LOAN AND SECURITY AGREEMENT
                           ---------------------------

LIFESTREAM DIAGNOSTICS, INC.
510 CLEARWATER LOOP, SUITE 101
POST FALLS, IDAHO 83854

The undersigned debtor (hereinafter referred to as "Borrower"), for good and
valuable consideration, and to induce Capital South Financial Services, Inc.,
d/b/a Capital South, (a Georgia corporation) (hereinafter referred to as
"Lender") to accept this Agreement and to make the loans and advances described
herein, hereby agrees with Lender as follows:

         1. Request for Loan. From time to time Borrower may request, and
Lender, may loan to Borrower (hereinafter referred to as the "Loan") up to
seventy five percent (75%) ("the Secured Percentage") of the amount of" Approved
Receivables" (as hereinafter defined) submitted by Borrower to Lender (exclusive
of Interest, fees, and other charges); together with 65% of the actual costs of
non-obsolete inventory, plus $1,000,000.00 fixed for the agreed upon evaluation
of U.S. patents and U.S. patent applications, U.S. trademarks and U.S.
copyrights, furniture, fixtures, and equipment; provided, however, that the
total principal amount of such loans and advances to Borrower shall not exceed
Borrower's maximum line of credit extended from time to time by Lender and
determined in Lender's sole discretion (hereinafter referred to as the "Maximum
Loan Amount"). No more than 20% of the outstanding Loan balance will be against
the receivables of anyone customer, in the discretion of the lender. All loans
and advances made by Lender hereunder shall be evidenced by a Secured Promissory
Note (the "Note") executed by Borrower and shall contain such terms as Lender
shall require. Interest and service charges on such loans shall be charged by
Lender and paid by Borrower at such rates and at such times as may be agreed
upon by the parties. " Approved Receivables," as used herein, shall mean only
such accounts, contract rights, chattel paper, instruments or general
intangibles as from time to time shall be acceptable to Lender; "approved
accounts" shall exclude accounts more than 90 days from invoice date, contras,
intra- company accounts, employee accounts, related accounts, foreign accounts
and other potential off- sets, in its sole judgment and discretion, in terms of
quality and current status. No more than 20% of the outstanding loan balance can
ever be against the receivables of any one customer . Notwithstanding anything
contained herein to the contrary, in the event that the amount owed by Borrower
to Lender under the Loan exceeds at any time the Maximum Loan Amount, then
Borrower shall immediately pay to Lender such excess.

         2. Security Interest. To secure the performance by Borrower of all of
its obligations hereunder, as well as all of the rights of Lender hereunder, and
to secure all amounts due under the Guaranty, including any renewal,
substitution, consolidation, or extension thereof, as well as payment of any and
all indebtedness which may now or hereafter in the future be owing by Borrower
to Lender, its successors and assigns, however and whenever incurred, arising or
evidenced, whether alone or together with another or others, whether direct,
indirect, or by way of assignment, whether joint or several, absolute or
contingent, due or to become due, and whether as principal maker, endorser,
surety, Borrower, mortgagee or otherwise, or which Lender may now or hereafter
have, own or hold (all of said debts, obligations and liabilities are herein
collectively called the "Liabilities") and whether such Liabilities are from
time to time reduced and thereafter increased or entirely extinguished and
thereafter re-incurred, Borrower hereby grants to Lender a present and
continuing lien upon, security title to and a security interest in; (a) all of


                                      -1-
<PAGE>

Borrower's accounts, contract rights, chattel paper, instruments, drafts and
general intangibles, whether now existing or hereafter arising or acquired
(herein referred to as the "Receivables"), together with any returned,
repossessed, or unshipped goods relating to the Receivables, and all dividends
and distributions on or rights in connection with any such property and all
rights of Borrower earned or to be earned under contracts to sell goods or
render services; (b) any balances, credits, accounts, items and monies of,
Borrower now or hereafter with Lender; (c) all inventory of debtor including
without limitation all raw materials, finished goods, work in process, and all
returns, where ever located; (d) interests in lease holds documents, documents
of title, tax refunds, causes of action against any person or entity; (e)
machinery, equipment, furniture, fixtures, attachments; (f) all books, records,
customer lists, trade secrets, formulae and other recorded information, whether
in the form of a writing, photograph, microfilm, microfiche, electronic medium,
or otherwise, together with all the Debtor's right title and interest in and to
all computer software in object code and source code, used to create, maintain,
or process any such records or data; (g) all U.S. Patents and U.S. Patent
Applications; U.S. Copyrights and U.S. Trademarks (h) any other property of any
nature whatsoever of Borrower now or hereafter in the possession of, assigned to
or hypothecated to the Lender for any purpose, including but not limited to
inventory, and In addition; (i) All of such property and Receivables are
hereafter collectively referred to as the "Collateral" and shall also include
all direct and remote proceeds thereof.

