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6. NOTES PAYABLE

12 Months Ended

Jun. 30, 2013

Convertible Notes Payable

In accounting for its convertible notes payable, proceeds from the sale of a convertible debt instrument with Common Stock purchase warrants are allocated to the two elements based on the relative fair values of the debt instrument without the warrants and of the warrants themselves at time of issuance. The portions of the proceeds allocated to the warrants are accounted for as paid-in capital with an offset to debt discount. The remainder of the proceeds are allocated to the debt instrument portion of the transaction as prescribed by ASC 470-25-20. The Company then calculates the effective conversion price of the note based on the fair value allocated to the debt instrument to determine the fair value of any beneficial conversion feature (“BCF”) associated with the convertible note in accordance with ASC 470-20-30. The BCF is recorded to additional paid-in capital with an offset to debt discount. Both the debt discount related to the issuance of warrants and related to a BCF is amortized over the life of the note.

Convertible Notes Payable – Related Parties

Convertible notes payable due to related parties consisted of the following as of June 30, 2013 and 2012, respectively:

Convertible Notes Payable – Related Parties

	June 30,		June 30,
	2013		2012

$250,000 face value, issued in February 2010, interest rate of 12%, matures in February 2013, net of unamortized discount of $0 and $54,290 at June 30, 2013 and June 30, 2012, respectively.	$	250,000	$	195,710

$250,000 face value, issued in May 2010, interest rate of 12%, matures in May 2013, net of unamortized discount of $0 and $70,256 at June 30, 2013 and June 30, 2012, respectively.		250,000		179,744

$250,000 face value, issued in August 2010, interest rate of 12%, matures in August 2013, net of unamortized discount of $24,559 and $122,820 at June 30, 2013 and June 30, 2012, respectively.		225,441		127,180

$250,000 face value, issued in December 2010, interest rate of 12%, matures in December 2013, net of unamortized discount of $40,148 and $123,404 at June 30, 2013 and June 30, 2012, respectively.		209,852		126,596

$250,000 face value, issued in November 2011, interest rate of 15%, matures in November 2012, net of unamortized discount of $0 and $49,285 as of June 30, 2013 and June 30, 2012, respectively.		250,000		200,715

$250,000 face value, issued in December 2011, interest rate of 15%, matures in June 2013, net of unamortized discount of $0 and $63,955 as of June 30, 2013 and June 30, 2012, respectively.		250,000		186,045

$100,000 face value, issued in December 2011, interest rate of 15%, matures in June 2013, net of unamortized discount of $0 and $26,851 as of June 30, 2013 and June 30, 2012, respectively.	100,000	73,149

$300,000 face value, issued in December 2011, interest rate of 15%, matures in June 2013, net of unamortized discount of $0 and $71,180 as of June 30, 2013 and June 30, 2012, respectively.	300,000	228,820

$100,000 face value, issued in February 2012, interest rate of 15%, matures in August 2013, net of unamortized discount of $1,168 and $13,713 as of June 30, 2013 and June 30, 2012, respectively.	98,832	86,287

$100,000 face value, issued in February 2012, interest rate of 15%, matures in August 2013, net of unamortized discount of $1,514 and $13,272 as of June 30, 2013 and June 30, 2012, respectively.	98,486	86,728

$150,000 face value, issued in March 2012, interest rate of 15%, matures in September 2013, net of unamortized discount of $1,111 and $7,443 as of June 30, 2013 and June 30, 2012, respectively.	148,889	142,557

$200,000 face value, issued in March 2012, interest rate of 15%, matures in September 2013, net of unamortized discount of $1,814 and $10,927 as of June 30, 2013 and June 30, 2012, respectively.	198,186	189,703

$200,000 face value, issued in April 2012, interest rate of 10%, matures in October 2013, net of unamortized discount of $2,450 and $10,652 as of June 30, 2013 and June 30, 2012, respectively.	197,550	189,348

$150,000 face value, issued in May 2012, interest rate of 10%, matures in November 2013, net of unamortized discount of $1,682 and $6,557 as of June 30, 2013 and June 30, 2012, respectively.	148,318	143,443

$125,000 face value, issued in June 2012, interest rate of 10%, matures in December 2013, net of unamortized discount of $1,897 and $6,277 as of June 30, 2013 and June 30, 2012, respectively.	123,103	118,723

$125,000 face value, issued in June 2012, interest rate of 10%, matures in December 2013, net of unamortized discount of $2,208 and $6,865 as of June 30, 2013 and June 30, 2012, respectively.	122,792	118,135

$50,000 face value, issued in August 2012, interest rate of 10%, matures in February 2014, net of unamortized discount of $0 as of June 30, 2013.	50,000	-

$50,000 face value, issued in September 2012, interest rate of 10%, matures in March 2014, net of unamortized discount of $0 as of June 30, 2013.	50,000	-

$100,000 face value, issued in October 2012, interest rate of 10%, matures in April 2014, net of unamortized discount of $2,662 as of June 30, 2013.	97,338	-

$100,000 face value, issued in October 2012, interest rate of 10%, matures in April 2014, net of unamortized discount of $2,786 as of June 30, 2013.	97,214	-

