENSES:Operating expenses decreased by 3.0% in the nine months ended September 30, 2015 when compared to operating expenses in the nine months ended September 30, 2014.First Quarter 2015. Research and developmentDevelopment expense increased while Selling and generalMarketing and administrativeGeneral and Administrative expenses decreased while selling and marketing expenses increased.declined. More specifically:

Research and Developmentdevelopment (“R&D”) expense

R&D expense decreased 31.7%increased 86.2% when comparing the nine months ended September 30, 2015 toFirst Quarter 2016 with the nine months ended September 30, 2014. This stems primarily from decreasedFirst Quarter 2015. Increased FDA compliance costs (dueand supplies and materials (all due to timing of actions taken to submit a marketing application to the FDA) and decreased utility costswere minimally offset by reductions in utilities (as a result of timing of the consolidation of our New Jersey facility)facility in late December; i.e. the First Quarter 2015 included costs associated with the actual consolidation efforts). These reductions were nominally offset by and increase in supply and material costs.

Our R&D department continueswill continue to focus their efforts on the enhancement of current products, the development of new testing assays, new product platforms and explorationthe evaluation of contract manufacturing opportunities. In the nine months ended September 30, 2015, development of a new drug assay continued. We expect to launch the new assay in the year ending December 31, 2015.

Selling and Marketing expensemarketing

Selling and marketing expense in the nine months ended September 30, 2015 increased by 7.2% when compared to selling and marketing expense in the nine months ended September 30, 2014. Throughout the nine months ended September 30, 2015, we made investments in selling and marketing. More specifically, we hired new regional sales managers, attended more trade shows, completed the redesign of marketing materials and purchased new trade show equipment. These investments resulted in increases to sales salaries, trade show expense and travel expense. These increases were partially offset by a decrease in sales commissions (due to changes in our commission compensation structure and reduced sales levels) and postage.

We expect to make additional investments in selling and marketing throughout the year ending December 31, 2015. Our direct sales force continues to focus their selling efforts in our target markets, which include, but are not limited to, Workplace and Government, as well as focusing on the physician and pain management clinic market with our CLIA waived Rapid TOX product line, and focusing on the forensic and international markets for our OralStat® product.

AMERICAN BIO MEDICA CORPORATION

General and Administrativeadministrative (“G&A” expense))

G&A expense fordecreased 6.6% in the nine months ended September 30, 2015 decreased 5.4%First Quarter 2016 when compared to G&A expense in the nine months ended September 30, 2014. Decreases in salariesFirst Quarter 2015. Consulting fees and benefits, brokerbrokers fees building rental, patent and licenses,decreased (both as a result of reduced debt refinancing activity), government contract administrative fees decreased (due to decreased sales under certain contracts) and bank service fees decreased (as a result of less collateral monitoring charges on our line of credit). These reductions were partiallyprimarily offset by increasesincreased investor relations costs (associated with investor travel and news dissemination), shipping supplies (associated with certain packaging previously being inventoried in consultingthe First Quarter 2015 and now being expensed in the First Quarter 2016), and accounting fees relocation expense (due to the consolidationcross-over of our NJ facility), outside service fees (due to increased ISO auditing fees) and repair and maintenance.two accounting firms). Share based payment expense was $27,000also increased in the nine months ended September 30, 2015 comparedFirst Quarter 2016 to $30,000$19,000 from $11,000 in the nine months ended September 30, 2014.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2015 (“THIRD QUARTER 2015”) COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2014 (“THIRD QUARTER 2014”)

Net Sales:Net sales in the ThirdFirst Quarter 2015 declined 9.1% when compared to net sales in the Third Quarter 2014. Government sales in the Third Quarter 2015 were still impacted by the loss of two state contracts (both of which switched to using a product manufactured outside of the United States). In addition, due to budget constraints, one of our government accounts started to use our all-inclusive urine cup when they previously were using a more expensive ABMC product line so, while the amount of product being purchased has not changed, the revenues received from this account have somewhat declined. These declines were partially offset by an increase in contract manufacturing and international sales; more specifically, sales in Latin America. The increase in contract manufacturing is due to the fact that purchases by one of our customers are back in line with historical levels after an inventory surplus issue.

COST OF GOODS SOLD/GROSS PROFIT: Cost of goods decreased to 51.8% of net sales in the Third Quarter 2015 from 58.7% of net sales in the Third Quarter 2014. Gross profit increased to 48.2% of net sales in the Third Quarter 2015 from 41.3% of net sales in Third Quarter 2014. While price pressures from foreign manufacturers and overall market conditions continue to impact sales margins, expense reductions made, and the partial consolidation of our manufacturing operations, have enabled us to somewhat overcome these issues and become more profitable from a manufacturing perspective. Production personnel levels, product manufacturing levels and inventory are continuously monitored to ensure they are adequate to meet current and anticipated sales demands.

