For the three months ended September
30, 2012 and 2011, the Company accrued $69,000 and $63,000, respectively, in salaries payable to its officers and major shareholders,
which are reflected in notes payable to those shareholders.
As of September 30 and June 30, 2012,
the balances of shareholder notes were $608,907 and $552,466, respectively. The balance included accrued salaries, along with various
advances to and from the Company. The notes are unsecured, due upon demand and accrue interest at the end of each month
on the then outstanding balance at the rate of 5.00% per annum. As of September 30 and June 30, 2012, accrued interest
payable on the notes was $19,921 and $14,962, respectively. Interest paid during the three months ended September 30, 2012 and
2011, was $2,391 and $2,059, respectively. These notes payable do not approximate fair value, as they are with related parties,
and do not bear market rates of interest.