NOTE 6 – NOTES PAYABLE

Notes payable consisted of the following:

	November 30, 2016		February 29, 2016

Demand notes payable, at 10% and 16%	$	4,418,868	$	3,927,468
Convertible Promissory Note dated August 10, 2012, due August 10, 2017, convertible into shares of our common stock at a price of $0.76 per share. The note carries an interest rate of 7% with interest only payments due on the 10^th of each month with the principal payment due on the maturity date. To-date, the Company has not made any interest payments as set forth in this note.		957,096		910,488
Convertible Promissory Note dated October 2, 2012, due October 2, 2017, convertible into shares of our common stock at a price of $0.76 per share. The note carries an interest rate of 7% with interest only payments due on the 2^nd of each month with the principal payment due on the maturity date. To-date, the Company has not made any interest payments as set forth in this note.		477,072		456,434
Senior secured convertible notes dated May 7, 2013, due May 7, 2014, convertible into shares of our common stock at a price of $0.75 per share. The note was not repaid.		2,395,700		2,395,700
Senior secured convertible notes dated June 20, 2013, due June 20, 2014, convertible into shares of our common stock at a price of $0.50 per share. The note was not repaid.		325,000		325,000
Convertible notes dated April thru September, 2016. The notes carry an interest rate of 5% and might be converted into shares of Company’s common stock if the shareholders approve a 7:1 reverse stock split.		636,490		-
		8,573,826		8,015,090

Less: Current portion	$	8,573,826	$	6,648,168

Long-term portion	$	-	$	1,366,922

CONVERTIBLE DEBT

On May 7, 2013, the Company transferred 4 notes payable with a total principal value of $1,000,000 together with accrued interest, and consulting fees to a senior secured convertible note with a principal value of $1,087,000 (“New Kenmont Note”) and warrants to Kenmont Capital Partners (“Kenmont”). The New Kenmont Note has a 1-year maturity date and is convertible into shares of common stock at the conversion price of $0.75 per share. The warrants entitle the holder to acquire 1,449,333 shares and have an initial exercise price of $0.75 per share, and have a 7-year term. The Company recorded $342,020 as a discount, which is being amortized over the life of the note. As of the date of filing, the Company has not made any interest payments under the Kenmont Note.

On May 7, 2013, the Company transferred 2 note payables with a total principal value of $550,000 together with accrued interest to a senior secured convertible note with a principal value of $558,700 (“New LPD Note”) and warrants to LPD Investments, Ltd. (“LPD”). The New LPD Note has a 1-year maturity date and is convertible into shares of common stock at the conversion price of $0.75 per share. The warrants entitle the holder to acquire 744,933 shares and have an initial exercise price of $0.75 per share, and have a 7-year term. The Company recorded $175,793 as a discount, which is being amortized over the life of the note. As of the date of filing, the Company has not made any interest payments under the New LPD Note.

On May 7, 2013, the Company entered into an agreement with an individual for the sale of a $750,000 of secured convertible note payable and warrants. The note has a 1-year maturity date and is convertible into shares of common stock at the conversion price of $0.75 per share. The warrants entitle the holder to acquire 1,000,000 shares and have an initial exercise price of $0.75 per share, and have a 7-year term. The Company recorded $235,985 as a discount, which is being amortized over the life of the note. As of the date of filing, the note has not been repaid and is currently accruing interest at the rate of 16%.

On June 20, 2013, the Company entered into an agreement with four individuals for the sale of $325,000 of secured convertible notes payable and warrants. These notes have a 1-year maturity date and are convertible into shares of common stock at the conversion price of $0.50 per share. The warrants entitle the holders to acquire 433,334 shares and have an initial exercise price of $0.75 per share, and have a 7-year term. The Company recorded $63,622 as a discount, which is being amortized over the life of these notes. As of the date of filing, these notes have not been repaid and are currently accruing interest at the rate of 16%.

On August 19, 2013, the Company entered into an agreement with a member of its Board of Directors for the sale of $2,500,000 of convertible notes payable (the “Director Note”) and warrants. The Director Note carries a base interest rate of 9.5%, has a 4-year maturity date and is convertible into shares of common stock at the conversion price of $0.50 per share. The warrant entitles the holder to acquire 5,000,000 shares at an initial exercise price of $0.75 per share for a 7-year exercise period. The Company recorded $667,118 as a discount, which is being amortized over the life of the Director Note. On June 20, 2013, $500,000 of this Director Note was converted to a demand note payable.

Future maturities of notes payable at November 30, 2015 are as follows:

2016	$	-
2017		-
Total	$	-

7% Convertible Promissory Notes:

On August 10, 2012 the Company entered into an agreement with an individual for the sale of an unsecured convertible promissory note in the amount of $1,000,000. The note’s balance together with all accrued interest thereon shall be due and payable on August 10, 2017 and the annual interest rate is 7% per annum and is due to be repaid 5 years from the closing date. The note holder will receive interest on the unpaid principal amount payable monthly in arrears on the tenth day of each calendar month commencing September 10, 2012. Interest shall be computed on the actual number of days elapsed over a 360-day year. The note holder has the right from and after the date of issuance, and until any time until the note is fully paid, to convert any outstanding and unpaid principal portion of the note into shares of the Company’s common stock. The company recorded $310,723 as a debt discount, which is being amortized over the life of the note. As of the date of filing, no payments of interest or principal have been made by the Company on this note.

On October 2, 2012 the Company entered into an agreement with an individual for the sale of an unsecured convertible promissory note in the amount of $500,000. The note’s balance together with all accrued interest thereon shall be due and payable on October 2, 2017 and the annual interest rate is 7% per annum and is due to be repaid 5 years from the closing date. The note holder will receive interest on the unpaid principal amount payable monthly in arrears on the second day of each calendar month commencing November 2, 2012. Interest shall be computed on the actual number of days elapsed over a 360-day year. The note holder has the right from and after the date of issuance, and until any time until the note is fully paid, to convert any outstanding and unpaid principal portion of the note into shares of the Company’s common stock. The company recorded $137,583 as a debt discount, which is being amortized over the life of the note. As of the date of filing, no payments of interest or principal have been made by the Company on this note.