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Convertible Notes Payable

9 Months Ended

Dec. 31, 2014

Note 10 – Convertible Notes Payable

(i) February 26, 2013 issuance of convertible notes with warrants

On February 26, 2013, the Company entered into two (2) 12% convertible notes payable of $350,000 in aggregate (“Convertible Notes”) with two investors (the “Payees”) maturing on September 30, 2013. The Payees have the option to convert the outstanding notes and interest due into the Company’s common shares at $0.25 per share at any time prior to September 30, 2013. In connection with the issuance of the Convertible Notes, the Company granted the Payees a warrant to purchase 1,400,000 common shares exercisable at $0.25 per share expiring three (3) years from the date of issuance.

The Company estimated the relative fair value of these warrants on the date of grant, using the Black-Scholes option-pricing model with the following weighted-average assumptions:

Expected option life (year)	3.00

Expected volatility	74.53	%

Risk-free interest rate	0.37	%

Dividend yield	0.00	%

The relative fair value of these warrants granted, estimated on the date of grant, was $110,425, which was recorded as a discount to the convertible notes payable. After allocating the $110,425 portion of the proceeds to the warrants as a discount to the Convertible Notes, an additional $113,925 was allocated to a beneficial conversion feature by crediting $113,925 to additional paid-in capital and debiting the same amount to the beneficial conversion feature. The Company amortizes the discount and beneficial conversion feature over the term of the Convertible Notes. The amortization of the discount and beneficial conversion feature were fully amortized as of September 30, 2013.

On March 11, 2014 the Convertible Note in the principal amount of $250,000 plus accrued interest of $29,945 was converted into the Company’s common shares at $0.25 per share for 1,124,274 common shares. The Convertible Note in the principal amount of $100,000 is currently past due with no penalty and the Company continues to accrue the interest at 12% per annum.

(ii) March 15, 2013 issuance of convertible note with warrant

On March 15, 2013, the Company cancelled a prior convertible note and entered into a 12% convertible note payable of $220,438, which is the total amount of the prior note principal and accrued interest, with the existing investor (the “Payee”), maturing on September 30, 2013. The Payee has the option to convert the outstanding note into the Company’s common shares at $0.25 per share at any time prior to payment in full of the principal balance of the convertible note. In connection with the issuance of the convertible note, the Company granted the Payee a warrant to purchase 881,753 common shares exercisable at $0.25 per share expiring three (3) years from the date of issuance. The note is currently past due with no penalty and the Company continues to accrue the interest at 12% per annum.

The Company estimated the relative fair value of these warrants on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

Expected option life (year)	3.00

Expected volatility	75.11	%

Risk-free interest rate	0.40	%

Dividend yield	0.00	%

The relative fair value of these warrants was $98,095, which was recorded as a discount to the convertible note payable. After allocating the $98,095, portion of the proceeds to the warrants as a discount to the convertible note, the effective conversion price of the convertible notes payable was lower than the market price at the date of issuance and per calculation the remaining balance of the face amount was allocated to a beneficial conversion feature by crediting $122,343 to additional paid-in capital and debiting the same amount to the beneficial conversion feature. The Company amortizes the discount and beneficial conversion feature over the term of the convertible note and the amounts were fully amortized as of September 30, 2013.

(iii) October 15, 2013 issuance of convertible note with derivative warrant

General Terms

On October 15, 2013, the Company issued a convertible note in the principal amount of $58,000 convertible at $0.20 per share, with an $8,000 Original Issue Discount ("OID") and interest at 10% per annum maturing on May 1, 2014. The Debenture is secured by 1,250,000 restricted common shares of the Company. The restricted shares will be issued in the name of Black Mountain Equities, Inc. upon closing.

On March 30, 2014, the principal of the Convertible Note plus accrued interest of $13,800 was converted into the Company’s common shares at $0.057 per share for 1,119,299 common shares and the 1,250,000 security shares were surrendered to the Company for cancellation.

