Note E – Line of Credit and Debt

Our Line of Credit and Debt consisted of the following as of June 30, 2015 and December 31, 2014:

	June 30, 2015			December 31, 2014
First Niagara: Mortgage payable in equal monthly installments of $13,199 including interest at 8.25% until May 1, 2017 (“Maturity”), collateralized by the building, land and personal property⁽¹⁾	$	0		$	348,000
Debenture financing $523,000 in principal amount of Series A Debentures; interest at 15% per annum from August 1, 2013 through January 31, 2015, payable quarterly; maturity date of February 1, 2015⁽²⁾.		0			523,000
Bridge Loan with Cantone Asset Management, LLC⁽³⁾: Interest rate of 15% payable upon loan maturity; maturity date of February 1, 2015⁽³⁾.		0			200,000
Loan and Security Agreement with Cherokee Financial, LLC⁽⁴⁾: 5 year note at an annual interest rate of 8% plus a 1% annual oversight fee, interest only and oversight fee paid quarterly with first payment being due on May 15, 2015, annual principal reduction payment of $75,000 due each year on the anniversary of the closing date with a final balloon payment being due on March 26, 2020. Loan is collateralized by a first security interest in building, land and property.		1,200,000			0
Imperium Line of Credit⁽⁵⁾: Interest payable in arrears for the preceding calendar month on the first day of each calendar month at a rate of 8% per annum plus “PIK” interest at a 2% per annum. Unused line fee equal to 2% of the maximum amount available under the line, less the aggregate amounts outstanding to Imperium, payable on the first day of each calendar month. Collateral Monitoring Fee of $2,500 due on the first day of each month. Success fee of $175,000 if Imperium terminates due to an event of default, or if we terminate and pre-pay all amounts due to Imperium prior to the stated expiration date of January 16, 2016.		0			1,076,000
Crestmark Line of Credit⁽⁶⁾: 3 year line of credit with interest payable at a variable rate based on WSJ Prime plus 2% with a floor or 5.25%; loan fee of 0.5% annually & monthly maintenance fee of 0.3% on actual loan balance from prior month. Early term fee of 3% if terminated in year 1 and 2% if terminated in year 2 or after (and prior to natural expiration). Loan is collateralized by first security interest in receivable and inventory.		1,072,000			0
		2,272,000			2,147,000
Less debt discount (Cherokee Financial, LLC Loan)		(202,000	)		(97,000	)
Total debt	$	2,070,000		$	2,050,000

Current portion	$	1,147,000		$	1,837,000
Long-term portion	$	923,000		$	213,000

(1)

The mortgage through First Niagara Bank was satisfied in full on March 27, 2015 via a refinancing with Cherokee Financial, LLC.

(2)

The Series A Debentures were satisfied in full on March 27, 2015 via a refinancing with Cherokee Financial, LLC.

(3)

The Bridge Loan with Cantone Asset Management, LLC was satisfied in full on March 27, 2015 via a refinancing with Cherokee Financial, LLC.

(4)

On March 26, 2015, the Company entered into a Loan and Security Agreement with Cherokee Financial, LLC (the “Cherokee LSA”). The purpose of the Cherokee LSA was to refinance the Series A Debentures and Cantone Asset Management LLC Bridge Loan (both of which matured on February 1, 2015) and the Mortgage Consolidation Loan with First Niagara Bank at a better interest rate.

(5)

On June 29, 2015, the Imperium Line of Credit was satisfied in Full via a refinancing with Crestmark Bank.

(6)

On June 29, 2015, the Company entered into a Loan and Security Agreement with Crestmark Bank. The purpose of the Crestmark LSA was to refinance the Company’s line of credit with Imperium at a better interest rate.

FIRST NIAGARA: MORTGAGE CONSOLIDATION LOAN

On April 28, 2014, the Company entered into a Third Amendment to Loan Agreement (the “Third Mortgage Consolidation Loan Amendment”) with First Niagara Bank. 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, 2015 via a refinancing with Cherokee Financial, LLC.

The balance on the Mortgage Consolidation Loan was $0 at June 30, 2015 and $348,000 at December 31, 2014, respectively. Interest expense recognized was $5,000 in the six months ended June 30, 2015, and $17,000 in the six months ended June 30, 2014. Interest expense recognized was $0 in the three months ended June 30,2015, and $10,000 in the three months ended June 30, 2014.

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 Series A Debentures’ original maturity date was August 1, 2012, but this original maturity date was extended in 2012 (with $645,000 in Series A Debentures extending) and extended again in October 2013 (the “2013 Debenture Extension”). One of the Series A Debenture Holders (representing $10,500 in Series A Debentures) did not wish to extend so the balance on the Series A Debentures was again decreased to $634,500.