$50,000 face value, issued in October 2012, interest rate of 10%, matures in April 2014, net of unamortized discount of $1,192 as of June 30, 2013.		48,808		-

$75,000 face value, issued in November 2012, interest rate of 10%, matures in May 2014, net of unamortized discount of $1,804 as of June 30, 2013.		73,196		-

$25,000 face value, issued in November 2012, interest rate of 10%, matures in May 2014, net of unamortized discount of $1,159 as of June 30, 2013.		23,841		-

$50,000 face value, issued in November 2012, interest rate of 10%, matures in May 2014, net of unamortized discount of $2,358 as of June 30, 2013.		47,642		-

$50,000 face value, issued in December 2012, interest rate of 10%, matures in June 2014, net of unamortized discount of $2,502 as of June 2014.		47,498		-

$75,000 face value, issued in January 2013, interest rate of 10%, matures in July 2014, net of unamortized discount of $2,111 as of June 30, 2013.		72,889		-

$25,000 face value, issued in January 2013, interest rate of 10%, matures in July 2014, net of unamortized discount of $637 as of June 30, 2013.		24,363		-

$35,000 face value, issued in January 2013, interest rate of 10%, matures in July 2014, net of unamortized discount of $1,099 as of June 30, 2013.		33,901		-

$5,000 face value, issued in February 2013, interest rate of 10%, matures in August 2014, net of unamortized discount of $156 as of June 30, 2013.		4,844		-

$10,000 face value, issued in February 2013, interest rate of 10%, matures in August 2014, net of unamortized discount of $374 as of June 30, 2013.		9,626		-

$50,000 face value, issued in February 2013, interest rate of 10%, matures in August 2014, net of unamortized discount of $2,296 as of June 30, 2013.		47,704		-

$50,000 face value, issued in March 2013, interest rate of 10%, matures in September 2014, net of unamortized discount of $1,746 as of June 30, 2013.		48,254		-

$75,000 face value, issued in April 2013, interest rate of 10%, matures in October 2014, net of unamortized discount of $2,712 as of June 30, 2013.		72,288		-

Total convertible notes payable – related parties		3,820,855		2,392,883

Less current portion		2,096,416		1,064,183

Convertible notes payable – related parties, long-term	$	1,724,439	$	1,328,700

On November 3, 2011, the Company issued a convertible note to a related party for $250,000 that matures one year after issuance. The note bears an interest rate of 15% per annum and is convertible, along with all accrued interest, into shares of the Company’s Common Stock at $0.40 per share. This note includes the following priority repayment provisions: 1) the Company agrees to apply 50% of the first $600,000 of capital raised by the Company in the near term toward all outstanding notes the lender has outstanding with the Company; 2) the Company agrees to apply the first $825,000 of proceeds raised beyond the $600,000 to any outstanding notes the lender has outstanding with the Company; and 3) if the Company is unable to raise additional capital but a large marketing or sales agreement is entered into which provide for revenue in excess of $50,000, all funds received above $50,000 shall be applied to any notes the lender has outstanding with the Company at the time. As of the date of the filing of this report, this note is in default.

In conjunction with the note, the Company issued detachable warrants to purchase 60,000 shares of the Company’s Common Stock. The warrant has an exercise price of $0.40 per share and a contractual life of 5 years from the issuance date. The value of BCF recorded was $118,455 and the debt discount related to the attached warrants was $24,705, for a total debt discount of $143,160.

On December 2, 2011, the Company issued a convertible note to a related party for $250,000 that matures in June 2013. The note bears an interest rate of 15% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share. In the event the Company enters into a revenue sharing agreement as specified in the note, the holder, at its option, may accelerate payment of the note up to 50% of the gross revenues received by the Company under the revenue sharing agreement. As of the date of the filing of this report, this note is in default.

In conjunction with the note, the Company issued detachable warrants to purchase 112,500 shares of the Company’s Common Stock. The warrant has an exercise price of $0.50 per share and a contractual life of 5 years from the issuance date. The value of the BCF recorded was $61,998 and the debt discount related to the attached warrants was $41,998, for a total debt discount of $103,996.

On December 15, 2011, the Company issued a convertible note to a related party for $100,000 that matures in June 2013. The note bears an interest rate of 15% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share. In the event the Company enters into a revenue sharing agreement as specified in the note, the holder, at its option, may accelerate payment of the note up to 50% of the gross revenues received by the Company under the revenue sharing agreement. As of the date of the filing of this report, this note is in default.

In conjunction with the note, the Company issued detachable warrants to purchase 50,000 shares of the Company’s Common Stock. The warrant has an exercise price of $0.50 per share and a contractual life of 5 years from the issuance date. The value of the BCF recorded was $24,020 and the debt discount related to the attached warrants was $18,020, for a total debt discount of $40,040.

On December 30, 2011, the Company issued a convertible note to a related party for $300,000 that matures in June 2013. The note bears an interest rate of 15% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share. In the event the Company enters into a revenue sharing agreement as specified in the note, the holder, at its option, may accelerate payment of the note up to 50% of the gross revenues received by the Company under the revenue sharing agreement. The convertible note is in default and has been reclassified as current.

