NOTE 7 -

NOTES PAYABLE - STOCKHOLDERS

In March 2013, the Company entered into a promissory note for $150,000 with a stockholder. The note bears a 10% interest rate, is unsecured and is due on December 31, 2013.

In April 2013, the Company entered into a promissory note for $10,000 with a stockholder. The note bears a 10% interest rate, is unsecured and is due on December 31, 2013.

In May 2013, the Company entered into two promissory notes for $14,325 with a stockholder. The notes bear a 10% interest rate, are unsecured and are due on December 31, 2013.

As further disucssed in Note 9, during the twelve months ended September 30, 2013, the Company repaid approximately $132,000 in notes payable to stockholders through the issuance of 57,481 shares of Series C Convertible Preferred Stock.

During prior years the Company entered into 3 promissory notes with one stockholder for a total amount of $110,000. Those notes bear a 10% interest rate, are unsecured and  were due on December 31, 2013.

The Company had other notes payable due to five stockholders totaling $176,142 as of September 30, 2012. These notes ranged in interest from 10% to 15% which were payable quarterly. All of these notes matured on December 31, 2012. As further discussed in Note 9, approximately $132,000 of these promissory notes plus accrued interest notes were converted to shares of Series C preferred stock. One note for $20,726 was extended to December 31, 2013.

Interest expense on notes payable - stockholders was $30,984 in 2013 and $38,588 in 2012.