Item 1A. Risk Factors.

The following risk factors and other information included in this Annual Report on Form 10-K should be carefully considered. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or which we currently deem immaterial also may impair our business operations. If any of the following risks occur, our business, financial condition, operating results, and cash flows could be materially adversely affected.

Risks Related to Our Financial Condition

Because of our recurring operating losses and negative cash flows from operations, our audit report expresses substantial doubt about our ability to continue as a going concern.

Because of our recurring operating losses and negative cash flows from operations and substantial indebtedness, our audit report expresses substantial doubt about our ability to continue as a going concern. At December 31, 2012 and 2011, we had working capital deficits of $3.1 million and $3.2 million, respectively. Our cash on hand and existing sources of cash are insufficient to fund our cash needs over the next twelve months under our current capital structure. We have prepared our financial statements on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The consolidated financial statements do not include any adjustments that might be necessary should we be unable to continue in existence.

We will need additional financing to meet our financial needs.

Despite our having obtained a commitment by a private investor to invest an additional $1 million pursuant to the MoU, and another investor to invest $2 million pursuant to the Investment Agreement, we will continue to require additional capital in order to fund our operations and achieve positive cash flow. Our current plan is to obtain additional financing after reviewing all possible options in detail, including, but not limited to, the issuance of equity or debt securities or alliances or joint ventures with other biotechnology firms, pharmaceutical companies with biotechnology divisions or medical diagnostic companies. It may be difficult, or impossible, for us to raise additional capital because our stock price has recently been trading at below its par value and because we may not have sufficient shares of authorized stock to issue to investors. If we are able to raise capital, funds raised from the issuance of additional equity securities may have a negative effect on our stockholders, such as a dilution of their percentage of ownership, and the rights, preferences or privileges of the new security holders may be senior to those of our current stockholders. There is no assurance that we will be able to obtain any financing on favorable terms, or at all. If we cannot obtain additional financing, we will likely not be able to continue our operations.

Our working capital deficit may adversely affect our ability to further implement our growth strategy and expand our presence in the international market for HIV and other diagnostic tests.

Neither our cash flow from operations nor our capital resources are sufficient to meet our existing financial needs or sustain our operations. If we are unable to generate significant revenue or attain profitability, we will not be able to sustain operations and will have to curtail significantly or cease operations.

Our financial condition has adversely affected our ability to pay suppliers, service providers and licensors on a timely basis which may jeopardize our ability to continue our operations and to maintain license rights necessary to continue shipments and sales of our products.

At December 31, 2012, our domestic trade accounts payable totaled $1.4 million, of which essentially all was over 60 days past due. Further, we currently have a number of cash-only arrangements with suppliers. Certain vendors and service providers may choose to bring legal action against us to recover amounts they deem due and owing. While we may dispute certain of these claims, should a creditor prevail, we may be required to pay all amounts due to the creditor. If the working capital that enables us to make payments is not available when required, we will be placed in significant financial jeopardy and we may be unable to continue our operations at current levels, or at all. Additionally, our financial condition has prevented us from ordering certain materials in the most economical order quantities, which increases the cost of our products and reduces our margins.

We have federal and state net operating losses and research and development credits which may expire before we can utilize them.

At December 31, 2012, we had federal net operating loss carryforwards of approximately $135 million. Section 382 of the Internal Revenue Code imposes an annual limitation on the utilization of net operating loss carryforwards following a “change in ownership.”  The amount of the limitation is based on a statutory rate of return and the value of the corporation at the time of the change of ownership. Our private placements and other sales of our equity securities can potentially cause a change of ownership either individually or in the aggregate. We have conducted a preliminary analysis of our stock ownership changes which indicates that ownership changes within the meaning of Section 382 of the Internal Revenue Code may have occurred in 2003 and 2004. After applying the Section 382 limitations resulting from these presumed ownership changes, approximately $83 million and $10.2 million of federal and state net operating loss carryforwards, respectively, are available at December 31, 2012. If a change of ownership has occurred as a result of past financings and an annual limitation is imposed, we may not be able to fully utilize all of our federal and state loss carryforwards and research and development credit carryforwards. Our inability to fully utilize our net operating loss carryforwards and tax credits could have a negative impact on our tax asset, financial position and results of operations.

