NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Basis of Presentation:

The preceding (a) condensed consolidated balance sheet as of December 31, 2014, which has been derived from audited financial statements, and (b) the unaudited interim condensed consolidated financial statements as of March 31, 2015 and for the three-month periods ended March 31, 2015 and 2014, respectively, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Certain information and footnote disclosures, which are normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted pursuant to such rules and regulations, although we believe that the disclosures made are adequate to provide for fair presentation. The interim financial information should be read in conjunction with the Financial Statements and the notes thereto, included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014, previously filed with the SEC.

In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of the Company's condensed consolidated financial position as of March 31, 2015, its condensed consolidated results of operations for the three-month periods ended March 31, 2015 and 2014, respectively, and its condensed consolidated cash flows for the three-month periods ended March 31, 2015 and 2014, as applicable, have been made. The interim results of operations are not necessarily indicative of the operating results for the full fiscal year or any future periods.

Revenue Recognition

The Company recognizes revenue for product sales in accordance with ASC 605, which provides that revenue is recognized when there is persuasive evidence of an arrangement, delivery has occurred or services have been rendered, the sales price is determinable, and collectability is reasonably assured. Revenue typically is recognized at time of shipment. Sales are recorded net of discounts, rebates and returns.

For certain contracts, the Company recognizes revenue from non-milestone payments and grant revenues when earned. Grants are invoiced after expenses are incurred. Revenues from projects or grants funded in advance are deferred until earned. Advanced revenues not earned were $496,000 and $340,000 as of March 31, 2015 and December 31, 2014, respectively.

The Company follows Financial Accounting Standards Board ("FASB") authoritative guidance ("guidance") prospectively for the recognition of revenue under the milestone method. The Company applies the milestone method of revenue recognition for certain collaborative research projects defining milestones at the inception of the agreement.

Inventories:

Inventories consist of the following at:

	March 31, 2015		December 31, 2014
Raw materials	$	2,075,535	$	2,323,863
Work in process		469,033		346,494
Finished goods		1,154,055		967,942
	$	3,698,623	$	3,638,299

Earnings Per Share:

Basic earnings per share is computed by dividing net income or loss by the weighted-average number of common shares outstanding for the period. Diluted income per share reflects the potential dilution from the exercise or conversion of other securities into common stock, but only if dilutive. The following securities, presented on a common share equivalent basis for the three-month periods ended March 31, 2015 and 2014, have been included in the earnings per share computations:

	For the three months ended
	March 31, 2015	March 31, 2014
Basic	9,624,691	9,339,181

Diluted	9,624,691	9,339,181

The following securities, presented on a common share equivalent basis for the three-month periods ended March 31, 2015 and 2014, have been included in the diluted per share computations as the exercise prices of these securities were less than the stock price as of March 31, 2015 and 2014, respectively:

	For the three months ended
	March 31, 2015	March 31, 2014

1999, 2008 and 2014 Plan Stock Options	-	-

There were 671,868 and 675,363 options outstanding as of March 31, 2015 and 2014, respectively, that were not included in the calculation of diluted per common share equivalent for the three months ended March 31, 2015 and 2014, respectively, because the effect would have been anti-dilutive as of March 31, 2015 and 2014, respectively.

Employee Stock Option Plan:

Effective June 3, 2008, the Company's stockholders voted to approve the 2008 Stock Incentive Plan ("SIP"), initially with 625,000 shares of Common Stock available to be issued. At the Annual Stockholder meeting on September 22, 2011, the Company's stockholders voted to approve an increase to the shares of Common Stock issuable under the SIP by 125,000 to 750,000. Under the terms of the SIP, the Compensation Committee of the Company's Board has the discretion to select the persons to whom awards are to be granted and the number of shares of common stock to be covered by each grant. Awards can be incentive stock options, non-incentive stock options, restricted stock and/or restricted stock units. The awards become vested at such times and under such conditions as determined by the Compensation Committee. As of March 31, 2015, there were 352,935 options exercised, 317,751 options outstanding and 79,314 options or shares still available to be issued under the SIP.