         3. Account Collection. Unless Lender shall otherwise consent in
writing, Borrower will forthwith upon receipt, transfer and deliver to Lender in
the form received all cash, checks, chattel paper, drafts, items or other
instruments for the payment of money (properly endorsed where required, so that
such items may be collected by Lender) which may be received by Borrower at any
time in full or partial payment or otherwise as proceeds of any Collateral.
Unless Lender shall otherwise consent in writing, any such items which may be
received by Borrower shall not be commingled with any other of Borrower's funds
or property, but will be held separate and apart from its own funds or property
and upon express trust for the Lender until delivery is made to Lender. Borrower
has agreed to stamp all existing and future invoices to notify all customers
that payment is to be made directly to Lender. Lender will within two working
days after receipt of funds wire transfer or Fed Ex 90% of all collected funds
to Borrower. The 10% retained shall be retained by Lender until the retained
amount aggregates 10% of the entire outstanding loan balance, to be turned over
to Borrower when the loan is paid in full. Lender shall open and maintain while
this Agreement is in effect an account with Bank of America in Borrower's name
but controlled solely by Lender (hereinafter referred to as the "Collection
Account"). Lender shall, at its sole option, do one of the following: (a) remit
to Borrower, along with a statement of account, 90% of the amount collected in
the Collection Account with respect to all of the Receivables or any particular
Receivable less any and all interest, fees, and other charges due and payable to
Lender with respect to such Receivables or Receivable or the Loan, or (b) remit
to Borrower, along with a statement of account, 90% of the amount collected in
the Collection Account with respect to all Receivables or any particular
Receivable, along with an invoice to Borrower for all interest, fees, and other
charges accrued to the date of such invoice, and Borrower shall pay such invoice
within 10 days from the date of such invoice, Borrower will send copies of all
invoices together with all backup material (purchase order and bill of lading)
to Lender.

           In the event that Lender makes any particular advance hereunder based
upon certain Receivables of Borrower, then payment shall not be deemed received
by Lender with respect to any one of such Receivables until Lender has received
payment with respect to all of such Receivables. Lender shall deliver to
Borrower a statement of account and such statement shall be binding and
conclusive upon Borrower unless Borrower notifies Lender to the contrary within
ten (10) days after the date each statement is rendered. If requested by Lender,
Borrower will turn over, and Lender will handle, the cash collection of the
Receivables; however, Borrower will, at its own expense, endeavor to collect all
amounts due under the Receivables, including the taking of such action with
respect to such collection including, but not limited to, litigation, as the
Lender may reasonably request or, in the absence of such request, as Borrower
may deem necessary or advisable. Borrower may in the ordinary course of
business, grant to any party obligated on the Receivables any rebate or
adjustment to which such party may be lawfully entitled, and, may accept, in
connection therewith, the return of goods, the sale or lease of which have given
rise to such Receivables. Borrower shall promptly notify Lender of and shall
settle all customer disputes; however, If Lender elects, it shall have the right
at all times to settle, compromise, adjust or litigate all customer disputes


                                      -2-
<PAGE>

directly with the customer or other complainant upon such terms and conditions
as Lender deems advisable including but not limited to the right to surrender,
release or exchange all or any part of any Receivable owed by a customer to
Borrower, and to compromise, extend, or renew for any period any such
Receivable, all without incurring liability to Borrower for its performance of
any such acts, and Lender hereby shall have the right to stop goods in transit
or to replevy or to reclaim such goods. All returned, replevied and reclaimed
goods (unless released by Lender) coming into Borrower's possession shall be
held by Borrower in trust for Lender. Borrower shall notify Lender promptly of
all such returned goods and shall promptly pay to Lender the gross amount of the
unpaid Receivables with respect thereto.

