diff --git a/backend/admin.py b/backend/admin.py
index 100e5c7..9bb53f8 100644
--- a/backend/admin.py
+++ b/backend/admin.py
@@ -1,3 +1,4 @@
+import os
 from fastapi import FastAPI, Depends, HTTPException, Request
 from fastapi.middleware.cors import CORSMiddleware
 from sqlalchemy.orm import Session
@@ -7,15 +8,17 @@ from models import User, APIKey, Quota
 
 app = FastAPI(title="Ollama Proxy Admin API")
 
+ALLOWED_ORIGINS = os.getenv("ALLOWED_ORIGINS", "http://localhost:5173").split(",")
+
 app.add_middleware(
     CORSMiddleware,
-    allow_origins=["*"],
+    allow_origins=ALLOWED_ORIGINS,
     allow_credentials=True,
-    allow_methods=["*"],
-    allow_headers=["*"],
+    allow_methods=["GET", "POST", "PUT", "DELETE"],
+    allow_headers=["Authorization", "Content-Type"],
 )
 
-async def require_admin_auth(request: Request):
+async def require_admin_auth(request: Request, db: Session = Depends(get_db)):
     auth_header = request.headers.get("Authorization", "")
     if auth_header.startswith("Bearer "):
         api_key = auth_header.replace("Bearer ", "")
@@ -23,24 +26,21 @@ async def require_admin_auth(request: Request):
         api_key = auth_header
     else:
         raise HTTPException(status_code=401, detail="Invalid or missing API key")
-    
-    db = next(get_db())
+
     db_key = crud.verify_api_key(db, api_key)
-    
     if not db_key:
         raise HTTPException(status_code=401, detail="Invalid API key")
-    
+
     db_user = db.query(User).filter(User.id == db_key.user_id).first()
-    if not db_user or db_user.username != "admin":
+    if not db_user or not db_user.is_admin:
         raise HTTPException(status_code=403, detail="Admin access required")
-    
+
     request.state.user = db_user
-    request.state.db = db
 
 @app.get("/api/users", response_model=list[schemas.User])
 async def read_users(
-    skip: int = 0, 
-    limit: int = 100, 
+    skip: int = 0,
+    limit: int = 100,
     db: Session = Depends(get_db),
     _ = Depends(require_admin_auth)
 ):
@@ -49,7 +49,7 @@ async def read_users(
 
 @app.post("/api/users", response_model=schemas.User)
 async def create_user(
-    user: schemas.UserCreate, 
+    user: schemas.UserCreate,
     db: Session = Depends(get_db),
     _ = Depends(require_admin_auth)
 ):
@@ -61,21 +61,24 @@ async def create_user(
         raise HTTPException(status_code=400, detail="Email already registered")
     return crud.create_user(db=db, username=user.username, email=user.email, password=user.password)
 
-@app.post("/api/api-keys", response_model=schemas.APIKey)
+@app.post("/api/api-keys", response_model=schemas.APIKeyCreated)
 async def create_api_key(
-    api_key: schemas.APIKeyCreate, 
+    api_key: schemas.APIKeyCreate,
     db: Session = Depends(get_db),
     _ = Depends(require_admin_auth)
 ):
     db_user = db.query(User).filter(User.id == api_key.user_id).first()
     if not db_user:
         raise HTTPException(status_code=404, detail="User not found")
-    return crud.create_api_key(db=db, user_id=api_key.user_id, name=api_key.name)
+    db_key, raw_key = crud.create_api_key(db=db, user_id=api_key.user_id, name=api_key.name)
+    result = schemas.APIKeyCreated.model_validate(db_key)
+    result.plaintext_key = raw_key
+    return result
 
 @app.get("/api/api-keys", response_model=list[schemas.APIKey])
 async def read_api_keys(
-    skip: int = 0, 
-    limit: int = 100, 
+    skip: int = 0,
+    limit: int = 100,
     db: Session = Depends(get_db),
     _ = Depends(require_admin_auth)
 ):
@@ -84,7 +87,7 @@ async def read_api_keys(
 
 @app.put("/api/api-keys/{api_key_id}/deactivate")
 async def deactivate_api_key(
-    api_key_id: int, 
+    api_key_id: int,
     db: Session = Depends(get_db),
     _ = Depends(require_admin_auth)
 ):
@@ -97,15 +100,15 @@ async def deactivate_api_key(
 
