Note 5- Convertible Notes and Related Parties Transactions

9 Months Ended

Apr. 30, 2015

Notes

Note 5- Convertible Notes and Related Parties Transactions

Note 5- Convertible Notes and Related Parties Transactions

In the nine months ended April 30, 2015 (Q1-Q3 ’15), the Board authorized the Company’s Chairman, President and CEO, to enter the Company into various convertible notes for the purposes of (1) retiring existing debts and (2) taking on new debts for services rendered. The conversion basis is set at $0.30 per share, up to an aggregate total of 8,000,000 shares, hence a total potential value of $2,400,000. The notes do not specify any repayment term, have an interest rate of 8%, and do not involve any collateral; accordingly they are considered short-term liabilities.

In connection with the issuance of these convertible notes the Company recognized approximately $687,000 in non-cash expenses during the nine months ended April 30, 2015 (Q1/Q2/Q3 ’15), related to management services, royalty and license fees, accrued interest, and various marketing, engineering and administrative services.

The following table details the Convertible Notes Payable and Accrued Interest.

Holder’s Relationship to Company	Nature of Services	Convertible Notes Payable as of            April 30, 2015	Convertible Interest as of April 30, 2015
(1) Chairman, President and CEO	Management services to Sep 30 ’14	$   328,960	$     15,351
(1) General Manager of Operations	Services to Sep 30 ’14	72,251	3,372
	Subtotal, Executive Officers (as defined in Rule 501(f) of Securities Act Regulation D)	401,211	18,723
(1) Licensor of XYO Technology	Royalty and license fees accrued as at Sep 30 ’14 including accrued interest	997,826	46,565
All others: consultants and/or independent contractors	Various marketing, engineering and administrative services	464,500	21,677
	Subtotal, Non-Executive Officers	1,462,326	68,242
	Total	$  1,863,537	$    86,965

(1)     Included as related parties on the balance sheet.

Related Party Expenses Line of Statement of Operations

	Nine months ended April 30, 2015 (Q1-Q3 ’15)	Nine months ended April 30, 2014 (Q1-Q3 ’14)	Three Months Ended April 30, 2015 (Q3 ’15)	Three Months Ended April 30, 2014 (Q3 ’14)
Management and Other Expenses:
Management services	207,380	116,307	28,876	$39,364
Travel-related reimbursement	2,892	451	732
Multi-media marketing, advertising and website services	3,907		526
Royalties and License Fees Pertaining to Exclusive Rights, excluding interest which appears under Other Income (Expense)	118,250	111,250	40,750	38,750
Variable Interest Entity outlined in Note 4:
Marketing services	-	2,402	-
Rent	25,360	25,243	9,336	8,144
Offset for legal fees paid on VIE’s behalf	-	(1,201)	-
Total Related Party Expenses	357,789	$254,452	80,220	$86,258