         If any Receivable is not paid within ninety (90) days from the date of
         the invoice, bill, or other writing giving rise to or evidencing such
         Receivable, or if any customer raises any claim of non-conformity of
         goods, total or partial failure of delivery, setoff, counterclaim, or
         breach of warranty or any other claim inconsistent with Borrower'
         warranties as made below, Borrower will, upon demand, pay to Lender the
         Secured Percentage of the gross amount of the Receivable so affected or
         unpaid, together with and damages or loss sustained by Lender and any
         accrued but unpaid Interest, fees, or other charges due Lender;
         provided, however, such payment may not be deemed a reassignment
         thereof and title thereto and to the goods represented thereby shall
         remain in Lender until and unless Lender executes a reassignment.
         Lender may, at any time and from time to time, notify any parties
         obligated on any of the Receivables to make payment to Lender of any
         amount due or to become due thereunder, and enforce collection of any
         of the Receivables by suit or otherwise, as hereinbefore provided. At
         any time, upon the request of Lender, Borrower will, at its own
         expense, notify any parties obligated on any of the Receivables to make
         payment to Lender of any amounts due or to become due thereunder.
         Borrower hereby appoints and constitutes Lender as its lawful
         attorney-in-fact to receive, open, and dispose of all mail addressed to
         Borrower pertaining to any of the Collateral; to notify the postal
         authorities to change the address and delivery of mail addressed to
         Borrower to such address as Lender may designate; to endorse Borrower's
         name upon any notes, acceptances, checks, drafts, money orders and
         other evidences of payment that may come into Lender's possession and
         to deposit or otherwise collect the same; to sign Borrower's name on
         any bill of lading relating to any collateral, on drafts against
         customers, listings of Receivables, and notices to customers; to
         prepare and mail invoices to Borrower's customers; to send verification
         of accounts to customers; to execute in Borrower's name any affidavits
         and notices with regard to any and all lien rights, and to do all other
         acts and things necessary to carry out this Agreement or to deal with
         the Collateral or proceeds thereof in its own name or in the name of
         the Borrower. All acts of said attorney-In-fact are hereby ratified.
         This power, being coupled with an interest, is irrevocable while
         Borrower is indebted to Lender.

         4. Warranties of Borrower. Borrower hereby represents, warrants, and
covenants to and with Lender that the Collateral is and will be free and clear
of any and all liens, security interests and encumbrances; that Borrower has and
will have the right to convey the Collateral as security for the Liabilities,
free and clear of any and all liens, security interests and encumbrances; that
Borrower will keep the Collateral free from any liens, encumbrances or security
interests whatsoever, other than the security interest created hereunder; that
Borrower will promptly pay or discharge all taxes assessed against the
Collateral and all liens which may attach thereto; that any and all information
set forth in any writing heretofore or hereafter delivered to Lender by Borrower
pertaining to the Collateral or Liabilities is and will be true and correct as
of the date thereof; that the Receivables will be, at the time of their
creation, bona fide and existing obligations of Borrower's customers arising out


