NOTE 3 – NOTES PAYABLE

Notes payable consisted of the following:

	August 31, 2018		February 28, 2018

Notes payable, at 10% and 5%	$	3,777,537	$	3,777,537
Convertible Promissory Note dated August 10, 2012 with an interest rate of 5% per annum. On January 30, 2017, this note was amended providing, among other things, for the conversion of 80% of the principal and accrued interest into common stock at $1.386 per share conditioned on the occurrence of certain future events the last of which was completed on February 14, 2018. Further details are provided below.		264,462		264,462
Convertible Promissory Note dated October 2, 2012 with an interest rate of 5% per annum. On January 30, 2017, this note was amended providing, among other things, for the conversion of 80% of the principal and accrued interest into common stock at $1.386 per share conditioned on the occurrence of certain future events the last of which was completed on February 14, 2018. Further details are provided below.		133,178		133,178
Senior secured convertible notes dated May 7, 2013 with an interest rate of 5% per annum. On January 30, 2017, this note was amended providing, among other things, for the conversion of 80% of the principal and accrued interest into common stock at $1.386 per share conditioned on the occurrence of certain future events the last of which was completed on February 14, 2018. Further details are provided below.		757,155		757,155
Senior secured convertible notes dated June 20, 2013 with an interest are of 5% per annum On January 30, 2017, this note was amended providing, among other things, for the conversion of 80% of the principal and accrued interest into common stock at $1.386 per share conditioned on the occurrence of certain future events the last of which was completed on February 14, 2018. Further details are provided below.		203,182		203,182
Convertible notes dated April 2016 thru February 2017 with an an interest rate of 5% per annum. Although the notes could have been converted into shares of common stock upon shareholder approval of the 7:1 reverse stock split that occurred on February 14, 2018, the note holder elected not to convert and to have the note paid over an eleven-month period. The first payment of $50,000 was paid in April 2018.		450,000		500,000
		5,585,514		5,635,514

Less: Current portion	$	1,352,537	$	1,402,537

Long-term portion	$	4,232,977	$	4,232,977

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. The New Kenmont Note had a 1-year maturity date and was convertible into shares of common stock at the conversion price of $1.38per share. As of the 1 for 7 reverse split, 80% of this note was converted into stock at a price of $1.38 per share. The warrants were subsequently exercised. The Company recorded $342,020 as a discount, which was amortized over the life of the note.There is a remaining balance of $304,081 as of August 31, 2018 and February 28, 2018.

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. The New LPD Note had a 1-year maturity date and was convertible into shares of common stock at the conversion price of $1.38 per share. As of the 1 for 7 reverse split, 80% of this note was converted into stock at a price of $1.38 per share.The warrants were subsequently exercised. The Company recorded $175,793 as a discount, which will be amortized over the life of the note. There is a remaining balance of $163,677 as of August 31, 2018 and February 28, 2018.

On May 7, 2013, the Company entered into an agreement with an individual for the sale of $750,000 of secured convertible note payable (the “Note”) and warrants. The Note had a 1-year maturity date and was convertible into shares of common stock at the conversion price of $1.38per share. As of the 1 for 7 reverse split, 80% of this note was converted into stock at a price of $1.38 per share.The warrants entitle the holder to acquire 1,000,000 shares and have an initial exercise price of $1.38 per share and have a 7-year term. The Company recorded $235,985 as a discount, which will be amortized over the life of the note. There is a remaining balance of $232,194 as of August 31, 2018 and February 28, 2018.

On January 30, 2017, the Company entered into an amendment to the agreements described immediately above with five of seven secured creditors holding a security interest in all of the Company’s assets except for its patents and other intellectual properties. The five secured creditors signing the amendment represented in excess of 95% of the total,secured debt. The amendment provided that all accrued and unpaid interest will be added to the principal amount. The amended notes provided for no interest from November 1, 2016 to February 14, 2018, the date on which the 1-for-7 reverse stock split became effective and at which time 80% of the total debt, including accrued interest, was converted into shares of common stock and a new five year 5% per annum convertible note was issued for the remainder. The amendment also provides that if the Company enters into a “Qualified Financing” (defined as receipt by the Company of not less than $4,000,000 in aggregate gross proceeds from the sale of securities in one or a series of related transactions after the execution date), then the Company shall remit to the holder the “Cash Payment Amount” as set forth in the amendment.

On June 20, 2013, the Company entered into an agreement with four individuals for the sale of $325,000 of secured convertible notes payable (the “Notes”) and warrants. The Notes had a 1-year maturity date and were convertible into shares of common stock at the conversion price of $0.50 per share. The warrants were subsequently exercised. The Company recorded $63,622 as a discount, which will be amortized over the life of the notes. There is a remaining balance of $203,182 as of August 31, 2018.

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 “BOD Notes”) and warrants. The BOD Notes carry a base interest rate of 9.5%, had a 4-year maturity date and are convertible into shares of common stock at the conversion price of $0.50 per share. The warrants were subsequently exercised. The Company recorded $667,118 as a discount, which will be amortized over the life of the note. There is a balance of $3,396,858 as of August 31, 2018.

On February 21, 2017, the Company entered into several Refinancing Agreements with a debt holder totaling $2,237,456 including interest of $489,466. The agreements waived all events of default and provided for new five-year 5% convertible notes with no interest for the first six months. Upon the effective date of February 14, 2018 of the 1 for 7 reverse stock split, the notes were converted into 1,164,555 shares of common stock.