NOTE E – LONG-TERM DEBT

Long-term debt consisted of the following:

	December 31, 2013		December 31, 2012
First Niagara:
Mortgage payable in equal monthly installments of $14,000 including interest at 9.25% through March 1, 2014 (“Maturity”) with a final lump sum payment representing the entire unpaid balance of principal, plus accrued interest at Maturity, collateralized by the building, land and personal property⁽¹⁾	$	452,000	$	608,000
MARLIN:
Capital lease payable in equal monthly installment of $147 including interest at 14.46% through September 1, 2013		0		1,000
Debenture financing⁽²⁾:
$634,000 in principal amount of Series A Debentures; interest at 15% per annum from August 1, 2013 through August 1, 2014, payable quarterly with first payment due November 1, 2013; maturity date of August 1, 2014		634,000		645,000
Bridge Loan with Cantone Asset Management, LLC⁽³⁾:
Interest rate of 15% payable upon loan maturity; maturity date of August 1, 2014.		200,000		150,000
		1,286,000		1,404,000
Less debt discount (Debenture financing)		(60,000)		0
Total current debt	$	1,226,000	$	1,404,000

(1)

The mortgage through First Niagara was refinanced and extended on March 8, 2013.

(2)

The original debt with the Series A Debenture Holders was $750,000, with an interest rate of 10% per annum. It was payable semi-annually in August and February of each year with the first payment due February 1, 2009 and a maturity date of August 1, 2012. In July 2012, the Series A Debentures were amended and extended; under the amendment and extension the interest rate from August 1, 2012 through December 31, 2012 was increased to 15% per annum (the interest rate from January 1, 2012 through July 31, 2012 remained at 10%), and the maturity date was extended to August 1, 2013, and $105,000 of Series A Debentures were repaid with a portion of loan proceeds from Cantone Asset Management LLC; lowering the principal of the Series A Debenture to $645,000. The Series A Debentures were amended and extended in October 2013, and the terms noted in the table above are the revised terms of the Series A Debentures. $10,000 in Series A Debentures was repaid under the extension, lowering the principal to $635,000 at December 31, 2013. Even after the amendment and extension, the Series A Debentures remained classified as a current liability given their maturity date of August 1, 2014.

(3)

In October 2013, the Company increased our Bridge Loan with Cantone Asset Management LLC from $150,000 to $200,000. The additional $50,000 was used to pay placement agent fees of $39,750 and Cantone Research Inc’s legal fees of $4,000. The remaining proceeds (approx $6,000) were remitted to the Company and used toward the repayment of the $10,000 in non-extending Series A Debentures.

At December 31, 2013, the following are the maturities of long-term debt for each of the next five years:

2014	$	1,226,000
2015		0
2016		0
2017		0
2018		0
	$	1,226,000

FIRST NIAGARA: MORTGAGE CONSOLIDATION LOAN

On February 23, 2011, the Company amended and extended its Mortgage Consolidation Loan (the “Mortgage Consolidation Loan”) with First Niagara Bank (“First Niagara”). The amended Mortgage Consolidation Loan continues to be secured by the Company’s facility in Kinderhook, New York as well as various pieces of machinery and equipment. All other terms of the Mortgage Consolidation Loan remained unchanged, including compliance with a covenant (measured monthly) to maintain a certain level of liquidity (defined as any combination of cash, marketable securities or borrowing availability under one or more credit facilities other than the Mortgage Consolidation Loan).

The amended Mortgage Consolidation Loan had a maturity date of March 1, 2013, and had a 6-year (72 month) amortization. The principal amount of the amended Mortgage Consolidation Loan was $815,000 with a fixed interest rate of 8.25%. The monthly payment of principal and interest was $14,000 and payments commenced on March 1, 2011. The Company was required to make a $15,000 principal payment at the time of closing of the amended Mortgage Consolidation Loan. The Company also incurred approximately $2,000 in costs associated with this amendment, which were legal costs incurred by First Niagara and passed on to the Company. The Company amortized less than $1,000 of this expense in Fiscal 2013 and in Fiscal 2012.

On March 8, 2013, the Company entered into a Second Amendment to Loan Agreement (the “Second Mortgage Consolidation Loan Amendment”) with First Niagara. Under the Second Mortgage Consolidation Loan Amendment, the Mortgage Consolidation Loan was recast into a 4-year fully amortizing note with a one-year term through March 1, 2014 (See Note L – Subsequent Events). The interest rate was increased from 8.25% to 9.25% and the monthly payment was reduced to $14,115 from $14,437. The Company was required to make a principal reduction payment of $25,000 at the time of closing. All other terms of the Mortgage Consolidation Loan remained unchanged.

The balance on the Mortgage Consolidation Loan was $452,000 at the end of Fiscal 2013 and $608,000 at the end of Fiscal 2012. We recognized $48,000 and $56,000 in interest expense in Fiscal 2013 and Fiscal 2012, respectively.