                                      -3-
<PAGE>

of the sale of goods and/or rendition of services by Borrower and are owned by
and owed to Borrower without defense, offset, or counterclaim; that Borrower is
solvent; that with regard to each Receivable as it arises, Borrower will have
made delivery of the goods or will have rendered the services ordered, the
customer will have accepted the goods and/or services, and no customer dispute
will exist in any respect, including without limitation, disputes as to price,
terms, warranties, quality or quantity; that each Receivable shall also be free
of any claims of setoff, release from liability or defense based upon any act of
God or a public enemy or war or because of the requirements of law or of rules,
orders or regulations having the force of law; that Borrower will have preserved
and will continue to preserve any liens and any rights to liens available by
virtue of sales; that Borrower's inventory is not subject to any security
Interest, lien or encumbrance (except as may have been disclosed to Lender in
writing); If a corporation, that Borrower is duly organized and existing under
the laws of the State of its incorporation, and is duly qualified and in good
standing in every other State in which it is doing business as a corporation;
that the execution, delivery and performance hereof are within Borrower's
corporate powers, have been duly authorized, are not in contravention of law or
the terms of Borrower's charter, bylaws or other incorporation papers, or of any
indenture, agreement or undertaking to which Borrower is a party or by which it
is bound; that without prior written notice to Lender, Borrower will not obtain
any loans, advances or other financial accommodations or arrangements from any
party other than Lender which would encumber any of its assets; that without
prior written consent of Lender, Borrower will not reorganize, merge or
consolidate, or issue or sell or redeem any of its common stock, or permit the
transfer by the present shareholders of Borrower to any other person or entity
of any or all of the common stock of Borrower outstanding or in treasury as of
the date hereof; that, in the event of any transfer of any of its stock or
assets by operation of law, Borrower shall immediately notify Lender; that there
is no pending order, notice, claim, litigation, proceeding or investigation
against or affecting Borrower, whether or not covered by insurance, that would
materially and adversely affect Borrower's operations, financial condition,
property or business; that Borrower will not sell, transfer, lease or otherwise
dispose of all or (except in the ordinary course of business) any material part
of its assets; that no account arises out of a contract with, or order from, an
account debtor that, by its terms, forbids or makes the assignment of that
account to Lender void or unenforceable; that the representations and warranties
made hereunder by Borrower are true on the date hereof and will be true on the
date of each loan advance by Lender hereunder; that Borrower's address as shown
above is the location of Borrower's principal place of business and chief
executive office, that such place of business is Borrower's only place of
business, and that Borrower has not maintained any other place of business or
principal place of business or corporate or tradename during the four (4) years
immediately preceding the date of the execution of this Agreement, unless having
notified Lender in writing of all previous addresses and names. Borrower
maintains the corporate office at 510 Clearwater Loop, Suite 101, Post Falls,
Idaho 83854 and maintains the production/shipping facility at 570 West
Clearwater Loop, Bldg. 1000, Suite D, Post Falls, Idaho 83854.

         5. Duties and Further Assurance of Borrower. Borrower covenants and
agrees that, so long as any of the liabilities remain outstanding and unpaid,
Borrower shall:

(1)      Financing Statements. Execute upon request of Lender such financing
         statements and other security documents and pay the cost of filing or
         recording the same, and do such other acts and things as the Lender may
         from time to time request to establish and maintain a valid security
         Interest of Lender in the Collateral;

(b)      Inspection and Information. Permit Lender, its agents and employees,
         from time to time, to inspect, audit and make copies of, and extract
         from, all records and other papers in the possession of Borrower,
         including but not limited to those pertaining to the Collateral and
         Borrower's debtors, including copies of customer invoices and evidence
         of shipment and such other documents and proof of delivery/rendition as


                                      -4-
<PAGE>

         Lender may at any time require; periodic inventory audits and relations
         with vendors and suppliers, and furnish such further information and
         documents concerning Borrower, the Collateral and Borrower's debtors as
         Lender may from time to time request;

(c)      Financial Statements. Furnish to Lender on or before the 20th day after
         the end of each month, financial statements in form and substance
         satisfactory to Lender and certified by an appropriate officer of
         Borrower, and furnish to Lender annually on or before the 90th day
         after the end of Borrower's fiscal year a financial statement in form
         and substance satisfactory to Lender and prepared by a certified public
         accountant acceptable to Lender; notwithstanding the level of CPA
         certification checked in the preceding clause or anything else to the
         contrary contained herein, Borrower shall, if requested by Lender,
         provide to Lender a financial statement of Borrower or any Borrower of
         Borrower, in form and substance satisfactory to Lender, and prepared by
         a certified public accountant acceptable to Lender;

(d)      Records Retention. Keep at its address shown herein its records
         concerning the Collateral, which records shall be of such character as
         will enable Lender to determine at any time the status of the
         Collateral;

(e)      Insurance and Taxes. Borrower shall keep any tangible Collateral fully
         insured against fire, theft, and other casualty with loss payable
         clause in favor of Lender, and shall pay all premiums promptly when the
         same become due and shall pay all taxes and other charges against the
         Collateral promptly when the same become due; should Borrower fail to
         pay any of said premiums or taxes or other charges, or should the
         Collateral become encumbered, Lender may pay the sums and add the
         amount of such payment to the Liabilities hereby secured; Lender is
         authorized to receive the proceeds of any insurance loss, and at the
         option of Lender, shall apply such proceeds toward either the repair or
         replacement of the Collateral or the payment of the Liabilities.
         Borrower shall furnish Lender evidence of being an additional named
         insured on a fire and hazard policy against loss of inventory,
         furniture, fixtures, and equipment, as well as business interruption.