In conjunction with the note, the Company issued detachable warrants to purchase 150,000 shares of the Company’s Common Stock. The warrant has an exercise price of $0.50 per share and a contractual life of 5 years from the issuance date. The value of the BCF recorded was $54,934 and the debt discount related to the attached warrants was $51,934, for a total debt discount of $106,868.

On February 3, 2012, the Company issued a convertible note to a related party for $100,000 that matures in August 2013. The note bears an interest rate of 15% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share. In the event the Company enters into a revenue sharing agreement as specified in the note, the holder, at its option, may accelerate payment of the note up to 50% of the gross revenues received by the Company under the revenue sharing agreement. The convertible note is in default and has been reclassified as current.

In conjunction with the note, the Company issued detachable warrants to purchase 25,000 shares of the Company’s Common Stock. The warrant has an exercise price of $0.40 per share and a contractual life of 5 years from the issuance date. The value of the BCF recorded was $9,400 and the debt discount related to the attached warrants was $9,400, for a total debt discount of $18,800.

On February 16, 2012, the Company issued a convertible note to a related party for $100,000 that matures in August 2013. The note bears an interest rate of 15% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share. In the event the Company enters into a revenue sharing agreement as specified in the note, the holder, at its option, may accelerate payment of the note up to 50% of the gross revenues received by the Company under the revenue sharing agreement. The convertible note is in default and has been reclassified as current.

In conjunction with the note, the Company issued detachable warrants to purchase 25,000 shares of the Company’s Common Stock. The warrant has an exercise price of $0.40 per share and a contractual life of 5 years from the issuance date. The value of the BCF recorded was $8,310 and the debt discount related to the attached warrants was $9,310, for a total debt discount of $17,620.

On March 2, 2012, the Company issued a convertible note to a related party for $150,000 that matures in September 2013. The note bears an interest rate of 15% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share. In the event the Company enters into arevenue sharing agreement as specified in the note, the holder, at its option, may accelerate payment of the note up to 50% of the gross revenues received by the Company under the revenue sharing agreement. The convertible note is in default and has been reclassified as current.

In conjunction with the note, the Company issued detachable warrants to purchase 37,500 shares of the Company’s Common Stock. The warrant has an exercise price of $0.40 per share and a contractual life of 5 years from the issuance date. The value of the BCF recorded was $-0- and the debt discount related to the attached warrants was $9,525, for a total debt discount of $9,525.

On March 16, 2012, the Company issued a convertible note to a related party for $200,000 that matures in September 2013. The note bears an interest rate of 15% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share. In the event the Company enters into a revenue sharing agreement as specified in the note, the holder, at its option, may accelerate payment of the note up to 50% of the gross revenues received by the Company under the revenue sharing agreement. The convertible note is in default and has been reclassified as current.

In conjunction with the note, the Company issued detachable warrants to purchase 50,000 shares of the Company’s Common Stock. The warrant has an exercise price of $0.40 per share and a contractual life of 5 years from the issuance date. The value of the BCF recorded was $-0- and the debt discount related to the attached warrants was $12,761, for a total debt discount of $12,761.

On April 17, 2012, the Company issued a convertible note to a related party for $200,000 that matures in October 2013. The note bears an interest rate of 10% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share.

In conjunction with the note, the Company issued detachable warrants to purchase 25,000 shares of the Company’s Common Stock. The warrant has an exercise price of $0.40 per share and a contractual life of 5 years from the issuance date. The value of the BCF recorded was $-0- and the debt discount related to the attached warrants was $12,315, for a total debt discount of $12,315.

On May 3, 2012, the Company issued a convertible note to a related party for $150,000 that matures in November 2013. The note bears an interest rate of 10% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share.

In conjunction with the note, the Company issued detachable warrants to purchase 25,000 shares of the Company’s Common Stock. The warrant has an exercise price of $0.40 per share and a contractual life of 5 years from the issuance date. The value of the BCF recorded was $-0- and the debt discount related to the attached warrants was $7,331, for a total debt discount of $7,331.

On June 5, 2012, the Company issued a convertible note to a related party for $125,000 that matures in December 2013. The note bears an interest rate of 10% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share.

In conjunction with the note, the Company issued detachable warrants to purchase 25,000 shares of the Company’s Common Stock. The warrant has an exercise price of $0.40 per share and a contractual life of 5 years from the issuance date. The value of the BCF recorded was $-0- and the debt discount related to the attached warrants was $6,577, for a total debt discount of $6,577.

On June 20, 2012, the Company issued a convertible note to a related party for $125,000 that matures in December 2013. The note bears an interest rate of 10% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share.

In conjunction with the note, the Company issued detachable warrants to purchase 25,000 shares of the Company’s Common Stock. The warrant has an exercise price of $0.40 per share and a contractual life of 5 years from the issuance date. The value of the BCF recorded was $-0- and the debt discount related to the attached warrants was $6,993, for a total debt discount of $6,993.

On August 9, 2012, the Company issued a convertible note to a related party for $50,000 that matures in February 9, 2014. The note bears an interest rate of 10% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share.

