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Note Payable

9 Months Ended

Sep. 30, 2012

Note 6.

Notes Payable

In April 2012 the Company borrowed $39,500 from Water Tech World Wide, LLC ("Water Tech"), one of the entities that the Company issued a "Master Distributorship" agreement which entitles the entity to purchase, engineer and install GEM water valve technology to GEM's customers. In addition, in the third quarter of 2012 the Company borrowed an additional $18,000 bringing the total obligation to $57,500. The notes evidencing the loan bears 7% simple interest and the notes are callable on demand. The balance on the notes totaling $57,500 and accrued interest of $1,559 is included in the Company's accompanying unaudited condensed consolidated balance sheet at September 30, 2012.

In addition during the third quarter of 2012, the Company financed its Board of Directors insurance premium. The amount financed is $48,730, comprised of five payments of $9,746. One payment was made in September 2012 leaving an outstanding balance of $38,984 as of September 30, 2012.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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