NOTE 7 - COMMITMENTS AND CONTINGENCIES

 Stock Escrow and Security Agreement

In 2004 and 2005, the Company entered into a Stock  Escrow and Security Agreement  with  two entities whereby  the  Company borrowed funds under the terms of a convertible promissory note.  One company has recently confirmed that they have no balance due from the Company and the entire balance has been recaptured as debt forgiveness in a prior current quarter. The Company still has $10,383 outstanding on its books as of June 30, 2012. Although the Company has not had request to convert these loans in many years and feels the statute of limitations has passed, they have kept reserve liabilities open in the event some settlement is eventually reached. Currently, there is no stock being held in escrow.