In conjunction with the note, the Company issued detachable warrants to purchase 50,000 shares of the Company’s Common Stock. The warrant has an exercise price of $0.25 per share and a contractual life of 5 years from the issuance date. The value of the BCF recorded was $2,356 and the debt discount related to the attached warrants was $2,356, for a total debt discount of $4,712.

On September 10, 2012, the Company issued a convertible note to a related party for $50,000 that matures in March 10, 2014. The note bears an interest rate of 10% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share.

In conjunction with the note, the Company issued detachable warrants to purchase 50,000 shares of the Company’s Common Stock. The warrant has an exercise price of $0.25 per share and a contractual life of 5 years from the issuance date. The value of the BCF recorded was $17,060 and the debt discount related to the attached warrants was $3,505, for a total debt discount of $20,120.

On October 10, 2012, the Company issued a convertible note to a related party for $100,000 that matures in April 10, 2014. The note bears an interest rate of 10% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share.

In conjunction with the note, the Company issued detachable warrants to purchase 25,000 shares of the Company’s Common Stock. The warrant has an exercise price of $0.40 per share and a contractual life of 5 years from the issuance date. The value of the BCF recorded was $-0- and the debt discount related to the attached warrants was $5,126, for a total debt discount of $5,126.

On October 17, 2012, the Company issued a convertible note to a related party for $100,000 that matures in April 17, 2014. The note bears an interest rate of 10% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share.

In conjunction with the note, the Company issued detachable warrants to purchase 25,000 shares of the Company’s Common Stock. The warrant has an exercise price of $0.40 per share and a contractual life of 5 years from the issuance date. The value of the BCF recorded was $-0- and the debt discount related to the attached warrants was $5,236, for a total debt discount of $5,236.

On October 25, 2012, the Company issued a convertible note to a related party for $50,000 that matures in April 25, 2014. The note bears an interest rate of 10% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share.

In conjunction with the note, the Company issued detachable warrants to purchase 12,500 shares of the Company’s Common Stock. The warrant has an exercise price of $0.40 per share and a contractual life of 5 years from the issuance date. The value of the BCF recorded was $-0- and the debt discount related to the attached warrants was $2,181, for a total debt discount of $2,181.

On November 13, 2012, the Company issued a convertible note to a related party for $75,000 that matures in May 13, 2014. The note bears an interest rate of 10% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share.

In conjunction with the note, the Company issued detachable warrants to purchase 18,750 shares of the Company’s Common Stock. The warrant has an exercise price of $0.40 per share and a contractual life of 5 years from the issuance date. The value of the BCF recorded was $-0- and the debt discount related to the attached warrants was $3,107, for a total debt discount of $3,107.

On November 23, 2012, the Company issued a convertible note to a related party for $25,000 that matures in May 23, 2014. The note bears an interest rate of 10% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share.

In conjunction with the note, the Company issued detachable warrants to purchase 6,250 shares of the Company’s Common Stock. The warrant has an exercise price of $0.40 per share and a contractual life of 5 years from the issuance date. The value of the BCF recorded was $-0- and the debt discount related to the attached warrants was $1,936, for a total debt discount of $1,936.

On November 28, 2012, the Company issued a convertible note to a related party for $50,000 that matures in May 28, 2014. The note bears an interest rate of 10% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share.

On December 17, 2012, the Company issued a convertible note to a related party for $50,000 that matures in June 17, 2014. The note bears an interest rate of 10% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share.

On January 14, 2013, the Company issued a convertible note to a related party for $75,000 that matures in July 14, 2014. The note bears an interest rate of 10% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share.

On January 23, 2013, the Company issued a convertible note to a related party for $25,000 that matures in July 14, 2014. The note bears an interest rate of 10% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share.

On January 31, 2013, the Company issued a convertible note to a related party for $35,000 that matures in July 31, 2014. The note bears an interest rate of 10% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share.

In conjunction with the note, the Company issued detachable warrants to purchase 8,750 shares of the Company’s Common Stock. The warrant has an exercise price of $0.40 per share and a contractual life of 5 years from the issuance date. The value of the BCF recorded was $-0- and the debt discount related to the attached warrants was $1,644, for a total debt discount of $1,644.

On February 5, 2013, the Company issued a convertible note to a related party for $5,000 that matures in August 5, 2014. The note bears an interest rate of 10% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share.

In conjunction with the note, the Company issued detachable warrants to purchase 1,250 shares of the Company’s Common Stock. The warrant has an exercise price of $0.40 per share and a contractual life of 5 years from the issuance date. The value of the BCF recorded was $-0- and the debt discount related to the attached warrants was $234, for a total debt discount of $234.

On February 14, 2013, the Company issued a convertible note to a related party for $10,000 that matures in August 14, 2014. The note bears an interest rate of 10% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share.

In conjunction with the note, the Company issued detachable warrants to purchase 2,500 shares of the Company’s Common Stock. The warrant has an exercise price of $0.40 per share and a contractual life of 5 years from the issuance date. The value of the BCF recorded was $0 and the debt discount related to the attached warrants was $559, for a total debt discount of $559.

