Note 7 - Long-term Debt

12 Months Ended

Dec. 31, 2013

Notes

Note 7 - Long-term Debt

Note 7 – Long-Term Debt

Our long-term debt consisted of the following at December 31:

	2013	2012
Note payable to an individual due    July 20, 2016, interest at 14%	$30,000	$30,000
Note payable to an individual due    July 20, 2016, interest at 14%	-	30,000
Note payable to an individual due    July 20, 2016, interest at 14%	-	30,000
Note payable to an individual due    April 14, 2015, interest at 14%	-	40,000
Total	30,000	130,000
Less discount	(6,915)	(42,049)
Net	23,085	87,951
Current portion	13,979	45,189
Long-term portion	$9,106	$42,762

The long-term debt has been recorded net of a discount for the value assigned to shares of our common stock and detachable warrants issued in connection with the origination of the notes.  The discount is amortized to interest expense over the term of the notes.  Pursuant to an Amendment to Security Agreement, the warrants were subsequently cancelled.

Payment terms for the $30,000 notes payable are $350 per month for six months and $698 per month for sixty months, including interest.  Payment terms for the $40,000 note are $467 per month for six months and $1,210 per month for forty-two months, including interest.  We are in default on the remaining $30,000 note payable at December 31, 2013 due to our failure to make timely payments in accordance with the terms of the note agreement.

During 2013, long-term debt totalling $100,000 was purchased by other entities that converted the obligations into into convertible debentures.