(f)      Costs. Borrower will pay all costs of closing the Loan and will
         reimburse Lender during the period of financing for all out-of-pocket
         or advanced expenses including but not limited to filing fees, long
         distance phone calls, travel expenses, legal fees, audit expenses pf
         $1,000.00 per audit, with a minimum of 4 audits per year , and wire
         transfer and returned-check charges.

         6. ACTS OF DEFAULT. If Borrower fails to pay when due any amount
payable under any of the liabilities; or if Borrower or any Borrower of
Borrower's obligations hereunder fails to perform or breaches any agreement or
undertaking herein or is in default under any writing relating to any of the
Liabilities, the Collateral or any other agreement between Lender and Borrower;
or if any Borrower of the Liabilities terminates or attempts to terminate such
guaranty, or if the Collateral declines in value or for any reason becomes
insufficient in Lender's sole and exclusive judgment to secure the liabilities
and Borrower, after demand, fails or refuses to substitute and/or make additions
to the Collateral satisfactory to Lender; or if any statement, representation or
warranty made or furnished to Lender by or in behalf of Borrower with respect to
the Liabilities; or the Collateral shall be untrue or incomplete in any material
respect as of the date made or if Borrower becomes insolvent or makes an
assignment for the benefit of creditors; or if any proceeding be instituted by


                                      -5-
<PAGE>

or against Borrower alleging that it is insolvent or unable to pay its debts as
they mature; or if any receiver be appointed for Borrower; or if any litigation
is instituted against Borrower that might materially and adversely affect its
operations, financial condition, property or business; or if a creditor of
Borrower shall obtain or attempt to obtain possession of the Collateral by any
means; or If any other circumstance or event occurs which shall cause Lender to
deem itself insecure, then Borrower shall be in default hereunder.

         7. Rights of Lender on Default. In the event of a default hereunder, at
the option of Lender, this Agreement shall terminate without prejudice to
Lender's rights hereunder, and without notice to Borrower of any kind, and any
or all of the liabilities may, at the option of Lender and without demand or
notice of any kind, be declared by tender, and the same shall become,
immediately due and payable, and Lender shall have, in addition to all other
rights and remedies which Lender may have under law, the following rights and
remedies all of which may be exercised with or without further notice to
Borrower: to foreclose the liens and security interests created under this
Agreement or under any other agreements relating to the Collateral by any
available judicial or non-judicial procedure; to enter any premises where any
Collateral may be located for the purpose of taking possession of or removing
the same; to sell, assign, lease or otherwise dispose of the Collateral, or any
part thereof, either at public or private sale or at any broker's board, in lots
or in bulk for cash, on credit, or otherwise, with or without representations or
warranties, and upon such terms as shall be acceptable to Lender, all at
Lender's sole option and as Lender in its sole discretion may deem advisable,
and Lender may bid upon or become purchaser at any such sale if public, free
from any right of redemption, which is hereby expressly waived by Borrower, and
Lender shall have the right at its option to apply or be credited with the
amount of all or any part of the Liabilities owing to Lender against the
purchase price bid by Lender at any such sale. Borrower and Lender expressly
acknowledge and agree that five (5) days' prior written notice from Lender to
Borrower of any such sale of Collateral shall satisfy the notice requirements of
O.C.G.A. Section 11-9-504. The net cash proceeds resulting from the collection,
liquidation, sale, lease or other disposition of the Collateral shall be applied
first to the expenses (including all attorney's fees) of retaking, holding,
storing, processing and preparing for sale, selling, collecting, liquidating and
the like, and then to the satisfaction of all Liabilities, with application as
to particular Liabilities or against principal or interest to be in Lender's
sole and absolute discretion. Borrower shall be liable to Lender and shall pay
to Lender on demand any deficiency which may remain after such sale,
disposition, collection or liquidation of the Collateral, and Lender in turn
agrees to remit to Borrower any surplus remaining after all Liabilities have
been paid in full. If any of the Collateral shall require repairing,
maintenance, preparation, or the like, or is in process or other unfinished
state, Lender shall have the right, but shall not be obligated, to do such
repairing, maintenance, preparation, processing or completion of manufacturing
for the purpose of putting the same in such saleable form as Lender shall deem
appropriate, but Lender shall have the right to sell or dispose of such
Collateral without such processing. Borrower will, at Lender's request, assemble
all the Collateral and make it available to Lender at places which Lender may
select, whether at Borrower's premises or elsewhere, and will make available to
Lender all premises and facilities of Borrower for the purpose of Lender's
taking possession of the Collateral or of removing or putting the Collateral in
saleable form. To facilitate the exercise by Lender of the rights and remedies
set forth in this paragraph, Borrower hereby constitutes Lender, or its agents,
or any other person whom Lender may designate, as attorney-in-fact for Borrower,
at Borrower's own cost and expense, to exercise all or any of the following
powers, which, being coupled with an interest, shall be irrevocable and shall
continue until all Liabilities have been paid in full and shall be in addition
to any other rights and remedies that the Lender may have: (i) to remove from
any premises where the same may be located any and all documents, instruments,
files, and records, and any receptacles and cabinets containing the same,
relating to the Collateral, and Lender may, at Borrower's cost and expense, as
much of the personnel, supplies and space of Borrower at its place of business