On February 22, 2013, the Company issued a convertible note to a related party for $50,000 that matures in August 22, 2014. The note bears an interest rate of 10% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share.

On March 6, 2013, the Company issued a convertible note to a related party for $50,000 that matures in September 6, 2013. The note bears an interest rate of 10% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share. The convertible note is in default and has been reclassified as current.

On April 8, 2013, the Company issued a convertible note to a related party for $75,000 that matures in October 8, 2014. The note bears an interest rate of 10% per annum and is convertible, along with all accrued interest, after 180 days into shares of the Company’s Common Stock at $0.50 per share.

On April 18, 2013, the Company issued a convertible note to a related party for $30,000 that matures in September 18, 2014. The note bears an interest rate of 10% per annum and is convertible, along with all accrued interest, after 180 days into shares of the In May, 2013 the company repaid the full amount of the note and accrued interest.

Convertible Notes Payable - Non-Related Parties

Convertible notes payable due to non-related parties consisted of the following as of June 30, 2013 and 2012, respectively:

Convertible Notes Payable - Non-Related Parties

	June 30,		June 30,
	2013		2012

$100,000 face value, issued in September 2011, interest rate of 0%, originally matured in December 2011, extended to May 2013, net of unamortized discount of $4,064 as of June 30, 2013 and June 30, 2012.	$	95,936	$	100,000

$10,000 face value, issued in October 2011, interest rate of 10%, matures in June 2012, net of unamortized discount of $-0- as of June 30, 2013 and June 30, 2012.		10,000		10,000

$15,000 face value, issued in October 2011, interest rate of 10%, matures in June 2012, net of unamortized discount of $-0- as of June 30, 2013 and June 30, 2012.		15,000		15,000

$15,000 face value, issued in December 2011, interest rate of 12%, matures in March 2012, net of unamortized discount of $-0- as of June 30, 2013 and June 30, 2012.		-		15,000

$10,000 face value, issued in December 2011, interest rate of 12%, matures in June 2012, net of unamortized discount of $-0- as of June 30, 2013 and June 30, 2012.		-		10,000

$75,000 face value, issued in January 2012, interest rate of 12%, matures in June 2013, net of unamortized discount of $3,017 as of June 30, 2013 and June 30, 2012.		71,983		75,000

$50,000 face value, of which 9, issued in August 2012, interest rate of 10%, matures in February 2013, net of unamortized discount of $-0- as of June 30, 2013.		50,000		-

$10,000 face value, issued in September 2012, interest rate of 10%, matures in March 2013, net of unamortized discount of $-0- as of March 31, 2013.		10,000		-

$50,000 face value of which $9,600 was converted leaving a $40,400 face value, issued in November 2012, interest rate of -0-%, matures in November 2013, net of unamortized discount of $13,789 as of June 30, 2013.		26,611		-

$30,000 face value, issued in February 2013, interest rate of -0-%, matures in November 2013, net of unamortized discount of $10,487 as of June 30, 2013.		19,513		-

$20,000 face value, issued in April 2013, interest rate of -0-%, matures in October 2013, net of unamortized discount of $12,678 as of June 30, 2013.		7,322		-

Total convertible notes payable – non-related parties		306,366		225,000

Less current portion		306,366		225,000

Convertible notes payable – non-related parties, long-term	$	-	$	-

On September 29, 2011, the Company issued a convertible note for $100,000 with an original maturity date 90 days after issuance. All or any amount of the principal amount of the note together with the accrued interest may be converted into shares of the Company’s Common Stock at a conversion price of $0.50 per share. In lieu of interest payments during the 90 day term, the Company issued to the holder a warrant to purchase 50,000 shares of the Company’s Common Stock. The warrant has an exercise price of $0.50 per share and a contractual life of 5 years from the issuance date. At the option of the Company, the due date of this note could be extended for three consecutive thirty-day periods. In lieu of interest during the extension periods, the Company was required to grant the holder 16,667 five year warrants with a $0.50 exercise price. The value of the BCF recorded was $57,845 and the debt discount relate to the attached warrants was $21,844, for a total debt discount of $79,689. As of the date of the filing of this report, this note is in default.

Prior to December 29, 2011, the Company elected to extend the maturity date of the note in accordance with the extension provisions which extended the due date to March 28, 2012. On April 1, 2012, the Company negotiated an extension on the note to July 28, 2012. On September 29, 2012, the Company negotiated an extension on the note to May 1, 2013. In accordance with ASC 470-50, the Company performed an analysis of the note extension to determine if the note was substantially modified and therefore requires debt extinguishment accounting, or if the due date extension is to be accounted for as modification. The Company determined that there is less than a 10 percent difference between the present value of the future cash flows associated with the modified note and the original note. Thus the Company has recorded the modification as a debt modification.

On October 5, 2011, the Company issued a convertible note for $100,000 that matures 90 days after issuance. The maturity date of the note can be extended, at the option of the holder, for a single 90 day period. The note bears an interest rate of 12% per annum and is convertible, along with all accrued interest, into shares of the Company’s Common Stock at $0.50 per share. The value of the BCF recorded was $26,000.

