UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K/A10-K

(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 20122014

Commission file number
000-54648
LAS VEGAS RAILWAY EXPRESS, INC.
(Exact name of Registrant as Specified in its Charter)


Delaware56-2646797
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification Number)

6650 Via Austi Parkway, Suite 170140
Las Vegas, NV  89119
(Address of principal executive offices)

702-583-6715
(Issuer’s telephone number)


Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

COMMON STOCK, $0.0001 PAR VALUE
(Title of Class)




Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes [  ] No [ X ]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes [  ] No [ X ]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X][  ] No [  ][X]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X] No [  ] No [X]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  [  ]


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [  ]           Accelerated filer [  ]           Non-accelerated filer [  ]     (Do not check if a smaller reporting company)          Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes [  ] No [X]

Aggregate market value of Common Stock held by non-affiliates based on the closing price of the registrant's Common Stock on the OTCBBOTCBQ on September 30, 20112013 was $3,321,267.$7,158,755.

Number of outstanding shares of common stock as of June 22, 201225, 2014 was 83,362,303.24,075,113.

Documents Incorporated by Reference:  None.

 
2
 

 



LAS VEGAS RAILWAY EXPRESS, INC.
TABLE OF CONTENTS

PART I PAGE
Item 1.Business43
Item 1A1A.Risk Factors107
Item 1B1B.Unresolved Staff Comments1411 
Item 2Properties1411
Item 3.Legal Proceedings1411
Item 4.Mine Safety Disclosures1411
PART II 1412
Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities1412
Item 6.Selected Financial Data1513
Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations1613
Item 7A.Quantitative and Qualitative Disclosures About Market Risk.1920
Item 8.Financial Statements and SupplementalSupplementary Data2021
Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure3642
Item 9A.Controls and Procedures3642
Item 9B.Other Information3743
PART III 3743
Item 10.Directors, Executive Officers and Corporate Governance3743
Item 11.Executive Compensation4147
Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters4350
Item 13.Certain Relationships and Related Transactions and Director Independence.4451
Item 14.Principal AccountingAccountant Fees and Services4452
PART IV 4452
Item 15.Exhibits and Financial Statement Schedules4552
SIGNATURES4654
 
 
32
 
 
LAS VEGAS RAILWAY EXPRESS, INC.

EXPLANATORY NOTEPART I

Las Vegas Railway Express, Inc. (the “Company”, “we”, “us”, or “our”) is filing this Amendment No. 1 to its Annual Report on Form 10-K/A (the "Amended 10-K") to amend its Annual Report on Form 10-K for the year ended March 31, 2012, filed with the Securities and Exchange Commission (the "SEC") on July 10, 2012 (the "Original 10-K"). This Amended 10-K restates, for reasons described below, the balance sheets as of March 31, 2012 and 2011 and its related statements of operations, stockholders’ deficit and cash flows for the years ended March 31, 2012.

The accompanying balance sheets as of March 31, 2012 and 2011 and related statements of operations, stockholders’ deficit and cash flows for the year ended March 31, 2012 have been restated for the following errors:

(1)  Reflect a correction in the presentation of common stock subscribed related to the purchase of the train business, from a liability to stockholders’ equity.  The nature of this account is such that it will not be settled with cash or other assets, but rather it will be settled by issuance of a fixed number of Company’s common stock.  Accordingly it should be classified in stockholders’ equity.
(2)  Certain of the warrants outstanding had elements that qualified them as derivative liabilities instead of equity. And two of the notes payable also had embedded elements that required bifurcation and statement as derivative liabilities. Accordingly, we obtained a third party valuation of the warrants and embedded derivatives and reclassified them as derivative liabilities.
(3)  The Company made corrections to the way it accounts for stock based compensation.
(4)  Finally, the Company has determined that since goodwill is amortized for income taxes, but not for books, there exists a temporary difference in the carrying amount of this asset between book and tax. Furthermore, as it cannot be concluded that this difference can be absorbed by the Company’s net operating loss carryforward, it is necessary to record a deferred income tax liability.

Amendments to the Original 10-K

For the convenience of the reader, this Amended 10-K sets forth the Original 10-K, as modified and superseded where necessary to
reflect the restatement. The following items have been amended principally as a result of, and to reflect, the restatement:

• Part II — Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
• Part II — Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations;
• Part II — Item 8. Financial Statements and Supplementary Data;
• Part II — Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure;
• Part II — Item 9A. Controls and Procedures;
• Part III — Item 14. Principal Accountant Fees and Services; and
• Part IV — Item 15. Exhibits and Financial Statement Schedules.

In accordance with applicable SEC rules, this Amended 10-K includes certifications from our Chief Executive Officer and Chief Financial Officer dated as of the date of this filing. Except for the items noted above, no other information included in the Original 10-K is being amended by this Amended 10-K. The Amended 10-K continues to speak as of the date of the Original 10-K, and we have not updated the filing to reflect events occurring subsequently to the Original 10-K date, other than those associated with the restatement of the Company's financial statements. Accordingly, this Amended 10-K should be read in conjunction with our filings made with the SEC subsequent to the filing of the Original 10-K.

PART I

Item 1.  Business
History

Las Vegas Railway Express, Inc. (the “Company”, “we”, “us”, or “our”) was formed, formerly known as a Delaware corporation in March 9, 2007 as Corporate Outfitters, Inc., a development stage company whose business plan involved establishing itself as a specialized brand promotional merchandising company. On November 3, 2008, pursuant to a common stock purchase agreement, the Company acquired all of the outstanding capital stock of Liberty Capital Asset Management. In connection with the acquisition, the Company changed its name to Liberty Capital Asset Management, Inc. and changed its business plan to one of acquiring pools of non-performing loans and restructuring the financial parameters such that the defaulted borrower can return to making payments in a timely manner. On January 21, 2010, the Company, acquired all100% of the assetsissued and outstanding stock of Las Vegas Railway Express, a Nevada corporation.corporation on January 21, 2010.  In connection with the acquisition, the Company changed its name to Las Vegas Railway Express, Inc. and changed its business plan to one of developing passenger rail transportation and ancillary ticketing and reservation services between the Los Angeles area and Las Vegas, Nevada. In November 2012, the Company executed an agreement with Union Pacific Railroad which allowed the Company to operate its passenger service on their property from Daggett, California to Las Vegas, a distance of 175.8 miles.  In May 2013, the Company and Amtrak, which was planning to haul the Company’s rail cars from Los Angeles to Las Vegas in regular service, was informed by BNSF Railway (“BNSF”) that it would not approve Amtrak’s request to operate on the BNSF system. Although the Company tried several alternative approaches to satisfy BNSF’s denial, none were accepted and both Amtrak and the Company were forced to suspend their efforts to establish the planned service over the Cajon Pass route.

During the development period for the Los Angeles to Las Vegas route, the Company became visible in the press and several independently owned passenger rail companies discussed how the Company’s Club X style railcars could be deployed on existing excursion lines. The Company began to focus its infrastructure towards acquiring independently owned passenger rail operations throughout the United States and providing upscale commuter Club X railcars for various state Department of Transportation municipal transportation agencies.

Company Overview

On April 23, 2014, the Company entered into an agreement with the Santa Fe Southern Railway, located in Santa Fe, New Mexico, to manage the passenger services. The Company will be adding its Club X cars to the train consists. Operations on the route are planned to commence in July 2014.  Subsequent routes will follow with a similar deployment format.
 
The Company owns outright a series of 16 Pullman bi-level passenger railcars, as well as two leased cars acquired through an agreement with Mid America Leasing Company. These cars are planned for use in the deployment of cars on our future affiliated routes. The first two cars have been completed and are scheduled to go into service on the Santa Fe Southern Railway in July 2014. The remaining cars are scheduled to be refurbished during the remainder of 2014.
The Company’s common stock is currently quoted on the OTCQB under the symbol “XTRN”.  The Company website is www.vegasxtrain.com, www.clubxtrain.com and www.xtrainvacations.com. The contents of this website are not incorporated into this Report.
The Company maintains offices at 6650 Via Austi Parkway, Suite 140, Las Vegas, Nevada 89119.
Our Competitive Strengths

We believe the following strengths will allow us to acquire prospective privately owned passenger rail operators throughout the US and consolidate them under one brand – X Train.
We are a licensed travel agency and can book tickets for numerous clients. As a licensed travel agency, we have access to numerous travel portfolios including virtually all passenger rail companies. By booking tickets on these rail lines, the Company believe it would become a known resource and proficient in rail travel bookings. If acquisitions are made, the travel agency call center operated by the Company can increase sales of tickets to our owned properties.
3
Experienced Management and Board of Directors. We have an experienced management team and board of directors comprised of both experienced industry professionals and successful entrepreneurs. Our CEO, Michael Barron has experience establishing and growing several companies over the past 30 years.  Mr. McPherson serves on the Board of Directors of CSX Corporation and has served as President/CEO of the Illinois Central Railroad, a Class 1 railroad and served as President/CEO of the Florida East Coast Railway.  Gilbert Lamphere also serves on the board of CSX Corporation.
Access to capital. Our team has raised over $20 million for the operations of the Company to date and has developed excellent relationships with the capital markets in the US. We believe we can raise capital for companies we acquire to grow their business under our umbrella.  However, there are no assurances that we will be successful in our capital raising efforts.  Since we have no revenues, we are dependent on continued access to additional debt and equity financing.  Inability to raise additional financing will have a material adverse impact on our business and operations.
Train Equipment and Service
The Company leases two passenger rail cars which it has refurbished into its Club X Train motif. Each Club X Train car seats 48 passengers in a club room style motif reminiscent of a nightclub of the 1940’s and 1950’s. One of the cars has a full demonstration kitchen on board for entertainment style cooking for party events. These cars are available to be deployed by various companies which we acquire to add a specialty product currently unavailable to most independent companies currently in the business.
Club X Train style car
      
 
 
4
 
 
Company OverviewClub X Train style interiors
 
The Company’s plan is to establish a rail passenger train service between Las Vegas and Los Angeles using existing railroad lines currently utilized by two Class I railroads, Burlington Northern and Union Pacific. The development concept is to provide a Las Vegas style experience on the train (which we plan to call the “X” Train), which would traverse the planned route in approximately 5 hours. We plan to operate a single travel route marketed primarily to a leisure traveler from the Southern California basin  enabling us to sell rail travel as a stand-alone operation with hotel rooms and other travel related services. Our unique travel option will offer a diversified product that will set us apart from travel related options of automobile and air.   
 
The Company is in discussions with both the Union Pacific RailroadSales and the BNSF Railway seeking to secure rail trackage rights agreements. The Company has reached a preliminary agreement with Union Pacific Railroad awaiting finalization of the BNSF agreement and certain capital planning issues. An updated capacity planning and feasibility analysis has substantially been completed for Union Pacific and is in final discussion with BNSF. A series of passenger railcars has been negotiated to be acquired under an agreement with Transportation Management Services.  The Company has executed a Memorandum of Understanding (or MOU) with the Plaza Hotel as a Las Vegas station site and has a similar pending agreement with the City of Fullerton for use of that station for the Los Angeles terminus of the service. The Company has executed an MOU with AMTRAK outlining duties and responsibilities of each party.Distribution
 
The Company estimates that it will needWe intend to obtain $35MM in additional capitalsell tickets for the X-Train through our website, www.xtrainvacations.com , www.clubxtrain.com and through our rail partners such as Santa Fe Southern Railway www.sfsr.com. Our call centers and our terminal ticket counters expect to begin operations of our train service. The Company intendsadditionally sell through third party distributors such as Expedia, Travelocity, Orbitz and other internet travel agencies. We also expect to seek to raise these funds through the public or private sale of equity and/or debt securities. There is no assurance such funding will be available on terms acceptable to the Company, or at all. If the Company succeeds in raising such funds, it intendsable to use them for   railcar purchase, design, refurbishment and outfitting, Las Vegas depot design and construction, lease payments, UP and BNSF mileage fees, salaries and other professional fees and also information technology and corporate infrastructure development. Subject to obtaining needed funding,certain of the Company estimates thatdistribution links provided by the various agencies where we deploy Club X train service will start in 3rd quarter of 2013.cars on municipal rail services.
 
Prior to commencing operations of the train service, the Company will also need to secure all of the above agreements with Union Pacific Railroad
Pricing and BNSF. Additionally, we will have to finalize our haulage agreement with Amtrak.

The Company’s common stock is currently quoted on the OTCBB under the symbol XTRN. The company website is www.vegasxtrain.com. The contents of this site are not incorporated in this Memorandum.

The Company maintains offices at 6650 Via Austi Parkway, Suite 170, Las Vegas, Nevada 89119.  Revenue Management
 
Marketplace
There has been no regular passenger railOur fare structure for Club X Train commuter service between these two demographic areas for 13 years. The only major highway between Los Angeles and Las Vegas is Interstate 15 (I-15). Over 12 million people travel this corridor from LA to Las Vegas every year and as the LA population grows, so will the traffic on this highway. The forecast for traffic on I-15 is expected to be 17 million by 2030. It is congested and becoming increasingly so,comprised of multiple "buckets," with motor vehicle travelers experiencing substantial delays during peak travel times (e.g., Friday and Sunday afternoons to 6 hours or more). Withseat prices generally increasing fuel costs, increasingly restrictive highway capacity, and reduced air travel from LA to Las Vegas, a rail transportation product with a Vegas motif, is a viable alternative.

The Southern California traveler represents a thirdas the number of all visitors to Las Vegas and 95% of these travelers use their automobiledays prior to travel decreases. Prices in the highest pricing “bucket” can be up to Las Vegas. If we capture 237,00050% higher than the prices in the lowest “bucket.” All fares vary slightly depending upon the time of these drivers (2.0%day purchased. All of the total marketplace) in Year 1, it will fill our productfares are expected to its initial capacitybe one-way and achieve profitability with additional capacity being added through Year 5.non-refundable, although they may be changed for a fee.
 
 
5
 

TravelThe number of seats offered at each fare “bucket” of Club X Train will be established through a continual process of forecasting, optimization and competitive analysis. Booking history and seasonal trends are expected to be used to forecast anticipated demand. These historical forecasts will be combined with current bookings, upcoming events, competitive pressures and other factors to establish a mix of fares designed to maximize revenue. This ability to accurately adjust prices based on fluctuating demand patterns is expected to allow us to maximize revenue from Southern California to Las Vegas constitutesexisting capacity.
Our pricing on Club X Train seats has been guided by a major portion of visitor activity and is a financial foundation for the economypricing study conducted by RL Banks. The results of the Las Vegas region. Aboutstudy after an examination of seven other comparable rail passenger excursion services are as follows:
Ancillary Revenues
In addition to the basic X-Train service offering, our business model also includes many premium options that will serve as sources of ancillary revenue. Each X-Train passenger car is expected to be served by a third of all Vegas visitors are Californians, according to a survey by the Las Vegas Convention and Visitors Authority in 2010. Statistics collected by the Center for Business and Economic Research at UNLV show that of 44.5 million annual visitors that drove into the Las Vegas Valley in 2010, 27% arrived from Southern California.

Products and Services

Class 1 Railroad Access

The Burlington Northern Santa Fe Railroad and the Union Pacific Railroad are the two largest Class 1 railroadsbartender who will prepare premium alcoholic beverages not included in the United Statesbase ticket fare. Snacks and own the railroad right of way between Los Angeles, Californiavarious X-Train merchandising are also expected to be offered for purchase through our free mobile application.
We also aim to capture significant revenue as a “one stop” booking agent for our passengers’ complete itinerary. In these activities, commissions are expected to be derived through our call centers, our website, and Las Vegas, Nevada,our on-board mobile application, where we plan to have the “X” Train operate its service. The first step in allowing any passenger train service along their infrastructure is the completion of capacity planning and logistics studies in order for the Class I railroads to align the introduction of passenger service with their existing freight business.  Final scheduling of the “X” Train time slotcustomers will be finalized byallowed the third quarter of 2012.



AMTRAK

We entered into an arrangement with AMTRAK in September 2009 in connection withoption to book ahead for various attractions and necessities such as hotels, tours, restaurant reservations, and rental cars at our goal of reinstating passenger rail service on the Las Vegas/Los Angeles rail corridor. AMTRAK had planned, but abandoned the service when their Federal funding did not materialize in 2006. We then began negotiations with AMTRAK to take over their position to run service on the route. Now, almost 3 years later, we have executed with AMTRAK the first of several agreements on this route and they have agreed to provide  locomotive engineers, conductors, train servicing, maintenance, ticketing services, and a host of other services associated with the operations of The “X” Train.

Train Operations

The proposed route of The “X” Train is approximately 300 miles with the end points being Fullerton, California and then direct to Las Vegas, Nevada, The railroad Rights-of-Way (ROW) over which passenger train service could operate between Las Vegas and Los Angeles, California include privately and publicly owned segments. The privately-held portions are owned either by BNSF Railway (BNSF) or by Union Pacific Railroad (UPRR).acquired properties.
 
 
6
 

 
Las Vegas Railway Express, Inc. has negotiated a trackage rights agreement with Union Pacific Railroad allowing our “X” Train access to their portion of our route. This agreement from Union Pacific Railroad is pending execution subject to the concurrence of the Burlington Northern Santa Fe Railroad by 3rd quarter of 2012.

Our agreements with the owners of the track where our route will travel and our willingness to pay the owners a competitive market rate gives our “X” Train the status needed to meet our scheduled travel times. In railroad terms, the owners of the track will allow our “X” Train to pass slower and longer freight trains by moving to the numerous sidings along the route. Further, such track owners will ensure immediate  maintenance of any and all track maintenance and other services that we would rely on for prompt and safe service.

In addition, the Class 1 railroads have completed their capacity planning analysis. These projects are performed by the railroad companies and include a specific time and destination study of the exact consist we will be running on the proposed existing rail infrastructure in our route..
Haulage Agreements

Our agreement with AMTRAK would provide us with trained T&E crews, consulting and inspection services during design, development and construction and daily inspections services to ensure safe and reliable operations. In addition to the stated services, our agreement and operating partnership would bring the following strengths:

●Experience in operating passenger rail service
●Existing contracts with Class I railroads
●Liability insurance caps
●Experienced crew and maintenance teams
●Established ticketing infrastructure on- line for cross marketing opportunities
●Established relationships with host railroads

AMTRAK will not be involved in any customer service operations related to our stated customer service standards.Employees
 
7
Fullerton Station

As the Los Angeles departureWe currently have 12 employees.  Initially, we anticipate hiring a team of approximately 2 employees per car deployed to assist in train and arrival pointsdepot operations. Most of our service, Fullerton was chosen for a number of reasons.

●Within 26 miles from LA
●Located in the sixth largest population county in the United States
●Links to Los Angeles County via public roads, bus and rail routes
●Very affluent
●Tourism-centric
●Connection to MetroLink services where there are over 15,000 daily boarding’s with easy connection to Union Station passengers
●Strategic marketing and ridership partnership opportunities with MetroLink
●Proximity to Disneyland for Las Vegas marketing efforts

Las Vegas Station

Our Las Vegas arrival statementtrain personnel will be located within the Downtown Las Vegas gamingclassified as servers / entertainers and resort district boardingare expected not to be covered by any collective bargaining agreements. Our food and connectedbeverage personnel are expected to the recently remodeled Plaza Hotel and Casino. Adjacentbe provided on an outsourced basis to Union Pacific’s main line and Symphony Plaza, our re-modeled station (formally AMTRAK’s Las Vegas station for its Dessert Wind) was chosen for:

●Its parking and local transportation ease of ingress and egress
●Location along the Union Pacific Railroad mainline
●10 minutes from over 150,000 hotel rooms
●Impact of ridership views along the famous Las Vegas “Strip”
●Strategic alliances with Fremont Street Experience, Downtown Redevelopment Agency and Las Vegas Convention and Visitors Agency
●Low cost proximity to traveling staff accommodations


 

These are examples of specifications and drawing disclosures of the train and station concept that will help you understand what constitutes a complete design of the train, which are provided as examples only.  Actual designs will vary from these illustrations.

8
Our Business Strategy

Capture And Divert Current Automobile Travelers.  95% of the 12,000,000 annual visitors from the Southern California/Los Angeles market drive to Las Vegas. In order to fill the initial “X” Train, we need only to divert/convert 237,000 from their car to the train or just 2.0% of the total annual drivers. The two demographic areas have significantly grown their population bases without the needed automobile infrastructure growing with it. 95% of all Las Vegas travelers from the Southern California basin drive to Las Vegas using the I-15 corridor.
Operating Partnerships with Host Railroads to Deliver on Time Performance.  Our agreements and our ability to pay a “market rate” with the two host railroad companies will be designed to ensure we and they will have no issues with their freight business and that they will ensure a high on-time result.
Operating Partnerships with Los Angeles based commuter Rail services. Metrolink.  The “X” Train is leveraging various relationships in the Los Angeles Metro area and one of them is the co- marketing plan with Metrolink. Metrolink operates commuter passenger rail service in the greater Los Angeles metro area and services over 12 million riders annually. Metrolink has 55 local train stations which share the same right of way and/or connect to X Train planned station at  Fullerton, California. By joint venturing a marketing plan with Metrolink, “X” Train gains access to its ridership for travel to Las Vegas.
Metrolink is looking to expand its weekend ridership and the “X” Train is a viable candidate. Discussions have already begun with Metrolink towards forging a joint marketing and operations plan for “X” Train to have access to the 55 stations in the Metrolink network.
Capacity Management.  We plan to start out with two (2) roundtrips a week. We anticipate that our capacity will be nearly 1,200 passengers a day. If demand fluctuates, we anticipate that we will have the ability to add or subtract cars to meet the demands of each day. In year 2 of our Business Plan we plan to add two additional trains to our schedule and by year 5 we anticipate having 10 trains running on this route.
Low Operating Costs.Most transportation travel companies have very high fixed and variable costs associated with operating their businesses and can comprise up to 70% of all of their operating costs.  Our model projects a stabilized cost associated with hauling our train comprised of negotiated rates with the host railroads. Corporate overhead is minimal.Masterpiece Cuisine.
 
