REVOLVING LINE OF CREDIT - RELATED PARTY

3 Months Ended

Mar. 31, 2013

REVOLVING LINE OF CREDIT - RELATED PARTY:

REVOLVING LINE OF CREDIT - RELATED PARTY

NOTE 5. REVOLVING LINE OF CREDIT – RELATED PARTY.

On July 13, 2011, the Company entered into an 8% revolving line of credit with J.H. Brech LLC, a related party, to provide access to funding for its operations up to $500,000.  As of March 31, 2013 and December 31, 2012 we owed $96,345 in principal and accrued interest of $13,104 and $11,203, respectively.  Funding under this line of credit is presently in abeyance, but management expects funding will restart in the next several months.  In the meantime, management is evaluating other, short-term, related party financing, although as of the date of this Report, no definitive agreements have been entered into for any additional financing.  

Interest is payable at 8% per annum on the outstanding principal amount due under the revolving line of credit and is payable semi-annually on June 30 and December 31 of each year commencing June 30, 2011.  The principal and any accrued but unpaid interest is due on July 13, 2014.  At our sole discretion, we can pay the interest in shares of our common stock valued as follows:

·   if our common stock is not listed for trading on an exchange or quoted for trading on the OTC Bulletin Board or the Pink Sheets, interest shares are valued at the greater of $0.50 per share or the fair market value as determined in good faith by us based upon the most recent arms-length transaction, or

·   if our common stock is listed for trading on an exchange or quoted for trading on the OTC Bulletin Board or the OTC Markets Group (formerly, the Pink Sheets), interest shares will be valued at the greater of (A) the closing price of our common stock on the trading day immediately preceding the date the interest payment is due and payable, or (B) the average closing price of the common stock for the five trading days immediately preceding the date the interest payment is due and payable.

We may prepay the note at any time without penalty.  Upon an event of default, J.H. Brech LLC has the right to accelerate the note.  Events of default include:

·   our failure to pay the interest and principal when due; 

·   a default by us under the terms of the note; 

·   appointment of a receiver, filing of a bankruptcy provision, a judgment or levy against our company exceeding $50,000 or a default under any other indebtedness exceeding $50,000; 

·   a liquidation of our company or a sale of all or substantially all of our assets; or 

·   a change of control of our company as defined in the note. 

Although we have not made the contractual payments, J.H. Brech LLC has not declared a default as of the date of this Report.