E. Notes Payable Transactions	3 Months Ended
Sep. 30, 2014
Notes to Financial Statements
NOTE E- Notes Payable Transactions	The Company has issued various 8% to 12% secured convertible notes (the Convertible Notes). The Company has bifurcated the convertible debt agreements according to the guidance provided by ASC 815-15-25. The principal and accrued interest for these notes is payable nine to twelve months after issuance, or such earlier date as defined in the agreement. The notes are convertible by the holder at any time after the issue date and by the Company at any time after issue with conversion periods as defined in the agreement. The notes are convertible into shares of the Company’s common stock at a price of 50% to 60% of the average of the three lowest closing bid prices of the stock during the defined trading day period ending one day prior to the date of conversion. The holders are not entitled to convert any portion of the Convertible Notes to the extent that the shares to be issued in connection therewith would cause the holder’s beneficial ownership of the Company’s common stock to exceed 4.99% of the outstanding shares of the Company’s common stock. Because of the operation of the floating conversion price and the holder’s ability to convert as described above, the Company is unable to determine at any time that number of shares into which the Convertible Notes may be convertible. The Convertible Notes contain customary representations and warranties, customary affirmative and negative covenants, customary anti-dilution provisions, and customary events of default that accelerate the due date of the unpaid principal amount of, and all accrued and unpaid interest on, the Convertible Notes. A default on the Convertible Notes could lead to certain penalties, including an obligation to (a) pay all of the following, plus an additional 50% of (i) default interest, (ii) other monetary penalties, and (iii) the outstanding balance on the Convertible Notes. As of September 30, 2014, the balance of the Convertible Notes is $532,715, net of discount of $463,253. The holders are entitled to have all shares issued upon conversion listed upon each national securities exchange or other automated quotation system, if any, upon which shares of the Company’s common stock are then listed. The Company is required to carry the embedded derivatives on its balance sheet at fair value and account for any unrealized change in fair value as a component in its results of operations. The Company valued the embedded derivatives using a binomial option-pricing model. The Company entered into a convertible note in the amount of $500,000 with an individual who is now a Director of the Company on November 13, 2009. The note expired on November 12, 2012, and a new note in the amount of $598,733 was entered into on January 31, 2013, with an interest rate of 8% and the right to pay off the note in whole or in part at any time. The new note is the balance of the former note plus expenses of $98,233, paid by the Board Member on behalf of the Company. The Company has not begun servicing this note. During 2013, the Company entered into a material definitive agreement with TCA Global Credit Master Fund, LP, a Cayman Islands limited partnership (TCA), with a promissory note in the amount of $350,000. Interest was is and payable each month at a rate of 12%. The note has a cross default clause and has a continuing, first priority security until such time as the note is repaid. This note is convertible only upon default. No derivative has been recorded because the value is nominal. As further consideration for TCA entering into and structuring the promissory note, the Company paid TCA a fee of $115,000, with consideration of 479,167 shares of common shares of the Company, which is recorded as a debt discount, and amortized over the initial term of the debt of one year. In June 2013, TCA restructured its debt agreement with the Company, which constituted a troubled debt restructuring, with the term of the debt extended through January 1, 2014. The principal balance of the note was increased to $368,757 (which included $14,000 of interest due to TCA) as a result of this debt restructuring. This balance was included with short-term convertible notes. Losses incurred as a result of this restructuring totaled $94,132, which consisted of the payment of $75,000 of common stock to TCA, the write-off of a remaining debt discount of $14,375 and an increase in the balance due to TCA of $4,757. The common stock issued to TCA is redeemable by the Company if TCA does not realize net proceeds of at least $75,000 from the shares within a twelve month period following receipt of the shares; accordingly, it has been classified outside of permanent equity. The conditionally redeemable common stock totaling $190,000 was reclassified to convertible notes during 2014. On April 24, 2014, the Company entered into a Master Exchange Agreement (the “Exchange Agreement”), with an Institutional Investor (the “Institutional Investor”) for the note initially issued by the Company to TCA, under which obligations of $579,109 were owed as of such date. Pursuant to the Exchange Agreement and subject to its terms and conditions, the Institutional Investor may, from time to time, at the Institutional Investor’s sole option, exchange obligations under the note, in whole or in part, for shares of the Company’s common stock. The number of common stock shares issuable to the Institutional Investor upon exchange of the obligation shall be determined by dividing the applicable “Exchange Amount” (as defined in the Agreement) by the “Exchange Price” (as defined in the Agreement). Since the closing date, the Institutional Investor has exchanged approximately $329,000 of the outstanding obligations under the note for common stock. In April 2013, two notes were signed with an individual for a total of $525,000, which were due on April 1, 2014, with 8% interest compounded annually. These notes are secured by a second position in all the Company’s assets. The Company has not begun servicing these notes.