OPERATING EXPENSES:Operating expenses decreased by 14.5% in the Third Quarter 2015, compared to the Third Quarter 2014. Research and development and general and administrative expenses decreased while selling and marketing expenses increased. More specifically:

Research and Development (“R&D”) expense

R&D expense decreased 51.1% when comparing the Third Quarter 2015 with the Third Quarter 2014.2015. This stems primarily from decreased FDA compliance costs (duestock based compensation related to timing of actions takenoptions issued to submit a marketing application to FDA) and decreased utility costs (as a result of the consolidation of our New Jersey facility). These reductions were nominally offset by and increase in supply and material costs. In the three months ended September 30, 2015, development of a new drug assay continued. We expect to launch the new assayCEO in the year ending December 31, 2015.First Quarter 2016.

Selling and Marketing expense

Selling and marketing expense increased 3.9% in the Third Quarter 2015, when compared to the Third Quarter 2014. Increased sales salaries (due to increased sales personnel) and increased trade show expense and sales travel were partially offset by a decrease in sales commissions (due to changes in our commission compensation structure and reduced sales levels).

General and Administrative (“G&A” expense)

G&A expense for the Third Quarter 2015 decreased 18.3% when compared to the Third Quarter 2014. Decreases in salaries and benefits, consulting fees, broker fees, legal fees, and bank service fees (all a result of decreased refinancing activity) were partially offset by increases in insurance, computer related expenses, repairs and maintenance and shipping supplies. Share based payment expense was $9,000 in the three months ended September 30, 2015, compared to $11,000 in the three months ended September 30, 2014.

AMERICAN BIO MEDICA CORPORATION

Liquidity and Capital Resources as of September 30, 2015March 31, 2016

Our cash requirements depend on numerous factors, including but not limited to manufacturing costs (such as raw materials, equipment, etc.), selling and marketing initiatives, product development activities, and effective management of inventory levels and production levels in response to sales forecasts. We expect to devote capital resources to continue selling and marketing initiatives and product development/research and development activities. We will examine other growth opportunities including strategic alliances and expect such activities will be funded from existing cash and cash equivalents, issuance of additional equity or additional borrowings, subject to market and other conditions. Our financial statements for the year ended December 31, 20142015 were prepared assuming we will continue as a going concern. Although our financial condition has improved when comparing the nine months ended September 30, 2015First Quarter 2016 with the nine months ended September 30, 2014,First Quarter 2015, our current cash balances, together with cash generated from future operations and amounts available under our credit facilities may not be sufficient to fund operations for the next twelve months. Our current line of credit has a term of 3 years, expiring on June 29, 2018 and has a maximum availability of $1,500,000. However, the amount available under our line of credit is based upon our accounts receivable and inventory. As of March 31, 2016, there were no additional amounts available under our line of credit because we draw any balance available on a daily basis. If cash generated from operationssales levels decline further, we will have reduced availability on our line of credit due to decreased accounts receivable balances. In addition, we would expect our inventory levels to decrease if sales levels decline further, and this also means reduced availability on our line of credit. If availability under our line of credit is not sufficient to satisfy our working capital and capital expenditure requirements, we will be required to obtain additional credit facilities, sell additional equity or obtain additional credit facilities.securities. There is no assurance that such financing will be available or that we will be able to complete financing on satisfactory terms, if at all.all

As of September 30, 2015,March 31, 2016, we had the following debt/credit facilities:

Working Capital

Our working capital increased $708,000was $929,000 at September 30, 2015March 31, 2016; this is a decrease of $203,000 when compared to working capital of $1,132,000 at March 31, 2015; and an increase of $42,000 when compared to working capital at December 31, 2014 primarily as a result of an increase2015. These changes in inventory and a decrease in the current portion of our long-term debt (as a result of our refinancing completed in March 2015). We have historically satisfied net working capital requirements through cashare primarily due to the reclassification of debt issuance cost and deferred finance costs from operations and bank debt.an asset to a reduction against the long-term liability.

Dividends

We have never paid any dividends on our common shares and anticipate that all future earnings, if any, will be retained for use in our business, and therefore, we do not anticipate paying any cash dividends.

Cash Flows

Cash provided by operations of $105,000$172,000 for the nine months ended September 30,First Quarter 2016 was comprised of net income of $1,000, a decrease in inventory of $104,000 and an increase in accounts payable of $98,000, offset by an increase in accounts receivable of $117,000. It was also affected by non-cash charges of amortization, depreciation and share-based payment in the amount of $69,000.

Cash provided by operations of $177,000 for the First Quarter 2015 is comprised of a net loss of $130,000,$45,000 plus a an increase in inventory of $189,000$111,000 and offset by a decrease in accounts receivable of $168,000, a decrease in accrued expense of $18,000 and an increase in accountswages payable of $38,000. It was also affected by non-cash changes of amortization and wages payable. The increase in inventory stems primarily from new components related to the Company’s all-inclusive drug test cup launched in early 2015.depreciation of $67,000.

