NOTE 7 – NOTES PAYABLE & ACCRUED INTEREST

The Company has six non-collateral notes payable outstanding. The first note is for $90,000 dated 2/3/2010, bearing simple interest of 6%. The second note is for $10,000 dated 4/5/2011, bearing simple interest of 6%. The third note is for $7,500 dated 9/1/2011, bearing simple interest of 6%. The three notes' principle and interest are due three years from the date of issuance. The fourth note in the amount of $14,067 is dated 2/24/12. The note requires nine monthly payments of $1,607, bearing annual interest of 6.7%. The current balance on this fourth note at September 30, 2012 is $3,187. The fifth note for $9,500 is dated 9/8/12. The note requires nine monthly payments of $1,089, bearing annual interest 7.75%. The current balance on the fifth note at September 30, 2012 is $7,436. The sixth note for $8,942 is dated 5/24/12 and is payable on demand. The note is with the same holder as notes 1-3 yet this note does not bear interest. The Company has chosen to record interest expense of 6% on this note and credit additional paid in capital.

Notes payable at September 30, 2012 and December 31, 2011 consisted of:

Total accrued interest on all outstanding notes payable at September 30, 2012 and December 31, 2011 was $15,788 and $10,950.