Payables and Accruals

12 Months Ended

Mar. 31, 2012

Payables and Accruals

Accounts Payable and Accrued Liabilities Disclosure

NOTE 7 - NOTES PAYABLE

Notes payable consisted of the following at March 31, 2012 and March 31, 2011

	March 31,
	2012	2011
Notes Payable	$         283,668	$         100,000
Line of Credit	36,335	-
Convertible Notes	315,000	215,000
Debt discount	-	(125,607)
Total Notes Payable	$         635,003	$         189,393

Notes Payable

On April 11, 2011, the Company repaid that certain note dated March 7, 2011, in the amount of $101,458. The payment consisted of $100,000 in principal and $1,458 in interest. The interest paid included $1,000 that was accrued as of March 31, 2011, in Accrued Expenses and was expensed in the previous period.  The interest rate was fifteen percent (15%) per annum.  The note was accompanied by a warrant to purchase 100,000 shares of restricted Rule 144 common stock at $0.17 per share.  The warrant expires 36 months from date of funding. This fair value of the warrant was recorded as a debt discount and amortized over the term of the loan using the effective interest method.  The warrant was evaluated for embedded derivatives in accordance with ASC 815 and was found to not include any embedded derivatives.  The warrant was valued using the Black Scholes Valuation Model.  The total value of the discount pertaining to this note was $10,931.

On December 30, 2011, the Company entered into a Note Payable in the amount of $30,000.  The note bears interest at ten percent (10%) per annum and was due on February 28, 2012.  This note was subsequently extended to July 31, 2012.

On January 6, 2012 the Company entered into a promissory note in the amount of $35,000.  The note paid interest at ten percent (10.0%) per annum.  The note was due and payable with accrued interest on or before March 6, 2012 and was secured by certain accounts receivable of the Company.  Upon collection of the pledged receivables the amount was rolled into a new Promissory Note dated January 26, 2012 in the aggregate amount of $175,000 with interest payable at fifteen percent (15%) per annum.  This note was due and payable on or before April 10, 2012.  The aggregate amount of $175,000 plus accrued interest was paid in full on April 18, 2012 upon receipt of the receivable related to the pledged purchase order used to secure the January 26, 2012 note.  The January 26, 2012 note included attached warrants to purchase 175,000 shares of restricted Rule 144 common stock at a rate of $0.12 per share.  The warrants expire 36 months from date of agreement. . The warrants were evaluated for embedded derivatives in accordance with ASC 815 and were found to not include any embedded derivatives.  The warrants attached to the note were valued using the Black Scholes Valuation Model, resulting in a fair value of $8,006. 

On January 13, 2012 the Company entered into two separate promissory notes in the amount of $35,000 each for an aggregate amount of $70,000.  The notes bear interest at nine percent (9%) per annum and are due and payable on or before January 10, 2013.  Minimum monthly payments of 1.5% of the loan balances are required and are submitted to Lenders’ financial institution.  Principal payments of $1,332 had been paid as of March 31, 2012.

On March 14, 2012 the Company entered into a promissory note for $10,000.  The note bears interest at ten percent (10%) and is due and payable on or before April 30, 2012.  This note was subsequently extended and is due and payable on or before July 31, 2012.

Line of Credit

                On September 13, 2011, the Company drew down a line of credit at a financial institution in the amount of $39,000.  The line of credit bears interest at 17.5% per annum.  The Company makes variable monthly payments. During the twelve months ended March 31, 2012, the Company had repaid $2,715 of principal.

Convertible Notes

                On March 31, 2011, the Company entered into several convertible promissory notes in the aggregate amount of $215,000. The notes are convertible into common stock at a rate of $0.15 per share.  The notes bear interest at ten percent (10.0%) per annum and include attached warrants to purchase two shares of restricted Rule 144 common stock for every dollar loaned, at a rate of $0.15 per share, for an aggregate total of 430,000 restricted Rule 144 common shares. The Notes were due on June 29, 2011, and are secured by that portion or percentage of the Borrower’s Intellectual Property which the principal amount of the Note bears to the fair market value of all Intellectual Property of the Borrower.  “Intellectual Property” of the Borrower is defined to mean all trademarks, registered or unregistered, marks, logos, business names, proprietary computer software, curriculum, copyrighted material, registered or unregistered, trade names, patents and patent applications, and all general intangibles relating to the foregoing.  Notwithstanding the foregoing, Intellectual Property shall not include any license, property or contract right the granting of a security in which would be prohibited by law or contract.  The warrants expire 36 months from date of agreements. The notes were evaluated for embedded derivatives in accordance with ASC 815 and were found to not include any embedded derivatives.  The Company recognized a discount on the debt issued, which was composed of an embedded beneficial conversion feature and attached warrants.  The Company measured the beneficial conversion feature by allocating a portion of the proceeds equal to the intrinsic value of the feature to additional paid-in-capital.  The intrinsic value of the feature was calculated on the commitment date using the effective conversion price of the notes.  This intrinsic value is limited to the portion of the proceeds allocated to the notes, and was calculated as $58,000.  The warrants attached to the notes were valued using the Black Scholes Valuation Model, resulting in a fair value of $63,479.  

