12% SENIOR SECURED CONVERTIBLE NOTE	12 Months Ended
Dec. 31, 2013
Notes to Financial Statements
12% SENIOR SECURED CONVERTIBLE NOTE	NOTE 18 – 12% SENIOR SECURED CONVERTIBLE NOTE On June 7, 2013, in conjunction with its acquisition of Rocky Mountain Hydroponics and Evergreen Garden Center (“RMH/EGC”) (see “NOTE 6 – PURCHASE – ROCKY MOUNTAIN HYDROPONICS and EVERGREEN GARDEN CENTER”), the Company issued $800,000 of 12% Senior Secured Convertible Notes (the “12% Convertible Notes”) to the former owners of RMH/EGC. The 12% Convertible Notes have a 2 year term, with the expiration date being June 8, 2015. The 12% Convertible Notes are secured by substantially all of the Company’s assets, which include the assets of all of the Company’s subsidiaries. Interest accrues daily on the outstanding principal amount at an annual rate of 12 percent and begins accruing on the Original Issue Date (June 7, 2013). Interest is calculated on the basis of a 360-day year, consisting of 12 thirty (30) calendar day periods. The holders of the 12% Convertible Notes can, at their sole discretion, convert any, or all, of the outstanding principal and accrued and unpaid interest into shares of the Company’s common stock. The conversion price is set at $0.035 per share, which is subject to adjustment in the event of any stock splits, stock dividends, and similar events. Per the terms of these 12% Convertible Notes, any conversion by the holders must be for at least an amount equal to the greater of (a) $35,000 of the principal amount of these 12% Convertible Notes and any accrued but unpaid interest thereon, and (b) 5,000,000 shares of common stock (such number to be appropriately adjusted for any stock splits, stock dividends, and similar events). During the year ended December 31, 2013, the Company recorded $51,451 of interest expense in relation to these 12% Convertible Notes. On December 16, 2013, two of the three Holders converted their entire principal and accrued and unpaid interest, which totaled $415,842, into 11,881,204 shares of the Company’s common stock at a per share conversion price of $0.035. As of December 31, 2013, the Company owed $408,000 in principal and $27,608 in accrued and unpaid interest on this note, for a total amount owed of $435,608. On the date these notes were issued, it was determined that there was a beneficial conversion feature valued at $0.005 per share, or $114,285 in the aggregate. As a result, the Company recorded a non-cash interest expense of $73,000 during the year ended December 31, 2013. The remaining, unamortized value of the beneficial conversion feature related to these notes was $41,825 as of December 31, 2013, and the Company will amortize the $41,285 at the rate of $2,429 per month over the remaining term of these notes.

12% SENIOR SECURED CONVERTIBLE NOTE

12 Months Ended

Dec. 31, 2013

NOTE 18 – 12% SENIOR SECURED CONVERTIBLE NOTE

On June 7, 2013, in conjunction with its acquisition of Rocky Mountain Hydroponics and Evergreen Garden Center (“RMH/EGC”) (see “NOTE 6 – PURCHASE – ROCKY MOUNTAIN HYDROPONICS and EVERGREEN GARDEN CENTER”), the Company issued $800,000 of 12% Senior Secured Convertible Notes (the “12% Convertible Notes”) to the former owners of RMH/EGC.

The 12% Convertible Notes have a 2 year term, with the expiration date being June 8, 2015. The 12% Convertible Notes are secured by substantially all of the Company’s assets, which include the assets of all of the Company’s subsidiaries. Interest accrues daily on the outstanding principal amount at an annual rate of 12 percent and begins accruing on the Original Issue Date (June 7, 2013). Interest is calculated on the basis of a 360-day year, consisting of 12 thirty (30) calendar day periods.

The holders of the 12% Convertible Notes can, at their sole discretion, convert any, or all, of the outstanding principal and accrued and unpaid interest into shares of the Company’s common stock. The conversion price is set at $0.035 per share, which is subject to adjustment in the event of any stock splits, stock dividends, and similar events. Per the terms of these 12% Convertible Notes, any conversion by the holders must be for at least an amount equal to the greater of (a) $35,000 of the principal amount of these 12% Convertible Notes and any accrued but unpaid interest thereon, and (b) 5,000,000 shares of common stock (such number to be appropriately adjusted for any stock splits, stock dividends, and similar events).

During the year ended December 31, 2013, the Company recorded $51,451 of interest expense in relation to these 12% Convertible Notes. On December 16, 2013, two of the three Holders converted their entire principal and accrued and unpaid interest, which totaled $415,842, into 11,881,204 shares of the Company’s common stock at a per share conversion price of $0.035. As of December 31, 2013, the Company owed $408,000 in principal and $27,608 in accrued and unpaid interest on this note, for a total amount owed of $435,608.

On the date these notes were issued, it was determined that there was a beneficial conversion feature valued at $0.005 per share, or $114,285 in the aggregate. As a result, the Company recorded a non-cash interest expense of $73,000 during the year ended December 31, 2013. The remaining, unamortized value of the beneficial conversion feature related to these notes was $41,825 as of December 31, 2013, and the Company will amortize the $41,285 at the rate of $2,429 per month over the remaining term of these notes.