8. Notes Payable - Related Parties

On March 29, 2012, the Company issued an unsecured note payable to Ramon Shealy ("Mr. Shealy"), a then director of the Company, who subsequently resigned from the Board of Directors on December 17, 2012, for personal reasons, in the amount of $238,000, bearing interest at a rate of 10% for the term of the note. All principal and interest was due and payable on September 27, 2012, but was later extended to November 24, 2012. On April 16, 2012, the Company issued a note payable to Mr. Shealy, in the amount of $12,000, bearing interest at a rate of 10% per quarter. All principal and interest was due on July 15, 2012, but was later extended to November 24, 2012. On November 24, 2012 the $238,000 Shealy Note and the $12,000 Shealy Note were combined into a $250,000 promissory note, under the same terms, with a maturity date of January 1, 2014. On March 13, 2013, the Company paid $100,000 of the principal amount of the $250,000 promissory note to Mr. Shealy. As of September 30, 2013, the $250,000 promissory note issued to Mr. Shealy had a principal balance of $150,000 and accrued interest of $25,659.

On June 20, 2012, the Company issued an unsecured promissory note payable to Jackie Chretien, a relative of the Company’s Founders, in the amount of $14,000, due July 1, 2014 and bearing interest at 5% per annum, with the principal and interest to be paid at maturity (the “$14,000 Jackie Chretien Note”). On March 5, 2013, the Company paid off in full, all principal of the $14,000 Jackie Chretien Note, and all accrued interest in the amount of $493.

On March 2, 2009, the Company issued an unsecured promissory note payable to Jackie Chretien, in the amount of $80,000 due January 1, 2014 and bearing interest at 5% per annum, with the principal and interest to be paid at maturity (the “$80,000 Jackie Chretien Note”). During 2011, the Company paid $15,000 in principal to Jackie Chretien. During the nine months ended September 30, 2013, the Company paid $25,000 in principal and $9,014 in accrued interest to Jackie Chretien related to this note. As of September 30, 2013 the $80,000 Jackie Chretien Note had a principal balance of $40,000 and accrued interest of $2,090.

On December 29, 2001, the Company issued an unsecured promissory note payable to A. Michael Chretien, a Founder of the Company, in the amount of $55,167, with any unpaid principal and interest due on January 1, 2014 (the “$55,167 A. Michael Chretien Note”). During 2011, the Company made principal payments of $14,752 to A. Michael Chretien. During the nine months ended September 30, 2013, the Company paid $34,137 in accrued interest to A. Michael Chretien. As of September 30, 2013, the $55,167 A. Michael Chretien Note had a principal balance of $40,415 and accrued interest of $2,342.

On July 16, 2012, the Company issued an unsecured note payable to a shareholder, Mr. Haddix (who on December 13, 2012 became a member of the Board of Directors of the Company and subsequently resigned from the Board on April 2, 2013 for health reasons), in the amount of $95,000, due 45 days from the date of issuance and bearing interest at a rate of 10% per annum, with the principal and interest to be paid on maturity (the “$95,000 Haddix Note”). On August 29, 2012 the maturity was extended to November 16, 2012. On November 16, 2012 the maturity was extended to December 16, 2012. On December 14, 2012, the maturity was extended to January 15, 2013 with all other terms remaining unchanged. On January 14, 2013 the Company entered into a satisfaction of note agreement with Mr. Haddix whereby Mr. Haddix surrendered the note to the Company and discharged the principal amount due under the Note in consideration for the Company issuing to Mr. Haddix a convertible promissory note in the amount of $95,000 plus accrued interest of $4,659 (for a total of $99,659) due January 1, 2014. On January 15, 2013 Mr. Haddix exercised his conversion rights under the convertible promissory note and surrendered the convertible promissory note to the Company. The company issued to Mr. Haddix 311,434 restricted common shares, $.001 par value, at $0.32 per share (based on the closing price on the immediately preceding business day subject to the applicable holding period restrictions under Rule 144) in reliance upon exemptions from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D, as promulgated by the SEC.

The table below reflects Notes payable due to related parties at September 30, 2013 and December 31, 2012, respectively:

	September 30,		December 31,
	2013		2012
The $95,000 Haddix Note	$	-	$	95,000
The $14,000 Jackie Chretien Note		-		14,000
The $80,000 Jackie Chretien Note		40,000		65,000
The $55,167 A. Michael Chretien Note		40,415		40,415
The $250,000 Shealy Note		150,000		250,000
Total notes payable - related party	$	230,415	$	464,415
Less current portion		(230,415)		(95,000)
Long-term portion of notes payable-related party	$	-	$	369,415

Future minimum principal payments of these notes payable as described in this Note 8 are as follows:

For the Twelve Months Ending September 30,	Amount
2014	$	230,415
Total	$	230,415

As of September 30, 2013 and December 31, 2012, accrued interest for these notes payable to related parties amounted to $30,091 and $72,033, respectively.

For the three months and nine months ended September 30, 2013 and 2012, interest expense in connection with notes payable – related parties was $4,623 and $6,361, and $15,944 and $42,879, respectively.