Debt

9 Months Ended

Sep. 30, 2011

6 - DEBT

Debt payable to related parties is as follows:

	September 30,		December 31,
	2011			2010
Notes payable to two stockholders in original amounts of $300,000 at an interest rate of 12%. Notes are due no later than June 30, 2012.	$	237,734		$	237,734

Note payable to Forest Capital, an affiliate of the Walter J. Doyle Trust, a stockholder, in the original amount of $250,000 at an annual interest rate of 10%. Effective December 13, 2009, the annual interest rate increased to 20%. This note is due on demand.		250,000			250,000

Note payable to Julie E. Jacobs Trust in the original amount of $100,000 at an annual interest rate of 20%. Effective September 26, 2010, the annual interest rate increased to 30%. This note is due on demand.		100,000			100,000

Note payable to Thelma Gault, a stockholder, in the original amount of $800,000 at an interest rate of 10%. The loan is collateralized by all assets of the Company, and on April 25, 2008 signed an agreement in which her collateralization is shared with the State of Ohio. On November 18, 2010, Thelma Gault signed an agreement subordinating up to $700,000 of debt to the Walter Doyle Trust and the Julie Jacobs Trust and to Standard Energy through the Julie Jacobs Trust. Note is due on May 1, 2014.		584,352			584,352

On October 5, 2010, the Company issued a note payable in the amount of $100,000 to Standard Energy, an affiliate of the Julie E. Jacobs Trust, at an annual interest rate of 10%. The note is due on demand.		100,000			100,000

On October 5, 2010, the Company issued a note payable in the amount of $25,000 to the Walter J. Doyle Trust at an annual interest rate of 10%. The note is due on demand.		25,000		25,000

On November 12, 2010, the Company entered into an inventory financing agreement with Standard Energy and the Walter J. Doyle Trust, each with an original issuance amount of $150,000 at a monthly interest rate of 2%. These notes share a first position lien on all assets. The note is due on demand.		299,386		299,386

Note payable to Richard Luden, a relative of Mark Luden, an officer and stockholder, for $82,000. This is an interest free loan that is to be repaid upon sale of the Company or at the discretion of the Board of Directors.		82,000		82,000
Total debt payable to related parties	$	1,678,472	$	1,678,472

Other debt is as follows:

Note payable to Ohio Innovation Loan Fund at an interest rate of 8%. Monthly payments of principal, interest, escrow, and service fees are based on the phase structure. The loan is collateralized by all assets of the Company, and this collateralization is shared with the Thelma Gault per agreement signed on April 25, 2008. On November 29, 2010, The Direct of Development for the State of Ohio signed an agreement subordinating up to $700,000 of debt to the Walter Doyle Trust and the Julie Jacobs Trust and to Standard Energy through the Julie Jacobs Trust. Note is due in January 2014.	$	681,885	$	703,656

Note payable to Merrill Lynch with interest payable at Libor plus .56%. In addition, this debt is guaranteed 50% each by the Walter J. Doyle Trust and the Julie E. Jacobs Trust. As compensation for their guarantees, the trusts receive 4% per annum and share a first position lien on all assets. The note is due on demand.		398,221		397,494

Notes payable to four different investors in the original amount of $250,000 at an interest rate of 12%. Note is due no later than June 30, 2012.		193,866		193,866

Note payable to Joseph Albert in the original amount of $100,000 at an annual interest rate of 7%. This note is convertible at the note holders option into 400,000 shares of common stock. The note is due on demand.		100,000		100,000

Note payable to John Robison in the original amount of $50,000 at an annual interest rate of 7%. This note is convertible at the note holder’s option into 250,000 shares of common stock. The note is due on demand.		50,000		50,000

Note payable to Carl Generes with no interest payable in the amount of 35,000. Note is due no later than February 23, 2012 and is for legal services related to SEC filings to occur in 2011.		35,000		-
Other debt	$	1,458,972	$	1,445,016

The principal maturities of the notes payable for the next five years and in the aggregate are as follows:

	Period ending September 30,
2012	$	2,804,297
2013		138,134
2014		113,013
2015		82,000
	$	3,137,444

In previous periods, the Company was not in compliance with certain debt covenants for which waivers were never received. As a result, the note payable to Ohio Innovation Loan Fund is classified as current in the accompanying balance sheets.