Competition

Las Vegas Railway Express’ “X” Train will have no conventionalOur primary competitor is Iowa Pacific Corp. of Chicago, Illinois. Iowa Pacific is a private company which operates freight short line businesses as well as six passenger rail service competing against our product. The 2012 Nevada State Rail Plan (www.nvrailplan.com) reviewed all the proposals for rail services for the year and Las Vegas Railway Express, Inc. was among the recommended projects.

There are two proposed high speed rail alternatives:

DesertXpress - Private Las Vegas Company

●High-speed rail
●Las Vegas to Victorville, CA (85 miles from Los Angeles)
●Requires  right-of-way acquisition
●$6 billion to construct new rail system
●7-10 years to complete if funded

Mag-Lev - American Mag-Lev Sponsor

●High-speed magnetic levitation technology
●Las Vegas to Anaheim, CA (25 miles from Los Angeles)
●Requires right-of-way acquisition
●$15 billion to construct
●15 years to complete if funded
excursions.
 
9

Intellectual Property
None.

Employees

As of March 31, 2012, we had 5 full-time employees, of whom 1 was in an administrative position and 4 were in management.

Item 1A.  Risk Factors

Risk FactorsRisks Related to Our Business

InvestingWe have a limited operating history upon which an evaluation of our prospects can be made.
Our future operations are contingent upon generating revenues and raising capital for operations.  Because we have a limited operating history, you will have difficulty evaluating our business and future prospects.
We also face the risk that we may not be able to effectively implement our business plan.  If we are not effective in addressing these risks, we may not operate profitably and we may not have adequate working capital to meet our Common Stock involves a high degree of risk. You should carefully considerobligations as they become due.
We currently have no revenues and are totally dependent upon the risks described below withproceeds from investors to fund our business.
We will have to fund all of our operations and capital expenditures from the other information included in this prospectus before making an investment decision. If any ofnet proceeds from investors, and future financings, as we have not yet generated revenues. There can be no assurance that we would be able to raise the possible adverse events described below actually occurs,additional funding needed to implement our business results of operationsplans or financial condition would likely suffer. In such an event, the market price ofthat unanticipated costs will not increase our Common Stock could decline and you could lose all or part of your investment.projected expenses.

We have a history of losses and a large accumulated deficitcan provide no assurance of our future operating results.
            We have not generated revenue since inception, and may not succeed in generating revenue. We have experienced net losses and negative cash flows from operating activities since inception and we may not be ableexpect such losses and negative cash flows to achieve profitabilitycontinue in the foreseeable future.
We have net losses As of $2,006,033March 31, 2014 and $1,791,983 forMarch 31, 2013, we had cash of $87,910 and $1,262,615, respectively. For the years ended March 31, 20122014 and 2011,2013, we incurred net losses of $13,052,020 and $6,766,091, respectively. As of March 31, 2012,2014, we havehad an aggregate accumulated deficit of $11,809,532.$31,627,643.  We may never achieve profitability. The opinion of our independent registered public accountants on our audited financial statements as of and for the year ended March 31, 2014 contains an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern.  Our ability to continue as a going concern is dependent upon raising capital from financing transactions and continued implementation of our business plan.
 Our business plan, in part, relies on our ability to acquire or partner with passenger rail companies.
We engage in attracting independently owned passenger rail operations to contract with us for either sales or operating rights contracts on their railroads.  Without these agreements, the Company would have no new operations from which it could operate its service.  The Company has no guarantee that it can secure these agreements in the future nor that the agreements it has can be maintained beyond their contract limits.
 We have incurred substantial indebtedness.
As of March 31, 2014 we have outstanding promissory notes of approximately $2,036,333.  In the past, we have been in default under this debt. There can be no assuranceassurances that we will be profitable in the future. If we are not profitable and cannot obtainraise sufficient capital we may have to cease our operations.
Changes in government policy could negatively impact demand for the Company’s services, impair its ability to price its services or increase its costs or liability exposure.
Changes in United States government policies could change the macroeconomic environment and affect demand for the Company’s services. Developments and changes in laws and regulations as well as increased economic regulation of the rail industry through legislative action and revised rules and standards applied by the U.S. Surface Transportation Board in various areas, including rates, services and access to facilities could adversely impact the Company’s ability to determine prices for rail services and significantly affect the revenues, costs and profitability of the Company’s business. Additionally, because of the significant costs to maintain its rail network, an increase in expenditures related to the maintenance of the rails owned by the Class I railroads could hinder the Company’s ability to maintain, improve or expand the rail network, facilities and equipment in order to accept or handle our Company’s increased demand. Federal or state spending on infrastructure improvements or incentives that favor other modes of transportation could also adversely affect the Company’s revenues.
The Company’s success depends on its ability to continue to comply with the significant federal, state and local governmental regulations to which it is subject.
The Company is subject to a significant amount of governmental laws and regulation with respect to its and practices, taxes, railroad operations and a variety of health, safety, labor, environmental and other matters. Failure to comply with applicable laws and regulations could have a material adverse effect on the Company. Governments may change the legislative and/or regulatory framework within which the Company operates without providing the Company with any recourse for any adverse effects that the change may have on its business. Federal legislation enacted in 2008 mandates the implementation of positive train control technology by December 31, 2015, on certain mainline track where intercity and commuter passenger railroads operate and where toxic-by-inhalation hazardous materials are transported. This type of technology is new and deploying it across our host railroads’ infrastructure may pose significant operating and implementation risks and could require significant capital expenditures.
As part of the Class I railroad operations, the Company will traverse rails that frequently transports chemicals and other hazardous materials, which could expose it to the risk of significant claims, losses and penalties.
The “host” or Class I railroads are required to transport these commodities to the extent of its common carrier obligation. An accidental release of these commodities could result in a significant loss of life and extensive property damage as well as environmental remediation obligations. The associated costs could have an adverse effect on the Company’s operating results, financial condition or liquidity. In addition, insurance premiums charged for some or all of the coverage currently maintained by the Company could increase dramatically or certain coverage may not be available to the Companygenerate sufficient revenue in the future if there is a catastrophic event related to rail transportation of these commodities.service our debt. If legal proceedings were commenced against us or we are unable to service our debt, then creditors may foreclose on the debt and seize our assets which may force us to suspend or cease operations altogether.

 
107
 
 
DownturnsOur indebtedness, combined with our other financial obligations and contractual commitments, could:
make it more difficult for us to satisfy its obligations with respect to the indebtedness and any failure to comply with the obligations under any of our debt instruments, including restrictive covenants, could result in further event of defaults under the loan agreements and instruments governing the indebtedness;
 require us to dedicate a substantial portion of any cash raised from financing or cash flow from future operations to payments on our indebtedness, thereby reducing funds available for working capital, capital expenditures, acquisitions, and other corporate purposes;
 increase our vulnerability to adverse economic and industry conditions, which could place us at a competitive disadvantage compared to competitors that have relatively less indebtedness;
 limit our flexibility in planning for, or reacting to, changes in business and the industry in which we operate; and
 limit our ability to borrow additional funds, or to dispose of assets to raise funds, if needed, for working capital, capital expenditures, acquisitions, and other corporate purposes.
We may incur significant additional indebtedness in the economyfuture. If we incur a substantial amount of additional indebtedness, the related risks that we face could adverselybecome more significant. Additionally, the terms of any future debt that we may incur may impose requirements or restrictions that further affect demand for the Company’s services.our financial and operating flexibility or subject it to other events of default.
 
Significant, extended negative changesIf We Fail To Comply With The Numerous Laws And Regulations That Govern Our Industry, Our Business Could Be Adversely Affected.
Our business must comply with extensive and complex rules and regulations of various federal, state and local government authorities.  We may not always have been and may not always be in domesticcompliance with these requirements.  Failure to comply with these requirements may result in, among other things, revocation of our ability to operate a conventional rail system, class action lawsuits, administrative enforcement actions and global economic conditions that impactcivil and criminal liability.
The Loss Of Any Of Our Executive Officers Or Key Personnel Would Likely Have An Adverse Effect On Our Business.
Our future success depends to a significant extent on the customers transported bycontinued services of our senior management and other key personnel, particularly Michael A. Barron.  The loss of the Company and mayservices of Mr. Barron or other key employees would also likely have an adverse effect on the Company’s operating results, financial condition or liquidity. Declines in economic growth and the United States travel industry all could result in reduced revenues in one or moreour business, units.
Negative changes in general economic conditions could lead to disruptions in the credit markets, increase credit risks and could adversely affect the Company’s financial condition or liquidity.
Challenging economic conditions may not only affect revenues due to reduced demand for many goods and services, but could result in payment delays and increased credit risk. Railroads are capital-intensive and may need to finance a portion of the building and maintenance of infrastructure as well as locomotives and other rail equipment. Economic slowdowns and related credit market disruptions may adversely affect the Company’s cost structure, its timely access to capital to meet financing needs and costs of its financings. Declines in the securities and credit markets could also affect the Company’s pension fund and railroad retirement tax rates, which in turn could increase funding requirements.
The Company is subject to stringent environmental laws and regulations, which may impose significant costs on its business operations.
The Company’s operations are subject to extensive federal, state and local environmental laws and regulations concerning, among other things, emissions to the air; discharges to waters; the generation, handling, storage, transportation and disposal of waste and hazardous materials; and the cleanup of hazardous material or petroleum releases. Changes to or limits on carbon dioxide emissions could result in significant capital expenditures to comply with these regulations with respect to the Company’s diesel locomotives, equipment, vehicles and machinery and its maintenance yards.  Emission regulations could also adversely affect fuel efficiency and increase operating costs. Further, local concerns on emissions and other forms of pollution could inhibit the Company’s ability to build facilities in strategic locations to facilitate growth and efficient operations. In addition, many land holdings are and have been used for industrial or transportation-related purposes or leased to commercial or industrial companies whose activities may have resulted in discharges onto the property. The Company’s subsidiaries have been and may continue to be subject to allegations or findings to the effect that they have violated, or are strictly liable under, these laws or regulations. The Company’s operating results, financial condition or liquidity could be adversely affected as a result of any of the foregoing, and it may be required to incur significant expenses to investigate and remediate environmental contamination.
Fuel supply availability and fuel prices may adversely affect the Company’s results of operations and financial condition or liquidity.condition.
 
Fuel supply availability could be impacted as a result of limitations in refining capacity, disruptionsOur Business Will Be Adversely Affected If We Are Unable To Protect Our Intellectual Property Rights From Third Party Challenges Or If We Are Involved In Litigation.
Trademarks and other proprietary rights if any are important to the supply chain, rising global demandour success and international politicalour competitive position.  Although we seek to protect our trademarks and economic factors. A significant reduction in fuel availability could impact the Company’s ability to provide transportation services at current levels, increase fuel costs and impact the economy. Each of these factors could have an adverse effect on the Company’s operating results, financial condition or liquidity. If the price of fuel increases substantially, the Company may be able to offset a significant portion of these higher fuel costsother proprietary rights through a fuel surcharge program or increasevariety of means, we cannot assure you that the actions we have taken are adequate to protect these rights.  We may also license content from third parties in ticket prices, which may result in loss of customers.
Severe weatherthe future and natural disastersit is possible that we could disrupt normal business operations, which would result in increased costs and liabilities and decreases in revenues.
The Company’s success will be dependent on its ability to operate its railroad system efficiently. Severe weather and natural disasters, such as tornados, flooding and earthquakes, could cause significant business interruptions and result in increased costs and liabilities and decreased revenues. In addition, damages to or loss of use of significant aspects offace infringement actions based upon the Company’s infrastructure due to natural or man-made disruptions could have an adverse effect on the Company’s operating results, financial condition or liquidity for an extended period of time until repairs or replacements could be made. Additionally, during natural disasters, the Company’s workforce may be unavailable, which could result in further delays. Extreme swings in weather could also negatively affect the performance of locomotives and rolling stock.content licensed from these third parties.
 
 
118
 

The Company’s operational dependencies may adversely affect results of operations, financial condition or liquidity.
 
Due to the integrated nature of the United States’ freight transportation infrastructure, the Company’s operations may be negatively affected by service disruptions of other entities such as ports and other railroads which interchange with the Company and its Class I railroad partners. A significant prolonged service disruption of one or more of these entities could have an adverse effectOur common stock is quoted on the Company’s resultsOTCQB, which may limit the liquidity and price of operations, financial conditionour common stock more than if our common stock were quoted or liquidity.listed on The Nasdaq Stock Market or a National Exchange.
 
Acts of terrorism or war, as well asOur securities are currently quoted on the threat of war, may cause significant disruptionsOTCQB, an inter-dealer automated quotation system for equity securities not included in the Company’s business operations.
Terrorist attacksNasdaq Stock Market.  Quotation of our securities on the OTCQB may limit the liquidity and any government responseprice of our securities more than if our securities were quoted or listed on The Nasdaq Stock Market or a national exchange.  Some investors may perceive our securities to those types of attacksbe less attractive because they are traded in the over-the-counter market.  In addition, as an OTCQB listed company, we do not attract the extensive analyst coverage that accompanies companies listed on other exchanges.  Further, institutional and warother investors may have investment guidelines that restrict or risk of war may adversely affectprohibit investing in securities traded on the Company’s results of operations, financial condition or liquidity. The Company’s use of the Class I railroad rail lines and facilities could be direct targets or indirect casualties of an act or acts of terror, which could cause significant business interruption and result in increased costs and liabilities and decreased revenues, which could have an adverse effect on operating results and financial condition. Such effects could be magnified if releases of hazardous materials are involved. Any act of terror, retaliatory strike, sustained military campaign or war or risk of warOTCQB.  These factors may have an adverse impact on the Company’s operating resultstrading and financial condition by causing unpredictable operating or financial conditions, including disruptionsprice of our host railroads or connecting rail lines, loss of critical customers or partners, volatility or sustained increase of fuel prices, fuel shortages, general economic decline and instability or weakness ofcommon stock.
Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern.
The accompanying financial markets. In addition, insurance premiums charged for some or all of the coverage currently maintained bystatements have been prepared assuming that the Company could increase dramatically,will continue as a going concern. As shown in the coverage available may not adequately compensate it for certain types of incidents and certain coverage’s may not be available toaccompanying financial statements, the Company inhas net losses of $13,052,020 and $6,766,091 for the future.years ended March 31, 2014 and 2013, respectively.  The Company also has an accumulated deficit of $31,627,643 and a negative working capital of $2,736,886 as of March 31, 2014, as well as outstanding convertible notes payable of $2,023,000, of which $1,750,000 is due on June 30, 2014.  Management believes that it will need additional equity or debt financing to be able to implement the business plan.  Given the lack of revenue, capital deficiency and negative working capital, there is substantial doubt about the Company’s ability to continue as a going concern.
Risks Related to Our Common Stock
 
The Company depends onapplication of the stability and availability of its information technology systems.
The Company relies on information technology in all aspects of its business. A significant disruption or failure of its information technology systems could result in service interruptions, revenue collections, safety failures, security violations, regulatory compliance failures and the inability to protect corporate information assets against intruders or other operational difficulties. Although the Company has taken steps to mitigate these risks, a significant disruption“Penny Stock” Rules could adversely affect the Company’s resultsmarket price of operations, financial condition or liquidity. Additionally, if the Company is unableour common stock and increase your transaction cost to acquire or implement new technology, it may suffer a competitive disadvantage, which could also have an adverse effect on the Company’s results of operations, financial condition or liquidity.sell those shares. .
 
The Company isSEC has adopted rule 3a51-1 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to various claims and lawsuits, and increases in the amount or severity of these claims and lawsuits could adversely affect the Company’s operating results, financial condition and liquidity.certain exceptions.  For any transaction involving a penny stock, unless exempt, Rule 15g-9 requires:
 
As part of its railroad operations,
  that a broker or dealer approve a person’s account for transactions in penny stocks; and
In order to approve a person’s account for transactions in penny stocks, the Company’s Class I railroad partners are exposedbroker or dealer must:
  obtain financial information and investment experience objectives of the person; and
  make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to various claims and litigation related to commercial disputes, personal injury, property damage, environmental liability and other matters. Personal injury claimsany transaction in a penny stock, a disclosure schedule prescribed by our employees and those of the host railroads are subjectSEC relating to the Federal Employees’ Liability Act (FELA), rather than state workers’ compensation laws. The Company believes that the FELA system,penny stock market, which, includes unscheduled awards and a reliance on the jury system, can contribute to increased expenses. Other proceedings include claims by third parties for punitive as well as compensatory damages, and a few proceedings purport to be class actions. Developments in legislative and judicial standards, material changes to litigation trends, or a catastrophic rail accident or series of accidents involving any or all of property damage, personal injury, and environmental liability could have a material adverse effect on the Company’s operating results, financial condition and liquidity.highlight form:
 
Most of the Company’s host railroad employees are represented by unions, and failure to negotiate reasonable collective bargaining agreements may result in strikes, work stoppages or substantially higher ongoing labor costs.
A significant majority of the Class I railroads employees are union-represented. These union employees work under collective bargaining agreements with various labor organizations. Wages, health and welfare benefits, work rules and other issues have traditionally been addressed through industry-wide negotiations. These negotiations have generally taken place over an extended period of time and have previously not resulted in any extended work stoppages. The existing agreements have remained in effect and will continue to remain in effect until new agreements are reached or the Railway Labor Act’s procedures (which include mediation, cooling-off periods and the possibility of presidential intervention) are exhausted. While the negotiations have not yet resulted in any extended work stoppages, if the Company or our Class I railroad partners are unable to negotiate acceptable new agreements, it could result in strikes by the affected workers, loss of business and increased operating costs as a result of higher wages or benefits paid to union members, any of which could have an adverse effect on the Company’s operating results, financial condition or liquidity.
  sets forth the basis on which the broker or dealer made the suitability determination; and
  that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
 
 
129
 
 
The unavailabilityGenerally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules.  This may make it more difficult for investors to dispose of qualified personnel could adversely affect the Company’s operations.
Changes in demographics, training requirementsour common stock and the unavailability of qualified personnel, particularly engineers and trainmen, could negatively impact the Company’s ability to meet demand for rail service. Recruiting and retaining qualified personnel, particularly those with expertisecause a decline in the railroad industry, are vital to operations. Although the Company has adequate personnel for the current business environment, unpredictable increases in demand for rail services may exacerbate the risk of not having sufficient numbers of trained personnel, which could have a negative impact on operational efficiency and otherwise have a material adverse effect on the Company’s operating results, financial condition or liquidity.

Our independent registered public accounting firm, in their report on the audited financial statements for the year ended March 31, 2012, states that there is a substantial doubt that we will be able to continue as a going concern.
Our auditors' report on our audited March 31, 2012 financial statements, and Note 2 to such financial statements, reflect the fact that without raising additional financing through loans or stock sales, it would be unlikely for us to continue as a going concern.  The business plan requires extensive infrastructure and capital expenditures prior to commencement of revenue generating operations. There can be no assurance that we will be able to raise additional capital and if we are unable to do so we may have to cease operations.

The Company has identified material weaknesses in internal control over financial reporting.
The Company has concluded that its internal control over financial reporting as of March 31, 2012 is ineffective because of material weakness identified related to inadequate technical accounting review of transactions which resulted in a restatement of the 2012 and 2011 financial statements. A failure to implement improved internal controls, or difficulties encountered in their implementation or execution, could cause the Company future delays in its reporting obligations and could have a negative effect on the Company and the trading price of the Company’s common stock. See “Item 9A. Controls and Procedures,” for more information on the status of the Company’s internal control over financial reporting.
RISKS RELATING TO OUR COMMON STOCK

We have not paid dividends on common stock in the past and do not expect to pay dividends in the future.  Any return on investment may be limited to themarket value of our common stock.

  the broker or dealer receives from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
We do not anticipate paying dividends.
We have never paid any cash dividends on our common stock since our inception, and we do not anticipate paying cash dividends in the foreseeable future.  The paymentAny dividends, which we may pay in the future, will be at the discretion of dividends on our common stock would depend on earnings, financial condition and other business and economic factors affecting it at such time as the Board of Directors may consider relevant.  Ifand will depend on our future earnings, any applicable regulatory considerations, our financial requirements and other similarly unpredictable factors.  For the foreseeable future, we do not pay dividends,anticipate that earnings, if any, will be retained for the operation and expansion of our common stock may be less valuable because a return on your investment will only occur if its stock price appreciates.business.

Possible conflicts of interest exist in related party transactions.
Our Board of Directors consists of Michael A. Barron, Gilbert H. Lamphere, John D. McPherson, John O’Connor and George Rebensdorf. These individuals are either executive officers, directors or principal shareholders of the Company.  Thus, there has in the past existed the potential for conflicts of interest in transactions between the Company and such individuals or entities in which such individuals have an interest.
There is a limited market for our common stock which may make it more difficult for stockholders to dispose of your stock.their shares.

Our common stock is currently quoted on the Over the Counter Bulletin BoardOTCQB under the symbol "XTRN".  There is a limited trading market for our common stock.  Accordingly, there can be no assurance as to the liquidity of any markets that may develop for our common stock, the ability of holders of our common stock to sell our common stock, or the prices at which holders may be able to sell our common stock.