 @app.put("/api/quotas/{user_id}", response_model=schemas.Quota)
 async def update_quota(
-    user_id: int, 
-    quota: schemas.QuotaCreate, 
+    user_id: int,
+    quota: schemas.QuotaCreate,
     db: Session = Depends(get_db),
     _ = Depends(require_admin_auth)
 ):
     db_quota = db.query(Quota).filter(Quota.user_id == user_id).first()
     if not db_quota:
         raise HTTPException(status_code=404, detail="Quota not found")
-    for key, value in quota.dict(exclude_unset=True).items():
+    for key, value in quota.model_dump(exclude_unset=True).items():
         setattr(db_quota, key, value)
     db.commit()
     db.refresh(db_quota)
diff --git a/backend/crud.py b/backend/crud.py
index 68650f8..fb17afe 100644
--- a/backend/crud.py
+++ b/backend/crud.py
@@ -1,10 +1,25 @@
 import secrets
 import hashlib
-from datetime import datetime, timedelta
+import bcrypt
+import tiktoken
+from datetime import datetime
 from sqlalchemy.orm import Session
-from database import get_db
 from models import APIKey, User, Quota, Usage
 
+_encoder = tiktoken.get_encoding("cl100k_base")
+
+def count_tokens(text: str) -> int:
+    return len(_encoder.encode(text))
+
+def hash_password(password: str) -> str:
+    return bcrypt.hashpw(password.encode(), bcrypt.gensalt()).decode()
+
+def verify_password(plain_password: str, hashed_password: str) -> bool:
+    return bcrypt.checkpw(plain_password.encode(), hashed_password.encode())
+
+def _hash_api_key(key: str) -> str:
+    return hashlib.sha256(key.encode()).hexdigest()
+
 def get_user_by_username(db: Session, username: str):
     return db.query(User).filter(User.username == username).first()
 
@@ -14,19 +29,17 @@ def get_user_by_email(db: Session, email: str):
 def generate_api_key():
     return "sk-" + secrets.token_urlsafe(32)
 
-def hash_password(password: str):
-    return hashlib.sha256(password.encode()).hexdigest()
-
-def create_user(db: Session, username: str, email: str, password: str):
+def create_user(db: Session, username: str, email: str, password: str, is_admin: bool = False):
     db_user = User(
         username=username,
         email=email,
-        hashed_password=hash_password(password)
+        hashed_password=hash_password(password),
+        is_admin=is_admin,
     )
     db.add(db_user)
     db.commit()
     db.refresh(db_user)
-    
+
     default_quota = Quota(
         user_id=db_user.id,
         daily_tokens=1000000,
@@ -36,60 +49,75 @@ def create_user(db: Session, username: str, email: str, password: str):
     )
     db.add(default_quota)
     db.commit()
-    
+
     return db_user
 
-def create_api_key(db: Session, user_id: int, name: str):
-    key = generate_api_key()
+def create_api_key(db: Session, user_id: int, name: str) -> tuple[APIKey, str]:
+    raw_key = generate_api_key()
     db_key = APIKey(
         name=name,
-        key=key,
+        key=_hash_api_key(raw_key),
         user_id=user_id
     )
     db.add(db_key)
     db.commit()
     db.refresh(db_key)
-    return db_key
+    return db_key, raw_key
 
 def verify_api_key(db: Session, api_key: str):
-    return db.query(APIKey).filter(APIKey.key == api_key, APIKey.is_active == True).first()
+    key_hash = _hash_api_key(api_key)
+    return db.query(APIKey).filter(APIKey.key == key_hash, APIKey.is_active == True).first()
 
 def get_quota(db: Session, user_id: int):
     return db.query(Quota).filter(Quota.user_id == user_id).first()
 
-def check_quota(db: Session, user_id: int, tokens: int = 0, requests: int = 1):
-    quota = get_quota(db, user_id)
-    usage = get_usage(db, user_id)
-    
-    if quota.daily_tokens and (usage.tokens_used + tokens) > quota.daily_tokens:
-        return False
-    if quota.monthly_tokens and (usage.tokens_used + tokens) > quota.monthly_tokens:
-        return False
-    if quota.daily_requests and (usage.requests_count + requests) > quota.daily_requests:
-        return False
-    if quota.monthly_requests and (usage.requests_count + requests) > quota.monthly_requests:
-        return False
-    
-    return True
-
-def increment_usage(db: Session, user_id: int, tokens: int = 0, requests: int = 1):
-    usage = get_or_create_usage(db, user_id)
-    usage.tokens_used += tokens
-    usage.requests_count += requests
-    db.commit()
-    db.refresh(usage)
+def get_quota_by_user_id(db: Session, user_id: int):
+    return db.query(Quota).filter(Quota.user_id == user_id).first()
 
 def get_usage(db: Session, user_id: int):
     return db.query(Usage).filter(Usage.user_id == user_id).first()
 
