Note H - Related Party

12 Months Ended

Dec. 31, 2014

Notes

Note H - Related Party

NOTE H – RELATED PARTY

In 2013, the Company had an operating lease for certain equipment which was leased from Generation Capital Associates, one of its shareholders whose parent company, High Capital Funding, LLC also one of its shareholders, held a $225,189 secured convertible promissory note (see Note C - Convertible Notes Payable Related Party). On May 31, 2013, the Company issued a $50,000 secured convertible promissory note and on June 3, 2013, issued 203,169 shares of its Series A convertible preferred stock (see Note G – Series A Convertible Preferred Stock), in complete satisfaction of the balance due on the operating lease in the amount of $253,169.  The Company recognized $195,042 as gain on settlement of accounts payable for the year ended December 31, 2013. 

The Company had been unable to make all of the required payments pursuant to the terms of the September 2007 agreement. This secured convertible promissory note is secured by the equipment leased by the Company pursuant to the aforementioned operating lease. Upon payment of the balance due on this secured convertible promissory note title of the equipment will be transferred to the Company free and clear of all liens and encumbrances.

The note holder has the right to convert the note, in its entirety or in part, into common stock of the Company at the rate of $1.00 per share.