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4. NOTES PAYABLE
 3 Months Ended
Jun. 30, 2014
Debt Disclosure [Abstract]  
NOTES PAYABLE

Notes payable consist of the following:

 

   June 30, 2014   March 31, 2014 
   Principal Balance   Accrued Interest   Principal Balance   Accrued Interest 
12% Notes payable, past due  $185,000   $360,750   $185,000   $353,813 
10% Note payable, past due   5,000    6,500    5,000    6,375 
Directors’ Note(s)   200,000    19,516    200,000    14,516 
Total  $390,000   $386,766   $390,000   $374,704 

 

During the three months ended June 30, 2014, we recorded interest expense of $12,062 related to the contractual interest rates of our notes payable.

 

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"). On April 21, 2010, a holder of $100,000 of the 12% Notes converted his principal balance and $71,758 of accrued interest into 687,033 shares of common stock at an agreed conversion price of $0.25 per share. At June 30, 2014, the 12% Notes were past due, in default, and bearing interest at the default rate of 15%.

 

10% NOTES

 

At June 30, 2014, one 10% Note in the amount of $5,000, which is past due and in default, remained outstanding and it bears interest at the default rate of 15%.

  

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.

 

DIRECTORS’ NOTES

 

In July 2013, we borrowed $400,000 from two of our directors under two 90 day notes for $200,000 each bearing 10% interest (the “Notes”). At the discretion of the holders, if not paid off by October 9, 2013, the noteholders were entitled to (i) convert their principal and accrued interest into shares of common stock at $0.088 per share (the “Conversion Price”) and (ii) receive warrants to purchase common stock equal to 50% of the principal converted under the Notes, with an exercise price of $0.132 per share. Additionally, there was a provision for a penalty interest rate of 12%.

 

That potential conversion price and warrant exercise price were based on the same pricing mechanism that we have used in prior equity unit financings since March 2012 (see Note 6) which are based on 80% of the then current market price of our common stock and with the warrant exercise price based on 120% of the same then current market price. We initially reserved 6,931,818 shares of common stock to support the conversion of the Notes and accrued interest in full as well as the exercise of the warrants in full (should such conversion and/or issuance occur).

 

During the fiscal year ended March 31, 2014, the principal of $200,000 and accrued interest of $9,367 were paid on one of the notes, which extinguished all potential common stock and warrant issuance provisions related to that Note.

 

The holder of the second Note agreed to extend the expiration date of his Note to July 31, 2014 and then subsequent to June 30, 2014, he converted his principal of $200,000 and accrued interest of $20,349 into 2,503,966 shares of our common stock per conversion formula of the note (see Note 15).