Cantone Research, Inc. (“CRI”) again acted as the Company’s Placement Agent in the 2013 Debenture Extension. CRI received 1) a cash fee of $39,750, 2) a 3-year warrant to purchase 75,000 shares of the Company’s common stock at an exercise price of $0.14, 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 CRI. The fair value of the CRI warrant was $10,000 and the Company recognized 100% of this expense on the date of the grant in the year ended December 31, 2013.

Under the 2013 Debenture Extension, the term of $634,500 in Series A Debentures was extended to reflect a maturity 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 remained 15% per annum, due quarterly in arrears and all other terms of the Series A Debentures remained the same. As previously indicated, the extension period of either 6 or 12 months was at the election of the Series A Debenture Holders. There were 27 of the 30 Series Debenture Holders (representing $543,500 of Series A Debentures), which elected to extend for a period of 12 months so they were granted 2-year warrants to purchase 543,500 shares of the Company’s common stock at an exercise price of $0.14. The other 3 (representing $91,000 in Series A Debentures) elected to extend for a period of 6 months and did not receive warrant grants. The fair value of the Debenture Holder warrants was $76,000.

The six months ended June 30, 2015 includes $0 in expense related to the 2013 Debenture Extension, and the six months ended June 30, 2014 includes $38,000 in expense. The three months ended June 30, 2015 includes $0 in expense related to the 2013 Debenture Extension, and the three months ended June 30, 2014 includes $19,000 in expense.

As of June 30, 2015, there was $0 in unrecognized expense with 0 months remaining related to the 2013 Debenture Extension.

BRIDGE LOAN WITH CANTONE ASSET MANAGEMENT, LLC.

When the Series A Debentures originally matured in 2012, there were certain holders (representing $100,000 in Debentures) that did not wish to extend the term of their Series A Debentures. Given this, the Company entered into a Bridge Loan with Cantone Asset Management, LLC (“CAM”) in the amount of $150,000 ($100,000 was used to pay those Holders of Series A Debentures that did not wish to extend the Series A Debentures and $50,000 was used to pay placement agent fees and expenses associated with the extension). The CAM Bridge Loan originally matured on August 1, 2013 with simple interest in advance of 15%.

On October 7, 2013, the Company entered into a new Bridge Loan with CAM (the “2013 Bridge Loan”). The 2013 Bridge Loan was 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 associated with the 2013 Bridge Loan.

The maturity date of the 2013 Bridge Loan was August 1, 2014, with simple interest of 15% paid in advance in the form of 300,000 restricted common shares of ABMC stock. In addition to the interest, as inducement to enter into the 2013 Bridge Loan, the Company issued 153,486 restricted shares of the Company’s common stock, and the Company issued CAM a 3-year warrant to purchase 250,000 shares of the Company’s common stock at an exercise price of $0.14. The CAM warrant was valued at $35,000 and the Company recognized 100% of this expense in the year ended December 31, 2013.

2014 Forbearance

On February 7, 2014, the Company paid $91,000 to the 6-month extension 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 principal amount of $543,000 related to the Series A Debentures and $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. On July 30, 2014, the Company entered into a term sheet to once again engage CRI to solicit existing holders of the Debenture Debt to forbear from exercising remedies of default related to the non-payment of principal until February 1, 2015. All but one of the 27 Series A Debenture holders agreed to forbear. 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.

The Company paid CRI a fee for assisting the Company in obtaining forbearance agreements from the Holders. The fee was 2% of the forbearing principal amount, and was paid $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 $2,000 in expense in the six months ended June 30, 2015, and $0 in expense in the six months ended June 30, 2014. The Company recognized $0 in costs in the three months ended June 30, 2015, and $0 in costs in the three months ended June 30, 2014. As of June 30, 2015, there is $0 in unrecognized expense with 0 month remaining.

The Company recognized $22,000 in interest expense in the six months ended June 30, 2015 related to the Series A Debentures and the CAM Bridge Loan, and $42,000 in interest expense in the six months ended June 30, 2014. The Company recognized $0 in interest expense in the three months ended June 30, 2015 related to the Series A Debentures and the CAM Bridge Loan, and $20,000 in interest expense in the three months ended June 30, 2014. We had $10,000 in accrued interest expense at June 30, 2015 related to the Series A Debentures and CAM Bridge Loan.

As of June 30, 2015, the balance on the Series A Debenture and the CAM Bridge Loan is $0.

LOAN AND SECURITY AGREEMENT WITH CHEROKEE FINANCIAL, LLC.

