NOTE J – SUBSEQUENT EVENTS

On January 21, 2015, the Company entered into a Strategic Manufacturing and Cooperation Agreement with a contract-manufacturing customer. This agreement covers the terms of manufacturing, quality control, a mutual technology transfer, cost savings and process improvement for the purpose of transferring the manufacturing of certain test strips (but not drugs of abuse test strips) that the Company produces for the contract manufacturing customer. Under this agreement, the Company will remain the sole manufacturer for the customer until at least June 4, 2016, and after this date, the Company will remain a supplier of 15% of the customer’s test strip needs. In addition, the Company will transfer certain expertise and documentation related to the manufacturing of the test strips. As consideration for this transfer, the Company will receive a sum of $300,000 to be paid in installments based upon the attainment of certain performance milestones. The Company received its first payment of $75,000 in February 2015.

On February 19, 2015, the Company entered into an addendum to their Financial Advisory Agreement (the “Addendum”) with Landmark. The Addendum provides that Landmark will continue to provide certain financial advisory services for a minimum period of 6 months (which period commenced on January 10, 2015), and as consideration for these services, the Company paid Landmark (a) a retainer fee consisting of 384,615 restricted shares of common stock. Otherwise all the original terms remain the same.

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 Cantone Asset Management LLC 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 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 a final balloon payment being due on March 26, 2020. In addition to the 8% interest, the Company will pay Cherokee Financial LLC a 1% cash annual fee (paid contemporaneously with payment of quarterly interest) for oversight and administration of the loan. The Company will also issue 1.8 million restricted shares of common stock to Cherokee Financial LLC. Cantone Research Inc, (the placement agent) received a fee of 5% of the note value (or $60,000) and 200,000 restricted shares of common stock.