NOTE 7 - CONVERTIBLE NOTES PAYABLE

As of June 30, 2011 and March 31, 2011, the Senior Notes payable amount is presented as follows:

As of June 30, 2011 and March 31, 2011, the Company has accrued interest of $3,061,898 and $1,430,108, respectively, relating to the outstanding Senior Notes outstanding. The Company has amortized the discount on the Senior Notes (difference between the redemption amount and the carrying amount as of the date of issue) in the amount of $2,110,174 and $1,703,728 as of June 30, 2011 and March 31, 2011, respectively. The carrying value of Senior Notes will be accreted to the redemption value of $65,824,673. During the three months ended June 30, 2011 and March 31, 2011 the Company recorded interest expense in the amount of $2,118,147 and $1,546,498, respectively.

As more fully discussed in this report in Note 2 – “Significant Accounting Policies”, on March 8, 2011, the Company entered into an agreement to restructure its Original Notes.

On June 2, 2011, at a special meeting of the Company’s common stockholders, the common stockholders voted on and approved the Conversion Price Reduction. The Conversion Price Reduction may also be subject to approval of the MOG. The Company have agreed with the Noteholders that the Company will seek clarification from the MOG as to whether MOG approval of the Conversion Price Reduction is necessary. The Company is not, however, obligated to seek such clarification until the Company has received the approval of the MOG of the Sale, and if approval of the Sale has been obtained, the Company may delay seeking such clarification to the extent the Company believes in good faith that it would adversely affect the approval of the MOG granted for the Sale. If the MOG confirms that approval is not necessary, the Company will execute a supplemental indenture to effect the Conversion Price Reduction upon receipt of such confirmation that the approval of the MOG is not required for the Conversion Price Reduction. If the MOG confirms that its approval is required, the Company is required to promptly seek that approval, and to cause the Conversion Price Reduction to become effective by the earlier of (a) the date that is 10 business days after approval of the MOG has been obtained or the date on which it is determined that such approval is not required, or (b) December 30, 2011.

If the Company does not complete the Sale, the Company anticipates that it will lack sufficient funds to retire the Senior Notes when they become due.