Convertible Notes Payable

6 Months Ended

Sep. 30, 2015

Debt Disclosure [Abstract]

Convertible Notes Payable

9. CONVERTIBLE NOTES PAYABLE

Pursuant to a Securities Purchase Agreement, dated April 25, 2014, as amended on July 29, 2014, by and between the Company and 31 Group, LLC, the Company sold convertible notes with a principal amount of $1,352,000, for a total purchase price of $1,270,000, to 31 Group, LLC. The first note in principal amount of $624,000 was issued on April 28, 2014. The second note in principal amount of $104,000 was issued on July 29, 2014. The third note in principal amount of $624,000 was issued on August 5, 2014. The Company incurred $30,000 financing costs on these notes. The notes mature 24 months after issuance and accrue interest at an annual rate of 8%.

The notes are convertible at any time after issuance, in whole or in part, at the investor’s option, into shares of common stock, at a conversion price equal to the lesser of (i) the product of (x) the arithmetic average of the lowest three volume weighted average prices of the common stock during the ten consecutive trading days ending and including the trading day immediately preceding the applicable conversion date and (y) 65%, and (ii) $0.35 (as adjusted for stock splits, stock dividends, stock combinations or other similar transactions). The Company has the right at any time to redeem all, but not less than all, of the total outstanding amount then remaining under the convertible notes at a price equal to 135% of the remaining outstanding amount. The Company is also required to reserve 150% of the number of shares of common stock that may be issued in conversion of the remaining outstanding amount.

Pursuant to a Securities Purchase Agreement, dated December 4, 2014, by and between the Company and 31 Group, LLC, the 31 Group is committed to purchase from the Company two convertible notes of the Company in the principal amounts of $385,000 and $275,000 for the cash purchase amounts of $350,000 and $250,000, respectively. The $385,000 note was issued on December 4, 2014 and will mature on May 17, 2016. The $275,000 note was issued on February 5, 2015 and will mature on July 30, 2016. The notes are convertible 179 days after issuance, in whole or in part, at 31 Group’s option, into shares of the Company’s common stock, at a conversion price equal to $0.15 per share. If after 179 days from the execution date of the notes, the price of the Company’s common stock is less than $0.15, the Company will have an additional 30 days to repay the 31 Group LLC. If the notes are not repaid, 31 Group LLC may convert the notes at a conversion rate of the product of (x) the arithmetic average of the lowest three volume weighted average prices of the common stock during the ten consecutive trading days ending and including the trading day immediately preceding the applicable conversion date and (y) 80%. The Company has the right at any time to redeem some or all, of the total outstanding amount then remaining under the convertible notes at a price equal to: (i) 100% of the outstanding principal and accrued interest if within 60 days of issuance (ii) 115% of the outstanding principal and accrued interest if between 61 and 149 days of issuance (iii) 120% of the outstanding principal and accrued interest if 150 days or more after issuance. The Company is also required to reserve 150% of the number of shares of common stock that may be issued in conversion of the remaining outstanding amount. As part of the note agreement the Company also agreed to give the note holder a 3% royalty payment on the net cash revenue from the sales of the Company’s HydroPlant units. The royalty is only payable when the Company has received $500,000 cash revenue and is for a period of twenty-four months starting from the date 31 Group receives an initial royalty payment.

On April 15, 2015, the Company entered into securities purchase agreements dated as of April 9, 2015, with Magna Equities II, LLC and Riverside Merchant Partners, LLC. Pursuant to the agreements, Magna Equities II, LLC and Riverside Merchant Partners, LLC each purchased separately from the Company a convertible note of the Company in the principal amount of $100,833, for $91,667 cash. Each note matures on October 9, 2016 and bears interest at 8% per annum.

On May 27, 2015, the Company entered into securities purchase agreements with Magna Equities II, LLC and Riverside Merchant Partners, LLC. Pursuant to the agreements, Magna Equities II, LLC and Riverside Merchant Partners, LLC each purchased separately from the Company a convertible note of the Company in the principal amount of $55,000 for $50,000 cash. Each note matures on May 27, 2016 and bears interest at 8% per annum.

On June 17, 2015, the Company entered into securities purchase agreements with Magna Equities II, LLC and Riverside Merchant Partners, LLC. Pursuant to the agreements, Magna Equities II, LLC and Riverside Merchant Partners, LLC each purchased separately from the Company a convertible note of the Company in the principal amount of $35,000, for $32,500 cash. Each note matures on June 17, 2016 and bears interest at 8% per annum.

On July 9, 2015, the Company entered into securities purchase agreements with Magna Equities II, LLC and Riverside Merchant Partners, LLC. Pursuant to the purchase agreements, Magna Equities II, LLC and Riverside Merchant Partners, LLC each purchased separately from the Company a convertible note of the Company in the principal amount of $93,500, for the cash purchase amount of $85,000. Each note matures on July 9, 2016 and bears interest at 8% per annum.

On August 14, 2015 and August 18, 2015, the Company entered into two securities purchase agreements with Magna Equities II, LLC and on August 25, 2015, the Company entered into one securities purchase agreement with Riverside Merchant Partners, LLC. Pursuant to these purchase agreements, Magna Equities II, LLC and Riverside Merchant Partners, LLC each purchased from the Company convertible notes in the aggregate principal amount of $102,778, for the cash purchase amount of $92,500. These notes will mature in one year after their making and each bears interest at 8% per annum.

The Company analyzed these convertible notes for derivative accounting consideration under FASB ASC 470 and determined that the embedded conversion feature qualified for accounting treatment as a financial derivative. Derivative value of $411,283 was recorded as debt discount on the note issuance dates. The discount is amortized by the Company through interest expense over the life of the notes.

The notes issued during the six months ended September 30, 2015 are convertible at any time during the period after 179 days after the issuance date at a price of $0.15 per share. If, 180 days after the issuance of the notes, market price of the Company’s common stock is below $0.15 per share, the Company will have 30 days to repay the notes. After 30 days, the note is convertible at 80% of the lowest trading price in 10 trading days prior to the conversion date.

A summary of value changes to the convertible notes during the six months ended September 30, 2015 is as follows:

Carrying value at March 31, 2015	$	560,264
Add: principal value of new convertible notes		774,222
Less: original issuance discount		(70,890)
Less: discount related to fair value of the embedded conversion feature		(411,283)
Less: conversions of note to equity		(280,000)
Add: amortization of discount		410,355
Carrying value at September 30, 2015	$	982,668