Risks Related to the Market for Our Common Stock

We have a history of operating losses and expect to report future losses that may cause our stock price to decline and a loss of your investment.

Since our inception of operations through December 31, 2012, we have incurred a cumulative loss of $181.2 million. We expect to continue to incur losses as we spend additional capital to market our products and establish our infrastructure and organization to support anticipated operations. We cannot be certain whether we will ever earn a significant amount of revenue or profit, or if we do, that we will be able to continue earning such revenues or profit. Any economic weakness or global recession, including the current environment, may limit our ability to ultimately market our products. Any of these factors could cause our stock price to decline and result in a loss of a portion or all of your investment.

The price and trading volume of our common stock is subject to certain factors beyond our control that may result in significant price and volume volatility, which substantially increases the risk that you may not be able to sell your shares at or above the price that you pay for the shares.

Factors beyond our control that may cause our share price to fluctuate significantly include, but are not limited to, the following:

Additionally, in recent years the stock market in general, and the OTC Bulletin Board (the "OTCBB") stocks in particular, have experienced extreme price and volume fluctuations. In some cases these fluctuations are unrelated or disproportionate to the operating performance of the underlying company. These market and industry factors may materially and adversely affect our stock price regardless of our operating performance. The historical trading of our common stock is not necessarily an indicator of how it will trade in the future and our trading price as of the date of this report is not necessarily an indicator of what the trading price of our common stock might be in the future.

In the past, class action litigation has often been brought against companies following periods of volatility in the market price of those companies' common stock. If we become involved in this type of litigation in the future it could result in substantial costs and diversion of management attention and resources, which could have a further negative effect on your investment in our stock.

Our issuance of warrants and stock options may have a negative effect on the trading price of our common stock.

We currently have a large number of stock options outstanding. The exercise of stock options and warrants into shares of common stock could cause significant dilution to our stockholders. In addition to the potential dilutive effect of issuing a large number of shares upon exercise of stock options and warrants, there is the potential that a large number of the shares may be sold in the public market at any given time, which could place significant downward pressure on the trading price of our common stock.

There is no assurance of an established public trading market, which would adversely affect the ability of investors in our company to sell their securities in the public markets.

Although our common stock trades on the OTCBB, a regular trading market for our common stock may not be sustained in the future. The Financial Industry Regulatory Authority (FINRA) limits quotation on the OTCBB to securities of issuers that are current in their reports filed with the SEC. If we fail to be current in the filing of our reports with the SEC, after a grace period of approximately 30 days, our common stock will not be able to be traded on the OTCBB. The OTCBB is an inter-dealer market that provides significantly less liquidity than a national securities exchange or automated quotation system.

Market prices for our common stock may be influenced by a number of factors, including:

Our common stock is a "penny stock."

Our common stock is a "penny stock" for purposes of Section 15(g) of the Exchange Act because common stock trades at a price less than $5.00 per share and is not traded on a "recognized" national exchange or quoted on The NASDAQ Stock Market, and we have net tangible assets of less than $2,000,000. The principal result or effect of being designated a "penny stock" is that securities broker-dealers cannot recommend our common stock but can only trade in it on an unsolicited basis.

Resale restrictions on transferring “penny stocks” are sometimes imposed by some states, which may make transactions in our common stock more difficult and may reduce the value of the investment. Various state securities laws impose restrictions on transferring “penny stocks” and as a result, investors in our common stock may have the ability to sell their shares of our common stock impaired. Certain foreign countries also impose limitations and restrictions on the ability of their citizens to own stock that is not traded on a recognized exchange, which, in certain instances, does not include the OTCBB.