On October 13, 2011, the Company issued a convertible note for $10,000 that matures 90 days after issuance. The note bears an interest rate of 10% per annum and is convertible, along with all accrued interest, into shares of the Company’s Common Stock at $0.50 per share. The maturity date of the note can be extended, at the option of the holder, for two consecutive 30 day periods in exchange for a warrant equal to 20% of the initial amount of the note issued with a strike price of $0.50 per share for 5 years. As additional compensation, the Company issued to the holder a warrant to purchase 5,000 shares of the Company’s Common Stock. The warrant has an exercise price of $0.50 per share and a contractual life of 5 years from the issuance date. The value of the BCF recorded was $3,970 and the debt discount related to the attached warrants was $1,970, for a total debt discount of $5,940. As of the date of the filing of this report, this note is in default.

On April 1, 2012, the note holder agreed to extend the maturity date of the note to June 30, 2012. The Company evaluated amendment under ASC 470, “Debt - Modification and Extinguishment”, and concluded that the extension did not result in significant and consequential changes to the economic substance of the debt and thus resulted in a modification of the debt and not extinguishment of the debt.

On October 13, 2011, the Company issued a convertible note for $15,000 that matures 90 days after issuance. The note bears an interest rate of 10% per annum and is convertible, along with all accrued interest, into shares of the Company’s Common Stock at $0.50 per share. The maturity date of the note can be extended, at the option of the holder, for two consecutive 30 day periods in exchange for a warrant equal to 20% of the initial amount of the note issued with a strike price of $0.50 per share for 5 years. As additional compensation, the Company issued to the holder a warrant to purchase 7,500 shares of the Company’s Common Stock. The warrant has an exercise price of $0.50 per share and a contractual life of 5 years from the issuance date. The value of the BCF recorded was $5,956 and the debt discount related to the attached warrants was $2,956, for a total debt discount of $8,912. As of the date of the filing of this report, this note is in default.

On December 9, 2011, the Company issued a convertible note to an unrelated individual for $15,000 that matures 90 days after issuance. The note bears an interest rate of 12% per annum and is convertible, along with all accrued interest, into shares of the Company’s Common Stock at $0.50 per share. The maturity date of the note can be extended, at the option of the holder, for a single 90 day period. As additional compensation, the Company issued to the holder a warrant to purchase 7,500 shares of the Company’s Common Stock. The warrant has an exercise price of $0.50 per share and a contractual life of five (5) years from the issuance date. The value of the beneficial conversion feature recorded was $2,003 and the debt discount relate to the attached warrants was $1,703, for a total debt discount of $3,706. As of the date of the filing of this report, this note is in default.

On February 29, 2012, the note holder agreed to extend the maturity date of the note to May 29, 2012. The note holder elected to convert the note and accrued interest on June 6, 2013.

On December 14, 2011, the Company issued a convertible note for $10,000 that matures 90 days after issuance. The note bears an interest rate of 12% per annum and is convertible, along with all accrued interest, into shares of the Company’s Common Stock at $0.50 per share. The maturity date of the note can be extended, at the option of the holder, for a single 90 day period. As additional compensation, the Company issued to the holder a warrant to purchase 5,000 shares of the Company’s Common Stock. The warrant has an exercise price of $0.50 per share and a contractual life of 5 years from the issuance date. The value of the BCF recorded was $1,222 and the debt discount related to the attached warrants was $1,122, for a total debt discount of $2,344. As of the date of the filing of this report, this note is in default.

On March 15, 2012, the note holder agreed to extend the maturity date of the note to June 13, 2012. The note holder elected to convert the note and accrued interest on June 6, 2013.

On January 6, 2012, the Company issued a convertible note for $75,000 that matures 90 days after issuance. In lieu of interest payments during the 90 day term, the Company issued to the holder a warrant to purchase 37,500 shares of the Company’s Common Stock. The warrant has an exercise price of $0.50 per share and a contractual life of 5 years from the issuance date. At the option of the Company, the due date of this note may be extended for three consecutive thirty-day periods by issuing a warrant to purchase 12,500 shares of the Company’s Common Stock. The warrant will have an exercise price of $0.50 per share and a contractual life of 5 years from the issuance date. The value of the warrants issued was $15,477 and has been capitalized as prepaid interest expense to be amortized over the 90 day life of the note. As of the date of the filing of this report, this note is in default.

On October 1, 2012, the note holder agreed to extend the maturity date of the note to June 30, 2013 The Company evaluated amendment under ASC 470-50, “Debt - Modification and Extinguishment”, and concluded that the extension did not result in significant and consequential changes to the economic substance of the debt and thus resulted in a modification of the debt and not extinguishment of the debt.

On August 16, 2012, the Company issued a convertible note to an unrelated individual for $10,000 that matures 30 days after issuance. The note bears an interest rate of 10% per annum and is convertible, along with all accrued interest, into shares of the Company’s Common Stock at $0.50 per share. The maturity date of the note can be extended, at the option of the holder, for a single 30 day period.

As additional compensation, the Company issued to the holder 10,000 shares of restricted Common Stock. The note holder elected to convert the note and accrued interest on November 14, 2012. The value of the debt discount relate to the attached common stock was $2,063.

