NOTE 9 - RELATED PARTY TRANSACTIONS

Dr. Seth Lederman and Dr. Donald Landry are primary founders of the Company and serve on the board of directors. They have entered into various transactions with the Company through several companies under their control, including L&L Technologies and Lederman & Co as described in Note 6.

During 2007, the Company issued senior convertible promissory notes (the "Senior Convertible Notes") pursuant to the Note Purchase Agreements among the Company and National Holdings Corporation, Lederman & Co., LLC, Eli Lederman PhD and Dr. Seth Lederman, all but one of whom are direct or indirect stockholders of the Company (collectively referred to herein as the "Noteholders"), in the amount of $50,000 per Senior Convertible Note, or $200,000 in the aggregate. The Senior Convertible Notes bore interest at the rate of 8% per annum and were payable together with the interest accrued thereon on the two year anniversary of the Senior Convertible Notes. The outstanding principal and interest accrued thereon were to be automatically converted into fully paid shares of capital stock upon the closing of a Qualified Financing of capital stock or securities convertible into preferred stock which resulted in gross proceeds of at least $2,000,000.

In June 2009, although a Qualified Financing had not occurred, the Noteholders agreed to exchange the Senior Convertible Notes for shares of capital stock of the Company at the rate of one share of capital per $0.13 of the outstanding principal balance of such notes. The accrued interest on the notes in the amount of $31,633 was forgiven. The excess of the carrying value of the notes including accrued interest over the fair value of the capital stock for which they were exchanged amounted to $31,633 of which $23,725, representing the excess related to the Noteholders who are direct or indirect stockholders, has been accounted for as a capital contribution and credited to additional paid-in capital and the remaining $7,908 was recorded as a gain on extinguishment of debt. Interest expense relating to the Senior Convertible Notes for the year ended December 31, 2009 was $8,044.

In 2007, Lederman & Co. loaned the Company $10,000. On December 19, 2008, the Company issued to Lederman & Co. a demand note in the amount of $280,000, which included new cash proceeds of $270,000 as well as the amount loaned in 2007, with interest accruing on the total demand note balance commencing December 19, 2008. On December 7, 2009, the Company borrowed an additional $150,000 from Lederman & Co. and issued a demand note. The principal balance of the demand notes outstanding as of December 31, 2009 was $430,000 with accrued interest owed at December 31, 2009 of $36,387. On March 5, 2010, the Company issued to Dr. Donald Landry a demand note in the amount of $50,000. The demand notes accrue interest at the rate of 12% per annum.

On July 30, 2010, the demand notes and all interest accrued thereon were converted into shares of capital stock. Demand notes held by Lederman & Co. totaling $430,000 and accrued interest thereon of $66,629 were converted into 2,166,444 shares of capital stock, at a conversion price of $0.23 per share of capital stock. The demand note held by Donald Landry totaling $50,000 and accrued interest thereon of $2,449 was converted into 228,835 shares of capital stock, at a conversion price of $0.23 per share of capital stock.

On September 9, 2011, the Company sold $500,000 principal amount of 8% convertible notes (the “Notes”) to members of the board of directors and their related parties. The Notes were due one year from the date of issuance, and were exchangeable for a future financing (the “New Financing”) at the option of the holders. Interest is payable on either the maturity date or on the date the Notes are exchanged into the New Financing, or such accrued interest can be converted into the New Financing. On October 7, 2011, the Notes were exchanged into debentures issued by the Company concurrently with the Share Exchange (see Note 5).

Interest expense on the demand notes for the years ended December 31, 2010 and 2009 was $32,691 and $35,267, respectively.