On December 6, 2005, immediately prior to the Initial Closing, the Company obligated itself to KeyBank National Association ("KeyBank") under the terms of a non-revolving one-year loan agreement dated December 2, 2005 (the "Loan Agreement") and received funds from KeyBank (the "Loan") in the amount of $3,060,000, for the purpose of completing the Initial Closing. As security for the Company's repayment obligations under the Loan Agreement, the Company has granted a security interest to KeyBank in a $3,060,000 Certificate of Deposit that is owned by the Company. The Loan will bear interest at an annual rate that is 2.0% greater than the annual rate of interest on the Certificate of Deposit held as collateral.

In connection with the Initial Closing, the Company and BioCheck have entered into a sublease agreement dated December 6, 2005, under the terms of which the Company shall have the right for a term of one year to occupy a small portion (expected to be 500 square feet or less) of BioCheck's current facilities, located at 323 Vintage Park Drive, Suite A, Foster City, California 94404. The Company shall pay as rent an amount per month equal to the base rent that BioCheck is currently obligated to pay for such space (currently $1.06 per square foot), plus any additional rent that BioCheck may become obligated to pay relating to such space.

Also effective December 6, 2005, the Company, BioCheck and John Chen ("Executive"), BioCheck's President immediately prior to the Initial Closing, have entered into an Executive Employment Agreement, under which Executive shall be employed as President of BioCheck. Executive has agreed to devote not less than ninety percent (90%) of his business time and efforts to the primary business of BioCheck. In the event that BioCheck terminates the employment of Executive at any time (other than for cause as defined in the agreement), Executive will be eligible to receive an amount equal to twelve (12) months of his then-current base salary. For so long as the Company owns less than all of the outstanding shares of BioCheck, BioCheck will not terminate Executive's employment without cause unless unanimously approved by the Board of Directors of BioCheck. In consideration of services Executive is to render under the Executive Employment Agreement, BioCheck has agreed to pay Executive a salary of $240,000 per year. Further, the Board of Directors of the Company has granted to Executive an option to purchase 500,000 shares of the common stock of the Company under the Company's 2003 Stock Incentive Plan, at an exercise price equal to $0.26 per share. In addition, Executive will be eligible for an additional grant of options equal to 250,000 shares of the common stock of the Company at the conclusion of each of the twelve (12) month and twenty-four (24) month periods following the Initial Closing, so long as at the conclusion of the applicable twelve (12) month and twenty-four (24) month period, BioCheck's net sales for the then most recently completed fiscal year exceed the net sales of the fiscal year which immediately precedes such most recently completed fiscal year. All stock options described hereunder are to vest, if at all, at a rate of 25% per annum subject to continued employment, and all options shall be exercisable for ten (10) years from the date of grant. Executive shall have a period of twelve (12) months following any termination of employment by the Company or BioCheck to exercise vested options.

Further, BioCheck and EverNew Biotech, Inc., a California corporation ("EverNew"), have entered into a Services Agreement dated December 6, 2005 (the "Services Agreement"). The holders of the shares of capital stock of EverNew immediately prior to the Initial Closing are substantially the same set of individuals and entities who held BioCheck's common stock immediately prior to the Initial Closing, including Executive as a significant shareholder. EverNew is an emerging point-of-care diagnostics company, with a number of products in development. EverNew currently has no revenues, and an annual operating budget of at least $250,000. Under the terms of the Services Agreement, EverNew shall render certain services to BioCheck, including assay research and development work, and BioCheck shall render certain administrative services to EverNew. The specific nature and scope of the work to be performed by EverNew shall be determined in good faith from time to time by BioCheck and EverNew. In consideration of services to be provided by EverNew, BioCheck shall pay to EverNew (the "EverNew Compensation") $12,000 per month, provided, however, if the sum of EverNew's gross revenues for a consecutive three (3) month period during the term of the Services Agreement equals or exceeds $100,000, then BioCheck shall no longer be obligated to pay EverNew any amounts for the remainder of the term of the Services Agreement. Further, in such event, EverNew shall pay BioCheck an amount equal to the EverNew Service Cost per month for the remainder of the term of the Services Agreement, and the EverNew Service Cost for such month shall be reduced by the amount of the BioCheck compensation paid to BioCheck for such month. As used in the Services Agreement, EverNew Service Cost means the cost of all BioCheck Services provided by BioCheck each month under the Services Agreement, as incurred and determined in good faith by BioCheck. The Services Agreement is described in this Report so that readers can better understand the disclosure concerning the Option Agreement described below. The Company is not implying that the Services Agreement is a "material definitive agreement" of the Company within the meaning of Item 1.01 of Form 8 K.

As part of the Relocation, the Company has announced that it will terminate all of its employees other than Chief Executive Officer Steven Guillen. All regular/full-time employees of the Company (other than Mr. Guillen) who have committed to continue to work for the Company until February 15, 2006, or who are "laid-off" by the Company effective prior to February 15, 2006 will receive severance benefits under an Employee Incentive Package. The provisions of the Employee Incentive Package will not apply to an employee who is terminated at any time for disciplinary reasons.

The Company estimates that the total amount expected to be incurred in connection with the Relocation shall be approximately $100,000 for relocating operations, and approximately $140,000 for payments under the Employee Incentive Package. The Company's estimates are based upon certain assumptions relating to, among other things, the effect of the Relocation on costs of goods sold and manufacturing expenses. No assurances can be given that the Company's estimates will prove accurate.

Also related to the Relocation, the Company has signed a term sheet with Westcore Peninsula Vintage LLC, a Delaware limited liability company ("Landlord"), that contemplates the Company and Landlord entering into a Lease Agreement (the "Lease Agreement"). Under the terms of the Lease Agreement, the Company would have the right to occupy approximately 3,371 square feet of space located at 323 Vintage Park Drive, Suite B, Foster City, California 94404 for 39 months. The monthly lease rate would be $1.00 per square foot, plus property taxes, property insurance and a common area expenses (approximately $0.46 per square foot in the aggregate). No assurances can be given that a Lease Agreement will be executed.