NOTE 18 - SUBSEQUENT EVENTS

On January 1, 2013 the Company granted options to purchase 650,000 shares of common stock to its independent directors.  The options have an exercise price of $0.02 per share, a five-year term, vest on January 1, 2014¸ and are subject to continuing service as a director. The options were valued using the Black-Scholes model using a volatility of 508.21%, an expected term of 5 years and an interest rate of 0.76%. The options are valued at $14,500 and will be recognized as expense over the requisite service period.

On January 1, 2013, the Company received $19,400 from a related party in exchange for forty-five day original issue discount note with a face value of $20,000 and a maturity date of February 15, 2013. The original discount interest rate was 2% per month. On February 15, 2013, the related party agreed to extend the note for an additional thirteen days, through March 1, 2013 on the same terms and conditions.  The original discount interest of $200 was paid to the lender on February 15, 2013. On March 1, 2013, the related party agreed to extend the note for an additional month, through March 31, 2013 on the same terms and conditions.  The original discount interest of $400 was paid to the lender on March 1, 2013.

In January 1, 2013, the Company entered into a new agreement with a shareholder to rollover an existing line of credit in the amount of $50,000. The original line of credit was for a total of $60,000 and ISA repaid $10,000 of that obligation during 2012. The new note maintains similar terms and conditions but with a reduction in the monthly fee from 3% to 2.5%.

On February 8, 2013, the Company entered into an Inter-creditor Agreement with Liquid Capital Exchange, Inc. (the Company's factor) and a shareholder who has a $165,000 original discount note dated July 15, 2012, secured by the intellectual property.  The Inter-creditor Agreement resolves a definition dispute concerning UCC's filed by both parties to protect their collateral.  A part of this agreement calls for the shareholder to receive 5% of all factor advances to the company until such time the shareholder loan is paid in full.  Additionally, until the loan is paid, if there is a trigger notice (loan is due or is called), the factor will pay to the shareholder all factor holdback amounts after collection of the related accounts receivable, less any factor fees.

On February 24, 2013, the original issue discount convertible note with a face value of $68,750 became due and payable. ISA is technically in default though no written notice has been received from the shareholder.  The Company is in discussions with the shareholder about either converting this note or extending for further period.  As of the date of this report discussions continue.