Note 12 – Note Payable

On June 30, 2015, the Company entered into a note payable in the amount of $1,300,000, in connection with the Asset Purchase Agreement (Note 8). The note is payable in 48 monthly installments of $29,938 including principal and interest at the rate of 5% per annum, commencing on July 31, 2015, and ending on June 30, 2019. The note is secured by all assets, inventory, molds, rights and contracts purchased pursuant to the Asset Purchase Agreement.

In the event the Company sells less than 8,000 PrepaCyte CB Processing System Units (“Units”) to outside customers during each of the twelve month periods during the note term beginning each July 1 and ending June 30, the note will be reduced by the lesser of $100,000 plus interest at the rate of 5% per annum or $25 times the difference between 8,000 and the actual number of Units sold plus interest at the rate of 5% per annum. Any annual note reduction shall serve to lower the remaining monthly note payments.

In addition, it is assumed that during the period from July 1, 2018 to June 30, 2019, the Company shall sell 4,000 Units and receive an additional $120,000 note reduction. However if the Company sells more than 4,000 Units, it will owe additional principal in the amount of $25 times the difference between 8,000 and the actual number of Units sold plus interest at the rate of 5% per annum, which is payable on June 30, 2019.

Maturities of the note payable subsequent to August 31, 2015 are as follows:

As of August 31, 2015, the Company has made two installments of $29,938 and recognized $10,731 of interest expense related to the note payable. The remaining principal balance of the note payable is $1,250,855 and is reflected on the accompanying balance sheets as of August 31, 2015.