Failure to achieve and maintain internal controls in accordance with Sections 302 and 404 of the Sarbanes-Oxley Act of 2002 could have a material adverse effect on our business and stock price.

We are examining and evaluating our internal control procedures to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, as required for our Annual Report on Form 10-K for the year ended December 31, 2012. If we fail to maintain adequate internal controls or fail to implement required new or improved controls, as such control standards are modified, supplemented or amended from time to time, we may not be able to assert that we can conclude on an ongoing basis that we have effective internal controls over financial reporting. Effective internal controls are necessary for us to produce reliable financial reports and are important in the prevention of financial fraud. If we cannot produce reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and there could be a material adverse effect on our stock price.

Risks Related to Our Business

A viable market for our products may not develop or we may not be able to successfully develop and market new products that we plan to introduce.

Our future success will depend, in large part, on the market acceptance, and the timing of such acceptance, of our Aware ^TM HIV-1/2 OMT rapid test and the HIV-1 BED Incidence Test and such other new products (e.g., the Aware ^TM 2 HIV test) or technologies as we may develop or acquire. To achieve market acceptance, we must make substantial marketing efforts and spend significant funds to inform potential customers and the public of the perceived benefits of these products. We currently have extremely limited resources with which to stimulate market interest in and demand for our products and limited evidence on which to evaluate the market’s reaction to products that may be developed.

We currently have approval to sell our Aware ^TM HIV-1/2 OMT rapid test product in countries including China, Russia, India, South Africa, U.A.E., Iraq, Uganda, Kenya, Cote d’Ivoire and Peru. We plan to seek regulatory approval in other countries as resources permit. Sub-Saharan Africa, China, India and Russia are the areas predicted to have the greatest increase in HIV infections over the next few years. We believe that a simple, non-invasive test such as ours will have significant demand as it can be used as an integral part of a real-time treatment program. Although we are optimistic regarding the future sales prospects for our Aware ^TM HIV-1/2 OMT rapid test, obtaining regulatory approval has not resulted in significant product sales to date. In Africa and elsewhere, government Ministries of Health or similar agencies are the primary purchasers of HIV tests, typically through a tender process which currently requires the exclusive use of blood tests. Such tenders often consider only the purchase cost of an HIV diagnostic test, ignoring the ancillary costs of administration, including costs such as personnel and materials required to draw and dispose of blood samples. We are directing considerable effort, including product donations to key user agencies, to encourage the consideration and inclusion of our oral fluid tests in such tenders. We consider these efforts to be part of an “enabling” strategy in which the standard of care for HIV diagnosis evolves from the exclusive use of blood tests to more widespread use of non-invasive oral fluid-based tests. This process is time-consuming and expensive. There can be no assurance that our Aware ^TM HIV-1/2 OMT rapid tests will obtain widespread market acceptance internationally or that significant sales will occur on a timetable that we can accurately project.

We manufacture the HIV-1 BED Incidence Test under license from the CDC and that test is available for sale, but we have limited experience marketing it and sales to-date have been modest. The CDC has issued an Information Sheet acknowledging that the assay may cause over-estimation under certain conditions and has issued revised recommendations and protocols for its use. As a result, although we believe that the Incidence Test is a valuable technology in the fight against the spread of HIV/AIDS and expect that the process of refining its applications will continue as its use expands, there can be no assurance that the Incidence Test will achieve widespread acceptance, either in the U. S. or internationally.

We have recently introduced our Aware Messenger ^TM oral fluid sample collection device, have no experience marketing such a product and our financial condition has allowed us to do only limited marketing for the product at present.

If our current products fail to achieve additional regulatory approvals or market acceptance or generate significant revenues, we may have to abandon them and alter our business plan. Such modifications to our business plan will likely delay achievement of sustainable cash flow from product sales and profitability. As a result, we may have to seek additional financing, which may not be available on the timetable required or on acceptable terms, or we may have to curtail our operations, or both.

Additionally, neither we nor our marketing partners have significant experience marketing and selling rapid diagnostic tests. Our success depends upon alliances with third-party international distributors and joint venture partners and upon our ability to penetrate expanded markets with such distributors and partners. There can be no assurance that:

Consequently, there can be no assurance that any of our current or potential new products will obtain widespread market acceptance and fill the market need that is perceived to exist. Additionally, although we plan to introduce an over the counter HIV diagnostic test for the domestic over the counter market, there can be no assurance regarding the timeline for which or certainty that the FDA will develop protocols for evaluation and approval of such a product.

We are dependent upon patents, licenses and other proprietary rights from third parties.

To facilitate the development and commercialization of a proprietary technology base for our rapid test products, we have obtained licenses to patents or other proprietary rights from other parties. Obtaining such licenses has required the payment of substantial amounts and will require the payment of royalties to maintain them in the future. We believe that the licenses to the technologies we have acquired are critical to our ability to sell our rapid tests currently being commercialized and other rapid tests that we may plan to develop and/or commercialize in the future.

There are numerous patents in the United States and other countries which claim lateral flow assay methods and related devices, some of which cover the technology used in our rapid test products and are in force in the United States and other countries. In 2004, we entered into a non-exclusive sublicense agreement with Abbott Laboratories that grants us worldwide rights related to patents for lateral flow assay methods and related devices. We believe that the acquisition of these rights will enable us to make or sell our rapid test products in countries where these patents are in force. In 2004, we also acquired a sublicense from Bio-Rad Laboratories and Bio-Rad Pasteur for patents related to the detection of the HIV-2 virus. HIV-2 is a type of the HIV virus estimated to represent a small fraction of the known HIV cases worldwide. Nevertheless, HIV-2 is considered to be an important component in the testing regimen for HIV in many markets. We believe that this sub-license agreement makes it possible for us to sell HIV-2 tests in countries where such patents are in force, or to manufacture in countries where such patents are in force and then sell into non-patent markets. Additionally, in 2004, we acquired rights from Ani Biotech for its rapid test diagnostic platform and sample applicator, which we believe is a viable alternative to current lateral flow technologies and with potentially worldwide applicability. The loss of any one of these licenses or challenges to the patents would be detrimental to the commercialization of our rapid tests by delaying or limiting our ability to sell our rapid test products, which would adversely affect our results of operations, cash flows and business.

In the event that our financial condition inhibits our ability to pay license fees or royalty payments due under our license agreements, our rights to use, transfer or sublicense those licenses could be jeopardized in the event of a default in payment of fees or royalties. The loss of any of the foregoing licenses could have a materially adverse effect on our ability to produce our products or introduce new HIV or other diagnostic products in countries covered by those patents since the license agreements provide necessary proprietary processes or components for the manufacture of our products.

Our success depends on our ability to protect our proprietary technologies.

The medical diagnostics test industry places considerable importance on obtaining patent, trademark, and trade secret protection, as well as other intellectual property rights, for new technologies, products and processes. Our success depends, in part, on our ability to develop and maintain a strong intellectual property portfolio or to obtain licenses to patents for products and technologies, both in the United States and in other countries.

As appropriate, we intend to file patent applications and obtain patent protection for our proprietary technology. These patent applications and patents, when filed, are intended to cover, as applicable, compositions of matter for our products, methods of making those products, methods of using those products, and apparatus relating to the use or manufacture of those products. We will also rely on trade secrets, know-how, and continuing technological advancements to protect our proprietary technology. There is, however, no assurance that we will be successful in obtaining the required patent protection or that such protection will be enforced in certain countries in which we compete.

We have entered, and will continue to enter, into confidentiality agreements with our employees, consultants, advisors and collaborators. However, these parties may not honor these agreements and we may not be able to successfully protect our rights to unpatented trade secrets and know-how. Others may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets and know-how.