On August 21, 2012, the Company issued a convertible note to an unrelated individual for $50,000 that matures six months after issuance. The note bears an interest rate of 10% per annum and is convertible, along with all accrued interest, into shares of the Company’s Common Stock at $0.50 per share. The maturity date of the note can be extended, at the option of the holder, for a single 30 day period.

As additional compensation, the Company issued to the holder 50,000 shares of restricted Common Stock. The value of the debt discount related to the attached Common Stock was $10,000.

On September 4, 2012, the Company issued a convertible note to an unrelated individual for $15,000 that matures six months after issuance. The note bears an interest rate of 10% per annum and is convertible, along with all accrued interest, into shares of the Company’s Common Stock at $0.25 per share. The maturity date of the note can be extended, at the option of the holder, for a single 30 day period.

As additional compensation, the Company issued to the holder 15,000 shares of restricted Common Stock. The value of debt discount relate to the attached common stock was $3,889.

On September 4, 2012, the Company issued a convertible note to an unrelated individual for $10,000 that matures six months after issuance. The note bears an interest rate of 10% per annum and is convertible, along with all accrued interest, into shares of the Company’s Common Stock at $0.50 per share. The maturity date of the note can be extended, at the option of the holder, for a single 30 day period.

As additional compensation, the Company issued to the holder 10,000 shares of restricted common stock. The value of the debt discount relate to the attached Common Stock was $2,481.

On November 28, 2012, the Company issued a convertible note to an unrelated individual for $50,000 that matures one year after issuance. The note bears an interest rate of 0% for the first 90 days and 10% after 90 days per annum and is convertible, along with all accrued interest, into shares of the Company’s Common Stock at the lesser of $0.18 per share or 60% of the lowest trade price in the 25 trading days previous to conversion. The maturity date of the note can be extended, at the option of the holder, for a single 30 day period. The value of the BCF recorded was $33,333. The note holder elected to convert the note and accrued interest on June 3, 2013.

On February 13, 2013, the Company issued a convertible note to an unrelated individual for $30,000 that matures on November 28, 2013. The note bears an interest rate of 0% for the first 90 days and 10% after 90 days per annum and is convertible, along with all accrued interest, into shares of the Company’s Common Stock at the lesser of $0.18 per share or 60% of the lowest trade price in the 25 trading days previous to conversion. The maturity date of the note can be extended, at the option of the holder, for a single 30 day period. The value of the BCF recorded was $30,000.

On March 7, 2013, the Company issued a convertible note to an unrelated individual for $65,000 that matures 60 days after issuance. The note bears an interest rate of 10% per annum and is convertible, along with all accrued interest, into shares of the Company’s Common Stock at $0.25 per share. The maturity date of the note can be extended, at the option of the holder, for a single 30 day period.

As additional compensation, the Company issued to the holder 65,000 shares of restricted common stock. The value of the debt discount relate to the attached Common Stock was $8,376.

On June 5, 2013, the company paid the full balance of the note and $1,603 of accrued interest related to the note.

On April 24, 2013, the Company issued a convertible note to an unrelated individual for $20,000 that matures on October 24, 2013. The note bears an interest rate of 0% for the first 90 days and 10% after 90 days per annum and is convertible, along with all accrued interest, into shares of the Company’s Common Stock at the lesser of $0.18 per share or 60% of the lowest trade price in the 25 trading days previous to conversion. The maturity date of the note can be extended, at the option of the holder, for a single 30 day period. The value of the BCF recorded was$20,000.

Non-Convertible Notes Payable – Related Parties

Non-convertible notes payable due to related parties consisted of the following as of June 30, 2013 and 2012:

	2013		2012
Face value of $200,000, issued in April 2011, original maturity date of August 2011 extended to June 30, 2013, 30,000 warrants per month were granted in lieu of interest through June 2011, warrants increased to 50,000 shares per month through August 2011, from September until maturity, the note bears interest at 12%.	$	200,000	$	200,000

Face value of $250,000, issued in September 2011, matures in September 2012, 25,000 warrants per month issued for first 90 days of interest, note bears interest at 15% from December 2011 through maturity.		250,000		250,000

Face value of $125,000, issued in October 2011, matures in October 2012, 30,000 warrants issued in lieu of interest through December 2011, note bears interest at 15% from December 2011 through maturity.		125,000		125,000

Total non-convertible notes payable – related parties		575,000		575,000

Less current portion		575,000		575,000

Non-convertible notes payable - related parties, long term	$	-	$	-

In April 2011, the Company executed a $200,000 note payable with a related party that matured 90 days following the date of the note. This note includes the following priority repayment provisions: 1) the Company agrees to apply 50% of the first $600,000 of capital raised by the Company in the near term toward all outstanding notes the lender has outstanding with the Company; 2) the Company agrees to apply the first $200,000 of proceeds raised beyond the $600,000 to any outstanding notes the lender has outstanding with the Company; and 3) if the Company is unable to raise additional capital but a large marketing or sales agreement is entered into which provide for revenue in excess of $50,000, all funds received above $50,000 shall be applied to any notes the lender has outstanding with the Company at the time. As of the date of the filing of this report, this note is in default.