-def get_quota_by_user_id(db: Session, user_id: int):
-    return db.query(Quota).filter(Quota.user_id == user_id).first()
-
-def get_or_create_usage(db: Session, user_id: int):
-    usage = get_usage(db, user_id)
+def check_and_increment_quota(db: Session, user_id: int, tokens: int = 0, requests: int = 1) -> bool:
+    usage = (
+        db.query(Usage)
+        .filter(Usage.user_id == user_id)
+        .with_for_update()
+        .first()
+    )
     if not usage:
         usage = Usage(user_id=user_id)
         db.add(usage)
-        db.commit()
-        db.refresh(usage)
-    return usage
+        db.flush()
+
+    now = datetime.utcnow()
+
+    if usage.daily_reset_at.date() < now.date():
+        usage.tokens_used_today = 0
+        usage.requests_today = 0
+        usage.daily_reset_at = now
+
+    if (usage.monthly_reset_at.year, usage.monthly_reset_at.month) < (now.year, now.month):
+        usage.tokens_used_month = 0
+        usage.requests_month = 0
+        usage.monthly_reset_at = now
+
+    quota = get_quota(db, user_id)
+    allowed = True
+    if quota:
+        if quota.daily_tokens and (usage.tokens_used_today + tokens) > quota.daily_tokens:
+            allowed = False
+        elif quota.monthly_tokens and (usage.tokens_used_month + tokens) > quota.monthly_tokens:
+            allowed = False
+        elif quota.daily_requests and (usage.requests_today + requests) > quota.daily_requests:
+            allowed = False
+        elif quota.monthly_requests and (usage.requests_month + requests) > quota.monthly_requests:
+            allowed = False
+
+    if allowed:
+        usage.tokens_used_today += tokens
+        usage.tokens_used_month += tokens
+        usage.requests_today += requests
+        usage.requests_month += requests
+
+    db.commit()
+    return allowed
\ No newline at end of file
diff --git a/backend/main.py b/backend/main.py
index ab36f1e..5a458d5 100644
--- a/backend/main.py
+++ b/backend/main.py
@@ -1,7 +1,9 @@
+import time
+import uuid
 from fastapi import FastAPI, HTTPException, Depends, Request
 from fastapi.responses import JSONResponse
 from sqlalchemy.orm import Session
-from database import get_db
+from database import get_db, SessionLocal
 import crud
 import httpx
 import os
@@ -22,54 +24,48 @@ async def authenticate_and_quota(request: Request, call_next):
     elif auth_header.startswith("sk-"):
         api_key = auth_header
     else:
-        raise HTTPException(status_code=401, detail="Invalid or missing API key")
-    
-    db = next(get_db())
-    db_key = crud.verify_api_key(db, api_key)
-    
-    if not db_key:
-        raise HTTPException(status_code=401, detail="Invalid API key")
-    
-    if not db_key.is_active:
-        raise HTTPException(status_code=403, detail="API key deactivated")
-    
-    request.state.user_id = db_key.user_id
-    
+        return JSONResponse(status_code=401, content={"detail": "Invalid or missing API key"})
+
+    db = SessionLocal()
+    try:
+        db_key = crud.verify_api_key(db, api_key)
+        if not db_key:
+            return JSONResponse(status_code=401, content={"detail": "Invalid API key"})
+        if not db_key.is_active:
+            return JSONResponse(status_code=403, content={"detail": "API key deactivated"})
+        request.state.user_id = db_key.user_id
+    finally:
+        db.close()
+
     response = await call_next(request)
     return response
 
 @app.post("/api/generate")
-async def generate(request: Request):
-    db = next(get_db())
+async def generate(request: Request, db: Session = Depends(get_db)):
     user_id = request.state.user_id
-    
+
     body = await request.json()
-    
-    prompt_tokens = len(body.get("prompt", "").split())
-    if not crud.check_quota(db, user_id, tokens=prompt_tokens, requests=1):
+
+    prompt_tokens = crud.count_tokens(body.get("prompt", ""))
+    if not crud.check_and_increment_quota(db, user_id, tokens=prompt_tokens, requests=1):
         raise HTTPException(status_code=429, detail="Quota exceeded")
-    
+
     response = await proxy_request(f"{OLLAMA_URL}/api/generate", method="POST", json_data=body, headers=dict(request.headers))
-    
-    crud.increment_usage(db, user_id, tokens=prompt_tokens, requests=1)
-    
+
     return JSONResponse(content=response.json(), status_code=response.status_code, headers=dict(response.headers))
 