Certain of our employees, including scientific and management personnel, were previously employed by competing companies. Although we encourage and expect all of our employees to abide by any confidentiality agreement with a prior employer, competing companies may allege trade secret violations and similar claims against us.

We have collaborated in the past and expect to collaborate in the future with universities and governmental research organizations which, as a result, may acquire part of the rights to any inventions or technical information derived from collaboration with them.

We may incur substantial costs and be required to expend substantial resources in asserting or protecting our intellectual property rights, or in defending suits against us related to intellectual property rights. Disputes regarding intellectual property rights could substantially delay product development or commercialization activities. Disputes regarding intellectual property rights might include state, federal or foreign court litigation as well as patent interference, patent reexamination, patent reissue, or trademark opposition proceedings in the United States Patent and Trademark Office. Opposition or revocation proceedings could be instituted in a foreign patent office. An adverse decision in any proceeding regarding intellectual property rights could result in the loss or limitation of our rights to a patent, an invention or trademark.

We may need to establish additional collaborative agreements, and this could have a negative effect on our freedom to operate our business or profit fully from sales of our products.

We may seek to collaborate with other companies to gain access to their research and development, manufacturing, marketing and financial resources. However, we may not be able to negotiate arrangements with any collaborative partners on acceptable terms. Any collaborative relationships that we enter into may include restrictions on our freedom to operate our business or to profit fully from the sales of our products.

Once a collaborative arrangement is established, the collaborative partner may discontinue funding any particular program or may, either alone or with others, pursue alternative technologies for the protects or diseases we are targeting. Competing products, developed by a collaborative partner or to which a collaborative partner has rights, may result in the collaborative partner withdrawing support as to all or a portion of our technology.

Without collaborative arrangements, we must fund our own research and development activities, accelerating the depletion of our financing resources and requiring us to develop our own marketing capabilities. Therefore, if we are unable to establish and maintain collaborative arrangements, we could experience a material adverse effect on our ability to develop products and, once developed, to market them successfully.

The time needed to obtain regulatory approvals and respond to changes in regulatory requirements could adversely affect our business.

Our existing and proposed products are subject to regulation by the FDA, Russian and Indian regulatory bodies and other governmental or public health agencies. In particular, we are subject to strict governmental controls on the development, manufacture, labeling, distribution and marketing of our products. In addition, we are often required to obtain approval or registration with other foreign governments or regulatory bodies before we can import and sell our products in these countries.

The process of obtaining required approvals or clearances from governmental or public health agencies can involve lengthy and detailed laboratory testing, human clinical trials, sampling activities and other costly, time-consuming procedures. The submission of an application to the FDA or other regulatory authority does not guarantee that an approval or clearance to market a product will be received. Each authority may impose its own requirements and delay or refuse to grant approval or clearance, even though a product has been approved in another country or by another agency.

Moreover, the approval or clearance process for a new product can be complex and lengthy. This time span increases our costs to develop new products as well as the risk that we will not succeed in introducing or selling them in our target markets.

Newly promulgated or changed regulations could also require us to undergo additional trials or procedures, or could make it impractical or impossible for us to market our products for certain uses, in certain markets, or at all.

We engage contract manufacturers and plan to conduct international manufacturing operations to produce some of our products, including our rapid tests currently being commercialized.

We have engaged a domestic contract manufacturer to produce our BED Incidence tests and our Aware Messenger ^TM sampling device and another in Thailand to produce our rapid HIV tests. We intend to subsequently introduce a new line of products using the Ani technology platform, and again expect to rely on outsourced or overseas manufacturing organizations. Initially, none of these entities will have more than limited experience, if any, in manufacturing our products and will have no experience in manufacturing them in commercial quantities. Furthermore, our rapid tests are not yet approved for sale in Thailand, which precludes us from selling them in certain countries in which approval in the country of manufacture, i.e. a “Certificate of Origin,” is a prerequisite to local product approval. While outsourcing our manufacturing processes to contract manufacturers may permit us to expand our manufacturing capacity more quickly, it may also subject us to problems in such areas as:

We rely on sole source suppliers that we cannot quickly replace for certain components critical to the manufacture of our products.