                The Company extended the due date on the Convertible Notes Payable dated March 31, 2011 in the aggregate amount of $215,000. These notes were originally due on June 29, 2011 and subsequently extended to October 27, and November 27, 2011. In consideration for the first note extension, the Company issued an additional 430,000 in restricted Rule 144 common stock warrants. The restricted Rule 144 common stock warrants allow for the purchase of one share of restricted Rule 144 common stock at $0.15 per restricted Rule 144 common stock warrant. The warrants expire 36 months from the date of the original warrant agreement.  The fair market value of these warrants was calculated using the Black Scholes Valuation Model, resulting in an expense of $61,995 during the quarter ended June 30, 2011.  On February 10, 2012, the notes were extended to August 25, 2013, with repayments to be made quarterly beginning in May, 2012, in the amount of $40,000 per quarter with the remaining balance due in August 2013. No additional warrants were issued in connection with the subsequent extensions.  The May 2012 payments have not been paid and at this time the payments on the Notes are past due.  No notice of default has been executed and the Company is negotiating with the Note Holders with respect to these payments.  At the Lender’s sole option, Lenders may elect to receive payment of their respective Note and all accrued interest in restricted common stock of the Borrower at the price per share of said common stock at same rate as the warrants.

On June 20, 2011 the Company entered into a convertible promissory note in the amount of $100,000.  The note paid interest at ten percent (10.0%) per annum and included attached warrants to purchase two shares of restricted Rule 144 common stock for every dollar loaned, at a rate of $0.15 per share, for a total of 200,000 restricted Rule 144 common shares. The Note was due on August 20, 2011. At the Lender’s sole option, Lender could elect to receive payment of this Note and all accrued interest on the due date in restricted Rule 144 common stock of the Borrower at the price per share of said restricted Rule 144 common stock at same rate as the warrants. The warrants expire 36 months from date of agreement. The note was evaluated for embedded derivatives in accordance with ASC 815 and was found to not include any embedded derivatives.  The Company recognized a discount on the debt issued, which was composed of an embedded beneficial conversion feature and attached warrants.  The Company measured the beneficial conversion feature by allocating a portion of the proceeds equal to the intrinsic value of the feature to additional paid-in-capital.  The intrinsic value of the feature was calculated on the commitment date using the effective conversion price of the notes.  This intrinsic value is limited to the portion of the proceeds allocated to the notes, and was calculated as $63,862.  The warrants attached to the notes were valued using the Black Scholes Valuation Model, resulting in a fair value of $36,138.  On September 30, 2011 the due date of this note was extended to November 1, 2011 at the same ten percent (10.0%) per annum rate.  As part of the extension specific accounts receivable were pledged as collateral on the note and as consideration for the extension, additional warrants to purchase two shares of restricted Rule 144 common stock for every dollar loaned, at a rate of $0.15 per share, for a total of 200,000 restricted Rule 144 common shares were granted to the Lender.  The attached warrants were valued using the Black Scholes Valuation Model, resulting in a fair value of $28,216 that was expensed at date of issue.  The note was repaid in full on November 7, 2011, the same day as the receivable that had been pledged as collateral was collected. 

                On February 29, 2012 the Company entered into three separate convertible promissory notes in the aggregate amount of $100,000.  The notes bear interest at ten percent (10.0%) per annum and are due on May 30, 2012.  At the sole option each respective Lender, the outstanding balance of the Notes may be converted into shares of Rule 144 Restricted Common Stock of the Borrower at a price per share of $ .05.  In the event Lender elects to convert any outstanding balance due under this Note into such shares, Lender shall give written notice to the Borrower seven (7) days prior to the effective date of such exercise.  At Borrower’s sole option, Borrower may elect to pay Lender in cash up to one-half (1/2) of the then principal and interest due under the Note.  In such event, the remaining balance of principal and interest shall be converted as provided under the Note agreement.  The notes were evaluated for embedded derivatives in accordance with ASC 815 and were found to not include any embedded derivatives.  Two Notes in an aggregate amount of $50,000 were extended and are now due and payable on July 31, 2012.  On June 14, 2012 the third Note, in the amount of $50,000, was converted into 1,028,770 shares of our “restricted” common stock in accordance with the terms of the Convertible Promissory Note. 

                The total amount of the debt discounts calculated upon issuance of all promissory notes during fiscal years 2012 and 2011 were $132,410 and $106,366, respectively.  Total amortization of the debt discount of $231,973 and $6,803 was charged to interest expense during the years ended March 31, 2012 and 2011, respectively.  Amortization of the debt discount is calculated using the effective interest method. 

NOTE 11 - ACCRUED EXPENSES

Accrued expenses are made up of the following at March 31, 2012 and March 31, 2011.

	March 31,	March 31,
	2012	2011
Credit card debt	$              56,872	$              39,768
Interest payable	31,915	1,000
Sales tax payable	14,030	105,377
Professional fees: legal, accounting & other	953	482
BOE printer payout	-	2,439
Total accrued expenses	$           103,770	$           149,066