RELATED PARTY TRANSACTIONS

3 Months Ended

Mar. 31, 2013

Notes to Financial Statements

NOTE 14 - RELATED PARTY TRANSACTIONS

As of July 1, 2010, there are notes payable to Craig Holland and Mick Donahoo for $25,000 each (a total of $50,000 notes payable) for money that was loaned to the company to secure the Sunwest Bank loan. The money was loaned to us at a rate of 10% interest compounded annually. The Company had a note payable balance of $50,000 for the periods ended March 31, 2013 and December 31, 2012. For the period ended March 31, 2013 and the period ended December 31, 2012, the Company recorded accrued interest of $14,501 and $13,024, respectively.

On August 2, 2010, the Company granted Craig Holland, its President, Chief Executive Officer, and a Director, options to purchase up to 115,000 shares of Company common stock at an exercise price of $0.11 per share. The options were granted under the Freeze Tag, Inc. 2006 Stock Plan. As of March 31, 2012, the stock options are fully expensed and included in stock based compensation of $16,003.

As of October 19, 2011, there is a note payable to Mick Donahoo for $5,000 for money that was loaned to the Company to secure equipment. The money was loaned to the Company at a rate of 10% interest compounded annually and matures on October 19, 2013. As of March 31, 2013 and December 31, 2012, accrued interest was $725 and $600, respectively.

As of April 11, 2012, there is a note payable to Mick Donahoo for $15,000 for money that was loaned to the Company. The money was loaned to the Company at a rate of 10% interest compounded annually and matures on July 11, 2013. As of March 31, 2013 and December 31, 2012, accrued interest was $1,580 and $1,205, respectively.

As of April 25, 2012, there is a note payable to Craig Holland and Mick Donahoo for $10,000 each (a total of $20,000 notes payable) for money that was loaned to the Company. As of March 31, 2013 and December 31, 2012, accrued interest was $1,902 and $1,398, respectively.

As of June 21, 2012, there is a note payable to the Holland Family Trust for $40,000 for money that was loaned to the Company. The money was loaned to the company at a rate of 10% interest compounded annually and matures on July 24, 2013. As of March 31, 2013 and December 31, 2012, accrued interest was $3,083 and $2,083 respectively.

As of August 13, 2012, there is a note payable to the Holland Family Trust for $70,000 for money that was loaned to the Company. The money was loaned to the Company at a rate of 10% interest compounded annually and matures on August 13, 2013. As of March 31, 2013 and December 31, 2012, accrued interest was $4,422 and $2,672, respectively.

As of September 12, 2012, there is a note payable to the Holland Family Trust for $65,000 for money that was loaned to the Company. The money was loaned to the Company at a rate of 10% interest compounded annually and matures on September 12, 2013. As of March 31, 2013 and December 31, 2012, accrued interest was $3,584 and $1,959, respectively.

As of October 11, 2012, there is a note payable to the Holland Family Trust for $50,000 for money that was loaned to the Company. The money was loaned to the Company at a rate of 10% interest compounded annually and matures on October 11, 2013. As of March 31, 2013 and December 31, 2012, accrued interest was $2,357 and $1,107, respectively.

On November 1, 2012, there was a note payable issued to the Holland Family Trust for $130,000. The money was loaned to the Company to pay off the debt associated with the two remaining Asher Enterprises, Inc. convertible promissory notes, and was loaned to the Company at a rate of 10% interest compounded annually and matures on November 1, 2013. As of March 31, 2013 and December 31, 2012, accrued interest was $5,417 and $2,167, respectively.

As of November 13, 2012, there is a note payable to the Holland Family Trust for $75,000 for money that was loaned to the Company. The money was loaned to the Company at a rate of 10% interest compounded annually and matures on May 13, 2013. As of March 31, 2013 and December 31, 2012, accrued interest was $2,875 and $1,000, respectively.