A sale of a substantial number of shares of our common stock may cause theThe price of our common stock is volatile, which may cause investment losses for our stockholders.
            The market for our common stock is highly volatile, having ranged in the last twelve months from a low of $0.15 to decline.

If our stockholders sell substantial amountsa high of $1.68 on the OTCQB. The trading price of our common stock on the OTCQB is subject to wide fluctuations in response to, among other things, quarterly variations in operating and financial results, and general economic and market conditions. In addition, statements or changes in opinions, ratings, or earnings estimates made by brokerage firms or industry analysts relating to our market or relating to us could result in an immediate and adverse effect on the market price of our common stock. The highly volatile nature of our stock price may cause investment losses for our shareholders. In the past, securities class action litigation has often been brought against companies following periods of volatility in the public market price of their securities. If securities class action litigation is brought against us, such litigation could result in substantial costs while diverting management’s attention and resources.
Our common stock could be further diluted as the result of the issuance of additional shares of common stock, convertible securities, warrants or options.
            In the past, we have issued common stock, convertible securities (such as convertible debentures and notes) and warrants in order to raise money. We have also issued options and warrants as compensation for services and incentive compensation for our employees and directors. We have shares of common stock reserved for issuance upon the exercise of certain of these securities and may increase the shares reserved for these purposes in the future. Our issuance of additional common stock, convertible securities, options and warrants could affect the rights of our stockholders, result in a reduction in the overall percentage holdings of our stockholders, could put downward pressure on the market price of our common stock, could fall.  These sales also may make it more difficult forresult in adjustments to exercise prices of outstanding warrants, and could obligate us to sell equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.

Ourissue additional shares of common stock is subject to the "Penny Stock" rules of the SEC and the trading market in our securities is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.

The SEC has adopted Rule 3a51-1 which establishes the definition of a "penny stock", for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions.  For any transaction involving a penny stock, unless exempt, Rule 15g-9 requires:
●that a broker or dealer approve a person's account for transactions in penny stocks; and
●that the broker or dealer receives from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

In order to approve a person's account for transactions in penny stocks, the broker or dealer must:

●obtain financial information and investment experience objectives of the person; and
●make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
of our stockholders.
 
 
1310
 

The broker
Shares eligible for future sale may adversely affect the market.
            From time to time, certain of our stockholders may be eligible to sell all or dealer must also deliver, priorsome of their shares of common stock by means of ordinary brokerage transactions in the open market pursuant to any transaction in a penny stock, a disclosure schedule prescribed byRule 144 promulgated under the SEC relatingSecurities Act, subject to certain limitations. In general, pursuant to amended Rule 144, non-affiliate stockholders may sell freely after six months subject only to the penny stock market, which, in highlight form:

●sets forth the basis on which the broker or dealer made the suitability determination; and
●that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

Disclosure also has to be made about the risks of investing in penny stocks in bothcurrent public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions.  Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

Generally, brokersrequirement. Affiliates may be less willing to execute transactions in securitiessell after six months subject to the "penny stock" rules.  This may make it more difficult for investors to disposeRule 144 volume, manner of sale (for equity securities), and current public information and notice requirements. Any substantial sales of our common stock and causepursuant to Rule 144 may have a decline inmaterial adverse effect on the market valueprice of our common stock.

As an issuer of “penny stock”, the protection provided by the federal securities laws relating to forward looking statements does not apply to us.
 
Although federal securities laws provide a safe harbor for forward-looking statements madeA large percentage of our stock is owned by a public company that files reports under the federal securities laws, this safe harbor is not available to issuersrelatively few people, including officers and directors.
As of penny stocks.March 31, 2014, our officers and directors beneficially owned approximately 20.17% of our outstanding common stock.  As a result,  we will not havethese stockholders could, if they were to act together, affect the benefitoutcome of this safe harbor protectionstockholder votes, which could, among other things, affect elections of directors, delay or prevent a change in the event of any legal action based upon a claimcontrol or other transaction that the material provided by us contained a material misstatement of fact or was misleading in any material respect because of our failure to include any statements necessary to make the statements not misleading. Such an action could hurt our financial condition.might be beneficial other stockholders.

Item 1B.  Unresolved Staff Comments.Comments

Not applicable.
applicable
 
Item 2.  Properties.

As of March 31, 2012,2014, we lease approximately 2,6007,079 square feet of general office space in premises located at 6650 Via Austi Parkway, Suite 170 and 140, Las Vegas, Nevada. Our lease for this space expires in February 2013April 2016 and provides for monthly payments of $5,800.$15,790.

Item 3.  Legal Proceedings.
 
In the ordinary course of business, the Company may be or has been involved in legal proceedings from time to time. As of the date of this annual report on Form 10-K, there have been no material changes to any legal proceedings relating to the Company which previously were not reported.

Item 4.  MINE SAFETY DISCLOSURESMine Safety Disclosure

Not applicable.

11
PART II

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our common stock is currently quoted on the Over-The-Counter Bulletin Board under the symbol “XTRN”.  On June 6, 2012,25, 2014, the last trade of our stock was at the price of $0.065$0.12 per share.  The following table sets forth the high and low prices per share of our common stock for each period indicated.  These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

  Common Shares 
Year Ended March 31, 2012: High  Low 
Quarter Ended June 30, 2011 $0.27  $0.15 
Quarter Ended September 30, 2011 $0.19  $0.095 
Quarter Ended December 31, 2011 $0.13  $0.07 
Quarter Ended March 31, 2012 $0.11  $0.06 
         
Year Ended March 31, 2011: High  Low 
Quarter Ended June 30, 2010 $0.25  $0.13 
Quarter Ended September 30, 2010 $0.35  $0.18 
Quarter Ended December 31, 2010 $0.33  $0.08 
Quarter Ended March 31, 2011 $0.29  $0.11 
  Common Shares 
Year Ended March 31, 2014: High  Low 
Quarter Ended June 30, 2013 $2.20  $1.40 
Quarter Ended September 30, 2013 $1.60  $0.80 
Quarter Ended December 31, 2013 $1.50  $0.73 
Quarter Ended March 31, 2014 $1.35  $0.47 
         
Year Ended March 31, 2013: High  Low 
Quarter Ended June 30, 2012 $1.80  $1.40 
Quarter Ended September 30, 2012 $4.00  $1.40 
Quarter Ended December 31, 2012 $3.80  $1.40 
Quarter Ended March 31, 2013 $2.60  $1.80 

14
Number of Stockholders

As of March 31, 2012,2014, there were 188345 stockholders of record of our common stock.  

Dividend Policy

We have never declared or paid any cash dividends on our common stock. We do not anticipate paying any cash dividends to stockholders in the foreseeable future. In addition, any future determination to pay cash dividends will be at the discretion of the Board of Directors and will be dependent upon our financial condition, results of operations, capital requirements, and such other factors as the Board of Directors deem relevant.


Equity Compensation Plan Information as of March 31, 20122014

Equity Compensation Plan InformationEquity Compensation Plan InformationEquity Compensation Plan Information 
Plan category 
Number of
securities to
be issued
upon
exercise of outstanding
options,
warrants
and rights
 
(a)
 
Weighted-
average
 exercise
price of
outstanding
 options,
warrants
and rights
 
(b)
 
Number of
securities
remaining
available for
future
 issuance
under equity compensation
plans
(excluding
securities
 reflected in
 column (a))
 
(c)
 
Number of securities
to be issued upon
exercise of outstanding
options,
warrants and rights
(a)
 
Weighted-average
 exercise price of
outstanding options,
warrants and rights
(b)
 
Number of securities
remaining available
for future issuance
under equity
compensation plans
 (excluding securities
 reflected in column (a))
(c)
 
Equity compensation plans approved by security holders - $- 20,000,000 100,000 $10 900,000 
Equity compensation plans not approved by security holders 2,000,000 $0.14 - 1,569,842 $ 5.04  - 
Total 2,000,000 $- 20,000,000 1,669,842 $5.04 900,000 
12
 
Recent Sales of Unregistered Securities.

On May 3, 2012, Las Vegas Railway Express, Inc. (the “Company”) entered into an a subscription agreement with an accredited investor, pursuant to which the Company sold 3,000,000 shares of common stock for an aggregate purchase price of $150,000. On May 23, 2012 the Company sold 1,500,000 shares of common stock for an aggregate purchase price of $75,000 and on May 31, 2012 the Company sold 8,300,000 shares of common stock for an aggregate purchase price of $415,000. In connection with the foregoing, the Company relied on the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended, for transactions not involving a public offering.None.

Purchases of Equity Securities by the Issuer and Affiliated Purchaser

None.

Item 6.  Selected Financial Data

Not applicable.

Forward-Looking Statements

Statements contained in this Form 10-K that are not historical facts are forward-looking statements.  In addition, words such as “believes,” “anticipates,” “expects,” “intends” and similar expressions are intended to identify forward-looking statements.  Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements or events, or timing of events, to differ materially from any future results, performance or achievements or events, or timing of events, expressed or implied by such forward-looking statements.  We cannot assure that we will be able to anticipate or respond timely to the changes that could adversely affect our operating results in one or more fiscal quarters.  Results of operations in any past period should not be considered indicative of results to be expected in future periods.  Fluctuations in operating results may result in fluctuations in the price of our securities.

15

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our financial statements and notes thereto included elsewhere herein.

Overview

Las Vegas Railway Express, Inc. (the "Company”, “Las Vegas Railway”“Company”, “we”, “our”“us”, or “us”“our”), a Delaware corporation, is a company whose plan is to re-establish a conventional rail passenger train service betweenformerly known as Liberty Capital Asset Management, Inc., acquired 100% of the issued and outstanding stock of Las Vegas Railway Express, a Nevada corporation on January 21, 2010.  In connection with the acquisition, the Company changed its name to Las Vegas Railway Express, Inc. and changed its business plan to one of developing passenger rail transportation and ancillary ticketing and reservation services between the Los Angeles usingarea and Las Vegas, Nevada. In November 2012, the Company executed an agreement with Union Pacific Railroad which allowed the Company to operate its passenger service on their property from Daggett, California to Las Vegas, a distance of 175.8 miles.  In May 2013, the Company and Amtrak, which was planning to haul the Company’s rail cars from Los Angeles to Las Vegas in regular service, was informed by BNSF Railway (“BNSF”) that it would not approve Amtrak’s request to operate on the BNSF system. Although the Company tried several alternative approaches to satisfy BNSF’s denial, none were accepted and both Amtrak and the Company were forced to suspend their efforts to establish the planned service over the Cajon Pass route.

Our assessment is that when we started, BNSF had 3,000 locomotives in mothballs and 2,000 crews furloughed. Traffic through Cajon Pass was at 86 trains per day with a total capacity of 160 trains per day. In short, they had capacity.  Today, all locomotives are back in service and BNSF is leasing 1,000 more. Oil is being hauled over this corridor and capacity is at a premium with 120+ trains per day over the pass. With pending capacity issues, BNSF is reserving its rail franchise for freight and has closed off any access via the Cajon pass.
During the development period for the Los Angeles to Las Vegas route, the company became visible in the press and several independently owned passenger rail companies discussed how the Club X style could be deployed on existing freight railroadexcursion lines. The development concept isCompany began to provide a Las Vegas style experiencefocus its infrastructure towards acquiring independently owned passenger rail operations throughout the United States and providing upscale commuter Club X railcars for various state Department of Transportation municipal transportation agencies.

13
On April 23, 2014, the Company entered into an agreement with the Santa Fe Southern Railway, located in Santa Fe New Mexico, to manage the passenger services on the railroad. The Company will be adding its Club X cars to the train which would traverseconsists. Operations on the route are planned routeto commence in approximately 5:00 hours. We planJuly 2014.  Subsequent routes will follow with a similar deployment format.
The Company owns outright a series of 16 bi-level passenger railcars as well as two leased cars acquired through an agreement with Mid America Leasing Company. These cars are planned for use in the deployment of cars on our future affiliated routes and acquired companies. The first two cars have been completed and are scheduled to operate a single travel route marketed primarilygo into service on the Santa Fe Southern Railway in July of 2014. The remaining cars are scheduled to a leisure traveler frombe refurbished during the Southern California basin  enabling us to sell rail travel as a stand-alone operation bundled with hotel rooms and other travel related services. Our unique travel option will offer a diversified product that will set us apart from travel related optionsremainder of automobile and air.2014.
 
Critical Accounting Policies

The preparation of our financial statements and notes thereto requires management to make estimates and assumptions that affect the amounts and disclosures reported within those financial statements. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, workers' compensation costs, collectiblescollection of accounts receivable, andreceivables, impairment of goodwill, and intangible assets, contingencies, litigation and income taxes. Management bases its estimates and judgments on historical experiences and on various other factors believed to be reasonable under the circumstances. Actual results under circumstances and conditions different than those assumed could result in material differences from the estimated amounts in the financial statements. There have been no material changes to these policies during the fiscal year.

Intangible Assets:

Goodwill represents the excess of purchase price over tangible and intangible assets acquired, less liabilities assumed arising from the acquisition of the train businessLas Vegas Railway Express on November 23, 2009.January 21, 2010.  Goodwill is not amortized, but is reviewed for potential impairment on an annual basis at the reporting unit level.  On March 31, 2012, asAs required by the Intangible“Intangibles – Goodwill and Other” topic of Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”), the Company conducted an analysis of the goodwill on its single reporting unit using the Company’s market capitalization (based on Level 1 inputs). For the fiscal years ending March 31, 2012 and 2011, our assessment2014.

Long-Lived Assets:

In accordance with FASB ASC 360-10, the Company evaluates long-lived assets for impairment foundwhenever events or changes in circumstances indicate that due totheir net book value may not be recoverable. When such factors and circumstances exist, the continued progress towardCompany compares the measurement goalsprojected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amount. Impairment, if any, is based on the excess of the business plan that therecarrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is no impairmentrecorded in the period in which the determination is made.
Deposit with Union Pacific:

On November 8, 2012, the Company entered into an agreement with Union Pacific Railroad Company whereby the Company was granted a nonexclusive operating right to use Union Pacific railroad track between Daggett, California and Las Vegas, Nevada, subject to certain terms and conditions.  In connection with this agreement, the Company made an earnest money deposit of goodwill.$600,000 and was required to meet certain financial conditions, including the provision of a letter of credit in favor of Union Pacific in the amount of $27,444,145 on or before October 31, 2013.   The Company haselected to terminate this agreement on October 31, 2013 as it no accumulated impairment losseslonger planned to operate on goodwill.the Union Pacific Railroad Company as a regularly scheduled passenger train.  As a result, the Company determined the $600,000 deposit was impaired and expensed the amount during the year ended March 31, 2014 as a component of selling, general and administrative expenses.

Income Taxes:

The Company accounts for income taxes under FASB ASC 740 "Income Taxes.Taxes."  Under the asset and liability method of FASB ASC 740, deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  The deferred tax assets of the Company relate primarily to operating loss carryforwards for federal income tax purposes. A full valuation allowance for deferred tax assets has been provided because the Company believes it is not more likely than not that the deferred tax asset will be realized. Realization of deferred tax assets is dependent on the Company generating sufficient taxable income in future periods.

The Company’s goodwill is deductible for tax but not for book. This difference creates a deferred tax liability, which cannot be matched with the Company’s deferred tax asset. As a result, the Company cannot net it with its net operating loss carryforward and therefore records a deferred tax liability to reflect the future non-deductibility of its goodwill asset. The deferred tax liability at March 31, 2012 and 2011 was $42,343 and $0, respectively.
14
 
The Company periodically evaluates its tax positions to determine whether it is more likely than not that such positions would be sustained upon examination by a tax authority for all open tax years, as defined by the statute of limitations, based on their technical merits. As of March 31, 20122014 and 2011,2013, the Company has not established a liability for uncertain tax positions.

Stock-Based Compensation:Share Based Payment:

The Company issues stock, options and warrants as share-based compensation to employees and non-employees.

The Company accounts for its stock-basedshare-based compensation to employees in accordance FASB ASC 718.  Stock-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the requisite service period. 

16
The Company accounts for stock-basedshare-based compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC 505-50 “Equity - Based Payments to Non-Employees.Non-Employees.” Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The final fair value of the share-based payment transaction is determined at the performance completion date. For interim periods, the fair value is estimated and the percentage of completion is applied to that estimate to determine the cumulative expense recorded.

The Company values compensatory stock compensation based on the market price on the measurement date. As described above, for employees this is the date of grant, and for non-employees, this is the date of serviceperformance completion.

The Company values stock options and warrants that do not qualify as derivative instruments using the Black-Scholes option pricing model.  There were no warrants or options grantedissued during the years ended March 31, 20122014 or 2011 for which the Company used2013.  There were no warrants valued using the Black-Scholes model.model during the year ended March 31, 2014.  
 
Certain compensatory warrants qualify as derivative instruments and are valued using the binomial lattice method. See Note 7 to the financial statementsdiscussion below regarding accounting for derivative liabilities.
Derivative Liabilities:

In connection with the private placement of Convertible Notes beginning in February 2013, the Company became contingently obligated to issue shares of common stock in excess of the 200 million authorized under the Company’s certificate of incorporation.  Consequently, the ability to settle these obligations with shares would be unavailable causing these obligations to potentially be settled in cash. This condition creates a derivative liability.

15
The Company has a sequencing policy regarding share settlement wherein instruments with the earliest issuance date would be settled first. The sequencing policy also considers contingently issuable additional shares, such as those issuable upon a stock split, to have an issuance date to coincide with the event giving rise to the additional shares.

Using this sequencing policy, all instruments convertible into common stock, including warrants and the conversion feature of notes payable, issued on and subsequent to November 30, 2012 had been accounted for as derivative liabilities.

On December 2, 2013, the Company effected a one-for-twenty reverse stock split of the Company’s issued and outstanding common stock shares.  As a result, the Company’s outstanding shares of common stock and common stock equivalents no longer exceeded the number of authorized shares.  As a result, as of December 2, 2013, these instruments that were accounted for as derivative liabilities were reclassified as equity.

The Company also has certain warrants and notes payable with elements that qualify as derivatives. The warrants have anti-dilution clauses that prevent calculation of the ultimate number of shares that may be issued upon exercise, and four outstanding notes payable that had a variable conversion feature that similarly prevented the calculation of the number of shares into which they were convertible.

The Company values these warrants and notes payable using the binomial lattice method.  The resulting liability is valued at each reporting date and the change in the liability is reflected as change in derivative liability in the statement of operations (see Note 7).

Fair Value of Financial Instruments:

The Company's financial instruments as defined by FASB ASC 825-10-50 include cash, trade accounts receivable, accountsnotes payable and accrued expenses.  All instrumentsderivative liabilities.  Derivative liabilities are accounted for on a historical cost basis, which, due to the short maturityrecorded at fair value.  The principal balance of these financial instruments, approximates fair value at March 31, 2012.  The amounts shown for notes payable approximateapproximates fair value because current interest rates and terms offered to the Company for similar debt are substantially the same.

FASB ASC 820 defines fair value, establishes a framework for measuring fair value, in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. FASB ASC 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:

Level 1. Observable inputs such as quoted prices in active markets;

Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3. Unobservable inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions.
The process for determining fair value using unobservable inputs is generally more subjective and involves a high degree of management judgment and assumptions. These assumptions may have a significant effect on our estimates of fair value, and the use of different assumptions as well as changes in market conditions could have a material effect on our results of operations or financial condition.
 
1716
 
 
Results of Operations

The following are the results of our continuing operations for the year ended March 31, 20122014 compared to the year ended March 31, 2011.2013:
  Year Ended       
  March 31,  March 31,       
  2014  2013  $ Change  % Change 
             
Operating Expenses:            
Compensation and payroll taxes $2,876,141  $3,034,474  $(158,333)  -5.2%
Selling, general and administrative  1,709,461   651,503   1,057,958   162.4%
Professional fees  1,873,146   1,616,524   256,622   15.9%
Impairment loss  843,697   -   843,697   100.0%
Depreciation expense  7,292   1,976   5,316   269.0%
  Total expenses  7,309,737   5,304,477   2,005,260   37.8%
                 
Loss from continuing operations  (7,309,737)  (5,304,477)  (2,005,260)  37.8%
                 
Other income (expense)                
Interest expense  (7,960,987)  (2,198,205)  (5,762,782)  262.2%
Change in derivative liability  2,162,790   270,466   1,892,324   699.7%
   Total other income (expense)  (5,798,197)  (1,927,739)  (3,870,458)  200.8%
                 
Net loss from continuing operations before provision for income taxes  (13,107,934)  (7,232,216)  (5,875,718)  81.2%
Benefit from (provision for) income taxes  55,914   (13,571)  69,485   -512.0%
Net loss from continuing operations  (13,052,020)  (7,245,787)  (5,806,233)  80.1%
                 
Discontinued operations:                
Income from discontinued operations, net of income taxes  -   479,696   (479,696)  -100.0%
                 
Net loss $(13,052,020) $(6,766,091) $(6,285,929)  92.9%
Revenue

             
  Year Ended          
  March 31,  March 31,       
  2012  2011  $ Change  % Change 
 (Restated)          
             
Operating Expenses:            
Compensation and payroll taxes $1,222,013  $780,849  $441,164   56.5%
Selling, general and administrative  233,577   314,835   (81,258)  -25.8%
Professional fees  268,731   752,052   (483,321)  -64.3%
Depreciation expense  320   -   320   100.0%
  Total expenses  1,724,641   1,847,736   (123,095)  -6.7%
                 
Loss from continuing operations  (1,724,641)  (1,847,736)  123,095   -6.7%
                 
Other (expense) income                
Interest income  -   3,000   (3,000)  -100.0%
Interest expense  (295,131)  (198,813)  (96,318)  48.4%
Change in derivative liability  37,086   -   37,086   100.0%
Loss on disposition of assets  -   (2,965)  2,965   -100.0%
Gain on extinguishment of debt  -   238,374   (238,374)  -100.0%
   Total other (expense) income  (258,045)  39,596   (297,641)  -751.7%
                 
Net loss from continuing operations before tax provision  (1,982,686)  (1,808,140)  (174,546)  9.7%
Provision for income taxes  42,343   -   42,343   100.0%
Net loss from continuing operations  (2,025,029)  (1,808,140)  (216,889)  12.0%
Discontinued operations:                
Income from discontinued operations  18,996   16,157   2,839   17.6%
                 
Net loss $(2,006,033) $(1,791,983) $(214,050)  11.9%
                 

Revenue
During the years ended March 31, 20122014 and 2011,2013, our railcar operations have yet to generate any revenue.

