9/30/2014

12/31/2013

Secured note payable to related party: During 2007, the Company entered into a line of credit agreement with SAI Corporation ("SAIC"), a corporation controlled by our CEO, Stephen J. Sperco, to borrow up to $500,000. The line of credit has been amended several times due to Bluegate's need to borrow funds for working capital purposes and has been increased to $1,338,000 from the previous balance of $1,321,000. As a condition to and as additional consideration for SAIC's agreement to lend additional funds to the Company, the Company granted SAIC a security interest in its assets as more specifically detailed in the Promissory Note and Security Agreement. Principal and interest is due on demand. Interest is at the rate of 15% per annum and payments are due and payable monthly at the end of each month until the outstanding principal balance is paid in full. The Company agreed to pay a late charge in the amount of $10,000 on any interest payment more than fifteen days delinquent.

During the nine months ended September 30, 2014 and the year ended December 31, 2013, Bluegate borrowed $27,000 and $65,600, respectively for working capital purposes.

$

—

$

1,310,600