 @app.post("/api/chat")
-async def chat(request: Request):
-    db = next(get_db())
+async def chat(request: Request, db: Session = Depends(get_db)):
     user_id = request.state.user_id
-    
+
     body = await request.json()
-    
-    prompt_tokens = sum(len(msg.get("content", "").split()) for msg in body.get("messages", []))
-    if not crud.check_quota(db, user_id, tokens=prompt_tokens, requests=1):
+
+    prompt_tokens = sum(crud.count_tokens(msg.get("content", "")) for msg in body.get("messages", []))
+    if not crud.check_and_increment_quota(db, user_id, tokens=prompt_tokens, requests=1):
         raise HTTPException(status_code=429, detail="Quota exceeded")
-    
+
     response = await proxy_request(f"{OLLAMA_URL}/api/chat", method="POST", json_data=body, headers=dict(request.headers))
-    
-    crud.increment_usage(db, user_id, tokens=prompt_tokens, requests=1)
-    
+
     return JSONResponse(content=response.json(), status_code=response.status_code, headers=dict(response.headers))
 
 @app.get("/api/tags")
@@ -101,48 +97,48 @@ async def list_openai_models(request: Request):
     return JSONResponse(content=openai_models, status_code=200, headers=dict(response.headers))
 
 @app.post("/v1/chat/completions")
-async def openai_chat_completions(request: Request):
-    db = next(get_db())
+async def openai_chat_completions(request: Request, db: Session = Depends(get_db)):
     user_id = request.state.user_id
-    
+
     body = await request.json()
-    
+
     messages = body.get("messages", [])
-    prompt_tokens = sum(len(msg.get("content", "").split()) for msg in messages)
-    
-    if not crud.check_quota(db, user_id, tokens=prompt_tokens, requests=1):
+    prompt_tokens = sum(crud.count_tokens(msg.get("content", "")) for msg in messages)
+
+    if not crud.check_and_increment_quota(db, user_id, tokens=prompt_tokens, requests=1):
         raise HTTPException(status_code=429, detail="Quota exceeded")
-    
+
     ollama_body = {
         "model": body.get("model", "llama3"),
         "messages": messages,
         "stream": body.get("stream", False)
     }
-    
+
     response = await proxy_request(f"{OLLAMA_URL}/api/chat", method="POST", json_data=ollama_body, headers=dict(request.headers))
-    
-    crud.increment_usage(db, user_id, tokens=prompt_tokens, requests=1)
-    
+
+    response_content = response.json().get("message", {}).get("content", "")
+    completion_tokens = crud.count_tokens(response_content)
+
     openai_response = {
-        "id": f"chatcmpl-{hash(msg.get('content', ''))}",
+        "id": f"chatcmpl-{uuid.uuid4().hex}",
         "object": "chat.completion",
-        "created": int(__import__('time').time()),
+        "created": int(time.time()),
         "model": body.get("model", "llama3"),
         "choices": [
             {
                 "index": 0,
                 "message": {
                     "role": "assistant",
-                    "content": response.json().get("message", {}).get("content", "")
+                    "content": response_content
                 },
                 "finish_reason": "stop"
             }
         ],
         "usage": {
             "prompt_tokens": prompt_tokens,
-            "completion_tokens": len(response.json().get("message", {}).get("content", "").split()),
-            "total_tokens": prompt_tokens + len(response.json().get("message", {}).get("content", "").split())
+            "completion_tokens": completion_tokens,
+            "total_tokens": prompt_tokens + completion_tokens
         }
     }
-    
+
     return JSONResponse(content=openai_response, status_code=200, headers={"Content-Type": "application/json"})
diff --git a/backend/models.py b/backend/models.py
index a9fd804..071955f 100644
--- a/backend/models.py
+++ b/backend/models.py
@@ -10,6 +10,7 @@ class User(Base):
     email = Column(String, unique=True, index=True)
     hashed_password = Column(String)
     is_active = Column(Boolean, default=True)
+    is_admin = Column(Boolean, default=False)
     created_at = Column(DateTime, default=datetime.utcnow)
 
 class APIKey(Base):
@@ -38,6 +39,9 @@ class Usage(Base):
 