RICOH

In May 2007, the Company purchased a copier through an equipment lease with RICOH in the amount of $17,000. The term of the lease was five years with an interest rate of 14.11%. In April 2012, the Company notified RICOH that it was opting to purchase the copier for $1.00 as provided in the Company’s lease. The amount outstanding on this lease was $0 at December 31 2013 and at December 31, 2012.

MARLIN

In October 2010, the Company purchased a copier through an equipment lease with Marlin Leasing in the amount of $4,000. The term of the lease was three years with an interest rate of 14.46%. The amount outstanding on this lease was $0 at December 31, 2013 and less than $1,000 at December 31, 2012.

DEBENTURE FINANCING

In August 2008, the Company completed an offering of Series A Debentures (“Series A Debentures”) and received gross proceeds of $750,000. The net proceeds of the offering of Series A Debentures were $631,000 after $54,000 of placement agent fees and expenses, legal and accounting fees of $63,000 and $2,000 of state filing fees.

The Series A Debentures accrued interest at a rate of 10% per annum (payable by the Company semi-annually). As placement agent, Cantone Research, Inc. (“Cantone”) received a placement agent fee of $52,500, or 7% of the gross principal amount of Series A Debentures sold. In addition, the Company issued Cantone a warrant to purchase 30,450 shares of the Company’s common stock at an exercise price of $0.37 per share and a warrant to purchase 44,550 shares of the Company’s common stock at an exercise price of $0.40 per share.

The Company incurred $131,000 in expenses related to the offering, including $12,000 in expense related to warrants issued to Cantone. The Company amortized $0 of this expense and $19,000 of this expense (of which a little under $2,000 was related to share based payment expense related to the Cantone warrants) in Fiscal 2013 and Fiscal 2012, respectively.

The unamortized balance was $0 at the end of Fiscal 2013 and Fiscal 2012, (as the Series A Debentures matured on August 1, 2012).

Series A Debenture Extension

The Series A Debentures matured on August 1, 2012. On July 25, 2012, the Company entered into a Placement Agent Agreement (the “Agent Agreement”) with Cantone. Under the terms of the Agent Agreement, Cantone acted as the Company’s exclusive placement agent in connection with an amendment of the Series A Debentures. Under the amendment, the term of Series A Debentures was extended to reflect a due date of August 1, 2013, and the interest rate during the extension period was increased from 10% to 15% per annum, due quarterly in arrears.

As compensation for their placement agent services, Cantone received a cash fee of 5% of the gross amount of existing Series A Debentures, or $37,500. Cantone also received 1% of the gross amount of Series A Debentures, or $7,500, as a non-accountable expense allowance and the Company reimbursed Cantone $5,000 in legal fees incurred in connection with the amendment of the Series A Debentures. These costs, totaling $50,000 were amortized over the term of the extension (12 months). The Company amortized $29,000 of this expense in Fiscal 2013 and $21,000 of expense in Fiscal 2012.

The warrants issued to Cantone (in connection with their services as placement agent in the original Series A Debenture financing) were also amended to reflect a purchase price of $0.17 per share and a new term of three (3) years. The Company incurred $12,000 in share based payment expense related to this amendment, which was fully expensed in Fiscal 2012.

On July 30, 2012, the Company entered into a Bridge Loan Agreement and Note (the “Bridge Loan”) with Cantone Asset Management, LLC (“CAM”). The Bridge Loan was in the amount of $150,000 and was used to pay $100,000 to those Holders of Series A Debentures that did not wish to amend/extend the Series A Debentures and $50,000 was used to pay placement agent fees and expenses indicated in the previous paragraph. The maturity date of the Bridge Loan was August 1, 2013 bearing simple interest in advance of 15%. In addition to the interest, on August 1, 2012, the Company issued CAM restricted stock of the Company equal to 10% of the gross amount of existing Series A Debentures, or $15,000 using a value of $0.17 per common share. On August 8, 2012, 88,235 restricted common shares were issued to CAM.

On July 31, 2012, the Company entered into an Agreement to the Series A Debenture (the “Series A Debenture Amendment”) with thirty-two of the thirty-seven holders of Series A Debentures (the “Debenture Holders”) (representing $645,000 of Series A Debentures). As previously indicated, the Series A Debenture Amendment extended the due date of the Series A Debentures to August 1, 2013 and increased the interest rate to 15% per annum, payable quarterly in arrears. All other terms of the Series A Debentures remained unchanged. Five of the Debenture Holders (representing $105,000 in Series A Debentures) did not wish to extend the Series A Debentures and the Company used proceeds of $100,000 from the Bridge Loan and $5,000 paid directly from the Company to pay principal amounts due to these non-extending Debenture Holders.