On March 26, 2015, the Company entered into a Loan and Security Agreement with Cherokee Financial, LLC (the “Cherokee LSA”). The purpose of the Cherokee LSA was to refinance the Company’s Series A Debentures and CAM Bridge Loan (both of which matured on February 1, 2015) and the Company’s Mortgage Consolidation Loan with First Niagara Bank at a better interest rate. 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). 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 make an annual principal reduction payment of $75,000 on each anniversary of the date of the closing with the first principal reduction payment being due on March 26, 2016. A final balloon payment is due on March 26, 2020. In addition to the 8% interest, the Company will pay Cherokee Financial, LLC a 1% annual fee (in cash and paid contemporaneously with payment of quarterly interest) for oversight and administration of the loan. The Company can call 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. The Company will also issue an additional 0.5 restricted shares of the Company’s common stock, or 600,000 restricted shares, to Cherokee Financial LLC on March 26, 2016, 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.

As placement agent for the transaction, 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 Company will also issue an additional 196,000 restricted shares of the Company’s common stock to CRI on March 26, 2016 as an additional placement 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.

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 exception of the interest expense, the Company will be amortizing these expenses over the term of the Cherokee LSA, or 5 years as deferred finance and debt issuance costs. 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 six months ended June 30, 2015 includes $27,000 in expense related to the Cherokee LSA, and the six months ended June 30, 2014 includes $0 in expense. The three months ended June 30, 2015 includes $17,000 in expense related to the Cherokee LSA, and the three months ended June 30, 2014 includes $0 in expense.

The Company recognized $25,000 in interest expense in the six months ended June 30, 2015, and $0 in interest expense in the six months ended June 30, 2014. The Company recognized $25,000 in interest expense in the three months ended June 30, 2015, and $0 in interest expense in the three months ended June 30, 2014. At June 30, 2015, the Company had $12,000 in accrued interest expense related to the Cherokee LSA.

As of June 30, 2015, the balance on the Cherokee LSA was $1,200,000.

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. As of the date of this report, the Borrowing Base of the Imperium Line of Credit is based solely on Eligible Receivables. 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), but no further formal waivers were issued.

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 of costs in the six months ended June 30, 2015 related to the Imperium Line of Credit, and $68,000 in costs in the six months ended June 30, 2014. The six months ended June 30, 2015 included accelerated amortization costs of $69,000 due to the early termination of the Imperium Line of Credit. The Company recognized $103,000 of costs in the three months ended June 30, 2015 related to the Imperium Line of Credit, and $34,000 in costs in the three months ended June 30, 2014. The three months ended June 30, 2015 included the same accelerated amortization costs due to early termination of the Imperium Line of Credit.

The Company incurred $48,000 in interest expense in the six months ended June 30, 2015, and $52,000 in interest expense in the six months ended June 30, 2014. The Company incurred $22,000 in interest expense in the three months ended June 30, 2015 and $25,000 in interest expense in the three months ended June 30, 2014. As of June 30, 2015, the Company had $0 in accrued interest related to the Imperium Line of Credit, and the balance on the Imperium Line of Credit was $0.

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. 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 will be 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, the Company must maintain a TNW of at least $1,650,000. 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 remains 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 receivables, (ii) prepaid expenses, (iii) deposits, (iv) net lease hold improvements, (v) goodwill and (vi) any other intangible asset, plus Subordinated Debt. For purposes of the TNW covenant calculation, the Company’s Mortgage with Cherokee Financial LLC (See Current Report on Form 8-K filed with the Commission on March 30, 2015) 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.

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. These expenses are all being amortized over the term of the Crestmark Line of Credit, or three years. The Company incurred $2,000 of these costs in the three and six months ended June 30,2015, and $0 of costs in the three and six months ended June 30, 2014.

As of the Closing Date, the Company’s loan availability under the Crestmark Line of Credit was $1,072,000. From the loan availability, the Company drew $1,018,000 to pay off the Imperium Line of Credit. The payoff to Imperium consisted of $200,000 owed on the Imperium Supplemental Advance, $22,000 in collateral monitoring fees due to Imperium, principal and interest of $746,000 and the $50,000 early termination fee. An additional $5,000 was drawn to pay the balance (after the partial refund on the Company’s due diligence fee) on the Loan Fee due to Crestmark at closing. Additional Loan Availability of $49,000 was remitted to the Company on the Closing Date.

As a condition to the financing, the Company’s Chief Executive Officer, Melissa Waterhouse (“Waterhouse”) was required to execute a Validity Guarantee (the “VG”). Under the Validity Guarantee, Waterhouse provides representations and warranties with respect to the validity of the Company’s receivables as well as guaranteeing the accuracy of the Company’s reporting to Crestmark related to the Company’s receivables. As compensation for her execution of the VG, on June 29, 2015, Waterhouse was awarded an option grant representing 250,000 common shares of the Company under the Company’s Fiscal 2001 stock option plan, at an exercise price of $0.12, the closing price of the Company’s common shares on the date of the grant (the “Waterhouse VG Option Grant”). The Waterhouse VG Option Grant vests over three (3) years in equal installments. See Note F below for more information related to the Waterhouse VG Option Grant.