     id = Column(Integer, primary_key=True, index=True)
     user_id = Column(Integer, ForeignKey("users.id"), unique=True)
-    tokens_used = Column(BigInteger, default=0)
-    requests_count = Column(Integer, default=0)
-    reset_at = Column(DateTime, default=datetime.utcnow)
+    tokens_used_today = Column(BigInteger, default=0)
+    tokens_used_month = Column(BigInteger, default=0)
+    requests_today = Column(Integer, default=0)
+    requests_month = Column(Integer, default=0)
+    daily_reset_at = Column(DateTime, default=datetime.utcnow)
+    monthly_reset_at = Column(DateTime, default=datetime.utcnow)
diff --git a/backend/requirements.txt b/backend/requirements.txt
index 22ffceb..66f0d51 100644
--- a/backend/requirements.txt
+++ b/backend/requirements.txt
@@ -6,7 +6,8 @@ alembic==1.14.0
 pydantic==2.10.3
 python-multipart==0.0.20
 python-jose[cryptography]==3.3.0
-passlib[bcrypt]==1.7.4
+bcrypt==5.0.0
+tiktoken==0.9.0
 python-dotenv==1.0.1
 pytest==8.3.4
 pytest-asyncio==0.25.1
diff --git a/backend/schemas.py b/backend/schemas.py
index 55cdaec..cc3cd1d 100644
--- a/backend/schemas.py
+++ b/backend/schemas.py
@@ -5,6 +5,7 @@ from typing import Optional
 class UserBase(BaseModel):
     username: str
     email: str
+    is_admin: bool = False
 
 class UserCreate(UserBase):
     password: str
@@ -33,6 +34,12 @@ class APIKey(APIKeyBase):
     class Config:
         from_attributes = True
 
+class APIKeyCreated(APIKey):
+    plaintext_key: str
+
+    class Config:
+        from_attributes = True
+
 class QuotaBase(BaseModel):
     daily_tokens: Optional[int] = None
     monthly_tokens: Optional[int] = None
@@ -51,9 +58,12 @@ class Quota(QuotaBase):
         from_attributes = True
 
 class UsageStats(BaseModel):
-    tokens_used: int = 0
-    requests_count: int = 0
-    last_reset: Optional[datetime] = None
+    tokens_used_today: int = 0
+    tokens_used_month: int = 0
+    requests_today: int = 0
+    requests_month: int = 0
+    daily_reset_at: Optional[datetime] = None
+    monthly_reset_at: Optional[datetime] = None
 
     class Config:
         from_attributes = True
diff --git a/backend/setup_admin.py b/backend/setup_admin.py
index daedf2c..6ad72f1 100644
--- a/backend/setup_admin.py
+++ b/backend/setup_admin.py
@@ -13,7 +13,8 @@ def setup_admin():
             username="admin",
             email="admin@ollama.local",
             hashed_password=hash_password("admin123"),
-            is_active=True
+            is_active=True,
+            is_admin=True,
         )
         db.add(admin_user)
         db.commit()
@@ -31,8 +32,8 @@ def setup_admin():
         db.commit()
         print("✓ Admin quota created")
         