E. Notes Payable Transactions

3 Months Ended

Sep. 30, 2014

The Company has issued various 8% to 12% secured convertible notes (the Convertible Notes). The Company has bifurcated the convertible debt agreements according to the guidance provided by ASC 815-15-25. The principal and accrued interest for these notes is payable nine to twelve months after issuance, or such earlier date as defined in the agreement. The notes are convertible by the holder at any time after the issue date and by the Company at any time after issue with conversion periods as defined in the agreement. The notes are convertible into shares of the Company’s common stock at a price of 50% to 60% of the average of the three lowest closing bid prices of the stock during the defined trading day period ending one day prior to the date of conversion. The holders are not entitled to convert any portion of the Convertible Notes to the extent that the shares to be issued in connection therewith would cause the holder’s beneficial ownership of the Company’s common stock to exceed 4.99% of the outstanding shares of the Company’s common stock. Because of the operation of the floating conversion price and the holder’s ability to convert as described above, the Company is unable to determine at any time that number of shares into which the Convertible Notes may be convertible.

The Convertible Notes contain customary representations and warranties, customary affirmative and negative covenants, customary anti-dilution provisions, and customary events of default that accelerate the due date of the unpaid principal amount of, and all accrued and unpaid interest on, the Convertible Notes. A default on the Convertible Notes could lead to certain penalties, including an obligation to (a) pay all of the following, plus an additional 50% of (i) default interest, (ii) other monetary penalties, and (iii) the outstanding balance on the Convertible Notes. As of September 30, 2014, the balance of the Convertible Notes is $532,715, net of discount of $463,253.

The holders are entitled to have all shares issued upon conversion listed upon each national securities exchange or other automated quotation system, if any, upon which shares of the Company’s common stock are then listed.

The Company is required to carry the embedded derivatives on its balance sheet at fair value and account for any unrealized change in fair value as a component in its results of operations. The Company valued the embedded derivatives using a binomial option-pricing model.

The Company entered into a convertible note in the amount of $500,000 with an individual who is now a Director of the Company on November 13, 2009. The note expired on November 12, 2012, and a new note in the amount of $598,733 was entered into on January 31, 2013, with an interest rate of 8% and the right to pay off the note in whole or in part at any time. The new note is the balance of the former note plus expenses of $98,233, paid by the Board Member on behalf of the Company. The Company has not begun servicing this note.

During 2013, the Company entered into a material definitive agreement with TCA Global Credit Master Fund, LP, a Cayman Islands limited partnership (TCA), with a promissory note in the amount of $350,000. Interest was is and payable each month at a rate of 12%. The note has a cross default clause and has a continuing, first priority security until such time as the note is repaid. This note is convertible only upon default. No derivative has been recorded because the value is nominal. As further consideration for TCA entering into and structuring the promissory note, the Company paid TCA a fee of $115,000, with consideration of 479,167 shares of common shares of the Company, which is recorded as a debt discount, and amortized over the initial term of the debt of one year.

In June 2013, TCA restructured its debt agreement with the Company, which constituted a troubled debt restructuring, with the term of the debt extended through January 1, 2014. The principal balance of the note was increased to $368,757 (which included $14,000 of interest due to TCA) as a result of this debt restructuring. This balance was included with short-term convertible notes. Losses incurred as a result of this restructuring totaled $94,132, which consisted of the payment of $75,000 of common stock to TCA, the write-off of a remaining debt discount of $14,375 and an increase in the balance due to TCA of $4,757. The common stock issued to TCA is redeemable by the Company if TCA does not realize net proceeds of at least $75,000 from the shares within a twelve month period following receipt of the shares; accordingly, it has been classified outside of permanent equity. The conditionally redeemable common stock totaling $190,000 was reclassified to convertible notes during 2014.

On April 24, 2014, the Company entered into a Master Exchange Agreement (the “Exchange Agreement”), with an Institutional Investor (the “Institutional Investor”) for the note initially issued by the Company to TCA, under which obligations of $579,109 were owed as of such date. Pursuant to the Exchange Agreement and subject to its terms and conditions, the Institutional Investor may, from time to time, at the Institutional Investor’s sole option, exchange obligations under the note, in whole or in part, for shares of the Company’s common stock. The number of common stock shares issuable to the Institutional Investor upon exchange of the obligation shall be determined by dividing the applicable “Exchange Amount” (as defined in the Agreement) by the “Exchange Price” (as defined in the Agreement). Since the closing date, the Institutional Investor has exchanged approximately $329,000 of the outstanding obligations under the note for common stock.

In April 2013, two notes were signed with an individual for a total of $525,000, which were due on April 1, 2014, with 8% interest compounded annually. These notes are secured by a second position in all the Company’s assets. The Company has not begun servicing these notes.