Events of Defaults

An “Event of Default”, wherever used herein, means any one of the following events: (i) An “Event of Default”, wherever used herein, means any one of the following events, (ii) A Conversion Failure; (iii) The Company or any subsidiary of the Company shall commence, or there shall be commenced against the Company or any subsidiary of the Company under any applicable bankruptcy or insolvency laws; (iv) (a) The Company or any subsidiary of the Company shall default in any of its obligations under any other indebtedness in an amount exceeding $100,000, whether such indebtedness now exists or shall hereafter be created and (b) The Common Stock is suspended or delisted for trading on the Over the Counter Bulletin Board market (the “Primary Market”), (c) The Company loses its ability to deliver shares via “DWAC/FAST” electronic transfer, (d) The Company loses its status as “DTC Eligible.”, (e) The Company shall become late or delinquent in its filing requirements as a fully-reporting issuer registered with the Securities & Exchange Commission.

Piggyback Registration Rights

The Company shall include on the next registration statement the Company files with SEC (or on the subsequent registration statement if such registration statement is withdrawn) all shares issuable upon conversion of this Note. Failure to do so will result in liquidated damages of 25% of the outstanding principal balance of this Note, but not less than $25,000, being immediately due and payable to the Holder at its election in the form of cash payment or addition to the balance of this Note.

Warrants

In connection with the issuance of the convertible note, the Company granted the note holder a warrant to purchase 1,000,000 common shares with an exercise price of $0.25 per share, subject to certain adjustments pursuant to Section 3(b) Subsequent Equity Sales and Section 3(c) Subsequent Rights Offerings of the warrant ("full price and share reset provisions") expiring five (5) years from the date of issuance.

Pursuant to Section 3 (b) Subsequent Equity Sales if the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to re-price, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock, at an effective price per share less than the then Exercise Price (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share which is less than the Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance), then the Exercise Price shall be reduced and only reduced to equal the Base Share Price and the number of Warrant Shares issuable hereunder shall be increased such that the aggregate Exercise Price payable hereunder, after taking into account the decrease in the Exercise Price, shall be equal to the aggregate Exercise Price prior to such adjustment.

Pursuant to Section 3 (c) Subsequent Rights Offerings if the Company, at any time while the Warrant is outstanding, shall issue rights, options or warrants to all holders of Common Stock (and not to Holders) entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the VWAP at the record date, then the Exercise Price shall be multiplied by a fraction, of which the denominator shall be the number of shares of the Common Stock outstanding on the date of issuance of such rights or warrants plus the number of additional shares of Common Stock offered for subscription or purchase, and of which the numerator shall be the number of shares of the Common Stock outstanding on the date of issuance of such rights or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered (assuming receipt by the Company in full of all consideration payable upon exercise of such rights, options or warrants) would purchase at such VWAP.

The fair value of note derivative liability and the warrant liability were $11,428 and $76,647, respectively, or $88,075 in aggregate; $50,000 of which was recorded as a discount to the convertible note and the $38,075 remaining balance was recorded as other expense. The Company amortizes the OID and the discount to the note over the term of the convertible note and marks to market the warrant value as of each quarter end.

(iv) March 3, 2014 issuance of convertible note with Securities Purchase Agreement

General Terms

On March 3, 2014, the Company entered into a securities purchase agreement with Nomis Bay Ltd. ("Nomis Bay"). The Purchase Agreement provides (i) Nomis Bay shall purchase from the Company a senior convertible note with an initial principal amount of $500,000 (the "Initial Convertible Note") for a purchase price of $340,000 (a 32% original issue discount) and (ii) the Company shall have the right to require Nomis Bay to purchase from the Company on or prior to the 10th trading day after the effective date of the Registration Statement an additional senior convertible note with a principal amount of $600,000 (the "Additional Convertible Note" and, together with the Initial Convertible Note, the "Convertible Notes") for a purchase price of $600,000. On March 3, 2014 and May 16, 2014, the Company issued the Initial Convertible Note and the Additional Convertible Note to Nomis Bay, respectively.