Operating Expenses

Compensation and payroll taxes increaseddecreased by $441,164,$158,333, or 56.5%5.2%, during the year ended March 31, 20122014 as compared to 2011.2013.  The increasedecrease in compensation expense in the current year is due primarily to higher costs in 2013 related to the issuance of warrants to directors and officers as compensation in November 2012, which resulted in additional expenses of approximately $1.2 million.  During the year ended March 31, 2014, the decrease in costs were offset by the hiring of additional full-time employees, addition of board members and issuing stock grants and warrants for compensation.  Selling, general and administrative expenses increased by $1,057,958, or 162.4%, during the year ended March 31, 2014 as compared to replace consultants that were previously used, includingthe same period in 2013 primarily due to the impairment of our Chief Executive Officerdeposit with Union Pacific of $600,000 resulting from the termination of our agreement with them in October 2013, as well as increases in director and Chief Operating Officer.  Accordingly, weofficers’ insurance and travel expenses related to raising capital.  We had a reduction ofan increase in our professional fee expenses during the year ended March 31, 20122014 of $483,321.  Selling, general$256,622, or 15.9%, due primarily to legal, consulting and administrative expenses decreased by $81,258, or 25.8% during 2012 primarily due to higher costs in 2011 associated with travel expensesaccounting services and $360,726 related to raising capital, as well as higherthe amortization of expenses associated with officers auto allowances and rent expense.from warrants issued to consultants.  We had an impairment loss of $843,697 during the year ended March 31, 2014 resulting from the impairment of our goodwill.

Other (Expense) Income

Interest expense increased by $96,318, or 48%,$5,762,782 during 2012the year ended March 31, 2014 as compared to the year ended March 31, 2013.  The increase is due primarily to the issuance of additional convertible notes payable in the current year as compared to 2013.  The conversion feature associated with the convertible notes and the value of warrants issued in connection with the convertible notes have been accounted for as discounts to the convertible notes payable.  The discount is being amortized into interest expense over the maturity date of the convertible notes.  This resulted in interest expense during the year ended March 31, 2014 of $4,835,032, compared to $2,165,385 in 2013, representing an increase of $2,669,647.  In addition, we had capitalized debt issuance costs related to these convertible notes payable, which are being amortized over the maturity date of the notes of February 1, 2014, which resulted in additional interest expense during the year ended March 31, 2014 of $637,680, compared to $15,472 during the year March 31, 2013.  During the year ended March 31, 2014, we also had debt conversion expense of $2,217,878 resulting from the induced conversion of convertible debt during February 2014 at a reduced conversion rate, which has been reflected as interest expense.  There was no such amount during the year ended March 31, 2013.

17
The change in the value of derivative liabilities amounted to $2,162,790 for the year ended March 31, 2014 as compared to $270,466 for the year ended March 31, 2013.  The increase was primarily due to the increasedecrease in debtvalue of derivative liabilities outstanding during the period, as well as the issuance of warrants in connection with debt during 2012.  Our change in derivative liability amounted to $37,086 during 2012 resulted in the decrease in the valuation of derivative transactions entered into during 2012.  There was no corresponding amount during 2011, as we had no derivatives during that timeframe.year.

Liquidity and Capital Resources

Liquidity is the ability of a company to generate funds to support asset growth, satisfy disbursement needs, maintain reserve requirements and otherwise operate on an ongoing basis. The Company has no operating revenues and is currently dependent on debt financing and sale of stockequity to fund operations.

We have experiencedAs shown in the accompanying financial statements, the Company has net losses of $13,052,020 and negative cash flows from operations since our inception.  We have sustained losses from continuing operations of $2,006,033 and $1,791,983$6,766,091 for the years ended March 31, 20122014 and 2011,2013, respectively.  

We continueThe Company also has an accumulated deficit of $31,627,643 and negative working capital of $2,736,886 as of March 31, 2014, as well as outstanding convertible notes payable of $2,023,000, of which $1,750,000 is due on June 30, 2014.  Management believes that it will need additional equity or debt financing to actively pursue various funding options, including equity offerings and debt financings, to obtain additional funds to continue the development of our products and bring them to commercial markets. There can be no assurance that we will be able to consummate any fund raising transactions on terms acceptableimplement its business plan.  Given the lack of revenue, capital deficiency and negative working capital, there is substantial doubt about the Company’s ability to us or at all.  continue as a going concern.

18
We believe that the successful growth and operation of our business is dependent upon our ability to do any or all of the following:
●·obtain adequate sources of debt or equity financing to pay unfunded operating expenses and fund long-term business operations; and
●
·manage or control working capital requirements by controlling operating expenses.

Management is attempting to raise additional equity and debt to sustain operations until it can market its services and achieves profitability.  The accompanying financial statements have been prepared assumingsuccessful outcome of future activities cannot be determined at this time and there are no assurances that, if achieved, the Company will continue as a going concern. Although a substantial portion of the Company’s cumulative net loss is attributablehave sufficient funds to discontinued operations, management believes that it will need additional equityexecute its intended business plan or debt financing to be able to implement the business plan.  These matters raise substantial doubt about the Company’s ability to continue as a going concern.  There can be no assurance that we will be successful in achieving our long-term plans as set forth above, or that such plans, if consummated, will enable us to obtain profitable operations or continue in the long-term.

The Company raised $ 383,254 during the year ended March 31, 2012 from private offerings of stock.  The Company also received an additional $788,333 from the issuance of debt.

On April 27, 2012 the Company commenced a private offering of common stock to raise interim funds (up to $1.5MM) through a private offering memorandum. As of June 22, 2012, the Company has received gross proceeds of $1,120,000 from the sale of 22,400,000 shares of common stock. The Company anticipates this will provide the Company with sufficientgenerate positive operating cash for at least one year.  The Company intends to seek such funding through private or public sales of equity and/or debt securities. There is no assurance such funding will be available on terms acceptable to the Company, or at all.results.
 
Cash Flows

Net cash used in operating activities for the years ended March 31, 20122014 and 2011 was $1,131,0682013 were $4,054,795 and $1,407,834,$2,783,090, respectively.  The primary sources of cashCash used in operating activities for the years ended March 31, 20122014 and 20112013 were fromprimarily due to net losses of $2,006,033$13,052,020 and $1,791,983. The non-cash components of operating expenses during$6,766,091, respectively.  During the yearsyear ended March 31, 2012 and 2011 primarily related to share based compensation2014, the net loss included significant non-cash expenses $685,881 and $625,993, respectively, as well asof $644,540 in stock issued for services, $4,835,032 in amortization of discounts on notes payable, $637,680 in amortization of debt offering costs, $600,000 for the impairment of our deposit with Union Pacific, $843,697 for the impairment loss associated with our goodwill, and $2,217,878 in debt conversion expenses.  During the year ended March 31, 2013, the net loss included significant non-cash expenses of $1,538,677 for stock issued for services, $1,201,370 in warrants issued for services, $2,096,482 in amortization of discounts of $257,653on notes payable, and $166,930, respectively.$80,524 for stock option compensation.

Net cash used forin investing activities during the year ended March 31, 20122014 amounted to $297,910, which represented property and equipment acquisitions primarily related to the acquisition of rail cars and related costs.  Net cash used in investing activities during the year ended March 31, 2013 was $3,200$980,122, which included $600,000 in spending for a deposit made with Union Pacific pursuant to an operating agreement signed, as well as $380,122 in property and $0 forequipment acquisitions, primarily due to the purchaseacquisition of a copier.  We had no capital expenditures during 2011.rail cars and other capitalized costs towards the railroad project. 
18
 
Net cash provided by financing activities for the yearsyear ended March 31, 20122014 amounted to $3,178,000 which consisted of $275,000 in proceeds from the sale of common stock and 2011 were $1,171,587 and $1,418,276, respectively. In 2012,$2,903,000 in proceeds from the Company sold stockissuance of convertible notes payable during the year.  Net cash provided by financing activities for $383,254 and issued debt of $788,333. In 2011, the Company sold stock for $ 1,269,001 and issued debt of $175,000. During the yearsyear ended March 31, 20122013 was $4,972,195 which consisted of $2,282,000 in proceeds from the sale of common stock, $1,900,000 in proceeds from convertible notes payable, $820,000 in proceeds from short-term notes payable, and 2011, $0$9,000 in proceeds from the exercise of warrants.  These proceeds were offset by the repayment of notes payable of $38,805.  

Description of Indebtedness

For a complete description of our outstanding debt as of March 31, 2014 ad 2013, see Notes 4 and $20,725, respectively, was paid5 to the financial statements.

As of March 31, 2014, we had an aggregate total of $2,023,000 of outstanding convertible notes payable, of which $1,873,000 is due during the fiscal year ended March 31, 2015 and $150,000 is due during the fiscal year ended March 31, 2016.  As of March 31, 2013, we had an aggregate total of $1,795,000 of outstanding convertible notes payable, which were all converted into common stock during the year ended March 31, 2014.  As of March 31, 2014 and 2013, we also had a secured promissory note payable of $13,333 outstanding, which is due during the year ended March 31, 2015.

Subsequent to the year ended March 31, 2014, we have entered into the additional debt transactions.

On April 2, 2014, the Company entered issued a convertible promissory note for $100,000 with a maturity date of October 2, 2014.  The note is convertible into shares of the Company’s common stock at a discount of 42% of the lowest traded price during the 5 trading days preceding the conversion date.

On April 11, 2014, the Company entered into a Note Exchange Agreement with the debt holder holding the $1,750,000 senior secured convertible promissory note originally issued on related party payables.November 22, 2013 under the Purchase Agreement (see Note 5).  Under the terms of the Note Exchange Agreement, the original senior secured convertible promissory note is cancelled and replaced with a new note for $2,000,000.  The new note matures on November 30, 2014, bears interest at the rate of 10% per year payable on maturity in cash or shares of common stock at the Company’s option (subject to certain conditions), and is convertible into shares of the Company’s common stock at a conversion price equal to $0.45, subject to adjustments in the event of future stock splits, stock dividends, and similar transactions, or in the event of subsequent equity sales by the Company at a price lower than the conversion price then in effect.  Under the new note, the Company’s obligations are secured by substantially all of the Company’s assets, excluding any railcar assets.

On April 17, 2014, the Company issued a convertible note payable providing for borrowings up to $250,000 with a maturity date of April 17, 2016.  The note has a one-time interest charge of 12% and is due on the maturity date. The outstanding balance of the note along with accrued interest is convertible into shares of the Company’s common stock at a rate equal to the lesser of $0.25 or 60% of the lowest trade occurring during the 25 trading days preceding the conversion date.  The Company received borrowings under this convertible note payable of $50,000 in April 2014.

On April 30, 2014, the Company entered into a convertible note payable providing for total borrowings of $250,000, which is payable in 3 installments of $83,333, one upon execution of the note, one due one month after execution, and one due two months after execution.  Interest on the note equals 10% of the total principal balance, regardless of how long the note is outstanding for.  The Company received payments of $83,333 on May 5, 2014 and on May 30, 2014.  The convertible note matures 6 months after the issuance, at which point the outstanding principal and interest is due.

On May 6, 2014, the Company entered into a convertible note payable providing for total borrowings of $32,500 which accrue interest at a rate of 8% per annum.  The convertible note matures and is due in full on February 12, 2015 along with any unpaid accrued interest.  The outstanding principal and accrued interest is convertible into shares of common stock at the option of the holder at a conversion rate equal to 61% of the average of the lowest 3 trading prices during the 10 trading days prior to the conversion.

19
 
On May 12, 2014, the Company entered into a secured convertible promissory note providing for total borrowings up to $335,000 which accrue interest at a rate of 10% per annum.  All outstanding borrowings mature and are due in 20 months from the issuance date.  The Company received an initial payment of $87,500 on the note issuance date.  The outstanding principal and interest is convertible into shares of common stock at the option of the holder at a conversion rate equal to the lesser of $0.35 per share or 60% of the average of the 3 lowest closing bid prices in the 20 trading days preceding the conversion date.  If the average of the 3 lowest closing bid prices is less than $0.10, then the conversion factor is reduced from 60% to 55%.  The debt holder was also issued warrants on May 12, 2014 in connection with this note payable granting the right to purchase a number of common stock shares equal to $167,500 divided by the market price (defined as the higher of the closing price on the issuance date or the volume weighted average price of the stock for the trading day that is 2 days prior to the exercise date) at an exercise price of $0.35 per share.

On May 28, 2014, the Company issued into a convertible promissory note providing for borrowings of $125,000.  The convertible promissory note matures on August 28, 2014, at which point the Company owes $187,500 which includes a total of $62,500 in interest expense.  The outstanding amounts are convertible into shares of common stock at the option of the holder at a conversion rate equal to 60% of the lowest traded price during the prior 20 trading days from the date of the conversion.

On June 13, 2014, the Company issued convertible debentures providing for total borrowing of $55,000 which accrued interest at the rate of 12% per annum. All borrowings mature and are due in one year from the issuance date. The debenture is convertible into shares of common stock at the option of the holder at the conversion rate lesser of 55% discount of the lowest closing bid price during the 25 trading days prior to the date of notice conversion or $0.25 per share.
Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.
 
Not applicable
 
 
1920
 

Item 8.  Financial Statements and Supplementary Data.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders
Las Vegas Railway Express, Inc.
Las Vegas, Nevada

We have audited the accompanying balance sheetsheets of Las Vegas Railway Express, Inc. (“Company”("Company"), as of March 31, 2012,2014, and 2013, and the related statementstatements of operations, stockholders’ deficit, and cash flows for each of the yeartwo years in the period ended March 31, 2012.2014.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audit.audits.
 
We conducted our auditaudits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our auditaudits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit providesaudits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Las Vegas Railway Express, Inc. as ofat March 31, 2012,2014, and 2013, and the resultresults of its operations and its cash flows for each of the yeartwo years in the period ended March 31, 2012,2014, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that Las Vegas Railway Express, Inc. will continue as a going concern. As described in Note 2 to the financial statements, the Company has suffered recurring losses from operations, has a net capital deficiency, has no revenues and has a negative working capital. These factors among others raise substantial doubt about its ability to continue as a going concern. Management's plans regarding these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
As described in Note 2 to the financial statements, the Company has restated its financial statements for 2012.


/s/ BDO USA, LLP
Los Angeles, California
June 10,  2013

20

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



Board of Directors
Las Vegas Railway Express, Inc.
Las Vegas, Nevada
We have audited the accompanying balance sheet of Las Vegas Railway Express, Inc., as of March 31, 2011, and the related statement of operations, stockholders’ equity (deficit) and cash flows for the year ended March 31, 2011. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Las Vegas Railway Express, Inc.  as of March 31, 2011, and the result of its operations and its cash flows for the year ended March 31, 2011, in conformity with accounting principles generally accepted (GAAP) in the United States of America.
The accompanying financial statements have been prepared assuming that Las Vegas Railway Express, Inc. will continue as a going concern.  As discussed in Note 2 to the financial statements, Las Vegas Railway Express, Inc.the Company has suffered recurring losses from operations, which raiseshas a net capital deficiency, has no revenues and has negative working capital.  These factors among others raise substantial doubt about its ability to continue as a going concern.  Management'sManagement’s plans regarding thosethese matters are also are described in Note 2.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

As described in Note 2 to the financial statements, the Company has restated its financial statements for 2011.
/s/ BDO USA LLP
 
Hamilton, PCLos Angeles, CA
 
/s/ Hamilton, PCJune 30, 2014
 
Denver, Colorado
July 10, 2012, except as to Note 2 which is as of June 10, 2013

 
21
 

LAS VEGAS RAILWAY EXPRESS, INC.
BALANCE SHEETS
  March 31,  March 31, 
  2014  2013 
       
Assets      
Current assets      
Cash $87,910  $1,262,615 
Other current assets  101,250   471,772 
Total current assets  189,160   1,734,387 
         
Property and equipment, net of accumulated depreciation  684,407   393,789 
         
Other assets        
Deposit with Union Pacific  -   600,000 
Other assets  22,385   25,958 
Goodwill  -   843,697 
Total other assets  22,385   1,469,655 
Total assets $895,952  $3,597,831 
         
Liabilities and Stockholders' Deficit        
         
Current liabilities        
Short term notes payable $13,333  $13,333 
Accounts payable and accrued expenses  442,711   375,295 
Derivative liability  1,198,018   3,181,537 
Current portion of convertible notes payable, net of discount  1,271,984   116,042 
Liabilities of discontinued operations  -   194,041 
Total current liabilities  2,926,046   3,880,248 
Deferred tax liability  -   55,914 
Long-term portion of convertible debt, net of current portion  150,000   - 
Total liabilities  3,076,046   3,936,162 
         
Commitments and contingencies        
         
Stockholders' deficit        
Common stock, $0.0001 par value, 200,000,000 shares authorized, 16,041,143 and 7,705,595 shares issued and outstanding as of March 31, 2014 and 2013, respectively  1,604   770 
Additional paid-in capital  29,445,945   18,236,522 
Accumulated deficit  (31,627,643)  (18,575,623)
Total stockholders' deficit  (2,180,094)  (338,331)
Total liabilities and stockholders' deficit $895,952  $3,597,831 

  March 31,  March 31, 
  2012  2011 
   (Restated)   (Restated) 
Assets 
       
Current assets      
Cash $ 53,632  $ 16,313 
Other current assets  47,028   - 
Total current assets  100,660   16,313 
         
Property and equipment, net of accumulated depreciation  2,880   - 
         
Other assets        
   Goodwill  843,697   843,697 
Total other assets  843,697   843,697 
Total assets $ 947,237  $ 860,010 
         
Liabilities and Stockholders' Equity (Deficit)        
         
Current liabilities        
Short term notes payable $ 785,116  $ - 
Accounts payable and accrued expenses  236,009   169,955 
Derivative liability  170,499   - 
Liabilities to be disposed of, current  905,950   999,122 
Total current liabilities  2,097,574   1,169,077 
         
Deferred tax liability  42,343   - 
         
Total liabilities  2,139,917   1,169,077 
         
Commitments        
         
Stockholders' deficiency        
Common stock subscribed  640,000   850,000 
Common stock, $0.0001 par value, 200,000,000 shares authorized, 48,653,350 and 39,201,498 shares issued and outstanding as of March 31, 2012 and 2011, respectively  4,865   3,920 
Additional paid-in capital  9,971,987   8,640,512 
Accumulated deficit  (11,809,532)  (9,803,499)
Total stockholders' deficiency  (1,192,680)  (309,067)
Total liabilities and stockholders' deficiency $ 947,237  $ 860,010 
         
See accompanying notes to financial statements 
See accompanying notes to financial statements

 
22
 

LAS VEGAS RAILWAY EXPRESS, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31, 20122014 AND 20112013
  March 31,  March 31, 
  2014  2013 
       
       
Operating Expenses:      
Compensation and payroll taxes $2,876,141  $3,034,474 
Selling, general and administrative  1,709,461   651,503 
Professional fees  1,873,146   1,616,524 
Impairment loss  843,697   - 
Depreciation expense  7,292   1,976 
  Total expenses  7,309,737   5,304,477 
         
Loss from operations  (7,309,737)  (5,304,477)
         
Other income (expense)        
Interest expense  (7,960,987)  (2,198,205)
Change in derivative liability  2,162,790   270,466 
   Total other income (expense)  (5,798,197)  (1,927,739)
         
Net loss from continuing operations before provision for income taxes  (13,107,934)  (7,232,216)
Benefit from (provision for) income taxes  55,914   (13,571)
Net loss from continuing operations  (13,052,020)  (7,245,787)
         
Discontinued operations:        
Income from discontinued operations, net of income taxes  -   479,696 
         
Net loss $(13,052,020) $(6,766,091)
         
Net loss per share, continuing operations, basic and diluted $(1.40) $(1.36)
Net income per share, discontinued operations, basic and diluted $-  $0.09 
Net loss per share, basic and diluted $(1.40) $(1.27)
         
Weighted average number of common shares outstanding, basic and diluted
  9,325,550   5,312,802 

  Year Ended 
  March 31,  March 31, 
  2012  2011 
   (Restated)    
Operating Expenses:      
Compensation and payroll taxes $ 1,222,013  $ 780,849 
Selling, general and administrative  233,577   314,835 
Professional fees  268,731   752,052 
Depreciation expense  320   - 
  Total expenses  1,724,641   1,847,736 
         
Loss from continuing operations  (1,724,641)  (1,847,736)
         