-        api_key = create_api_key(db, admin_user.id, "admin-api-key")
-        print(f"✓ Admin API Key: {api_key.key}")
+        _, raw_key = create_api_key(db, admin_user.id, "admin-api-key")
+        print(f"✓ Admin API Key: {raw_key}")
     else:
         print("✗ Admin user already exists")
     db.close()
diff --git a/backend/tests/__init__.py b/backend/tests/__init__.py
new file mode 100644
index 0000000..73e3b1b
--- /dev/null
+++ b/backend/tests/__init__.py
@@ -0,0 +1 @@
+"""Tests for the Ollama Proxy."""
diff --git a/backend/tests/__pycache__/__init__.cpython-312.pyc b/backend/tests/__pycache__/__init__.cpython-312.pyc
new file mode 100644
index 0000000..2751027
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diff --git a/backend/tests/__pycache__/conftest.cpython-312-pytest-8.3.4.pyc b/backend/tests/__pycache__/conftest.cpython-312-pytest-8.3.4.pyc
new file mode 100644
index 0000000..e95f4ef
Binary files /dev/null and b/backend/tests/__pycache__/conftest.cpython-312-pytest-8.3.4.pyc differ
diff --git a/backend/tests/__pycache__/test_auth.cpython-312-pytest-8.3.4.pyc b/backend/tests/__pycache__/test_auth.cpython-312-pytest-8.3.4.pyc
new file mode 100644
index 0000000..4a0c115
Binary files /dev/null and b/backend/tests/__pycache__/test_auth.cpython-312-pytest-8.3.4.pyc differ
diff --git a/backend/tests/__pycache__/test_quota.cpython-312-pytest-8.3.4.pyc b/backend/tests/__pycache__/test_quota.cpython-312-pytest-8.3.4.pyc
new file mode 100644
index 0000000..ed40ea5
Binary files /dev/null and b/backend/tests/__pycache__/test_quota.cpython-312-pytest-8.3.4.pyc differ
diff --git a/backend/tests/conftest.py b/backend/tests/conftest.py
new file mode 100644
index 0000000..cdb70be
--- /dev/null
+++ b/backend/tests/conftest.py
@@ -0,0 +1,87 @@
+import pytest
+from fastapi.testclient import TestClient
+import tempfile
+import os
+from pathlib import Path
+
+def create_test_db():
+    """Create a temporary SQLite database for tests."""
+    temp_db = tempfile.NamedTemporaryFile(suffix='.db', delete=False)
+    temp_db.close()
+    os.environ["DATABASE_URL"] = f"sqlite:///{temp_db.name}"
+    return temp_db.name
+
+def cleanup_test_db(db_path):
+    """Remove the temporary database."""
+    if os.path.exists(db_path):
+        os.unlink(db_path)
+    os.environ.pop("DATABASE_URL", None)
+
+def setup_test_db():
+    """Setup test database with required data."""
+    from database import Base, engine, SessionLocal
+    from models import User, APIKey, Quota, Usage
+    from crud import create_api_key, hash_password
+    
+    # Create tables
+    Base.metadata.create_all(bind=engine)
+    
+    db = SessionLocal()
+    
+    # Create test user
+    test_user = User(
+        username="testuser",
+        email="test@example.com",
+        hashed_password=hash_password("test123"),
+        is_active=True
+    )
+    db.add(test_user)
+    db.commit()
+    db.refresh(test_user)
+    
+    # Create API key for test user
+    _, raw_key = create_api_key(db, test_user.id, "test-key")
+    os.environ["TEST_API_KEY"] = raw_key
+
+    # Create admin user
+    admin_user = User(
+        username="admin",
+        email="admin@example.com",
+        hashed_password=hash_password("admin123"),
+        is_active=True,
+        is_admin=True,
+    )
+    db.add(admin_user)
+    db.commit()
+    db.refresh(admin_user)
+
+    # Create admin API key
+    _, admin_raw_key = create_api_key(db, admin_user.id, "admin-key")
+    os.environ["ADMIN_API_KEY"] = admin_raw_key
+    
+    db.close()
+
+    return raw_key, admin_raw_key
+
+def teardown_test_db():
+    """Clean up test database and environment."""
+    from database import engine
+    from models import Base
+    Base.metadata.drop_all(bind=engine)
+    
+    os.environ.pop("TEST_API_KEY", None)
+    os.environ.pop("ADMIN_API_KEY", None)
+
+@pytest.fixture(scope="session")
+def test_client():
+    """Create test client with test database."""
+    db_path = create_test_db()
+    setup_test_db()
+    
+    from main import app
+    client = TestClient(app)
+    
+    yield client
+    
+    teardown_test_db()
+    cleanup_test_db(db_path)
diff --git a/backend/tests/test_auth.py b/backend/tests/test_auth.py
new file mode 100644
index 0000000..853c863
--- /dev/null
+++ b/backend/tests/test_auth.py
@@ -0,0 +1,106 @@
+import pytest
+import os
+from unittest.mock import AsyncMock, patch
+from fastapi.testclient import TestClient
+from main import app
+from database import Base, engine, SessionLocal
+from models import User, APIKey, Quota
+from crud import create_api_key, hash_password
+
+os.environ["OLLAMA_URL"] = "http://127.0.0.1:9999"
+
+def setup_test_db():
+    """Setup test database with required data."""
+    Base.metadata.drop_all(bind=engine)
+    Base.metadata.create_all(bind=engine)
+    
+    db = SessionLocal()
+    
+    test_user = User(
+        username="testuser",