The Initial Convertible Note matures on December 27, 2014 (subject to extension as provided) and, in addition to the 32% original issue discount, accrues interest at 8% per annum. The Additional Convertible Note will mature on March 16, 2015 (subject to extension as provided) and will accrue interest at 8% per annum. The Convertible Notes are convertible at any time at a conversion price equal to the lesser of (i) the product of (x) the arithmetic average of the lowest two (2) volume weighted average prices of the Common Stock during the 10 consecutive trading days ending and including the trading day immediately preceding the applicable conversion date and (y) 60% (the "Variable Conversion Price") or (ii) $0.30 per share (as adjusted for stock splits, stock dividends, stock combinations or other similar transactions).

The Company agreed to pay up to $40,000 of reasonable attorneys' fees and expenses incurred by Nomis Bay in connection with the transaction, which shall be withheld by Nomis Bay from the Initial Purchase Price for the Initial Convertible Note. An additional $20,400 shall be withheld by Nomis Bay from the Initial Purchase Price for the Initial Convertible Note and shall be paid directly to Garden State Securities for its services in acting as placement agent in connection with the transaction. Moreover, $36,000 shall be withheld by Nomis Bay from the Additional Purchase Price paid for the Additional Convertible Note, as applicable, and shall be paid directly to Garden State Securities for its services in acting as placement agent in connection with the transaction. The Company also agreed to issue warrants to purchase up to 90,667 shares of Common Stock at an exercise price of $0.30 per share to Garden State Securities for its services in acting as placement agent in connection with the transaction.

Extinguishment of debt

The total of $160,000 of the outstanding principal amount of the initial Convertible note together with any accrued interest shall be automatically extinguished without any cash payment by the Company upon (i) the Company has filed the Registration Statement with the SEC that has been declared effective by the SEC on or prior to the Effectiveness Deadline and the prospectus contained therein is available for use by Nomis Bay for the resale by Nomis Bay of the shares of Common Stock issued or issuable upon conversion of the Convertible Notes and (ii) no event of default or an event that with the passage of time or giving of notice would constitute an event of default has occurred on or prior to such date. The Registration statement was effective on May 15, 2014 and the $160,000 principal amount was automatically extinguished.

Registration Rights Agreement

In connection with the execution of the Purchase Agreement, on the Closing Date, the Company and Nomis Bay also entered into a registration rights agreement dated as of the Closing Date (the "Registration Rights Agreement"). Pursuant to the Registration Rights Agreement, the Company has agreed to file an initial registration statement ("Registration Statement") with the SEC to register the resale of 24,602,792 shares of Common Stock (representing one-third of the number of shares of Common Stock held by non-affiliates of the Company) into which the Convertible Notes may be converted, on or prior to the 45th calendar day after the Closing Date (the "Filing Deadline") and have it declared effective at the earlier of (i) the 120th calendar day after the Closing Date and (ii) the fifth business day after the date the Company is notified by the SEC that such Registration Statement will not be reviewed or will not be subject

to further review (the "Effectiveness Deadline"). The Registration statement was filed and declared effective on May 15, 2014.

Conversion

Nomis Bay completed the conversion of $940,000 for the note principal with accrued interest of $955,990 in aggregate to 22,120,141 shares during the quarter ending September 30, 2014.

(iv) December 30, 2014 issuance of convertible note with Securities Purchase Agreement

On December 30, 2014, the Company entered into a Securities Purchase Agreement (the "Purchase Agreement") with an accredited investor (the "Purchaser") to raise $1,000,000 (the "Offering") through the sale of an Original Issue Discount Senior Convertible Debenture (the "Debenture"). In connection with the Offering, the Company issued to the Purchaser: (i) the Debenture in the principle amount of $1,250,000 with an original issue discount of twenty percent (20%) and a conversion price of $0.125 per share (the "Debenture") and (ii) warrants to purchase 10,000,000 shares of the Company's common stock at an exercise price of $0.12 with a term of 7 years (the "Warrants"). The Debenture matures 18 months from the Closing Date, with monthly payments beginning 6 months from the Closing Date. The Debenture and Warrants each includes certain anti-dilution protections and the Debenture includes protections against decreases in the trading price of the Company's common stock. The Warrants are exercisable on June 30, 2015 beginning six months from the Closing Date. The Purchase Agreement includes certain restrictions on and a right of first refusal for future financings by the Company.