Other (expense) income        
Interest income  -   3,000 
Interest expense  (295,131)  (198,813)
Change in derivative liability  37,086   - 
Loss on disposition of assets  -   (2,965)
Gain on extinguishment of debt  -   238,374 
   Total other (expense) income  (258,045)  39,596 
         
Net loss from continuing operations before tax provision  (1,982,686)  (1,808,140)
Provision for income taxes  42,343   - 
Net loss from continuing operations  (2,025,029)  (1,808,140)
Discontinued operations:        
Income from discontinued operations  18,996   16,157 
         
Net loss $(2,006,033) $ (1,791,983)
         
Net (loss) per share, continuing operations, basic and diluted $(0.05) $ (0.05)
Net income (loss) per share, discontinued operations, basic and diluted $-  $ - 
Net (loss) per share basic and diluted $(0.05) $ (0.05)
Weighted average number of common        
shares outstanding, basic and diluted  43,680,249   36,253,005 
         
See accompanying notes to financial statements 
See accompanying notes to financial statements

 
23
 
LAS VEGAS RAILWAY EXPRESS, INC.
STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)DEFICIT
 
           Additional       
  Common Stock        Paid-in  Accumulated    
  Shares  Amount  Subscriptions  Capital  Deficit  Total 
                   
Balance, March 31, 2010  22,889,686  $2,289  $640,000  $6,464,307  $(8,011,516) $(904,920)
                         
Stock issued for cash  8,049,411   805       1,268,196       1,269,001 
Stock issued from subscriptions payable  4,000,000   400       159,600       160,000 
Stock issued for services  2,388,416   239   210,000   267,655       477,894 
Stock issued for compensation  454,615   45       67,532       67,577 
Stock issued for debt  1,451,174   145       154,287       154,432 
Stock issued for debt discount  2,400,000   240       299,760       300,000 
Recission of stock issued for debt  (2,431,804)  (243)      (121,347)  -   (121,590)
Stock based compensation              80,522       80,522 
Net loss  -   -       -   (1,791,983)  (1,791,983)
Balance, March 31, 2011 (restated)  39,201,498   3,920   850,000   8,640,512   (9,803,499)  (309,067)
                         
Stock issued for cash  3,785,023   379       382,875       383,254 
Stock issued from subscriptions payable  600,000   60   (210,000)  209,940       - 
Stock issued for services  982,741   98       127,395       127,493 
Stock issued for compensation (restated)  4,334,268   433       514,933       515,366 
Warrants issued for debt discount (restated)              53,285       53,285 
Stock based compensation  -   -       80,522   -   80,522 
Recission of stock issued to former officer  (250,000)  (25)      (37,475)      (37,500)
Net loss (restated)  -   -       -   (2,006,033)  (2,006,033)
Balance, March 31, 2012 (Restated)  48,653,530  $4,865  $640,000  $9,971,987  $(11,809,532) $(1,192,680)

           Additional       
  Common Stock        Paid-in  Accumulated    
  Shares  Amount  Subscriptions  Capital  Deficit  Total 
Balance, March 31, 2012  2,432,677  $243  $640,000  $9,976,609  $(11,809,532) $(1,192,680)
                         
Stock issued from subscriptions payable  800,000   80   (640,000)  639,920   -   - 
Stock issued for servives  463,868   46   -   1,538,631   -   1,538,677 
Stock issued for cash  2,282,000   228   -   2,281,772   -   2,282,000 
Stock issued for conversion of debt  1,682,050   168   -   2,055,938   -   2,056,106 
Exercise of warrants  45,000   5   -   8,995   -   9,000 
Discount on convertible notes payable  -   -   -   440,000   -   440,000 
Warrants issued for services  -   -   -   1,201,370   -   1,201,370 
Warrants issued for property and equipment  -   -   -   12,763   -   12,763 
Stock option compensation  -   -   -   80,524   -   80,524 
Net loss  -   -   -   -   (6,766,091)  (6,766,091)
Balance, March 31, 2013  7,705,595  $770  $-  $18,236,522  $(18,575,623) $(338,331)
                         
Stock issued for cash  600,000   60   -   274,940   -   275,000 
Stock issued for conversion of debt  4,410,747   441   -   5,062,828   -   5,063,269 
Stock issued for services  728,143   73   -   644,467   -   644,540 
Exercise of warrants  9,823   1   -   (1)  -   - 
Stock issued in exchange of warrants  2,586,835   259   -   594,783   -   595,042 
Warrants issued for services  -   -   -   329,416   -   329,416 
Reclassification of derivative liabilities  -   -   -   4,302,990   -   4,302,990 
Net loss  -   -   -       (13,052,020)  (13,052,020)
Balance, March 31, 2014  16,041,143  $1,604  $-  $29,445,945  $(31,627,643) $(2,180,094)
See accompanying notes to financial statements.


statements

 
24
 

LAS VEGAS RAILWAY EXPRESS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 20122014 AND 20112013

 March 31,  March 31,  March 31,  March 31, 
 2012  2011  2014  2013 
  (Restated)          
Cash flows from operating activities            
Net loss $ (2,006,033) $ (1,791,983) $(13,052,020) $(6,766,091)
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation and amortization  320   -   7,292   1,976 
Amortization of discounts on note payable  257,653   166,930   4,835,032   2,096,482 
Gain on extinguishment of debt  -   (238,374)
Loss on disposition of assets  -   2,965 
Amortization of debt offering costs  637,680   15,472 
Impairment of Union Pacific deposit  600,000   - 
Deferred tax provision  42,343   -   (55,914)  13,571 
Change in value of derivative liability  (37,086)  -   (2,162,790)  (270,466)
Stock issued and subscribed for services  127,493   477,894   644,540   1,538,677 
Stock issued for compensation  477,866   67,577 
Stock option compensation  80,522   80,522   -   80,524 
Impairment loss on goodwill  843,697   - 
Debt conversion expense  2,217,878   - 
Stock issued for exchange of warrants  595,042   - 
Warrants issued for services  582,837   1,201,370 
        
Changes in operating assets and liabilities:                
Other current assets  (47,028)  50,000   204,593   (440,216)
Other assets  3,573   (25,958)
Liabilities of discontinued operations, net  (93,172)  (349,438)  (194,041)  (510,631)
Accounts payable and accrued expenses  66,054   126,073   237,806   282,200 
                
Net cash used in operating activities  (1,131,068)  (1,407,834)  (4,054,795)  (2,783,090)
                
Cash flows from investing activities                
Purchases of property and equipment  (3,200)  -   (297,910)  (380,122)
Deposit with Union Pacific  -   (600,000)
Net cash used in investing activities  (3,200)  -   (297,910)  (980,122)
                
Cash flows from financing activities                
Proceeds from sale of stock  383,254   1,269,001   275,000   2,282,000 
Payments on related party notes payables  -   (20,725)
Proceeds from exercise of warrants  -   9,000 
Proceeds from convertible notes payable  2,903,000   1,900,000 
Proceeds from notes payable  788,333   175,000   -   820,000 
Payments on note payable  -   (5,000)  -   (38,805)
                
Net cash provided by financing activities  1,171,587   1,418,276   3,178,000   4,972,195 
                
Net change in cash  37,319   10,442   (1,174,705)  1,208,983 
Cash, beginning of the year  16,313   5,871 
Cash, end of the year $ 53,632  $ 16,313 
Cash, beginning of the period  1,262,615   53,632 
Cash, end of the period $87,910  $1,262,615 
                
Supplemental disclosure of cash flow information:                
Interest paid  -   28,850  $-  $5,497 
Income taxes paid  -   -  $-  $- 
                
Supplemental disclosure of non-cash investing and financing transactions:Supplemental disclosure of non-cash investing and financing transactions:             
Warrants issued for debt  53,285   160,000 
Stock issued for debt  -   154,432 
Recission of stock previously issued for debt  -   121,590 
        
        
Stock issued to settle stock subscriptions $-  $640,000 
Stock issued for debt and accrued interest $2,845,391  $1,907,050 
Warrants issued for payment of property and equipment $-  $12,763 
Increase in liabilities of discontinued operations from forbearance agreement $-  $58,754 
See accompanying notes to financial statements


 
25
 

LAS VEGAS RAILWAY EXPRESS, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 20122014 and 20112013


(1)  Description of Business:

Las Vegas Railway Express, Inc.  (the “Company”, “we”, “us”, or “our”) was formed as a Delaware corporation in March 9, 2007 as Corporate Outfitters, Inc., a development stage company. On November 3, 2008, pursuant to a common stock purchase agreement, the Company acquired 100% of the outstanding capital stock of Liberty Capital Asset Management, a Nevada corporation, formed in July of 2008 as a holding company for all the assets of CD Banc LLC in contemplation of the company going public via a reverse merger into a publicly trading corporation.

CD Banc LLC was formed in 2003 as a Nevada limited liability corporation with the purpose of acquiring real estate assets and holding them for long-term appreciation.

The Company business plan is to re-establish a conventional passenger train service between the Las Vegas and Los Angeles metropolitan areas.  On January 21, 2010, the Company completed a share exchange and asset purchase agreement with Las Vegas Railway Express, a Nevada Corporation, and subsequently changed its name from Liberty Capital Asset Management, Inc. to Las Vegas Railway Express, Inc.

The Company previously pursued a business plan of establishing passenger rail service between the Los Angeles area and Las Vegas, Nevada.  During 2014, the Company changed its focus to providing upscale commuter Club X railcars for various state Department of Transportation municipal agencies.

The Company owns outright 16 bi-level passenger railcars as well as two leased cars acquired through an agreement with Mid America Leasing Company.

(2)  Summary of Significant Accounting Policies:
 
Basis of Presentation:

The accompanying financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America.America ("GAAP"). 

Restatement:
The accompanying financial statements as of March 31, 2012 and 2011 and forEffective on December 2, 2013, the year ended March 31, 2012have been restated to reflectCompany executed a correction in the presentation of common stock subscribed related to the purchase of the train business, from a liability to stockholders’ equity.  The nature of this account is such that it will not be settled with cash or other assets, but rather it will be settled by issuance of a fixed numberone-for-twenty reverse split of the Company’s issued and outstanding shares of common stock.  Accordingly it should be classifiedAll references to number of shares and per share amounts included in stockholders’ equity.
Additionally, the Company has determined that certain of the warrants outstanding had elements that qualified them as derivative liabilities instead of equity. And two of its notes payable also had embedded elements that required bifurcation and statement as derivative liabilities. Accordingly, it obtained a third party valuation of the warrants and embedded derivatives and reclassified them as derivative liabilities.
Additionally, the Company made correctionsthis report give effect to the way it accounts forreverse stock based compensationsplit.
   
Finally, the Company has determined that since goodwill is amortized for income taxes, but not for books, there exists a temporary difference in the carrying amount of this asset between book and tax. Furthermore, as it cannot be concluded that this difference can be absorbed by the Company’s net operating loss carryforward, it is necessary to record a deferred income tax liability.
The impact of the restatements described above is as follows.

26

As of March 31, 2012:         
  As Previously       
  Reported  Adjustments  Restated 
          
Notes payable $788,333  $(3,217) $785,116 
Derivative liability  -   170,499   170,499 
Stock subscription payable  640,000   (640,000)  - 
Total current liabilities  2,570,292   (472,718)  2,097,574 
Deferred tax liability  -   42,343   42,343 
Total liabilities  2,570,292   (430,375)  2,139,917 
             
Common stock subscribed  -   640,000   640,000 
Additional paid in capital  9,995,692   (23,705)  9,971,987 
Retained earnings  (11,623,612)  (185,920)  (11,809,532)
Total stockholders' deficit  (1,623,055)  (430,375)  (1,192,680)
             
             
For the year ended March 31, 2012:            
  As Previously         
  Reported  Adjustments  Restated 
             
Operating Expenses:            
Compensation and payroll taxes $1,128,689  $93,324  $1,222,013 
Selling, general and administrative  233,577   -    233,577 
Professional fees  268,731   -    268,731 
Depreciation expense  320   -    320 
  Total expenses  1,631,317   93,324   1,724,641 
Loss from operations  (1,631,317)  (93,324)  (1,724,641)
Other income (expense):            
Change in derivative liability  -   37,086   37,086 
Interest income (expense)  (207,792)  (87,339)  (295,131)
   Total other income (expense)  (207,792)  (50,253)  (258,045)
Net loss from continuing operations before tax provision  (1,839,109)  (143,577)  (1,982,686)
Provision for income taxes  -   42,343   42,343 
Net loss from continuing operations  (1,839,109)  (185,920)  (2,025,029)
Discontinued operations:            
Income (loss) from discontinued operations, net of income tax  18,996       18,996 
Net loss $(1,820,113) $(185,920) $(2,006,033)
             
 As of March 31, 2011:  As Previously          
   Reported    Adjustments    Restated  
             
Stock subscription payable $640,000   $(640,000 ) $-  
Total liabilities  1,809,077    (640,000 )  1,169,077  
             
Common stock subscribed  210,000    640,000    850,000  
Total stockholders' deficit  (949,067 )  640,000    (309,067 )
             



27
Going Concern:

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the accompanying financial statements, the Company has net losses of $2,006,033$13,052,020 and $1,791,983$6,766,091 for the years ended March 31, 20122014 and 2011,2013, respectively.  AlthoughThe Company also has an accumulated deficit of $31,627,643 and a substantial portionnegative working capital of the Company’s cumulative net loss$2,736,886 as of March 31, 2014, as well as outstanding convertible notes payable of $2,023,000, of which $1,750,000 is attributable to discontinued operations, managementdue on June 30, 2014.  Management believes that it will need additional equity or debt financing to be able to implement the business plan.  The Company has no operating revenuesGiven the lack of revenue, capital deficiency and negative working capital, there is currently dependent on external debt financing and/or sale of equities to fund operations.  These matters raise substantial doubt about the Company’s ability to continue as a going concern.

Management is attempting to raise additional equity and debt to sustain operations until it can market its services and achieves profitability.  The successful outcome of future activities cannot be determined at this time and there are no assurances that, if achieved, the Company will have sufficient funds to execute its intended business plan or generate positive operating results.

The accompanying financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

26
 
Risks and Uncertainties:

The Company generates no revenues.  The Company operates in an industry that is subject to intense competition and potential government regulations.  Significant changes in regulations and the abilityinability of the Company to establish contracts with rail services providers could have a materially adverse impact on the Company’s operations.
 
Use of Estimates:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of AmericaGAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported periods.  Amounts could materially change in the future.

Cash and Cash Equivalents:

The Company considers all highly liquid holdings with maturities of three months or less at the time of purchase to be cash equivalents.

Property and Equipment:

Property and equipment are statedrecorded at historical cost less accumulated depreciation.  Depreciation is recorded using theand depreciated on a straight-line methodbasis over thetheir estimated useful lives of approximately five years once the relatedindividual assets ranging from threeare placed in service.  The Company expenses all purchases of equipment with individual costs of under $500, and these amounts are not material to thirty years. Total depreciation expense related to property and equipment was $320 and $0 for the years ended March 31, 2012 and 2011, respectively. Maintenance and repairs are charged to operations when incurred.  Major betterments and renewals are capitalized.  Gains or losses are recognized upon sale or disposition of assets.financial statements.

Intangible Assets:

Goodwill represents the excess of purchase price over tangible and intangible assets acquired, less liabilities assumed arising from the acquisition of the train businessLas Vegas Railway Express on November 23, 2009.January 21, 2010.  Goodwill is not amortized, but is reviewed for potential impairment on an annual basis at the reporting unit level.  On March 31, 2012, asAs required by the "Intangible -“Intangibles – Goodwill and Other"Other” topic of Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”), the Company conducted an analysis of the goodwill on its single reporting unit usingMarch 31, 2014.  Due to the Company’s market capitalization (based on Level 1 inputs). Forchanges in the business model during the year ended March 31, 2014, management has determined the goodwill has been fully impaired as of March 31, 2014.  As a result, for the fiscal yearsyear ending March 31, 2012 and 2011, our assessment2014, the Company recorded an impairment loss of $843,697 in the accompanying statement of operations.

Long-Lived Assets:

In accordance with FASB ASC 360-10, the Company evaluates long-lived assets for impairment foundwhenever events or changes in circumstances indicate that duetheir net book value may not be recoverable. When such factors and circumstances exist, the Company compares the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made. During the year ended March 31, 2014, the Company determined that $98,172 of capitalized costs relating to the continued progress towardconstruction of a proposed train station in North Las Vegas were impaired a result in the measurement goalschange in the Company’s business plan.  These amounts have been expensed and included as a component of professional fees during the business plan that there is no impairmentyear ended March 31, 2014.
Deposit with Union Pacific:

On November 8, 2012, the Company entered into an agreement with Union Pacific Railroad Company whereby the Company was granted a nonexclusive operating right to use Union Pacific railroad track between Daggett, California and Las Vegas, Nevada, subject to certain terms and conditions.  In connection with this agreement, the Company made an earnest money deposit of goodwill.$600,000 and was required to meet certain financial conditions, including the provision of a letter of credit in favor of Union Pacific in the amount of $27,444,145 on or before October 31, 2013.   The Company haselected to terminate this agreement on October 31, 2013 as it no accumulated impairment losseslonger planned to operate on goodwill.the Union Pacific Railroad Company tracks as a regularly scheduled passenger train.  As a result, the Company determined the $600,000 deposit was impaired and expensed the amount during the year ended March 31, 2014 as a component of selling, general and administrative expenses.

27
 
Basic and Diluted Loss Per Share:

In accordance with FASB ASC 260, “Earnings“Earnings Per Share,,” the basic loss per common share is computed by dividing the net loss available to common stockholders after reducing net income by preferred stock dividends, by the weighted average common shares outstanding during the period.  Diluted earnings per share reflect per share amounts that would have resulted if diluted potential common stock had been converted to common stock.  Common stock equivalents have not been included in the diluted earnings per share computation for the years ended March 31, 20122014 and 20112013 as the amounts are anti-dilutive.  As of March 31, 20122014 and 2011,2013, the Company had 2,000,000100,000 outstanding options which were excluded from the computation of net incomeloss per share because they are anti-dilutive.  As of March 31, 2012,2014 and 2013, the Company also had convertible debt that wasis convertible into 3,000,0005,339,132 and 1,795,000 shares, respectively, of common stock which was excluded from the computation.  As of March 31, 2012,2014 and 2013, the Company had 1,500,0001,569,842 and 2,924,842 outstanding warrants, respectively, which were also excluded from the computation because they were anti-dilutive.
28

Income Taxes:

The Company accounts for income taxes under FASB ASC 740 "Income Taxes.Taxes."  Under the asset and liability method of FASB ASC 740, deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  The deferred tax assets of the Company relate primarily to operating loss carryforwards for federal income tax purposes. A full valuation allowance for deferred tax assets has been provided because the Company believes it is not more likely than not that the deferred tax asset will be realized. Realization of deferred tax assets is dependent on the Company generating sufficient taxable income in future periods.

ThePrior to the impairment of the goodwill as of March 31, 2014, the Company’s goodwill iswas deductible for tax but not for book.purposes. This difference createscreated a deferred tax liability, which cannotcould not be matched with the Company’s deferred tax asset. As a result, the Company cannotwas not able to net itthe deferred tax liability with its net operating loss carryforward, and therefore recordsrecorded a deferred tax liability to reflect the future non-deductibility of its goodwill asset. The deferred tax liability at March 31, 20122013 was $55,914.  Upon the impairment of the goodwill as of March 31, 2014, the deferred tax liability no longer existed and 2011 was $42,343 andamounted to $0 respectively.as of March 31, 2014.
 
The Company periodically evaluates its tax positions to determine whether it is more likely than not that such positions would be sustained upon examination by a tax authority for all open tax years, as defined by the statute of limitations, based on their technical merits. As of March 31, 20122014 and 2011,2013, the Company has not established a liability for uncertain tax positions.

Share Based Payment:
Stock-Based Compensation:

The Company issues stock, options and warrants as share-based compensation to employees and non-employees.

The Company accounts for its share-based compensation to employees in accordance FASB ASC 718.  Stock-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the requisite service period. 

28
The Company accounts for share-based compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC 505-50 “Equity - Based Payments to Non-Employees.Non-Employees.” Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The final fair value of the share-based payment transaction is determined at the performance completion date. For interim periods, the fair value is estimated and the percentage of completion is applied to that estimate to determine the cumulative expense recorded.

The Company values compensatory stock compensation based on the market price on the measurement date. As described above, for employees this is the date of grant, and for non-employees, this is the date of serviceperformance completion.

The Company values stock options and warrants that do not qualify as derivative instruments using the Black-Scholes option pricing model.  There were no warrants or options grantedissued during the years ended March 31, 20122014 or 2011 for which the Company used2013.  There were no warrants valued using the Black-Scholes model.model during the year ended March 31, 2014.  Assumptions used in the Black-Scholes model to value warrants issued during the year ended March 31, 2013 are as follows:
  Year Ended Year Ended
  March 31, March 31,
  2014 2013
     
Expected life in yearsNA 1.5 - 10 years
Stock price volatilityNA 158.6% - 286.0%
Risk free interest rateNA 0.25% - 1.62%
Expected dividendsNA None
Forfeiture rateNA 0%
 
Certain compensatory warrants qualify as derivative instruments and are valued using the binomial lattice method. See Note 7discussion below regarding accounting for derivative liabilities.
 
Derivative Liabilities:

In connection with the private placement of Convertible Notes beginning in February 2013, the Company became contingently obligated to issue shares of common stock in excess of the 200 million authorized under the Company’s certificate of incorporation.  Consequently, the ability to settle these obligations with shares would be unavailable causing these obligations to potentially be settled in cash. This condition creates a derivative liability.

