25.

SUBSEQUENT EVENTS

On October 30, 2013, the Company signed a secured promissory note, with Mikkel Pitzner, the non-employee BOD, for $85,000. Per the terms and conditions of the loan, Mr. Pitzner was granted a security interest up to $200,000 in and to all of the Company’s right, title and interest in its fixed assets, inventory, receivables, and all documents including its books, records, and files. The security was granted junior to BBT until such time the Company settles the deficiency judgment held by the BBT, Senior Creditor, as discussed in the next paragraph. In addition, the terms of the agreement state the Company will use its best efforts to settle the BBT Judgment and terminate all Uniform Commercial Code filings in favor of the Senior Creditor within 10 business days of the date of the agreement. Terms of the repayment of the loan are $8,585.47 monthly principal and interest payments at 21.21% interest per annum for a term of twelve months beginning thirty days from the date of the note. As further inducement to make the loan, Mr. Pitzner was granted an option to purchase 1,802,565 shares of the Company’s common stock for $.01 per share. The option is exercisable immediately and will continue for a period ending two years from the agreement date with an option for cashless exercise based on a formula within the agreement. The closing price per share of the Company’s stock closing on the OTCBB on the date of the agreement was $.025 per share. As a result of the option granted, the Company recorded approximately $45,000 stock option expense using the Black-Scholes valuation model on date of the agreement.

On October 14, 2013, BBT, the lender that foreclosed on the Company’s real estate brought before the court a Motion for Deficiency Final Judgment (the “Motion”) against Trebor Industries, Inc., fully owned subsidiary of the Company, and Robert M. Carmichael, the Company’s Chief Executive Officer, and received a final judgment of $103,026, plus interest. As part of the Motion, a Fact Information sheet was to be provided the defendants for completion including all required attachments within forty-five days of delivery from plaintiff, unless the Final Judgment is satisfied or post-judgment discovery is stayed.

Conversions of debentures to common stock occurred subsequent to September 30, 2013. The stock was issued upon partial conversion of a convertible note without restrictive legend pursuant to Rule 144, as the holder acquired convertible note issued by the Company more than six months prior to the date of conversion and did not pay any additional consideration for the shares. Conversions were as follows (ref. number corresponds to lender reference number in Note 12. CONVERTIBLE DEBENTURES):

Ref (4) lender –

On November 15, 2013, the lender converted $2,000 of its debenture to 149,254 shares.

On October 14, 2013, the lender converted $2,200 of its debenture to 146,667 shares.

On October 21, 2013, the lender converted $2,700 of its debenture to 144,385 shares.