Garden State Securities, Inc. (the "Placement Agent") served as the placement agent of the Company for the Offering. In consideration for services rendered as the Placement Agent, the Company agreed to: (i) pay to the Placement Agent cash commissions equal to $60,000, or 6.0% of the gross proceeds received in the Offering, and (ii) issue to the Placement Agent, or its designee, a Warrant to purchase up to 600,000 shares of the Company's common stock representing 6% of the securities issued in the Offering on the same terms as the Warrants (the "Agent Warrants").

Convertible notes payable consisted of the following:

	December 31, 2014		March 31, 2014
On February 26, 2013, the Company issued two (2) convertible notes in the principal amount of $250,000 and $100,000, respectively, convertible at $0.25 per share, with interest at 12% per annum due on September 30, 2013. The Convertible Note in the principal amount of $250,000 with the accrued interest was converted to 1,154,520 shares on March 11, 2014. The Convertible Note in the principal amount of $100,000 is currently past due with no penalty and the Company continues to accrue the interest at 12% per annum.		100,000		100,000

On March 15, 2013, the Company cancelled a prior convertible note and entered into a 12% convertible note payable in the principal amount of $220,438 convertible into the Company’s common shares at $0.25 per share at any time prior to payment in full of the principal balance of the convertible note, maturing on September 30, 2013. The note is currently past due with no penalty and the Company continues to accrue the interest at 12% per annum		220,439		220,438

On July 16, 2013, the Company issued a convertible note in the principal amount of $111,111 with a 10% Original Issuance Discount ("OID") and a one-time interest charge of 12% after 90 days. The note is due one (1) year from the date of issuance with the conversion price at 65% of the lowest trade price for the 25 trade day period before the conversion date . The principal of the note of $111,111 and the related accrued interest of $13,333 were converted to 2,250,158 shares in January, 2014 and February, 2014.		-		-

On August 27, 2013, the Company issued a convertible notes in the principal amount of $153,500 convertible at 65% of the three lowest bids for 30 trading days before the conversion date with interest at 8% per annum due on May 26, 2014. The principal of the note of $153,500 and the related accrued interest of $6,140 were converted to 2,892,700 shares in February, 2014 and March, 2014.		-		-

On September 26, 2013, the Company issued a convertible note in the principal amount of $27,778 with a 10% Original Issuance Discount ("OID") and a one-time interest charge of 12%. The note is due one (1) year from the date of issuance with the conversion price at 65% of the lowest trade price for the 25 trade day period before the conversion date. The principal of the note of $27,778 and the related accrued interest of $3,333 were converted to 556,549 shares on March 26, 2014.	-	-

On October 15, 2013, the Company issued a convertible note in the principal amount of $58,000 convertible at $0.20 per share, with an $8,000 Original Issue Discount ("OID") and interest at 10% per annum maturing on May 1, 2014. The Debenture is secured by 1,250,000 restricted common shares of the Company. In connection with the issuance of the convertible note, the Company granted the note holder a warrant to purchase 1,000,000 common shares with an exercise price of $0.25 per share, subject to certain adjustments pursuant to Section 3(b) Subsequent Equity Sales and Section 3(c) Subsequent Rights Offerings of the warrant ("full price and share reset provisions") expiring five (5) years from the date of issuance. The principal of the note of $58,000 and the related accrued interest of $5,800 were converted to 1,119,299 shares on March 30, 2014.	-	-