The Company has a sequencing policy regarding share settlement wherein instruments with the earliest issuance date would be settled first. The sequencing policy also considers contingently issuable additional shares, such as those issuable upon a stock split, to have an issuance date to coincide with the event giving rise to the additional shares.

Using this sequencing policy, all instruments convertible into common stock, including warrants and the conversion feature of notes payable, issued on and subsequent to November 30, 2012 had been accounted for as derivative liabilities.

On December 2, 2013, the Company effected a one-for-twenty reverse stock split of the Company’s issued and outstanding common stock shares.  As a result, the Company’s outstanding shares of common stock and common stock equivalents no longer exceeded the number of authorized shares.  As a result, as of December 2, 2013, these instruments that were accounted for as derivative liabilities were reclassified as equity.

The Company also has certain warrants and embedded conversion options in notes payable with elements that qualify as derivatives. The warrants have anti-dilution clauses that prevent calculation of the ultimate number of shares that may be issued upon exercise, and four outstanding notes payable that had a variable conversion feature that similarly prevented the calculation of the number of shares into which they were convertible.

The Company values these warrants and embedded conversion options in notes payable using the binomial lattice method.  The resulting liability is valued at each reporting date and the change in the liability is reflected as change in derivative liability in the statement of operations (see Note 7).

29
Fair Value of Financial Instruments:

The Company's financial instruments as defined by FASB ASC 825-10-50 include cash, trade accounts receivable, accountsnotes payable and accrued expenses.  All instrumentsderivative liabilities.  Derivative liabilities are accounted for on a historical cost basis, which, due to the short maturityrecorded at fair value.  The principal balance of these financial instruments, approximates fair value at March 31, 2012.  The amounts shown for notes payable approximateapproximates fair value because current interest rates and terms offered to the Company for similar debt are substantially the same.

FASB ASC 820 defines fair value, establishes a framework for measuring fair value, in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. FASB ASC 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:

Level 1. Observable inputs such as quoted prices in active markets;

Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3. Unobservable inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions.
 
29
The Company used Level 3 measurments in computing the fair value of goodwill, which was fully impaired on March 31, 2014.
 
The processFair value heirarchy for determiningrecurring fair value using unobservable inputsmeasurements is generally more subjective and involves a high degree of management judgment and assumptions. These assumptions may have a significant effect on our estimates of fair value, and the use of different assumptions as well as changes in market conditions could have a material effect on our results of operations or financial condition.follows:

New Accounting Pronouncements:
  Fair Value  Fair Value Measurements at March 31, 2014 
  as of  Using Fair Value Heirarchy 
  March 31, 2014  Level 1  Level 2  Level 3 
Liabilities:            
     Derivative liability $1,138,477  $-  $1,138,477  $- 
 
Issued

In December 2011, the FASB issued Account Standards Update (“ASU”) 2011-12, “Comprehensive Income - Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU 2011-05,” to defer the effective date of the specific requirement to present items that are reclassified out of accumulated other comprehensive income to net income alongside their respective components of net income and other comprehensive income. All other provisions of this update, which are to be applied retrospectively, are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of this accounting standard update will become effective for the reporting period beginning January 1, 2012. The adoption of this guidance will not have a material impact on the Company’s financial position, results of operations or cash flows.

In December 2011, the FASB issued ASU 2011-10, “Derecognition of in Substance Real Estate—a Scope Clarification” to clarify that when a parent (reporting entity) ceases to have a controlling financial interest (as described in ASC subtopic 810-10, Consolidation) in a subsidiary that is in substance real estate as a result of default on the subsidiary’s nonrecourse debt, the reporting entity should apply the guidance in subtopic 360-20, Property, Plant and Equipment, to determine whether it should derecognize the in substance real estate. Generally, a reporting entity would not satisfy the requirements to derecognize the in substance real estate before the legal transfer of the real estate to the lender and the extinguishment of the related nonrecourse indebtedness. Under this new guidance, even if the reporting entity ceases to have a controlling financial interest under subtopic 810-10, the reporting entity would continue to include the real estate, debt, and the results of the subsidiary’s operations in its consolidated financial statements until legal title to the real estate is transferred to legally satisfy the debt. This amendment is applicable to us prospectively for deconsolidation events occurring after June 15, 2012. The adoption of this accounting standard update will become effective for the reporting period beginning July 1, 2012. The adoption of this guidance will not have a material impact on the Company’s financial position, results of operations, or cash flows.

Other recent accounting pronouncements did not, or are not believed by management to, have a material impact on the Company's present or future financial statements
(4)(3)  Property and Equipment:

Property and equipment consisted of the following as of March 31, 20122014 and 2011,2013:
 
  March 31,  March 31, 
  2014  2013 
       
Office equipment $61,611  $40,921 
Computer software  24,167   14,192 
Transportation equipment under construction  621,802   354,557 
         
   707,580   409,670 
         
Less: accumulated depreciation  (23,173)  (15,881)
         
  $684,407  $393,789 

  March 31,  March 31, 
  2012  2011 
       
       
Furniture and fixtures $112,413  $112,413 
Equipment  177,023   173,823 
Leasehold improvements  63,250   63,250 
Software  30,722   30,722 
         
   383,408   380,208 
         
Less: accumulated depreciation  (188,689)  (188,369)
Less: impairment of assets  (191,839)  (191,839)
         
  $2,880  $- 
 
30
 


During the year ended March 31, 2014, the Company determined that $98,172 of capitalized costs relating to the construction of a proposed train station in North Las Vegas were impaired a result in the change in the Company’s business plan.  These amounts have been expensed and included as a component of professional fees during the year ended March 31, 2014.
 
(5)(4)  Notes payable:
A summary of outstanding notes payable is as follows:
 
  March 31,  March 31, 
  2014  2013 
       
 Secured promissory notes,  dated  May 17, 2011 through      
       
May 17, 2012 to an investor bearing interest at 8% per annum, payable on May 17, 2012.  The Company is in default on this note.
 $13,333  $13,333 
         
 Total outstanding notes payable $13,333  $13,333 
  March 31,  March 31, 
  2012  2011 
       
 Notes payable - discontinued operations      
       
 Secured promissory notes,  dated June 25, 2008, to two $126,005  $126,005 
 investors, bearing interest at 10% per annum, payable        
 September 1, 2010.        
         
 Unsecured promissory notes payable dated October 1, 2009        
 bearing interest at 10% per annum, payable September 1, 2010
  22,055   24,055 
         
 Notes included in liabilities from discontinued operations $148,060  $150,060 
         
 Notes payable - current operations        
         
 Unsecured promissory note,  dated  April 4, 2011, to        
 an investor bearing interest at 8% per annum, payable on        
 April 4, 2012. $97,266  $- 
         
 Secured promissory notes,  dated  May 17, 2011 through        
 May 17, 2012 to an investor bearing interest at 8% per annum,        
 payable on May 17, 2012.  12,850   - 
         
 Secured promissory note,  dated August 15, 2011, to an        
 investor, bearing interest at 10% per annum, payable        
 February 11, 2012.  100,000   - 
         
 Secured promissory note,  dated  September 30, 2011, to        
 an investor bearing interest at 10% per annum, payable on        
 March 28, 2012.  50,000   - 
         
 Secured promissory notes,  dated  October 8, 2011,        
 to three investors bearing interest at 10% per annum,        
 payable on April 10, 2012.  225,000   - 
         
 Secured promissory note,  dated  January 25, 2012, to        
 an investor bearing interest at 10% per annum, payable on        
 demand, convertible to common shares at $0.10 per share.  100,000   - 
         
 Secured promissory note,  dated  February 24, 2012, to an        
 investor bearing interest at 10% per annum, payable on        
 demand, convertible to common shares at $0.10 per share.  200,000   - 
         
 Total outstanding notes payable from continuing operations $785,116  $- 
         

TheAs of March 31, 2014, the Company is in default on the above note payable for $13,333.  The Company has received a demand for payment on this note as of March 31, 2014.
(5)  Convertible Notes Payable:

During February and March 2013, the Company issued a series of convertible notes payable made(the “Convertible Notes”) to investors thatfor total proceeds of $1,900,000.  The Convertible Notes are includedconvertible into shares of the Company’s common stock at $1.00 per share at the option of the debt holder.  The Convertible Notes bear interest at a rate of 8% per annum, and have a maturity date of February 1, 2014.  Prior to March 31, 2013, the debt holders converted $105,000 of outstanding principal into 105,000 shares of common stock.  As a result, as of March 31, 2013, the remaining gross principal balance of the Convertible Notes outstanding amounted to $1,795,000.

During the year ended March 31, 2014, the Company issued additional Convertible Notes to investors for additional proceeds of $880,000 with the same terms as described above.  During the year ended March 31, 2014, the debt holders converted $460,000 of outstanding principal and $9,287 of accrued interest into 469,287 shares of common stock pursuant to the original terms in liabilitiesthe agreements.

Prior to the maturity date of discontinued operations.the Convertible Notes on February 1, 2014, to induce the debt holders to promptly convert their remaining outstanding balances into shares of the Company’s common stock, the Company offered the debt holders with balances still outstanding a one-time reduction in the conversion rate from $1.00 per share to $0.60 per share.  The debt holders had until February 28, 2014 in order to exercise the reduced conversion rate.

Subsequent to the offer being made, all remaining debt holders of the Convertible Notes elected to convert their outstanding principal and accrued interest balances into shares of common stock at the reduced rate of $0.60 per share.  The aggregate principal balance of the Convertible Notes converted at the reduced rate amounted to $2,215,000, as well as accrued interest balances of $161,104.  This resulted in 3,960,174 shares of common stock issuable as payment for the outstanding principal and interest.  As of March 31, 2012, there has been no demand made2014, the Company had issued 3,941,483 shares of common stock for repaymentthe conversion of the notes or accrued interest.Convertible Notes.  The remaining 18,991 shares issuable for the conversion of $11,224 in outstanding balances are yet to be issued as of March 31, 2014.  Under the guidance in ASC 470-20-40-16, the Company recognized an expense at each conversion date equal to the fair value of the stock and other consideration transferred after the change in terms, less the fair value of securities issuable under the original conversion terms.  The excess in value amounted to $2,217,878 and was reflected as interest expense in the accompanying statement of operations for the year ended March 31, 2014.   

 
31
 
As of March 31, 2014, there was no remaining principal balance outstanding on the Convertible Notes.

In connection with the Convertible Notes, the Company granted an aggregate of 2,680,000 (including 880,000 during the year ended March 31, 2014) warrants to purchase additional shares of common stock at an exercise price of $2.00 per share and a contractual life of 3 years.  Prior to the Company’s reverse stock split on December 2, 2013, the Company did not have sufficient authorized shares to satisfy the exercise of these warrants.  As a result, the warrants issued during the nine months ended December 31, 2013 were determined to be derivative liabilities which resulted in additional derivative liabilities of $1,372,237.  The conversion option associated with the Convertible Notes was bifurcated and also recorded as a derivative liability. See Note 7, Derivative Instruments.

The value of the derivative liabilities and discounts created through the issuance of the Convertible Notes and warrants during the year ended March 31, 2014 as described above exceeded the proceeds of the Convertible Notes by $1,675,450. This excess was recorded as interest expense on the issuance dates of each note and warrant during the year ended March 31, 2014.

On October 1, 2013, the Company entered into a promissory note which provides for the Company to borrow up to $350,000 in principal (the “Promissory Note”).  As of March 31, 2014, the Company has borrowed $150,000 under this Promissory Note, which represents the outstanding amount as of March 31, 2014.  Outstanding borrowings mature two years from the effective date of each payment.  If the outstanding balance of the note is repaid by the Company on or before 90 days from the effective date of the borrowing, the interest charged is 0%.  However, if the Company does not repay the note within 90 days, a one-time interest charge of 12% shall be applied to the outstanding principal sum.  The outstanding balance of the note may be converted into common stock at the option of the debt holder at a rate equal to $0.90 per share, or 60% of the lowest trading price in the 25 days trading days previous to the conversion date.

On November 22, 2013, the Company, entered into and closed a purchase agreement (the “Purchase Agreement”) with an institutional investor, pursuant to which the Company sold to the investor a senior secured convertible promissory note in the principal amount of $1,750,000 (the “Note”), and warrants to purchase 300,000 shares of common stock (the “Warrants”), for an aggregate purchase price of $1,750,000. The Note matures on June 30, 2014, bears interest at the rate of 10% per year payable on maturity in cash or shares of common stock at the Company’s option (subject to certain conditions), and is convertible into shares of the Company’s common stock at a conversion price equal to $0.70, subject to adjustment in the event of future stock splits, stock dividends, and similar transactions, or in the event of subsequent equity sales by the Company at a price lower than the conversion price then in effect.  The Warrants have a five year term, are exercisable on a cash or cashless basis, and have an exercise price equal to $1.00, subject to adjustment in the event of future stock splits, stock dividends, and similar transactions, or in the event of subsequent equity sales by the Company at a price lower than the exercise price then in effect.

The Company’s obligations under the Note are secured by substantially all of the Company’s assets pursuant to a security agreement, dated November 22, 2013 (the “Security Agreement”), between the Company and the Investor.

On March 24, 2014, the Company entered into a Convertible Promissory Note with Iconic Holdings, LLC (the “Iconic Note”) in which the Company has access to borrow a total principal amount of $165,000.  All borrowings incur interest at a rate of 8% per annum, which is payable as of the maturity date of March 24, 2015.  The initial borrowing made by the Company amounted to $55,000, which represents the amount outstanding on the Iconic Note as of March 31, 2014.  At the option of the debt holder, the outstanding balance may be converted at any time into shares of the Company’s common stock at a conversion rate equal to the lower of $0.50 or 60% of the lowest trading price of the Company’s common stock during the 25 consecutive trading days prior to conversion election date.

On March 25, 2014, the Company entered into a convertible note agreement with KBM Worldwide, Inc. (the “KBM Note”) for total principal borrowings of $68,000, which represented the amount outstanding as of March 31, 2014.  The amounts are due nine months after the issuance of the note on December 25, 2014, and bear interest at a rate of 8% per annum.  At the option of the debt holder, beginning 180 days after the issuance of the note, the debt holder may convert the outstanding balance of the KBM Note into shares of the Company’s common stock at a conversion rate equal to 61% of the average of the lowest three closing trading prices during the 10 trading day period prior to the conversion election date.

32
The above warrants issued with the Purchase Agreement have anti-dilution clauses that prevent calculation of the ultimate number of shares that may be issued upon exercise, and the Note, Promissory Note, Iconic Note and KBM Note balances described above have variable conversion features that similarly prevented the calculation of the number of shares into which they were convertible.  As a result, the Company accounts for both the conversion feature associated with these notes and the warrants as derivatives.  The Company values these warrants and conversion features using the binomial lattice method.  The resulting liability is valued at each reporting date and the change in the liability is reflected as change in derivative liability in the statement of operations.
The following summarizes the book value of the convertible notes payable outstanding as of March 31, 2014 and 2013.

  March 31,  March 31, 
  2014  2013 
       
 Principal balance of convertible notes payable outstanding $2,023,000  $1,795,000 
         
 Less: discount on convertible notes payable  (601,016)  (1,678,958)
      ��  
 Convertible notes payable, net $1,421,984  $116,042 
Future scheduled maturities of these notes payable are as follows:

  Year Ended 
  March 31, 
    
2015 $1,873,000 
2016  150,000 
Total $2,023,000 
In connection with the Convertible Notes, the Company incurred debt issuance costs, which primarily represented commissions paid to acquire the debt.  These costs have been capitalized and are being amortized through the maturity date of the notes.  Since the issuance of the Convertible Notes began in February 2013, the Company has capitalized a total of $653,151 of debt issuance costs, including the fair value of 236,000 warrants issued on April 29, 2013 as commission.  Amortization of these capitalized debt issuance costs amounted to $637,679 and $15,472 for the year ended March 31, 2014 and 2013, respectively, which is reflected as interest expense on the accompanying statement of operations.  As of March 31, 2014 and 2013, the remaining amount of capitalized debt issuance costs amounted to $0 and $116,329, respectively, which are included as a component of other current assets and other assets on the accompanying balance sheets.
33
 
(6)  Commitments and Contingencies:

Operating Leases

The Company leases its facilities under a rental agreement that expires in January 31, 2013.April 30, 2016.  The rental agreement includes common area maintenance, property taxes and insurance.  It also provided eightthree months abatement of the base rent.  The Company also leases two of its railcars under an operating lease agreement for a 36 month period that provides for minimum monthly rental payments of $28,000 that expires in August 2016.

Future annual minimum payments under these operating leases are as follows:

Years ending March 31,   Years ending March 31, 
      
2013 $58,400 
2015 $480,882 
2016  485,129 
2017  152,457 
Total $ 58,400  $1,118,468 
 
Rental expense under operating leases for the years ended March 31, 20122014 and 20112013 was $51,522$332,612 and $59,234,$78,660, respectively.

Litigation

In the ordinary course of business, the Company may be or has been involved in legal proceedings from time to time. As of the date of this annual report, on Form 10-K, there have been no material changes to any legal proceedings relating to the Company which previously were not reported.

(7)  Derivative Instruments:

Excess Shares

In connection with the private placement of Convertible Notes beginning in February 2013 (see Note 5), the Company became contingently obligated to issue shares in excess of the 200 million shares authorized by stockholders. Consequently, the ability to settle these obligations with shares would be unavailable causing these obligations to potentially be settled in cash. This condition creates a derivative liability.

The Company has a sequencing policy regarding share settlement wherein instruments with the earliest issuance date would be settled first. The sequencing policy also considers contingently issuable additional shares, such as those issuable upon a stock split or anti-dilution, to have an issuance date to coincide with the event giving rise to the additional shares.

Using this sequencing policy, all instruments convertible into common stock, including warrants and the conversion feature of notes payable, issued subsequent to February 19, 2013 are classified as derivative liabilities.

Other Derivatives

The Company has certain warrants and notes payable with elements that qualify as derivatives. The warrants have anti-dilution clauses that prevent calculation of the ultimate number of shares that may be issued upon exercise, and two of the notes payable had a variable conversion feature that similarly prevented the calculation of the number of shares into which they were convertible.

34
 
The derivative liability, as it relates to the different instruments, is shown in the following table.table:
  Year Ended March 31, 2014  Year ended March 31, 2013 
     Conversion Feature        Conversion Feature    
     of        of    
  Warrants  Notes Payable  Total  Warrants  Notes Payable  Total 
                   
Beginning balance, April 1 $1,663,394  $1,518,143  $3,181,537  $134,791  $35,708  $170,499 
Additional issuances  3,232,748   2,601,417   5,834,165   1,800,725   1,831,865   3,632,590 
Exercised/converted  (33,829)  (307,693)  (341,522)  (172,591)  (178,495)  (351,086)
Reclassification to equity  (3,758,287)  (1,555,085)  (5,313,372)  -   -   - 
Change in derivative liability  (898,778)  (1,264,012)  (2,162,790)  (99,531)  (170,935)  (270,466)
Ending balance, March 31 $205,248  $992,770  $1,198,018  $1,663,394  $1,518,143  $3,181,537 
The derivative liability was valued using the binomial lattice method with the following inputs.

  Year Ended March 31, 2012 
     Conversion Feature    
     of    
  Warrants  Notes Payable  Total 
          
Beginning balance, March 31, 2011 $-  $-  $- 
Additional issuances  171,877   35,708   207,585 
Exercised/converted  -   -   - 
Change in derivative liability  (37,086)  -   (37,086)
Ending balance, March 31, 2012 $134,791  $35,708  $170,499 
  Year Ended  Year Ended 
  March 31, 2014  March 31, 2013 
       
Expected life in years 0.13 - 9.41 years  0.36 - 5.1 years 
Stock price volatility  112.3% - 347.2%  46.8% - 191.5%
Discount rate  0.03% - 2.59%  0.05% - 0.91%
Expected dividends None  None 
Forfeiture rate  0%  0%
(8)  Equity:

(8)  Equity:Common Stock

The Company is authorized to issue 200,000,000 shares of common stock.   There were 48,653,530stock and 39,201,498 sharesno other class of common stock outstanding as of March 31, 2012 and 2011, respectively.at this time.   The holders of common stock are entitled to one vote per share on all matters submitted to a vote of stockholders and are not entitled to cumulate their votes in the election of directors.  The holders of common stock are entitled to any dividends that may be declared by the Board of Directors out of funds legally available therefore subject to the prior rights of holders of any outstanding shares of preferred stock and any contractual restrictions we have against the payment of dividends on common stock. In the event of our liquidation or dissolution, holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities and the liquidation preferences of any outstanding shares of preferred stock.  Holders of common stock have no preemptive or other subscription rights and no right to convert their common stock into any other securities.
 
During the year ended March 31, 2012,2014, the Company issued in a private placement, 3,785,023an aggregate of 4,410,747 shares of its common stock for the conversion of $2,845,411 in convertible notes payable and accrued interest.  The conversion of debt into stock resulted in a totaldebt conversion expense of $383,254.$2,217,878 (see Note 5).  This included 200,000 shares of common stock for the conversion of a $200,000 convertible note payable held by a related party entity owned by a Director of the Company.  During the year ended March 31, 2011,2013, the Company issued 8,049,411an aggregate of 1,682,050 shares of common stock for a totalthe conversion of $1,269,001.$2,056,106 of outstanding notes payable and accrued interest.

