NOTE 15 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following:

	Dec. 31, 2012		June 30, 2012
Accounts payable - trade	$	848,435	$	928,385
Accrued tangible personal property taxes payable		6,000		6,000
Accrued compensated absences		41,417		41,417
Accrued wages, payroll taxes and penalties		1,977,766		2,100,436
Other accrued expenses		152,586		141,740

Totals	$	3,026,204	$	3,217,978

As of December 31, 2012, we owe $557,269 in accrued wages and $1,362,302 in accrued payroll taxes. The $1,362,302 in accrued payroll taxes represents unfunded payroll taxes, interest and penalties commencing with the quarter ending March 31, 2010. The reason we incurred the penalties and interest was due to the difficulty in raising capital to have sufficient funds to pay the taxes.

From May 2010 to June 2012, claims were made by the IRS for payment of our accrued payroll taxes, interest and penalties, which as of June 30, 2012 was $1,489,640. We engaged tax counsel to handle this matter and intend to fully satisfy our tax obligations. In order to qualify for an IRS Installment Agreement, we must be current in our payment of payroll taxes in the period they are due. We have paid all of our payroll taxes payable for the calendar year 2012.

The IRS sent formal collection demands for each quarter we were delinquent in payment of payroll taxes beginning with the quarter ending March 31, 2010. On November 22, 2011, the IRS filed a lien with the Secretary of State of Florida in Tallahassee, Florida totaling $779,996. Subsequently, on February 2, 2012, the IRS filed a lien with the Secretary of State of Florida in Tallahassee, Florida totaling $140,439; and on June 28, 2012, the IRS filed a lien with the Secretary of State of Florida in Tallahassee, Florida totaling $1,479. Our tax counsel negotiated an Installment Agreement to make installment payments to satisfy outstanding taxes, penalties and interest due. The Installment Agreement states that we must pay $15,000 a month for 12 months with the first payment due by November 28, 2012; $20,000 a month for 12 months beginning November 28, 2013; and $25,000 a month for 12 months beginning November 28, 2014 until such time as the balance owed is paid in full. In the event that we are able to pay off the balance due to the IRS, our tax counsel would attempt to negotiate a waiver on the penalties.

From July 1, 2012 through December 31, 2012, we have made payments to the IRS totaling $165,951. We have paid all of our payroll taxes payable for the calendar year 2012. Of the $165,951, we made two $15,000 payments totaling $30,000 during the quarter ending December 31, 2012 as per our Installment Agreement. We paid accrued payroll taxes totaling $67,359 for the quarter ending March 31, 2012 and $21,134 for the quarter ending June 30, 2012. We paid a total of $33,091 in payroll taxes for the quarter ending September 30, 2012 and $14,368 for the quarter ending December 31, 2012.

If we ultimately are unable to pay the outstanding payroll tax, penalties and interest on a timetable pursuant to the terms of the Installment Agreement, we may have to cease operations.