                                      -6-

<PAGE>

as may be necessary to properly administer and control the Collateral or the
handling of collections and realizations thereon; and (ii) to take or bring in
Lender's name or in the name of Borrower steps, actions, suits or proceedings
deemed by Lender necessary or desirable to effect collection of or to realize
upon the Collateral. No delay or failure on the part of Lender in the exercise
of any right or remedy shall operate as a waiver thereof, and no single or
partial exercise by Lender of any right or remedy shall preclude other or
further exercise thereof, or the exercise of any other right or remedy. The
Lender shall be under no duty to exercise any or all of the rights and remedies
given by this Agreement and no party to this Agreement shall be discharged from
his or its obligations or undertakings hereunder (a) should the Lender release
or agree not to sue any person against whom the party has, to the knowledge of
the Lender, a right of recourse, or (b) should Lender agree to suspend the right
to enforce the Note or Lender's interest In the Collateral against such person
or otherwise discharge such persons.

         8. Business Use. Borrower represents and warrants that the Loan will be
used for business, non-consumer purposes and not for personal, family or
household purposes, and that the loan proceeds shall be used to pay accrued
royalties, reduce payables, and continue marketing.

         9. Applicable Law. The laws of the State of Georgia shall govern the
construction of this Agreement and the rights and remedies of the parties
hereto, and any litigation regarding this transaction shall be conducted in the
U.S. District Court for the Northern District of Georgia. Venue and Jurisdiction
are stipulated and expressly agreed. Borrower expressly waives the right to
Trial by Jury.

               (a) Binding Effect, Assignment and Entire Agreement. This
Agreement shall inure to the benefit of, and shall be binding upon, the parties
hereto and their respective heirs, legal representatives, successors and
permitted assigns. Borrower has no right to assign any of its rights or
obligations hereunder without the prior written consent of Lender. This
Agreement, and the documents executed and delivered pursuant hereto, constitute
the entire agreement between the parties, and may be amended only by a writing
signed on behalf of the party sought to be charged.

               (b) Severability. If any provision of this Agreement shall be
held invalid under any applicable law, such invalidity shall not affect any
other provision of this Agreement that can be given effect without the invalid
provision, and to that end, the provisions hereof are severable.

               (c) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one and the same instrument.

               (d) Seal.  This Agreement is intended to take effect as an
instrument under seal.

The effective date of this Agreement shall be June 18, 2002.

BORROWER:                                     LENDER:
Lifestream Diagnostics, Inc.,                 Capital South Financial Services,
a Nevada Corporation                          a Georgia Corporation


By:      /s/ Brett R. Sweezy                  By:  /s/ R. DeVille
Name:    Brett R. Sweezy                      Name:  R. DeVille
Title:   CFO                                  Title:  General Counsel

Attest:  /s/ Gerri Vance
Name:   Gerri Vance
Title   Administrative Services Manager

                                      -7-