The note provides for no interest but required the Company to issue to the lender, for each thirty day period of the original term, a warrant to purchase 30,000 shares of the Company’s common stock at a price of $0.60 per share over a contractual life of five years. The Company may also elect, at its option, to extend the maturity date for two 30-day periods upon notice of such election to the lender and the issuance of a warrant to purchase up to 50,000 shares of the Company’s Common Stock at a price of $0.60 per share with a contractual life of 5 years for each such extension. The note is not convertible and no warrant was issued in connection with the issuance of the note so there is no beneficial conversion feature value or debt discount applicable to the origination of the note.

On June 30, 2011 and July 30, 2011, the Company exercised its options on the above notes to extend the maturity dates, each time for 30 days, pursuant to the provision contained in the original financing agreement. Upon final maturity of the note payable at August 29, 2011, the Company and lender agreed to amend the original financing agreement in which the maturity date was extended to June 30, 2012 with an interest rate of 12% per annum. The lender could choose to have the accrued interest outstanding on the note be repaid in shares of the Company’s common stock in lieu of cash. For each instance where such election was made, the number of shares of the Company’s common stock to be issued was to be calculated at a discount based on seventy-five percent (75%) of the average of the closing prices of the Company’s Common Stock as reported by Bloomberg, L.P., or other independent reporting services acceptable to the lender and the Company for 10 trading days prior to the date such payment was due.

The Company evaluated the above amendment to extend the maturity date from August 29, 2011 to June 30, 2012 under the guidance of ASC 470-50, “Debt - Modification and Extinguishment”, and concluded that such extension of the maturity date of the note did not result in a 10% or more change in the present value of the cash flow, and thus did not result in an extinguishment of the note.

On October 12, 2012, the note holder agreed to extend the maturity date of the note to June 30, 2013. No consideration was paid to extend the maturity date.

In September 2011, the Company entered into a one-year note payable for $250,000 with a related party. The note provided for 0% interest per annum for the first 90 days. In lieu of interest for the first 90 days, the Company granted the lender a warrant to purchase 25,000 shares of Company’s Common Stock at an exercise price of $0.40 for a contractual period of 5 years for each 30 days or portion thereof the note remains outstanding. If the note remained outstanding beyond the first 90 days, the note provided for an interest rate of 15% per annum. This note includes the following priority repayment provisions: 1) the Company agrees to apply 50% of the first $600,000 of capital raised by the Company in the near term toward all outstanding notes the lender has outstanding with the Company; 2) the Company agrees to apply the first $450,000 of proceeds raised beyond the $600,000 to any outstanding notes the lender has outstanding with the Company; and 3) if the Company is unable to raise additional capital but a large marketing or sales agreement is entered into which provide for revenue in excess of $50,000, all funds received above $50,000 shall be applied to any notes the lender has outstanding with the Company at the time.

The Company was also required to provide to the lender or its representative online access, for viewing purposes only, to the accounting and financial data maintained by the Company. Online access shall be terminated once the loan and other funds advanced by the lender to the Company, including any accrued interest, have been fully paid.

Further, per the terms of the agreement, if the note was not fully repaid by October 31, 2011, which was subsequently extended to November 15, 2011, and the Company had not deployed and made operational certain designated studios, the Company would be obligated to issue to the lender a warrant to purchase 25,000 shares of the Company’s Common Stock at an exercise price of $0.40 per share with a contractual life of 5 years. Such warrant was issued in accordance with the terms of the note.

On October 1, 2012, the note holder agreed to extend the maturity date of the note to June 30, 2013. No consideration was paid to extend the maturity date.

In October 2011, the Company entered into a one-year note payable for $125,000 with a related party. The note provided for 0% interest per annum for the first 45 days. In lieu of interest for the first 45 days, the Company granted the lender a warrant to purchase 30,000 shares of Company’s Common Stock at an exercise price of $0.40 for a contractual period of 5 years. Effective December 1, 2011, the note bears interest of 15% per annum until paid.

This note includes the following priority repayment provisions: 1) the Company agrees to apply 50% of the first $600,000 of capital raised by the Company in the near term toward all outstanding notes the lender has outstanding with the Company; 2) the Company agrees to apply the first $575,000 of proceeds raised beyond the $600,000 to any outstanding notes the lender has outstanding with the Company; and 3) if the Company is unable to raise additional capital but a large marketing or sales agreement is entered into which provide for revenue in excess of $50,000, all funds received above $50,000 shall be applied to any notes the lender has outstanding with the Company at the time.

In February 6, 2013, the Company entered into a two-week note payable for $50,000 with a related party. The note provided for 0% interest per annum. The note was paid in full on maturity date.

Non-Convertible Notes Payable – Non-Related Parties

Non-convertible notes payable due to non-related parties consisted of the following as of June 30, 2013 and 2012:

	2013		2012
Various term notes with total face value of $40,488 due upon demand, interest rates range from 12% to 14%.	$	40,488	$	40,488
Total non-convertible note payable – non-related parties		40,488		40,488
Less current portion		40,488		40,488
Non-convertible notes payable – non-related parties, long-term	$	-	$	-

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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