We purchase some components from single sources, and although we believe we could obtain alternatives at competitive cost, any delay or interruption in the supply of these sole source components could have a material adverse effect on us by significantly impairing our or our contract manufacturer’s ability to manufacture products in sufficient quantities, particularly as we increase our manufacturing activities in support of commercial sales. In addition, it is possible that such changes might require further changes in our products and subject them to additional regulatory requirements and review. Further, price increases imposed by these suppliers may result in increased costs and reduced margins to us, if we are unable to pass the increased costs on to our customers. In addition, if our financial condition impairs our ability to pay for critical components on a timely basis, our suppliers may delay or cease selling critical components to us, which could also restrict our ability to manufacture. We typically do not have long-term supply agreements with these suppliers, relying instead on periodic purchase orders to acquire materials with the result that suppliers could delay or decline to ship components until payment is made in advance or on a COD basis.

We may not be able to retain and/or attract key executives and other personnel.

A large percentage of our executives and senior employees left the Company during 2008. As a small company, our success depends on the services of key employees in various research and development, administrative, marketing and quality systems positions. Our inability to replace or attract key employees in certain positions as a result of our financial condition, or for other reasons, could have a material adverse effect on our operations.

Our research, development and commercialization efforts may not succeed or our competitors may develop and commercialize more effective or successful diagnostic products.

In order to remain competitive, we must regularly commit substantial resources to research and development and the commercialization of new products. The research and development process generally takes a significant amount of time and money from inception to commercial product launch. This process is conducted in various stages. During each stage there is a substantial risk that we will not achieve our goals on a timely basis, or at all, and we may have to abandon a product in which we have invested substantial amounts of money.

A primary focus of our efforts has been rapid HIV tests that we are commercializing or that are in the process of being developed. We plan to expand our product line to include tests for other STD’s or synergistic diseases or conditions. However, there can be no assurance that we will have the funds to perform the necessary research and development to do this. Moreover, there can be no assurance that will succeed in our research and development efforts with respect to rapid tests or other technologies or products or in our commercialization of these tests.

Successful products require significant development and investment, including testing, to demonstrate their efficacy, cost-effectiveness and other benefits prior to commercialization. In addition, regulatory approval must be obtained before most products may be sold. Regulatory authorities may not approve these products for commercial sale. In addition, even if a product is developed and all applicable regulatory approvals are obtained, there may be little or no market for the product at a price that will allow us to earn a reasonable profit, or we may be unable to obtain the requisite licenses to sell the product or to qualify for a government tender, which are often requirements in third world countries where the greatest need and largest market for HIV diagnostic testing exists. Accordingly, if we fail to develop commercially successful products, or if competitors develop more effective products or a greater number of successful new products, or there are governmental limitations affecting our ability to sell our products, customers may decide to use products developed by our competitors. This would result in a loss of current or anticipated future revenues and adversely affect our results of operations, cash flows and business.

We face intense competition in the medical diagnostic products market and rapid technological advances by competitors.

Competition in our diagnostic market is intense and we expect it to increase. Many of our competitors have significantly greater financial, marketing and distribution resources than we do. Our competitors may succeed in developing or marketing technologies and products that are more effective than ours. In addition, if acceptance for oral fluid testing expands, we may experience competition from companies in areas where intellectual property rights may not be as stringent as in the United States. These developments could render our technologies or products obsolete or noncompetitive or otherwise affect our ability to increase or maintain our products’ market share. Further, the greater resources of our competitors could enable them to develop competing products more quickly so as to make it difficult for us to develop a share of the market for these products. By having greater resources, our competitors may also be able to respond more quickly to technology changes in the marketplace and may be able to obtain regulatory approval for products more quickly than we can. Our future success will depend on our ability to remain competitive with other developers of medical devices and therapies.