+        email="test@example.com",
+        hashed_password=hash_password("test123"),
+        is_active=True
+    )
+    db.add(test_user)
+    db.commit()
+    db.refresh(test_user)
+    
+    quota = Quota(
+        user_id=test_user.id,
+        daily_tokens=1000000,
+        monthly_tokens=10000000,
+        daily_requests=1000,
+        monthly_requests=10000
+    )
+    db.add(quota)
+    db.commit()
+    
+    api_key_record, raw_key = create_api_key(db, test_user.id, "test-key")
+    os.environ["TEST_API_KEY"] = raw_key
+
+    admin_user = User(
+        username="admin",
+        email="admin@example.com",
+        hashed_password=hash_password("admin123"),
+        is_active=True,
+        is_admin=True,
+    )
+    db.add(admin_user)
+    db.commit()
+    db.refresh(admin_user)
+
+    admin_quota = Quota(
+        user_id=admin_user.id,
+        daily_tokens=10000000,
+        monthly_tokens=100000000,
+        daily_requests=10000,
+        monthly_requests=100000
+    )
+    db.add(admin_quota)
+    db.commit()
+
+    _, admin_raw_key = create_api_key(db, admin_user.id, "admin-key")
+    os.environ["ADMIN_API_KEY"] = admin_raw_key
+    
+    db.close()
+    
+    return os.environ["TEST_API_KEY"], os.environ["ADMIN_API_KEY"]
+
+def teardown_test_db():
+    """Clean up test database and environment."""
+    Base.metadata.drop_all(bind=engine)
+    os.environ.pop("TEST_API_KEY", None)
+    os.environ.pop("ADMIN_API_KEY", None)
+
+@pytest.fixture(scope="function")
+def test_client():
+    setup_test_db()
+    client = TestClient(app, raise_server_exceptions=False)
+    yield client
+    teardown_test_db()
+
+def test_auth_middleware_missing_auth(test_client):
+    response = test_client.post("/api/generate", json={"model": "llama3", "prompt": "test"})
+    assert response.status_code == 401
+
+def test_auth_middleware_invalid_key(test_client):
+    response = test_client.post(
+        "/api/generate",
+        headers={"Authorization": "sk-invalid-key"},
+        json={"model": "llama3", "prompt": "test"}
+    )
+    assert response.status_code == 401
+
+@patch("main.proxy_request", new_callable=AsyncMock)
+def test_auth_middleware_valid_key(mock_proxy, test_client):
+    mock_proxy.return_value.status_code = 200
+    mock_proxy.return_value.json = lambda: {"response": "success"}
+    mock_proxy.return_value.headers = {}
+    
+    response = test_client.post(
+        "/api/generate",
+        headers={"Authorization": os.environ.get("TEST_API_KEY", "")},
+        json={"model": "llama3", "prompt": "test"}
+    )
+    assert response.status_code == 200
diff --git a/backend/tests/test_quota.py b/backend/tests/test_quota.py
new file mode 100644
index 0000000..f2ab9e6
--- /dev/null
+++ b/backend/tests/test_quota.py
@@ -0,0 +1,182 @@
+import pytest
+import os
+from datetime import datetime, timedelta
+
+os.environ.setdefault("OLLAMA_URL", "http://127.0.0.1:9999")
+
+from database import Base, engine, SessionLocal
+from models import User, Quota, Usage
+from crud import check_and_increment_quota, count_tokens, hash_password
+
+
+def make_user_and_quota(db, daily_tokens=None, monthly_tokens=None,
+                        daily_requests=None, monthly_requests=None):
+    user = User(
+        username="quotauser",
+        email="quota@example.com",
+        hashed_password=hash_password("pass"),
+        is_active=True,
+    )
+    db.add(user)
+    db.commit()
+    db.refresh(user)
+
+    quota = Quota(
+        user_id=user.id,
+        daily_tokens=daily_tokens,
+        monthly_tokens=monthly_tokens,
+        daily_requests=daily_requests,
+        monthly_requests=monthly_requests,
+    )
+    db.add(quota)
+    db.commit()
+
+    return user.id
+
+
+@pytest.fixture
+def db():
+    Base.metadata.drop_all(bind=engine)
+    Base.metadata.create_all(bind=engine)
+    session = SessionLocal()
+    yield session
+    session.close()
+    Base.metadata.drop_all(bind=engine)
+
+
+# --- count_tokens ---
+
+def test_count_tokens_empty():
+    assert count_tokens("") == 0
+
+def test_count_tokens_returns_int():
+    assert isinstance(count_tokens("hello world"), int)
+
+def test_count_tokens_scales_with_length():
+    assert count_tokens("a b c d e f g h") > count_tokens("a")
+
+def test_count_tokens_more_accurate_than_split():
+    # tiktoken counts "don't" as 2 tokens, split counts it as 1 word
+    text = "don't do that"
+    assert count_tokens(text) >= len(text.split())
+
+
+# --- check_and_increment_quota ---
+
+def test_allowed_within_daily_token_limit(db):
+    user_id = make_user_and_quota(db, daily_tokens=1000)
+    assert check_and_increment_quota(db, user_id, tokens=100, requests=1) is True
+
+def test_denied_when_daily_tokens_exceeded(db):
+    user_id = make_user_and_quota(db, daily_tokens=50)
+    assert check_and_increment_quota(db, user_id, tokens=100, requests=1) is False
+
