Quarterly report pursuant to Section 13 or 15(d)

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

9 Months Ended

Sep. 30, 2013

NOTE 10 – RELATED PARTY TRANSACTIONS

Notes payable, related parties

In February 2011, we executed a secured, promissory note with one of our officers in the amount of $50,000 (the “2011 Officer Note”). The 2011 Officer Note is secured by certain assets in MV and bears interest at 8% per annum and was originally due on August 15, 2011. It is currently due on demand. As additional consideration, we issued to the officer a five-year warrant to purchase 25,000 shares of our common stock at an exercise price of $0.60 per share. We valued the warrant at approximately $6,000 using the Black-Scholes model and recorded this amount as a debt discount. The debt discount was fully amortized during 2011.

Notes payable, related parties and accrued interest due to certain related parties as of September 30, 2013 and December 31, 2012 are as follows:

	2013		2012

Note payable dated February 2004, bearing interest at 8% per annum, originally due January 2008; assigned to CEO by a third party in 2010; due on demand, in default	$	97,000	$	97,000

Note payable due to President of our subsidiary, REGS, interest at 8% per annum, originally due February 2009, in default		800		4,200

2011 Officer Note (see description above), in default		50,000		50,000

Accrued interest		48,000		39,200

	$	195,800	$	190,400

We believe the stated interest rates on the related party notes payable represent reasonable market rates based on the note payable arrangements we have executed with third parties.

- Definition

The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.

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