NOTE 4 - NOTES PAYABLE - RELATED PARTIES

The Company's notes payable to related parties classified as current liabilities consist of the following as of March 31, 2014 and December 31, 2013:

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interest rate per month

On August 30, 2012 a company that is majority owned by a foreign investor and personal friend of the Company's President and COO, entered into an arrangement with the Company to loan up to $100,000 (subsequently increased to $300,000) on a revolving basis at an interest rate of 2.5% per month based on purchase orders or invoices that have not been previously factored. The initial deposit for this loan came from the Company's President and COO pursuant to the investor, who is a foreign national, setting up an appropriate entity to handle further transactions. Further, the Company's President and COO has personally guaranteed the loan. At March 31, 2014 and December 31, 2013 there was outstanding principal balance of $296,260 and $274,078, respectively. Accrued interest at March 31, 2014 and December 31, 2013 was $36,726 and $17,923, respectively.

On June 27, 2012 an individual whom the Company's President and COO has significant influence over, loaned the Company $10,000 at an interest rate of 1.5% per month payable monthly. Between July 13, 2012 and July 24, 2012 the related party advanced an additional $15,000 (the 2012 advances) due on demand. On January 1, 2013, the Company received $19,400 from this 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 2013 note). The original discount interest rate was 2% per month. At March 31, 2014 and December 31, 2013, there were outstanding principal balances of $20,000 and $20,000, respectively related to the 2012 advances. Accrued interest at March 31, 2014 and December 31, 2013 was $0.

During the second quarter of 2012, the Company reclassified $30,265 of accounts payable balances due to the CEO, to Notes payable - related parties. These balances were a result of Company expenses charged to the CEO's personal credit cards. The Company was previously paying the credit card companies directly for these expenses incurred. During the third quarter 2012 the company recorded accrued payroll of $54,682 for this officer. These amounts are non-interest bearing and are on demand. The Company pays these loans as sufficient funds become available. During the three months ending March 31, 2014 the Company repaid $3,608. At March 31, 2014 and December 31, 2013 this officer had an outstanding loan balance of $32,401 and $36,009, respectively.