On November 21, 2013, the Company issued a convertible note in the principal amount of $53,000, convertible at 65% of the three lowest bids for 30 trading days before the conversion date, with interest at 8% per annum, due on August 25, 2014. The principal of the note of $53,000 and the related accrued interest of $2,120 were converted to 652,710 and 26,108 shares on May 27 and May 28, 2014.	-	53,000

On December 9, 2013, the Company issued a convertible note in the principal amount of $55,556 with a 10% Original Issuance Discount ("OID") and a one-time interest charge of 12%. The note is due one (1) year from the date of issuance with the conversion price at 65% of the lowest trade price for the 25 trade day period before the conversion date . The principal of the note of $55,556 and the related accrued interest of $6,666 were converted to 1,113,099 shares on March 27, 2014.	-	-

On February 7, 2014, the Company issued a convertible notes in the principal amount of $80,000 convertible at $0.10 per share, with interest at 8% per annum due on February 6, 2015.	80,000	80,000

On February 20, 2014 the Company issued a convertible note in the principal amount of $55,556 with a 10% Original Issuance Discount ("OID") and 12% one-time interest. The note is due on February 20, 2015, one (1) year from the date of issuance with the conversion price at 65% of the lowest trade price for the 25 trade day period before the conversion date. The principal of the note of $55,556 and the related accrued interest of $6,666 were converted to1,082,000 and 120,664 shares on August 20, 2014 and September 4, 2014.	-	55,556

On March 3, 2014 the Company issued a convertible note in the principal amount of $500,000 with a 32% Original Issuance Discount ("OID") that is to be waived upon filing a registration report and convertible at 60% of the two lowest bids for 10 trading days before the conversion date with interest at 8% per annum, due on December 17, 2014, The principal of note of $340,000 net of waived OID was converted to 6,899,892 shares during the quarter ending December 31, 2014.	-	340,000

On May 16, 2014 the Company issued a convertible note in the principal amount of $600,000 and convertible at 60% of the two lowest bids for 10 trading days before the conversion date with interest at 8% per annum, due on March 15, 2015. The principal of the note of $600,000 and the related accrued interest of $15,990 were converted to14,810,250 and 410,000 shares during the quarter ending December 31, 2014.	-	-

On June 23, 2014 the Company issued a convertible note in the principal amount of $150,000 with a 10% Original Issuance Discount ("OID") and 12% one-time interest. The note is due June 22, 2015, one (1) year from the date of issuance, convertible at 65% of the lowest trade price for the 25 trade day period before the conversion date. The principal amount of $28,892.50 was converted to 700,000 shares on December 29, 2014. The principal amount of $30,956.25 and $37,498.50 were converted to 750,000 and 900,000 shares on January 20, 2015 and February 4, 2015, respectively.	121,108	-

On November 21, 2014 the Company issued a convertible note in the principal amount of $110,000 with a 10% Original Issuance Discount ("OID") and 8% one-time interest. The note is due one (1) year from the date of issuance, convertible at 70% of the lowest trade price for the 25 trade day period before the conversion date.	110,000	-

On December 17, 2014 the Company issued a convertible note in the principal amount of $222,222 with a 10% Original Issuance Discount ("OID") and 12% one-time interest. The note is due one (1) year from the date of issuance, convertible at 65% of the lowest trade price for the 25 trade day period before the conversion date.		222,222			-

On December 30, 2014 the Company issued a convertible note in the principal amount of $1,250,000 with a 20% Original Issuance Discount ("OID"). The note is due on June 30, 2016 convertible at $0.125 per share subject to adjustment stated in the agreement.		1,250,000			-

Face amount		2,103,769			848,994

Discount representing (i) the relative fair value of the warrants issued, (ii) the beneficial conversion features and (iii) the derivative liability on conversion features		(1,557,576	)		(860,701	)

Accumulated amortization of discount of convertible notes payable		515,036			467,468

Remaining discount		(1,042,540	)		(393,233	)

Convertible notes payable, net	$	1,061,228		$	455,761