Effective June 19, 2014, the Company's stockholders voted to approve the 2014 Stock Incentive Plan ("2014-SIP"), with 800,000 shares of Common Stock available to be issued. Under the terms of the 2014-SIP, the Compensation Committee of the Company's Board has the discretion to select the persons to whom awards are to be granted and the number of shares of common stock to be covered by each grant. Awards can be incentive stock options, restricted stock and/or restricted stock units. The awards become vested at such times and under such conditions as determined by the Compensation Committee at the time of the initial stock option grant. As of March 31, 2015, there were no options exercised, 129,750 options outstanding and 670,250 options or shares still available to be issued under the 2014-SIP.

The weighted average estimated fair value, at their respective dates of grant, of stock options granted in the three-month periods ended March 31, 2015 and 2014 was none and $3.42 per share, respectively, as the Company did not grant any options during the three months ended March 31, 2015. The fair value of options at the date of grant was estimated using the Black-Scholes option pricing model. The expected volatility is based upon the historical volatility of our stock. The expected term is based on historical information.

The assumptions made in calculating the fair values of options granted during the periods indicated are as follows:

	For the three months ended
	March 31, 2015	March 31, 2014
Expected term (in years)	n/a	6.3
Expected volatility	n/a	96.10%
Expected dividend yield	n/a	0%
Risk-free interest rate	n/a	1.52%

The Company's results for the three-month periods ended March 31, 2015 and 2014 include share-based compensation expense totaling $109,300 and $70,430, respectively. Such amounts have been included in the Condensed Consolidated Statements of Operations within cost of goods sold (none and $3,050, respectively), research and development ($18,200 and $18,250, respectively), and selling, general and administrative expenses ($91,100 and $49,130, respectively). The income tax benefit has been recognized in the statement of operations for share-based compensation arrangements.

Stock option compensation expense for the three-month periods ended March 31, 2015 and 2014 is based on the estimated fair value, at the date of issuance, of options outstanding, which is being amortized on a straight-line basis over the requisite service period for each vesting portion of the award, except for those that vested immediately and for which the estimated fair value was expensed immediately.

The following table provides stock option activity for the three months ended March 31, 2015:

Stock Options	Number of Shares			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at December 31, 2014		691,869		$	3.66	3.97 years	$	334,636

Granted		0			0.00
Exercised		(37,500	)		2.16
Forfeited/expired/cancelled		-			-
Outstanding at March 31, 2015		654,369		$	3.75	3.94 years	$	326,945

Exercisable at March 31, 2015		288,119		$	3.88	2.70 years	$	136,955

As of March 31, 2015, there was $521,645 of net unrecognized compensation cost related to stock options that have not vested, which is expected to be recognized over a weighted average period of approximately 2.30 years. The total fair value of stock options vested during the three-month periods ended March 31, 2015 and 2014 was approximately $357,484 and $40,388, respectively.

Geographic Information:

U.S. GAAP establishes standards for the manner in which business enterprises report information about operating segments in financial statements and requires that those enterprises report selected information. It also establishes standards for related disclosures about products and services, geographic areas, and major customers.

The Company produces only one group of similar products known collectively as "rapid medical tests". Management believes that it operates in a single business segment. Net product sales by geographic area are as follows:

	For the three months ended
	March 31, 2015		March 31, 2014
Africa	$	1,576,054	$	831,462
Asia		50,813		51,047
Europe		65,146		36,059
North America		1,319,002		3,763,149
South America		2,603,670		222,448
	$	5,614,685	$	4,904,165

Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consist of:

	March 31, 2015		December 31, 2014
Accounts payable – suppliers	$	1,631,940	$	1,980,120
Accrued commissions		772,657		947,451
Accrued royalties / license fees		876,081		1,034,062
Accrued payroll		265,116		106,487
Accrued vacation		260,671		219,924
Accrued bonuses		177,700		265,500
Accrued expenses – other		405,779		392,486
TOTAL	$	4,389,944	$	4,946,030

h) Recent Accounting Pronouncements Affecting the Company

Revenue from Contracts with Customers

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, "Revenue from Contracts with Customers: Topic 606" (ASU 2014-09), to supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing U.S. GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. ASU 2014-09 is effective for us in our first quarter of fiscal 2017 using either of two methods: (i) retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-09; or (ii) retrospective with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application and providing certain additional disclosures as defined per ASU 2014-09. We are currently evaluating the impact of our pending adoption of ASU 2014-09 on our consolidated financial statement.