During the year ended March 31, 2012,2014, the Company issued 982,741an aggregate of 728,143 shares of its common stock as payment for consulting services, totaling $127,493.directors’ and employee compensation resulting in total expense of $644,540.  During the year ended March 31, 2011,2013, the Company issued 2,388,416an aggregate of 463,868 shares of common stock as payment for consulting services, totaling $477,894.directors’ and employee compensation resulting in an expense of $1,538,677.   The fair value of the consulting servicesdirectors’ and employees’ service was determined by the closing price of the stock on date of issuance.grant and board of director minutes authorizing the shares.
35
 
During the year ended March 31, 2012,2014 and 2013, the Company issued 4,334,2689,823 and 45,000 shares of its common stock, as compensationrespectively, for employees valued at $515,366.  During the year end March 31, 2011, the Company issued 454,615 sharesexercise of its common stock as compensation for employees valued at $67,577.  The fair value of the employee services was determined by the closing price of the stock on date of issuance or the employment agreement in force at the date of issuance.

32
warrants.  

During the year ended March 31, 2011,2014, the Company sold an aggregate total of 600,000 shares of common stock for total proceeds of $275,000, including 350,000 shares of common stock to a director of the Company for total proceeds of $175,000.  During the year ended March 31, 2013, the Company issued 4,000,0002,282,000 shares of its common stock as part of its Asset Purchase Agreementa private placement for total proceeds of $2,282,000.

During the year ended March 31, 2014, the Company exchanged 2,875,650 outstanding warrants for 2,586,835 shares of common stock.  Under the guidance in FASB ASC 718-20-35, the Company compared the fair value of the shares of common stock issued to the fair value of the warrants exchanged.  To the extent that the fair value of the shares issued exceeded the value of the warrants as of the exchange dates, the Company recorded additional compensation costs.  This resulted in the acquisitionCompany recording an additional $595,042 of railway assets.  Stockexpense during the year ended March 31, 2014, which is reflected as a component of compensation and payroll taxes in the accompanying statement of operations.

Warrants

During the year ended March 31, 2014, the Company issued uponan aggregate of 880,000 warrants in connection with the completion of certain agreements.  The remaining 16,000,000 shares are to beConvertible Notes issued uponduring the completion of the agreements, which are deemed necessaryperiod, as well as 236,000 warrants for the continued operationpayment of commissions associated with acquiring the Convertible Notes.  The Company also issued 300,000 warrants in connection with the senior convertible promissory note granted on November 22, 2013, which have been accounted for as derivative liabilities (see Note 7).  During the year ended March 31, 2013, the Company issued an aggregate of 1,800,000 warrants in connection with the Convertible Notes issued during the period.

During the year ended March 31, 2014, the Company issued an additional 125,000 warrants as payment of directors’ services.  The warrants were accounted for as derivative liabilities prior to the reverse stock split on December 2, 2013.  The warrants are exercisable into shares of the Company’s proposed railway service.common stock at exercise prices between $2 and $3 per share.   

During the year ended March 31, 2013, the Company issued an aggregate total of 1,124,842 warrants for services and the purchase of fixed assets.  The warrants issued during the year ended March 31, 2013 resulted in an aggregate of $1,201,370 of expense, as well as an increase to property and equipment of $12,763 for the purchase of transportation equipment.  These warrants are exercisable into shares of the Company’s common stock at exercise prices ranging from $1.00 to $11.00 per share.
The following summarizes the Company's warrant activity during the years ended March 31, 2014 and 2013.

Warrants
Outstanding - March 31, 2012116,309
Granted2,924,842
Exercised(45,000)
Cancelled(71,309)
Outstanding - March 31, 20132,924,842
Granted1,541,000
Exercised(20,350)
Cancelled(2,875,650)
Outstanding - March 31, 20141,569,842

36
(9)  Stock Option Plan:Share Based Compensation:
Stock-Option Plan

The Company’s 2011 Stock Option Plan provides for the grant of 20,000,0001,000,000 incentive or non-statutory stock options to purchase common stock. Employees, who share the responsibility for the management growth or protection of the business of the Company and certain Non-Employee (“Selected Persons”),non-employees, are eligible to receive options which are approved by a committee of the Board of Directors.  These options vest over five years and are exercisable for a ten-year period from the date of the grant.

The Company has recorded employee shared based compensation of $558,388 and $148,099 for March 31, 2012 and 2011, respectively.  As of March 31, 2012 and 2011,2014, the Company had 2,000,000100,000 options outstanding.  The fair value for these options was estimatedoutstanding at the date of grant, November 1, 2008 using a Black-Scholes option pricing model with the following weighted-average assumptions for an estimated 2.5 year term; risk free rate of 3.5%; no dividend yield; volatility factors of the expected marketexercise price of the Company’s common stock$10.00 per share.  These options were fully vested as of (51%), the market value of the Company’s stock on grant date was $0.45.
At March 31, 2012, the Company had approximately $80,522 of total unrecognized2013, and therefore there no further compensation cost relatedwas recorded during the year ended March 31, 2014.  Stock option compensation cost recorded during the year ended March 31, 2013 amounted to unvested stock options. This cost is expected to be recognized over a weighted-average period of approximately 2 years.$80,524.  No options were granted or exercised during the years ended March 31, 2012.2014 and 2013.  The outstanding options will expire in November 2018.  

A summaryEmployment Agreements

The Company has an employment agreement with Michael Barron, the CEO and President of the Company, which provides for an annual salary of $180,000.  Base salary will be increased to $300,000 based upon receipt of significant corporate or public funding.  In addition, Mr. Barron is entitled to receive an incentive or performance bonus as follows:  1) Upon the Company’s stock option activity follows:execution of a definitive agreement with AMTRAK, Mr. Barron shall be granted 50,000 shares, 2) Upon the Company’s execution of a definitive agreement with BNSF, Mr. Barron shall be granted 25,000 shares, 3) Upon the Company’s execution of a definitive agreement with Union Pacific, Mr. Barron shall be granted 25,000 shares, 4) Upon the Company’s execution of a definitive agreement with a rail car provider, Mr. Barron shall be granted 25,000 shares, 5) Upon the Company’s completion of its operation of its first train between Los Angeles and Las Vegas, Mr. Barron shall be granted 75,000 shares.  He is also entitled to a car allowance of $1,000 per month.  His employment agreement provides that if we terminate him without cause, he is entitled to receive a lump sum payment equal to twice his annual salary plus the present value of a performance bonus computed on the basis that we achieve all of our performance targets.  Mr. Barron’s employment agreement commenced as of February 1, 2012.

  March 31, 2012  March 31, 2011
     Weighted    Weighted
     Average    Average
     Exercise    Exercise
  Options  Price  Options Price
           
Outstanding - March 31, 2011  2,000,000  $0.50   2,000,000 $0.50
               
Granted  -   -   -  -
               
Exercised  -   -    -  -
               
Cancelled  -   -   -  -
               
               
Outstanding - March 31, 2012  2,000,000  $0.50   2,000,000 $0.50
               
Exercisable - end of year  1,600,000  $0.50   1,200,000 $0.50
The Company has an employment agreement with Wanda Witoslawski which requires her to perform the duties of Chief Financial Officer and Treasurer of the Company for the duration of the employment agreement.  During the term of this Agreement, the Company agrees to pay Ms. Witoslawski a base salary at the rate of $120,000 per year.  Base salary will be increased to $200,000 per year based only upon receipt of significant corporate or public funding.  Additionally, a total of 50,000 shares per year will be vested quarterly, in arrears, for a total period of 3 years for a total of 150,000 shares.  In addition, Mrs. Witoslawski is entitled to receive an incentive or performance bonus as follows:  1) Upon the Company‘s execution of a definitive agreement with AMTRAK, Ms. Witoslawski shall be granted 25,000 shares, 2) Upon the Company’s execution of a definitive agreement with BNSF, Ms. Witoslawski shall be granted 12,500 shares, 3) Upon the Company’s execution of a definitive agreement with Union Pacific, Ms. Witoslawski shall be granted 12,500 shares, 4) Upon the Company’s execution of a definitive agreement with a rail car provider, Ms. Witoslawski shall be granted 12,500 shares, 5) Upon the Company’s completion of its operation of its first train between Los Angeles and Las Vegas, Ms. Witoslawski shall be granted 62,500 shares.  She is also entitled to a car allowance of $500 per month.  Her employment agreement provides that if we terminate her without cause, she is entitled to receive a lump sum payment equal to twice her annual salary plus the present value of a performance bonus computed on the basis that we achieve all of our performance targets.  Mrs. Witoslawski’s employment agreement commenced as of February 1, 2012.

Due to the change in the Company’s business model, it is not probable for the stock to be issued under the above agreements.  Therefore, no further compensation cost is being recorded for the bonus shares to be issued to Mr. Barron and Ms. Witoslawski.

Our employment agreement with Penny White requires her to perform the duties of President and Chief Operating Officer of the Company for the duration of the employment agreement.  During the term of this Agreement, the Company agrees to pay Ms. White a base salary at the rate of $150,000 per year.  Additionally, a total of 1 million shares per year will be vested quarterly, in arrears, for a total period of 3 years for a total of 3 million shares.  Her employment agreement provides that if we terminate her without cause, she is entitled to receive a lump sum payment equal to twice her annual salary plus the present value of a performance bonus computed on the basis that we achieve all of our performance targets.  Mrs. White’s employment agreement commenced as of August 15, 2012.  As of March 31, 2014, there is a total of $240,833 in unrecognized stock-based compensation expense relating to this employment agreement.
 
3337
 
 
(10)  Income Taxes:

 
Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating losses and tax credit carry forwards.  The tax effects of significant items comprising the Company’s deferred taxes as of March 31, 20122014 and 20112013 are as follows.follows:
 
 March 31,  March 31,  March 31,  March 31, 
Deferred tax assets 2012  2011  2014  2013 
            
Net operating loss carryforward $6,243,339  $5,577,000  $10,732,493  $7,470,147 
Stock option compensation  27,377   - 
Share based compensation  600,019   477,373 
Warrants issued in connection with debt  18,117   -   567,839   567,839 
Total deferred tax assets  (6,288,833)  (5,577,000)
Valuation allowance  (11,900,351)  (8,515,359)
Net deferred tax assets $-  $-  $-  $- 
                
Deferred tax liabilities                
Goodwill $42,343  $-  $-  $55,914 
Net deferred tax liabilities $ 42,343  $ -   -   55,914 
 
A reconciliation of the provision for income taxes with the expected income tax computed by applying the Federalfederal statutory income tax rate to income before provision for income taxes for the years ended March 31, 20122014 and 20112013 are as follows.follows:
 
 March 31,  March 31,  March 31,  March 31, 
 2012  2011  2014  2013 
Income tax benefit computed at the Federal statutory rate of 34% $(682,051) $(487,000)
        
Income tax benefit from continuing operations computed at the Federal statutory rate of 34% $(4,293,269) $(2,463,568)
Income tax expense from discontinued operations computed at the Federal statutory rate of 34%  -   163,097 
Increase in valuation allowance  669,442   487,000   3,384,992   2,226,526 
Other  12,609   -   852,363   73,945 
Amortization of goodwill  42,343   -   -   13,571 
Provision for income taxes $42,343  $- 
(Benefit from) provision for income taxes $(55,914) $13,571 

38
 
ASC 740 requires that the tax benefit of net operating losses carry forwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.”  Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carry forward period.  Because of the Company’s recent history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a 100% valuation allowance against the asset amounts.
 
Any uncertain tax positions would be related to tax years that remain open and subject to examination by the relevant tax authorities.  The Company has no liabilities related to uncertain tax positions or unrecognized benefits as of the year end March 31, 20122014 or 2011.2013.  The Company has not accrued for interest or penalties associated with unrecognized tax liabilities.
 
As of March 31, 2012,2014, the Company had federal net operating loss carry forwards of approximately $18.3$31.6 million, which may be available to offset future taxable income for tax purposes.  These net operating loss carry forwards begin to expire in 2027 through 2032.  This carry forward may be limited upon the consummation of a business combinationownership change under IRC Section 381.382.

(11)  Related-Party Transactions:
 
Michael A. Barron, ourthe CEO and President of the Company, is a 100% owner and President of Allegheny Nevada Holdings Corporation, “Allegheny”.  The Company iswas indebted to Allegheny by a certain promissory note, dated January 6, 2009, of which Allegheny loaned the Company funds for working capital needs.   Said Agreement was amended on October 1, 2009 and a portion was converted to 1,564,719 shares of the Company’s common stock at $0.05 per share.  As of January 15, 2011, the amendment was rescinded, returning the shares to the Company and restoring the note balance.  No gain or loss was recognized in the amendment or rescission.  As of March 31, 20122014 and 2011,2013, the balance of the note was $89,186$0 and $107,563,$124,301, respectively.  This note was included in liabilities of discontinued operations on the balance sheet. During the year ended March 31, 2014, the Company paid $124,301 to pay off principal balance and $27,272 for interest at the rate of 10%.
 
On November 23, 2009, the Company entered into an Asset Purchase Agreement with Las Vegas Railway Express, a Nevada Corporation, of which Allegheny iswas owner of 28.6% and Mr. Barron is a 28.6% owner, independent of Allegheny.  On January 21, 2010, by shareholder approval the Company acquired Las Vegas Railway Express for 20,000,0001,000,000 shares of the Company’s stock, of which 4,000,000 has been200,000 were issued on April 23, 2010.  The remaining 16,000,000800,000 shares are to bewere issued upon the completion of certain agreements.  These agreements are deemed necessary for the continued operation of the Company’s proposed railway service.on August 15, 2012.
As of March 31, 2012 and 2011, Allegheny Nevada Holdings had a beneficial ownership in the Company of 4.12% and 0%, respectively.
As of March 31, 2012 and 2011, Mr. Barron had accrued wages of $71,563 and $65,734, respectively.
34

Dianne David Barron, ourthe Company’s Manager of Station Development is the spouse of our Chief Executive Officer,the CEO, Michael A. Barron.Barron and receives an annual salary of $96,000.
 
Joseph Cosio-Barron, former President, Secretary and Director of the Company is a 100% owner of CBS Consultants “CBS”, a Nevada Corporation.  CBS had a 22.9% ownership of Las Vegas Railway Express at the time of acquisition on October 1, 2009, the Company entered into a promissory note with Mr. Cosio-Barron for $86,709.  The Company converted 867,085 shares of the Company’s stock at $0.05 per share, resulting in a balance at March 31, 20122014 and 20112013 of $46,102$0 and $57,198,$69,740, respectively.   AsThis note was included in liabilities of discontinued operations on the balance sheet.  During the year ended March 31, 20122014, the Company paid $69,740 to pay off principal balance and 2011, Mr. Cosio-Barron had accrued wages$14,592 for interest at the rate of $57,80010%.

Gilbert H. Lamphere, a Director of the Company, is a partner of FlatWorld Capital, a company that entered into Advisory Agreement with Las Vegas Railway Express, Inc. As compensation FlatWorld Capital was issued 494,396 warrants which are exercisable into shares of common stock at exercise prices ranging from $2 to $11 per share.

During the year ended March 31, 2014, the Company issued an additional 125,000 warrants as payment of directors’ services.  The warrants are exercisable into shares of the Company’s common stock at exercise prices between $2 and $51,971, respectively.$3 per share.  The Company also issued 200,000 shares of common stock for the conversion of a $200,000 convertible note payable held by a related party entity owned by a Director of the Company. 

During the year ended March 31, 2014, the Company incurred $53,822 of legal and administrative expenses relating to the formation of a limited partnership, of which the Company holds a 20% interest and is the general partner.

39
John H. Marino, a former Director of the Company through March 10, 2014, is a 100% owner of Transportation Management Services, Inc., a company that entered into consulting agreement with the Company. During the year ended March 31, 2013 Transportation Management Services, Inc. was issued 30,000 shares of common stock, as well as $13,500 in cash, which resulted in total consulting expense of $43,500.  During the year ended March 31, 2014, the Company issued Transportation Management Services, Inc. 13,125 shares of common stock as payment for services provided which resulted in consulting expense of $10,500.  During the year ended March 31, 2013, the Company acquired four of its railcars from Transportation Management Services, Inc. for a total purchase price of $29,000, along with warrants to purchase 6,050 shares of common stock which were valued at $12,763.
(12)  Discontinued Operations:
 
As discussed in Note 1, priorPrior to January 21, 2010, the Company had been actively engaged in acquiring underperforming mortgage loan portfolios and generating revenues from re-performing, sale of loans and fee revenue.  As of January 21, 2010, the Company changed its primary business and abandoned the prior business. Accordingly, the assets and liabilities and results of operation related to this business have been classified as discontinued operations in the financial statements for all periods presented.  As a result,During the prior period comparative financial statements have been restated. Prior to this decision, the loan business represented substantially all of the Company’s operating revenue.
Prior to the Company’s corporate restructuring in 2010,year ended March 31, 2014 and 2013, the Company had several accounts payable dating back to 2008 and prior (the “Liberty Capital Payables”). All of these Liberty Capital Payables were related to business operations which were discontinued in January 2010. In 2012, the Company updated its internal review of the status of the Liberty Capital Payables and recorded a $47,330 gain resulting from relief of liabilities that were cleared based on expiration of Nevada statutes of limitations. The gain is reflected as a gain from discontinued operations. There was no tax impact as the prior tax assets had a 100% valuation allowance resulting in no balance sheet ornet income statement adjustments for taxes.
The following table summarizes results from discontinued operations forof $0 and $476,766, respectively, which resulted from the years ended March 31, 2012 and 2011:
  Year Ended 
  March 31,  March 31, 
  2012  2011 
       
Revenues $4,315  $52,506 
Cost of sales  -   - 
Gross profit  4,315   52,506 
Operating Expenses:        
Selling, general and administrative  -   4,528 
  Total expenses  -   4,528 
Loss from discontinued operations  4,315   47,978 
Other (expense) income        
Interest expense  (32,649)  (31,831)
Write down of payables  47,330   - 
   Total other (expense) income  14,681   (31,831)
Net income from discontinued operations $18,996  $16,147 
write down of payables.

The following table summarizes the liabilities classified as discontinued operations in the accompanying balance sheets.sheets:

  March 31,  March 31, 
  2012  2011 
Accounts payable and accrued expenses $622,603  $684,302 
Notes payable  148,060   150,060 
Notes payable, related party  135,287   164,760 
  $905,950  $999,122 
  March 31,  March 31, 
  2014  2013 
       
Notes payable, related party $-  $194,041 
  $-  $194,041 
The Company entered into forbearance agreements with investors holding the notes that are included in liabilities to be disposed of.  The outstanding balance of the notes were fully paid by March 31, 2014.

In preparing these financial statements,(13)  Subsequent Events

On April 1, 2014, the Company has evaluated eventsissued stock options to 5 employees and members of management that entitle the employees to a combined 20% of the total issued and outstanding common shares.  The Company also issued stock options to directors as compensation which provides for the purchase of an aggregate total of 2,400,000 shares of common stock.  All options granted have an exercise price of $0.0001 per share.  The stock options are fully vested on the date of issuance and have a contractual life of 5 years.  Subsequent to the year ended March 31, 2014, the Company issued an aggregate total of 5,144,054 shares of common stock for the exercise of options.

On April 2, 2014, the Company entered issued a convertible promissory note for $100,000 with a maturity date of October 2, 2014.  The note is convertible into shares of the Company’s common stock at a discount of 42% of the lowest traded price during the 5 trading days preceding the conversion date.

On April 11, 2014, the Company entered into a Note Exchange Agreement with the debt holder holding the $1,750,000 senior secured convertible promissory note originally issued on November 22, 2013 under the Purchase Agreement (see Note 5).  Under the terms of the Note Exchange Agreement, the original senior secured convertible promissory note is cancelled and replaced with a new note for $2,000,000.  The new note matures on November 30, 2014, bears interest at the rate of 10% per year payable on maturity in cash or shares of common stock at the Company’s option (subject to certain conditions), and is convertible into shares of the Company’s common stock at a conversion price equal to $0.45, subject to adjustments in the event of future stock splits, stock dividends, and similar transactions, for potential recognition or disclosure through July 9, 2012.in the event of subsequent equity sales by the Company at a price lower than the conversion price then in effect.  Under the new note, the Company’s obligations are secured by substantially all of the Company’s assets, excluding any railcar assets.

 
3540
 


(13)  Subsequent Event
In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through July 9, 2012.
 
On April 11, 2012 the Company entered into Promissory Note Conversion Agreement with Jameson Capital LLC pursuant to which a promissory note with accrued interest in the total amount of $15,602.85 was converted to restricted common stock at the price of $0.05 per share totaling 312,057 shares.
On April 24, 2012 the Company issued 400,000 shares of common stock for Directors’ compensation.
On April 30, 201214, 2014, the Company entered into a Promissory Note Conversionsecurities purchase agreement with Ascendiant Capital Partners. LLC (“Ascendiant”) whereby the Company may sell to Ascendiant up to $10 million worth of the Company’s common stock on a private placement basis.  Upon entering into the securities purchase agreement, the Company issued Ascendiant 1,250,000 shares of common stock as a commitment fee.  On June 24, 2014, the Company terminated the securities purchase agreement with Ascendiant.

On April 17, 2014, the Company issued a convertible note payable providing for borrowings up to $250,000 with a maturity date of April 17, 2016.  The note has a one-time interest charge of 12% and is due on the maturity date. The outstanding balance of the note along with accrued interest is convertible into shares of the Company’s common stock at a rate equal to the lesser of $0.25 or 60% of the lowest trade occurring during the 25 trading days preceding the conversion date.  The Company received borrowings under this convertible note payable of $50,000 in April 2014.