2013 Series A Debenture Extension

On October 7, 2013, the Company entered into a new Placement Agent Agreement (“2013 Agent Agreement”) with Cantone related to the further extension of the Series A Debentures, as amended, due August 1, 2013. Under the terms of the 2013 Agent Agreement, Cantone acted as the Company’s exclusive placement agent in connection with an amendment of the Series A Debentures. Under the amendment, the term of Series A Debentures was extended to reflect a due date of either February 1, 2014 or August 1, 2014, at the election of the Series A Debenture Holder. The interest rate during the extension period remains 15% per annum, due quarterly in arrears. All other terms of the Series A Debentures remain the same.

As compensation for their placement agent services, Cantone received 1) a cash fee of 5% ($39,750) of the gross amount ($795,000) of existing Series A Debentures and the CAM note combined, 2) a 3-year warrant to purchase 75,000 common shares at an exercise price of $0.14 (the average closing sale price of the Company’s common shares for the 5 days business days ending October 7, 2013), and 3) a non-accountable expense allowance paid with 115,000 restricted shares of ABMC common stock (in lieu of cash). The Company also paid $4,000 in legal fees incurred by Cantone. These costs are being amortized over the term of the 12-month extension. The Company amortized $25,000 in costs in Fiscal 2013 and $0 in Fiscal 2012 (as the Company did not enter into the extension until October 2013). The fair value of the Cantone warrant was estimated utilizing the Black-Scholes option-pricing model. The following weighted average assumptions were used: dividend yield of 0%; risk-free interest rate of 2.65; expected life of 10 years; and stock price volatility of 73%. The value of the Cantone warrant was $10,000 and the Company recognized 100% of this expense on the date of the grant, or $10,000 in Fiscal 2013.

On October 7, 2013, the Company entered into a new Bridge Loan Agreement and Note (the “2013 Bridge Loan”) with CAM. The 2013 Bridge Loan is in the amount of $200,000 and was used to pay off the existing Bridge Loan with Cam ($150,000) and the remaining $50,000 was used to pay placement agent fees and expenses as indicated in the preceding paragraph. Net proceeds of $6,250 were remitted to the Company. The 15% interest on the existing Bridge Loan of $150,000 was paid with 225,000 restricted shares of ABMC common stock.

The maturity date of the 2013 Bridge Loan is August 1, 2014 and it bears simple interest in advance of 15% to be paid in the form of 300,000 shares of restricted shares of ABMC common stock. In addition to the interest, as inducement to enter into the 2013 Bridge Loan, the Company issued 153,486 restricted shares of ABMC common stock, and the Company issued CAM a 3-year warrant to purchase 250,000 common shares at an exercise price of $0.14 (the average closing sale price of the Company’s common shares for the 5 days business days ending October 7, 2013). The warrants were 100% exercisable on the date of the grant. The fair value of the CAM warrant was estimated utilizing the Black-Scholes option-pricing model. The following weighted average assumptions were used: dividend yield of 0%; risk-free interest rate of 2.65; expected life of 10 years; and stock price volatility of 73%. The value of the warrant was $35,000 and the Company recognized 100% of this expense on the date of the grant, or $35,000 in Fiscal 2013.

On October 7, 2013, the Company entered into an Agreement to the Series A Debenture (the “2013 Series A Debenture Amendment”) with 30 of the 32 holders of Series A Debentures (the “Debenture Holders”) (representing $634,500 of Series A Debentures). One of the Debenture Holders (representing $10,500 in Series A Debentures) did not wish to extend and the Company used the net proceeds and cash on hand to pay the principal amount due to this Holder. One of the Debenture Holders transferred their investment to another existing Debenture Holder. As previously indicated, the extension period of either 6 or 12 months was at the election of the Debenture Holder. 27 of the 30 Debenture Holders (representing $543,500 of Series A Debentures) elected to extend for a period of 12 months. The other 3 (representing $91,000 in Series A Debentures) elected to extend for a period of 6 months. The 27 holders that elected to extend for a 12-month period were each issued a warrant to purchase 1 shares of common stock for each $1.00 that was extended. The Company issued 2 year warrants to purchase 543,500 shares of ABMC common stock at an exercise price of $0.14 (the average closing sale price of our common shares for the 5 days business days ending October 7, 2013). The fair value of the Debenture Holder warrants was estimated utilizing the Black-Scholes option-pricing model. The following weighted average assumptions were used: dividend yield of 0%; risk-free interest rate of 2.65; expected life of 10 years; and stock price volatility of 73%. The value of the warrants was $76,000 and we are amortizing this cost over the term of the Series A Debenture extension, or 12 months. The Company recognized $32,000 in expense in Fiscal 2013. As of December 31, 2013, there was $44,000 in unrecognized debt issuance expense with 7 months remaining.

The Company recognized $122,000 in interest expense in Fiscal 2013 and $93,000 in Fiscal 2012. The Company had $27,000 in accrued interest expense at the end of Fiscal 2013, and $26,000 in accrued interest expense at the end of Fiscal 2012. In Fiscal 2013, the Company recorded a debt discount in the amount of $60,000 related to securities issued in connection with the Series A Debentures.