Our quarterly results may fluctuate due to certain regulatory, marketing, financing and competitive factors over which we have little or no control.

The factors listed below, some of which we cannot control, may cause our revenues and results of operations to fluctuate significantly:

The success of our plans to enter international markets may be limited or disrupted due to risks related to international trade and marketing and the capabilities of our distributors and manufacturers.

We must rely on revenues to be generated from sales of our current or planned incidence and rapid tests, largely to international distributors. We believe that our alternative fluid-based tests can provide significant benefits in countries that do not have the facilities or personnel to safely and effectively collect and test blood samples. To date, however, sales to international customers have resulted in relatively insignificant revenues. A majority of the companies with which we compete in the sale of HIV screening tests actively market their diagnostic products outside of the United States. Manufacturers from Japan, Canada, Europe, and Australia offer a number of HIV screening tests in those markets, including HIV-1/2 rapid tests, which are not approved for sale in the U.S. market. There can be no assurance that our products will compete effectively against these products in foreign markets. The following risks may limit or disrupt the success of our international efforts:

Some of our distributors have limited international marketing experience. There can be no assurance that these distributors will be able to successfully market our products in foreign markets. Any such failure will delay or disrupt our plans to expand our business.

An economic downturn, terrorist attacks or other conditions beyond our control may adversely affect our business or our customers may not be able to satisfy their contractual obligations and we may not be able to deliver our products as a result of the impact of conditions such as certain world events or natural disasters.

Changes in economic conditions could adversely affect our business. For example, in a difficult economic environment, customers may be unwilling or unable to invest in new diagnostic products, may elect to reduce the amount of their purchases or may perform less HIV testing. A weakening business climate could also cause longer sales cycles and slower growth, and could expose us to increased business or credit risk in dealing with customers adversely affected by economic conditions.

Terrorist attacks or regional conflicts and subsequent governmental responses to these attacks could cause further economic instability or lead to further acts of terrorism in the United States and elsewhere. These actions could adversely affect economic conditions outside the United States and reduce demand for our products internationally. Terrorist attacks could also cause regulatory agencies, such as the FDA or agencies that perform similar functions outside the United States, to focus their resources on vaccines or other products intended to address the threat of biological or chemical warfare. This diversion of resources could delay our ability to obtain regulatory approvals required to manufacture, market or sell our products in the United States and other countries.

Our business model and future revenue forecasts call for a significant expansion of sales in the People’s Republic of China as well as in Africa, Russia, India and elsewhere upon successful commercialization of our rapid test products. Should conditions beyond our control, such as disease outbreaks, natural disasters, war or political unrest, redirect attention from the worldwide HIV/AIDS epidemic or concern for other STD’s, if and when we are able to develop and introduce such diagnostic products, our customers’ ability to meet their contractual purchase obligations and/or our ability to supply product internationally for either evaluation or commercial use may prevent us from achieving the revenues we have projected. As a result, we may have to seek additional financing beyond that which we have projected, which may not be available on the timetable required or on acceptable terms that are not substantially dilutive to our stockholders, or we may have to curtail our operations, or both.

As a small manufacturer of medical diagnostic products, we are exposed to product liability and recall risks for which insurance coverage is expensive, limited and potentially inadequate.

We manufacture medical diagnostic products, which subjects us to risks of product liability claims or product recalls, particularly in the event of false positive or false negative reports. A product recall or a successful product liability claim or claims that exceed our insurance coverage could have a material adverse effect on us. We maintain a $5,000,000 claims-made policy of product liability insurance. However, product liability insurance is expensive. In the future we may not be able to obtain coverage on acceptable terms, if at all. Moreover, our insurance coverage may not adequately protect us from liability that we incur in connection with clinical trials or sales of our products.