As of December 10, 2012, there is a note payable to the Holland Family Trust for $75,000 for money that was loaned to the Company. The money was loaned to the Company at a rate of 10% interest compounded annually and matures on June 10, 2013. As of March 31, 2013 and December 31, 2012, accrued interest was $2,307 and $432, respectively.

As of January 10, 2013, there is a note payable to the Holland Family Trust for $25,000 for money that was loaned to the Company. The money was loaned to the Company at a rate of 10% interest compounded annually and matures on July 10, 2013. As of March 31, 2013 and December 31, 2012, accrued interest was $556 and $0, respectively.

As of January 29, 2013, there is a note payable to the Holland Family Trust for $17,000 for money that was loaned to the Company. The money was loaned to the Company at a rate of 10% interest compounded annually and matures on July 29, 2013. As of March 31, 2013 and December 31, 2012, accrued interest was $283 and $0, respectively.

As of March 26, 2013, there is a note payable to the Holland Family Trust for $30,000 for money that was loaned to the Company. The money was loaned to the Company at a rate of 10% interest compounded annually and matures on September 26, 2013. As of March 31, 2013 and December 31, 2012, accrued interest was $41 and $0, respectively.

On July 2, 2010, a convertible note loan from Holland Family Trust, (whose sole trustee is Franklena Holland, mother of Company president Craig Holland), was secured for $100,000. The Company has received $75,000 of the purchase price, with the remaining $25,000 to be paid at a later date. The promissory note is convertible into the Company’s common stock at a rate of $0.10 per share. The convertible promissory note bears interest at the rate of 10% per annum and matures 12 months from the date each purchase installment was received. Interest on the notes is paid each month at the first of the month as such there was no accrued interest as of December 31, 2011. On November 6, 2012, the Company modified the note, such that its conversion rate was $0.0038 instead of $0.1000; which resulted in an increase to additional paid in capital and interest expense of 34,577. Also on November 6, 2012, the Company converted $75,000 in principal and $5,103 in accrued interest into 10,680,356 common shares in accordance with the modified convertible note.

The Company evaluated this related party convertible note for derivative liability treatment noting that if the shares were converted at a fixed price of $0.10 per share, and the principal value of $75,000, this would result in 750,000 additional shares which is less than 1% of the authorized share count; therefore, the number of shares is determinate and in conclusion, the note is not considered a derivative liability. In addition, the Company evaluated this related party convertible note for a beneficial conversion feature noting that the conversion price of $0.10 which was exactly the same as the market price of $0.10 during the 2009-2010 fiscal years when the common shares were being sold to private purchasers consistently at this price; therefore, no beneficial conversion feature was created during issuance of this note.

On January 26, 2012, a convertible note loan from Holland Family Trust, (whose sole trustee is Franklena Holland, mother of Company president Craig Holland), was secured for $100,000. The promissory note is convertible into the Company’s common stock at a rate of $0.05 per share. The convertible promissory note bears interest at the rate of 10% per annum and matures 12 months from the date each purchase installment was received. On April 19, 2012, Franklena E. Holland passed away. The terms of the Holland Family Trust indicate that Craig B. Holland becomes the Successor Trustee after Franklena's passing. As of April 19, 2012, Mr. Holland is now acting as the Trustee of the Holland Family Trust. As of March 31, 2013 and December 31, 2012, accrued interest was $10,833 and $8,333, respectively. On January 26, 2013, this note was amended for its maturity date which was updated to be January 26, 2014.

The Company evaluated this related party convertible note for derivative liability treatment noting that if the shares were converted at a fixed price of $0.05 per share, and the principal value of $100,000, this would result in 2,000,000 additional shares which is approximately 2% of the authorized share count; therefore, the number of shares is determinate and in conclusion, the note is not considered a derivative liability. In addition, the Company evaluated this related party convertible note for a beneficial conversion feature noting that the conversion price of $0.05 which was exactly the same as the market price of $0.05 on the date of issuance; therefore, no beneficial conversion feature was created during issuance of this note.