NOTE 4. NOTES PAYABLE

3 Months Ended

Jun. 30, 2011

NOTE 4. NOTES PAYABLE

Principal amounts of notes payable consist of the following at June 30, 2011 and March 31, 2011:

	June 30, 2011			March 31, 2011
12% Notes payable, past due		$	185,000		$	185,000
10% Note payable, past due			5,000			5,000
Tonaquint Note			360,186			--
Total Notes Payable		$	550,186		$	190,000

12% NOTES

From August 1999 through May 2005, we entered into various borrowing arrangements for the issuance of notes payable from private placement offerings (the "12% Notes"). At June 30, 2011, 12% Notes with a principal balance of $185,000 are outstanding, all of which are past due, in default, and bearing interest at the default rate of 15%. At June 30, 2011, interest payable on the 12% Notes totaled $277,500.

10% NOTES

At June 30, 2011, one 10% Note in the amount of $5,000, which is past due and in default, remained outstanding. At June 30, 2011, interest payable on this note totaled $5,000.

Management's plans to satisfy the remaining outstanding balance on these 12% and 10% Notes include converting the notes to common stock at market value or repayment with available funds.

TONAQUINT NOTE

On June 28, 2011, we entered into a Termination Agreement with Tonaquint, Inc. (See Note 5) under which both parties agreed that in consideration of the termination of a warrant, the waiving of all fees, penalties, the creation of the selling program and other factors, we agreed to issue an unsecured non-convertible promissory note (the "New Note") in the principal amount of $360,185, which provides for annual interest at a rate of 6%, payable monthly in either cash or our stock, at our option. The New Note has a maturity date of April 30, 2012.

- 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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