Net cash used in investing activities in the nine months ended September 30, 2015 wasconsisting of patent costs remains low at $3,000 and $2,000 for the purchase of property, plantFirst Quarter 2016 and equipment and patent application costs, while net cash used in investing activities in the nine months ended September 30, 2014 was for the purchase of property, plant and equipment, patent application costs and proceeds from the sale of equipment.First Quarter 2015, respectively.

Net cash used in financing activities infor the nine months ended September 30, 2015First Quarter 2016 consisted solely of proceeds from our refinancing offset by debt payments, deferred finance costs and net proceeds from our lines of credit. Net cash used in financing activities in the nine months ended September 30, 2015 consisted of payments on debt financing, deferred finance costs and payments on our line of credit and other debt financings, offset by proceeds from our line of credit.

Net cash used in financing activities for the First Quarter 2015 consisted solely of payments on our line of credit and other debt financing, offset by proceeds from a debt refinancing

At September 30, 2015March 31, 2016, we had cash and cash equivalents of $224,000.$97,000. The use in cash over the last 12-18 months stems primarily from costs associated with regulatory filings, payments on deferred compensation, equipment purchases and consolidation costs.

AMERICAN BIO MEDICA CORPORATIONOutlook/Risk

OutlookWe do not expect significant increases in expenses in the year ending December 31, 2016 (“2016”) and we continue to take steps to ensure that operating expenses and manufacturing costs remain in line with sales levels. In 2016, we are focusing our efforts on improving sales. Such steps include, but are not limited to, obtaining an over-the-counter marketing clearance from FDA for one of our all-inclusive drug testing cups (allowing us to further penetrate Clinical markets such as pain management and drug treatment), and entering into strategic relationships with third parties to offer additional services (such as toxicology management services) to our customers (thereby increasing product sales and generating other revenue from the sale of services). In addition, in the second quarter of the year ending December 31, 2016, we expect to receive our final payment of $150,000 related to a tech transfer with one of our contract-manufacturing customers.

Although our financial condition has improved over previous recent fiscal years, if events and circumstances occur such that 1) we do not meet our current operating plans to increase sales, 2) we are unable to raise sufficient additional equity or debt financing, or 3) our credit facilities are insufficient or not available, we may be required to further reduce expenses or take other steps which could have a material adverse effect on our future performance.

Our ability to repay our current debt will depend primarily upon our future operating performance, which may be affected by general economic, financial, competitive, regulatory, business and other factors beyond our control, including those discussed herein. In addition, we cannot assure you that future borrowings or equity financing will be available for the payment of any indebtedness we may have.

Our failure to comply with the covenant under our revolving credit facility could result in an event of default, which, if not cured or waived, could result in the Company being required to pay higher costs associated with the indebtedness. If we are forced to refinance our debt on less favorable terms, our results of operations and financial condition could be adversely affected by increased costs and rates. We may also be forced to pursue one or more alternative strategies, such as restructuring, selling assets, reducing or delaying capital expenditures or seeking additional equity capital. There can be no assurances that any of these strategies could be effectedimplemented on satisfactory terms, if at all.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company, we are not required to provide the information required by this item.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer (Principal Executive Officer)/PrincipalChief Financial Officer (Principal Financial Officer), together with other members of management, has reviewed and evaluated the effectiveness of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rule 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report. Based on this review and evaluation, our Principal Executive Officer/Principal Financial Officer concluded that our disclosure controls and procedures are effective to ensure that material information relating to the Company is recorded, processed, summarized, and reported in a timely manner.

(b) Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the last quarterly period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

See Part I, Item 1, Note DC in the Notes to interim Condensedconsolidated Financial Statements included in this report for a description of pending legal proceedings in which we may be a party.

Item 1A. Risk Factors

There have been no material changes to our risk factors set forth in Part I, Item 1A, in our Annual Report on Form 10-K for the year ended December 31, 2014.2015.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.As previously indicated earlier in this report under Note E, in March 2016, we instructed our transfer agent to issue 600,000 restricted shares of our common stock to Cherokee Financial, LLC (“Cherokee”) in connection with a existing provision in our Loan and Security Agreement entered into with Cherokee in March 2015. The transfer agent issued these shares on April 5, 2016. The Company did not receive any proceeds from this issuance.

In addition, we instructed our transfer agent to issue 196,000 restricted shares of common stock to Cantone Research, Inc. in connection with an existing provision in our Loan and Security Agreement with Cherokee. The transfer agent issued these shares on April 5, 2016. The Company did not receive any proceeds from this issuance.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.applicable.

Item 5. Other Information

None.

AMERICAN BIO MEDICA CORPORATION

Item 6. Exhibits

AMERICAN BIO MEDICA CORPORATION

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: NovemberMay 16, 20152016