5.  NOTES PAYABLE:

Senior Secured Notes Payable - The Company issued senior secured promissory notes totaling $1,000,000 on May 22, 2013. The notes bear interest at a rate of 12% per annum and is payable monthly on the first day of each month.  The notes are secured by all of our assets, except for certain equipment we have previously financed.  The entire principal balance and all accrued interest is due September 15, 2013.   Mr. Gus Blass III, a member of our board of directors and a stockholder, holds $125,000 of this debt in an individual capacity and $125,000 through an entity in which he is a managing member. 

Senior Subordinated Note Payable - The Company issued a senior subordinated note payable in the amount of $1,000,000 on April 15, 2011 to Richard Giles, a founder, stockholder and former director of the Company.  The note bears interest at a rate of 6% per annum and matures on April 15, 2014. The holder of the senior subordinated note has agreed to subordinate to the lenders of the senior secured notes his security interest in our assets granted under the Subordinated Security Agreement dated April 15, 2011.  As of June 30, 2013, the note is subject to mandatory principal payments as follows:

Interest on the senior subordinated note payable totaling $2,630 was outstanding at June 30, 2013.

Loan Payable - In September 2012, the Company financed the purchase of equipment used for transport and demonstration of our equipment.  The note, in the original amount of $142,290, bears interest at a rate of 2.6% per annum and matures on September 4, 2017.

As of June 30, 2013, the note is subject to mandatory principal payments as follows: