8. Notes Payable - Related Parties

On March 29, 2012, the Company issued an unsecured note payable to Ramon 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 two notes were combined into a $250,000 promissory note, under the same terms, with a maturity date of January 1, 2014 and was later extended to January 1, 2015. On March 13, 2013, the Company paid $ 100,000 of the principal amount of the $250,000 promissory note to Mr. Shealy. As of June 30, 2014, the $ 250,000 promissory note issued to Mr. Shealy had a principal balance of $ 150,000 and accrued interest of $ 36,289.

On March 2, 2009, the Company issued an unsecured promissory note payable to Ms. 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. On December 27, 2013 the $80,000 promissory note was extended under the same terms, with a maturity date of January 1, 2015. During the six months ended June 30, 2014, the Company paid $7,500 in principal to Ms. Chretien related to this note. As of June 30, 2014 the note had a principal balance of $25,000 and accrued interest of $ 3,215.

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. During 2013, the Company paid $ 11,250 in accrued interest to A. Michael Chretien. On December 27, 2013, the note was extended, under the same terms, with a maturity of January 12, 2015. As of June 30, 2014, the note had a principal balance of $ 40,415 and accrued interest of $ 3,853.

On May 12, 2014, the Company issued a convertible promissory note in an aggregate amount of $30,000 (the “Note in an Aggregate Amount of $30,000”) to Robert Schroeder, a director of the Company. The Convertible Notes mature on December 31, 2015 (the “Maturity Date”) and bear interest at an annual rate of interest of 10 percent until maturity, with interest payable quarterly. Robert Schroeder has a right, in his sole discretion, to convert the Convertible Note into shares of Common Stock, par value $0.001 per share, of the Company under certain circumstances at a conversion rate of $0.08 per Share. If the Convertible Notes have not been fully repaid by the Company by the Maturity Date or converted into shares at the election of the Convertible Note Investors prior to the Maturity Date, then such Convertible Notes will accrue interest at the annual rate of 12% from the Maturity Date until the date the Convertible Notes are repaid in full. Any interest not paid quarterly will also accrue interest at the annual rate of 12%. Under the terms of the Convertible Note, the Company agreed to seek shareholder approval to increase the number of authorized shares of the Company by at least 25,000,000 shares on or before September 30, 2014. The Company intends to use the proceeds of the Convertible Note for working capital, general corporate purposes, and debt repayment. As of June 30, 2014, the note had accrued interest of $427.

On June 6, 2014, the Company issued a convertible promissory note in an aggregate amount of $10,000 (the “Note in an Aggregate Amount of $10,000”) to Matthew L. Chretien, President, CEO and a director of the Company. The Convertible Notes mature on December 31, 2015 (the “Maturity Date”) and bear interest at an annual rate of interest of 10 percent until maturity, with interest payable quarterly. Matthew L. Chretien has a right, in his sole discretion, to convert the Convertible Note into shares of Common Stock, par value $0.001 per share, of the Company under certain circumstances at a conversion rate of $0.08 per Share. If the Convertible Notes have not been fully repaid by the Company by the Maturity Date or converted into shares at the election of the Convertible Note Investors prior to the Maturity Date, then such Convertible Notes will accrue interest at the annual rate of 12% from the Maturity Date until the date the Convertible Notes are repaid in full. Any interest not paid quarterly will also accrue interest at the annual rate of 12%. Under the terms of the Convertible Note, the Company agreed to seek shareholder approval to increase the number of authorized shares of the Company by at least 25,000,000 shares on or before September 30, 2014. As of June 30, 2014, the note had accrued interest of $66.

The Company intends to use the proceeds of the Convertible Note for working capital, general corporate purposes, and debt repayment.

Notes payable due to related parties consist of the following:

	June 30,		December 31,
	2014		2013
The $80,000 Jackie Chretien Note	$	25,000	$	32,500
The $55,167 A. Michael Chretien Note		40,415		40,415
The $250,000 Shealy Note		150,000		150,000
The $30,000 Robert C. Schroeder Convertible Promissory Note		30,000		-

The $10,000 Matthew L. Chretien Convertible Promissory Note		10,000		-
Total notes payable - related party	$	255,415	$	222,915
Less current portion		(215,415)		-
Long-term portion of notes payable-related party	$	40,000	$	222,915

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

For the Twelve Months Ended June 30,	Amount
2015	$	215,415
2016		40,000
Total	$	255,415

As of June 30, 2014 and December 31, 2013, accrued interest for these notes payable-related parties amounted to $43,851 and $34,614, respectively.

For the three months and six months ended June 30, 2014 and 2013, interest expense in connection with notes payable – related parties was $4,879 and $8,809, and $4,678 and $1,737, respectively.