+def test_denied_when_monthly_tokens_exceeded(db):
+    user_id = make_user_and_quota(db, monthly_tokens=50)
+    assert check_and_increment_quota(db, user_id, tokens=100, requests=1) is False
+
+def test_denied_when_daily_requests_exceeded(db):
+    user_id = make_user_and_quota(db, daily_requests=1)
+    check_and_increment_quota(db, user_id, tokens=0, requests=1)
+    assert check_and_increment_quota(db, user_id, tokens=0, requests=1) is False
+
+def test_denied_when_monthly_requests_exceeded(db):
+    user_id = make_user_and_quota(db, monthly_requests=1)
+    check_and_increment_quota(db, user_id, tokens=0, requests=1)
+    assert check_and_increment_quota(db, user_id, tokens=0, requests=1) is False
+
+def test_increments_both_daily_and_monthly_counters(db):
+    user_id = make_user_and_quota(db, daily_tokens=1000, monthly_tokens=10000,
+                                  daily_requests=100, monthly_requests=1000)
+    check_and_increment_quota(db, user_id, tokens=50, requests=1)
+
+    usage = db.query(Usage).filter(Usage.user_id == user_id).first()
+    assert usage.tokens_used_today == 50
+    assert usage.tokens_used_month == 50
+    assert usage.requests_today == 1
+    assert usage.requests_month == 1
+
+def test_creates_usage_record_on_first_call(db):
+    user_id = make_user_and_quota(db, daily_tokens=1000)
+    assert db.query(Usage).filter(Usage.user_id == user_id).first() is None
+
+    check_and_increment_quota(db, user_id, tokens=10, requests=1)
+
+    assert db.query(Usage).filter(Usage.user_id == user_id).first() is not None
+
+def test_no_quota_allows_any_request(db):
+    user_id = make_user_and_quota(db)  # all limits None
+    assert check_and_increment_quota(db, user_id, tokens=999999, requests=9999) is True
+
+def test_cumulative_usage_across_calls(db):
+    user_id = make_user_and_quota(db, daily_tokens=200)
+    check_and_increment_quota(db, user_id, tokens=100, requests=1)
+    check_and_increment_quota(db, user_id, tokens=99, requests=1)
+    # 199 used, 1 remaining – exactly 1 more token should pass
+    assert check_and_increment_quota(db, user_id, tokens=1, requests=1) is True
+    # Now 200 used – next request must fail
+    assert check_and_increment_quota(db, user_id, tokens=1, requests=1) is False
+
+
+# --- Reset logic ---
+
+def test_daily_reset_restores_access(db):
+    user_id = make_user_and_quota(db, daily_tokens=100)
+    check_and_increment_quota(db, user_id, tokens=90, requests=1)
+
+    # Backdate daily_reset_at to yesterday
+    usage = db.query(Usage).filter(Usage.user_id == user_id).first()
+    usage.daily_reset_at = datetime.utcnow() - timedelta(days=1)
+    db.commit()
+
+    # Should pass again after reset
+    assert check_and_increment_quota(db, user_id, tokens=90, requests=1) is True
+
+    usage = db.query(Usage).filter(Usage.user_id == user_id).first()
+    assert usage.tokens_used_today == 90
+
+def test_daily_reset_does_not_affect_monthly_counter(db):
+    user_id = make_user_and_quota(db, daily_tokens=1000, monthly_tokens=10000)
+    check_and_increment_quota(db, user_id, tokens=50, requests=1)
+
+    usage = db.query(Usage).filter(Usage.user_id == user_id).first()
+    usage.daily_reset_at = datetime.utcnow() - timedelta(days=1)
+    db.commit()
+
+    check_and_increment_quota(db, user_id, tokens=50, requests=1)
+
+    usage = db.query(Usage).filter(Usage.user_id == user_id).first()
+    assert usage.tokens_used_today == 50
+    assert usage.tokens_used_month == 100  # cumulative across days
+
+def test_monthly_reset_restores_access(db):
+    user_id = make_user_and_quota(db, monthly_tokens=100)
+    check_and_increment_quota(db, user_id, tokens=90, requests=1)
+
+    usage = db.query(Usage).filter(Usage.user_id == user_id).first()
+    usage.monthly_reset_at = datetime.utcnow() - timedelta(days=32)
+    db.commit()
+
+    assert check_and_increment_quota(db, user_id, tokens=90, requests=1) is True
+
+    usage = db.query(Usage).filter(Usage.user_id == user_id).first()
+    assert usage.tokens_used_month == 90
+
+def test_failed_quota_check_still_commits_reset(db):
+    user_id = make_user_and_quota(db, daily_tokens=100, daily_requests=5)
+    check_and_increment_quota(db, user_id, tokens=80, requests=1)
+
+    # Backdate so a reset fires, but the new request still exceeds the limit
+    usage = db.query(Usage).filter(Usage.user_id == user_id).first()
+    usage.daily_reset_at = datetime.utcnow() - timedelta(days=1)
+    usage.tokens_used_today = 80
+    db.commit()
+
+    # After reset tokens_used_today = 0; 200 tokens exceeds 100 limit
+    result = check_and_increment_quota(db, user_id, tokens=200, requests=1)
+    assert result is False
+
+    # Reset must still be persisted so the next request sees fresh counters
+    db.expire_all()
+    usage = db.query(Usage).filter(Usage.user_id == user_id).first()
+    assert usage.tokens_used_today == 0