On April 23, 2014, the Company entered into an Assignment and Use Agreement with American Pension Services, Inc. Administrator for Gilbert H. LamphereSanta Fe Southern Railroad (“SFSR”) with a term of 5 years, pursuant to which two promissory notes, inSFSR granted the total valueCompany exclusivity to manage and control all aspects of $300,000 were convertedExcursion Services and special Event Services between Lamy and Santa Fe, New Mexico.  Under the terms of the agreement, the Company will pay for the cost of repairs of the tracks and equipment up to restricted common stock ata sum of $250,000.  The Company and SFSR have further agreed to enter into a lease agreement for certain equipment and a service agreement to allow the price of $0.10 per share totaling 3,000,000 shares.Company to operate certain equipment on existing SFSR tracks.

On April 30, 20122014, the Company entered into a Promissory Note Conversion Agreement with Gilbert H. Lamphere pursuant toconvertible note payable providing for total borrowings of $250,000, which is payable in 3 installments of $83,333, one upon execution of the note, one due one month after execution, and one due two promissory notes, inmonths after execution.  Interest on the note equals 10% of the total valueprincipal balance, regardless of $150,000, were converted to restricted common stockhow long the note is outstanding for.  The Company received payments of $83,333 on May 5, 2014 and on May 30, 2014.  The convertible note matures 6 months after the issuance, at which point the price of $0.10 per share totaling 1,500,000 shares.outstanding principal and interest is due.

On May 22, 20126, 2014, the Company issued 500,000 sharesentered into a convertible note payable providing for total borrowings of Common Stock for Directors’ compensation$32,500 which accrue interest at a rate of 8% per annum.  The convertible note matures and 1,000,000 shares were issued pursuant to an employment agreement.
On May 31, 2012 the Company issued 4,996,716 shares of common stock by Promissory Note Conversion Agreementsis due in full on February 12, 2015 along with three entities and converting these notesany unpaid accrued interest.  The outstanding principal and accrued interest at the price of $0.05 per share.
On June 4, 2012 the Company issued 600,000 shares of common stock for debt of $30,000.
On April 27, 2012 the Company commenced a private offering under a Private Placement Memorandum under Regulation D of the Securities Act of 1933 of up to aggregate number of 30,000,000is convertible into shares of common stock at the option of the holder at a conversion rate equal to 61% of the average of the lowest 3 trading prices during the 10 trading days prior to the conversion.

On May 12, 2014, the Company entered into a secured convertible promissory note providing for total borrowings up to $335,000 which accrue interest at a rate of 10% per annum.  All outstanding borrowings mature and are due in 20 months from the issuance date.  The Company received an initial payment of $87,500 on the note issuance date.  The outstanding principal and interest is convertible into shares of common stock at the option of the holder at a conversion rate equal to the lesser of $0.35 per share or 60% of the average of the 3 lowest closing bid prices in the 20 trading days preceding the conversion date.  If the average of the 3 lowest closing bid prices is less than $0.10, then the conversion factor is reduced from 60% to 55%.  The debt holder was also issued warrants on May 12, 2014 in connection with this note payable granting the right to purchase a number of common stock shares equal to $167,500 divided by the market price (defined as the higher of the closing price on the issuance date or the volume weighted average price of $0.05 totaling upthe stock for the trading day that is 2 days prior to $1,500,000 worththe exercise date) at an exercise price of common stock.  As of June 22, 2012$0.35 per share.

On May 28, 2014, the Company issued 22,400,000into a convertible promissory note providing for borrowings of $125,000.  The convertible promissory note matures on August 28, 2014, at which point the Company owes $187,500 which includes a total of $62,500 in interest expense.  The outstanding amounts are convertible into shares of common stock at the option of the holder at a conversion rate equal to 60% of the lowest traded price during the prior 20 trading days from the date of the conversion.

On June 13, 2014, the Company issued convertible debenture providing for total borrowing of $55,000 which accrue interest at the rate of 12% per annum. All borrowings mature and are due in one year from the issuance date. The debenture is convertible into shares of common stock at the option of the holder at the conversion rate lesser of 55% discount of the lowest closing bid price during the 25 trading days prior to the date of notice conversion or $0.25 per share.

41
Subsequent to the year ended March 31, 2014, the Company issued 90,000 shares of common stock to a consultant pursuant to a consulting agreement and 50,000 shares to an employee pursuant to an employment agreement.

Subsequent to the year ended March 31, 2014, the Company issued 585,000 shares of common stock for an aggregate purchase pricethe partial conversion of $1,120,000.convertible notes payable and interest outstanding at March 31, 2014.  The Company also issued 18,741 shares of common stock as payment of accrued interest on note payables and 646,176 shares of common stock as a payment for aged accounts payables.

Item 9.  Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

On December 10, 2012, Hamilton, PC (“Hamilton”) was dismissed as the Company’s independent registered public accounting firm. Hamilton’s dismissal was approved by the Company’s board of directors. Hamilton’s audit reports on the Company’s financial statements for the fiscal years ended March 31, 2012 and 2011 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles, except that, the audit reports included an explanatory paragraph with respect to the uncertainty as to the Company’s ability to continue as a going concern. During the years ended March 31, 2012 and 2011 and during the subsequent interim period preceding the date of Hamilton’s dismissal, there were (i) no disagreements with Hamilton on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, and (ii) no reportable events (as that term is defined in Item 304(a)(1)(v) of Regulation S-K).None.

On December 10, 2012, the Company engaged BDO USA, LLP (“BDO”) to serve as its independent registered public accounting firm. During the years ended March 31, 2012 and 2011 and during the subsequent interim period preceding the date of BDO’s engagement, the Company did not consult with BDO regarding the application of accounting principles to a specific completed or contemplated transaction, or the type of audit opinion that might be rendered on the Company’s financial statements. The decision to engage BDO was approved by the Company’s board of directors.

Item 9A.  Controls and Procedures.

We maintainEvaluation of Disclosure Controls and Procedures. Our management, with the participation of our CEO and our CFO, evaluated the effectiveness of our disclosure controls and procedures as March 31, 2014.  Based on that are designed to ensureevaluation, our CEO and our CFO concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were effective as of March 31, 2014 such that material information required to be disclosed is made known to management and others, as appropriate, to allow timely decision regarding required disclosure and that the information required to be disclosed by us in our reports filed under the Securities Exchange Act of 1934 as amended ( the “Exchange Act”) is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is(ii) accumulated and communicated to our management, including its chief executive officerour CEO and chief financial officer,CFO, as appropriate to allow timely decisions regarding required disclosure.

Limitations on A controls system cannot provide absolute assurance, however, that the Effectivenessobjectives of Disclosure Controls.  In designingthe controls system are met, and evaluating the disclosureno evaluation of controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonableabsolute assurance that all control issues and instances of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Evaluation of Disclosure Controls and Procedures.  As of March 31, 2012, the end of the fiscal year covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer (“CEO”) and our chief financial officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our CEO and CFO concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not operating effectively as of March 31, 2012. Our disclosure controls and procedures were not effective because of the “material weakness” described below under “Management’s Annual Report on Internal Control over Financial Reporting”.fraud, if any, within a company have been detected.
 
36


Management’s Annual Report on Internal Control over Financial Reporting. Reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.

Our management, with the participation of the CEO and CFO, evaluated the effectiveness of the Company’s internal control over financial reporting as of March 31, 2012.2014. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework. Based on this evaluation, our management, with the participation of the CEO and CFO, concluded that, there was a material weakness in the design and operating effectivenessas of certain accounting and financial reporting processes, as described more fully below. Due to this material weakness management concluded that the Company’sMarch 31, 2014, our internal control over financial reporting was not effective as of March 31, 2012.

effective.
A "material weakness" is defined as a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. A “significant deficiency” is defined as a control deficiency, or combination of control deficiencies, that adversely affects the Company’s ability to initiate, authorize, record, process, or report external financial information reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the Company’s annual or interim financial statements that is more than inconsequential will not be prevented or detected.

Material Weakness in Accounting and Financial Reporting.
The Company did not maintain effective control over its annual financial statement reporting process which resulted in a restatement of the 2012 and 2011 financial statements. This restatement was a direct result of inadequate technical accounting review of transactions due to our inability to staff our accounting department with experienced US GAAP and SEC reporting personnel. A material weakness in financial reporting impacts the Company’s ability to timely report financial information in conformity with U.S. generally accepted accounting principles (“GAAP”), which could affect all significant financial statement accounts and disclosures.  To remediate this material weakness in internal control over financial reporting, we have engaged a consultant with US GAAP and SEC reporting expertise to review our accounting prior to the issuance of financial statements.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’sManagement's report was not subject to attestation by the Company’sCompany's registered public accounting firm pursuant to rulesan exemption for smaller reporting companies under Section 989G of the SecuritiesDodd-Frank Wall Street Reform and Exchange Commission that permits us to provide only management’s report in this annual report.Consumer Protection Act.

Changes in Internal Control over Financial Reporting.During the fourth quarter of the year ended March 31, 2012, the Company discovered the material weakness

There were no changes in our internal control over financial reporting disclosed above whichduring the quarter ended March 31, 2014 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

42
 
Item 9B.  Other Information

None.
 
PART III

Item 10.  Directors, Executive Officers and Corporate GoveranceGovernance.

Directors and Executive Officers

The following table sets forth information regarding our executive officers and directors:

NameAgeOffice
Gilbert H. Lamphere60
Michael A. Barron63Chairman of the Board of Directors,
Michael A. Barron61Chief Executive Officer President and Director
Wanda Witoslawski47Chief Financial Officer, Secretary and Treasurer
John D. McPherson6566Director
JohnGilbert H. MarinoLamphere7361Director
Thomas MulliganWanda Witoslawski6149Chief Financial Officer and Treasurer
John M.B. O’Connor59Director
George Rebensdorf59Director
Penny White53President and Chief Operating Officer

Directors hold office for a period of one year from their election at the annual meeting of stockholders and until their successors is duly elected and qualified. Officers are elected by, and serve at the discretion of, the Board of Directors. None of the above individuals has any family relationship with any other.

37

Set forth below is a brief description of the background and business experience of each of our executive officers and directors.

Gilbert H. Lamphere – Chairman, 60
Mr. Lamphere has served as our Chairman since October 1, 2011. Mr. Lamphere serves on the Board of Directors of CSX Corporation and has served on the board of Canadian National Railway, Chaired the Board of the Illinois Central Railroad and served on the board of Florida East Coast Railway (350 miles down East Coast of Florida).  He was also instrumental in the investment and oversight of Mid-South Rail.  Mid-South, Illinois Central and Canadian National became successively the most efficient railroads with the lowest operating ratios in North America. He is the Managing Director of Lamphere Capital Management, a private investment firm which he founded in 1999 and Chairman of FlatWorld Acquisition Corp., a publicly traded private equity company. He has served as a director of numerous other public companies, including Carlyle Industries, Inc., Cleveland-Cliffs, Inc., R.P. Scherer Corporation, Global Natural Resources Corporation and Recognition International, Inc. Earlier in his career, Mr. Lamphere was Vice President of Mergers and Acquisitions at Morgan Stanley. Mr. Lamphere’s railroad industry knowledge and experience qualify him to serve on our board of directors.
Michael A. Barron – PresidentChairman and Chief Executive Officer, 6163

Mr. Barron has been a developer of new business enterprises for nearly 30 years. Mr. Barron began his career in 1971 where he was the Senior Planner for the City of Monterey and was the HUD liaison for the City’s downtown redevelopment project. He master planned the city’s redevelopment of famous Cannery Row, Fisherman’s Wharf, and was Secretary of the Architectural Review Committee. Mr. Barron was the founder of Citidata, the first electronic provider of computerized real estate multiple listing service (MLS) information in the nation from 1975 to 1979. Citidata became the nation’s largest provider of electronic real estate information and was sold to Moore Industries in 1979. In June 1979, TRW hired Mr. Barron to develop its real estate information services division (TRW/REIS) that acquired 11 companies in the field and eventually became the world’s largest repository of real estate property information - Experian. In November 1988, he founded and served as President, until 1992, of Finet Holdings Corporation (NASDAQ:FNCM), a publicly traded mortgage broker and banking business specializing in e-mortgage financing on site in real estate offices and remote loan origination via the Internet (www.finet.com). The company was publicly traded and maintained a market capitalization of $500 million. From March 1995-1998, Mr. Barron pioneered the first nationwide commercially deployed video conference mortgage financing platform for Intel Corporation which as a licensed mortgage banker and broker in 20 states funded over $1 billion in closed loans. He later went on to serve as CEO for Shearson Home Loans and founded Liberty Capital, a $100 million asset management company based in Las Vegas, Nevada. Mr. Barron holds a B.S. degree from California Polytechnic University. Michael A. Barron has served as Director on Las Vegas Railway Express’ Board of Directors since inception. Mr. Barron’s experience as our president and chief executive officer quality him to serve on our board of directors.

43
Wanda Witoslawski - Chief Financial Officer, 4749

Prior to joining the Company, Ms. Witoslawski was Controller for Ocean West Enterprises 1999-2005 and managed the mortgage banking function of that California mortgage bank.  Her duties included accounting responsibility for over 200 branch offices, management of a $100 million mortgage bank warehouse line, payroll, general ledger and corporate accounting for SEC filings of the publicly traded company.  Upon acquisition of Ocean West by Shearson Home Loans in 2005, she became Controller of publicly traded Shearson conducting the accounting operation for a staff of 1,350 employees including payroll, branch accounting and credit line management for over $200 million in warehouse banking credit.  She assisted the CEO and President in the acquisition of five mortgage companies and development of a 250 office branch system with funding in excess of $1 billion per year, controlled the expense accounting & managed Shearson’s eighteen consecutive quarters of profitability.  Upon Shearson’s exit from mortgage banking in 2007, she joined the principals Mr. Barron and Mr. Cosio-Barron as Controller at Liberty Capital Asset Management, an investor in acquiring defaulted mortgage pools, managing public accounting documents for SEC filings and the financial supervision over the liquidation of over 4,000 mortgage loans the company had acquired.  She has a Master’s Degree in Economics from the University of Gdansk, Poland, a diploma in Marketing from Kensington College of Business, London, England and a diploma in professional accounting from Learning Tree University, Irvine, CA. Ms. Witoslawski is fluent in English, Polish and Russian.

Penny White – President/ Chief Operating Officer - 53
 
Ms. White previously was on the Branson, MO District Marketing Counsel and Ad Committee for the Branson Chamber of Commerce and Convention and Visitors Bureau and was the Vice President for FlyBranson Travel, LLC dba Branson Air Express. Ms. White was instrumental in the startup of The Branson Airports owned airline Branson AirExpress. ¨
Prior to joining The Branson Airport, Ms. White worked for Allstate Ticketing and Tours in Las Vegas where she took a “mom and pop” company with 30 employees and 5 locations that was generating $3 million in annual revenue to a medium sized company with over 250 employees and 21 locations producing $56 million in annual revenue from managing Hotel Box Offices, Hoover Dam ticketing services to managing customer service booths at Forum Shops, Canal Shops and Miracle Mile at Planet Hollywood. During her 9 year tenure she held the positions of Controller, Vice President of Finance and Marketing and President. Several of her achievements at Allstate was developing their propriety ticketing system and securing the URL name showtickets.com, where she was instrumental in taking it from conceptual to revenue producing in 2001.
John D. McPherson – Director, 6566

Mr. McPherson has served as a director of the Company since January 15, 2012. Mr. McPherson joined the Board of Directors of CSX Corporation in July 2008. He served as President and COO of Florida East Coast Railway, a wholly-owned subsidiary of Florida East Coast Industries, Inc., from 1999 until his retirement in 2007. From 1993-1998, Mr. McPherson served as Senior Vice President - Operations, and from 1998-1999, he served as President and CEO of the Illinois Central Railroad. Illinois Central became the most efficient railroad with the lowest operating ratio in North America. Prior to joining the Illinois Central Railroad, Mr. McPherson served in various capacities at Santa Fe Railroad for 25 years. As a result of his extensive career in the rail industry, Mr. McPherson serves as an expert in railroad operations. From 1997-2007, Mr. McPherson served as a member of the board of directors of TTX Company, a railcar provider and freight car management services joint venture of North American railroads. Mr. McPherson’s railroad industry knowledge and experience qualifies him to serve on the Company’s board of directors.

Gilbert H. Lamphere – Director, 61

Mr. Lamphere has served as a director of the Company since October 1, 2011. Mr. Lamphere serves on the Board of Directors of CSX Corporation and has served on the board of Canadian National Railway, Chaired the Board of the Illinois Central Railroad and served on the board of Florida East Coast Railway (350 miles down East Coast of Florida).  He was also instrumental in the investment and oversight of Mid-South Rail.  Mid-South, Illinois Central and Canadian National became successively the most efficient railroads with the lowest operating ratios in North America. He is the Managing Director of Lamphere Capital Management, a private investment firm which he founded in 1999 and Chairman of FlatWorld Acquisition Corp., a publicly traded private equity company. He has served as a director of numerous other public companies, including Carlyle Industries, Inc., Cleveland-Cliffs, Inc., R.P. Scherer Corporation, Global Natural Resources Corporation and Recognition International, Inc. Earlier in his career, Mr. Lamphere was Vice President of Mergers and Acquisitions at Morgan Stanley. Mr. Lamphere’s railroad industry knowledge and experience qualify him to serve on our board of directors.

 
3844
 

John H. Marino,M. B. O’Connor - Director, 7359

Mr. MarinoO’Connor has served as a director of the Company since January 15, 2012.11, 2013. Mr. Marino has recently joined the company as Vice President – Rail Operations where he supervises the Company’s activities with the Class 1 railroads, Amtrak, railcar procurement, and railset maintenance. Mr. Marino also serves as PresidentO’Connor is Chairman of TransportationJ.H. Whitney Investment Management, Services, Inc.,LLC, a position he has held since 1983.January 2005. From April 1992 until July 1996, he served as President and Chief Operating Officer of Rail America NYSE:RA, a publicly traded company and the largest short line railroad company in America.January 2009 to March 2011, Mr. Marino co-founded Huron & Eastern Railway Company, Inc., a subsidiary of Rail America, and from 1986 until April 1996, served as its President and one of its directors. Mr. MarinoO’Connor also served as the President of Huron Transportation Group from its formation in January 1987 until its merger with Rail America Services Corporation in December 1993. He has served as President and Chief Executive Officer of several short line railroads,Tactronics Holdings, LLC a Whitney Capital Partners portfolio Holding Company that provided tactical integrated electronic systems to U.S. and foreign military customers as an officerwell as composite armor solutions for military vehicles through its Armostruxx division. Previously, Mr. O’Connor was Chairman of JP Morgan Alternative Asset Management, Inc. (part of the Reading Railroadinvestment manager arm of JP Morgan), Chairman of JP Morgan Incubator Strategies, Inc. (a hedge fund investment arm of JP Morgan) and withan Executive Partner of JP Morgan Partners (a private equity firm) and responsible for all proprietary and client Hedge Fund and Fund of Fund activities of JP Morgan, in addition to his responsibilities as a Senior Private Equity Manager. He was also a member of the Risk Management Committee of JP Morgan Chase, which is responsible for policy formulation and oversight of all market and credit risk taking activities globally. Mr. O’Connor earned a bachelor’s degree in economics from Tulane University and an MBA degree from Columbia University Graduate School of Business. Mr. O’Connor serves as a special consultant in a pro-bono capacity for the U.S. Department of Defense and is an appointed special consultant to the Department of Defense Business Board. He is a member of the Senior Advisors Panel of both the United States Railway Association, Washington, D.C. Mr. Marino received his B.S. degree in civil engineering from Princeton University in 1961European Command and his M.S. degree in transportation engineering from Purdue University in 1963. From 1963 to 1968, he served as an officer with the United States Army CorpsSouthern Command and a member of Engineers. the Highland Forum which supports the Under Secretary of Defense for Intelligence. Mr. Marino’s railroad industryO’Connor also serves on the boards of the Fund for the City of New York (an organization which develops and helps implement innovations in policy, programs, practices and technology in order to advance the functioning of government and nonprofit organizations) and The Animal Care and Control Center in the City of New York as well as North Carolina Outward Bound. He is a trustee of the China Institute (the oldest institution in America focused on the U.S.—China relationship). Mr. O’Connor has been a director of Olin Corporation since 2006, where he is a member of the Audit Committee and the Directors and Corporate Governance Committee. Mr. O’Connor’s financial and business executive knowledge and experience qualify him to serve on the Company’s board of directors.
Thomas Mulligan –Director, 61
 
George Rebensdorf - Director, 59

Mr. Mulligan was an Operations Executive at Union PacificRebensdorf, 58, is a finance and M&A professional with more than 38over 25 years of experience where he was the Directorin all phases of Passenger Rail Operations.industry, both domestically and internationally. He has worked with financial and investment banking firms of all sizes and has participated in over 50 merger and acquisition transactions valued at over $1.2 billion. He has served as an advisor in public and private financings valued at over $1.8 billion, with concentrated transaction experience in management, transportation, dispatching, budgetingthe small cap and operations administration at the division, district and corporate level.  Many of his responsibilities included rules compliance, contract negotiations, budget control, expense control, strategic planning andmicro cap industries. He has been the corporate liaison for freight and passenger rail operations.  Tom has an excellent record for identifying opportunities for improving operations, cost control and raising customer satisfaction.  Mr. Mulligan was a member on the Railroad Safety Advisory Committee for the Federal Railroad Administration and was formally assigned by Governor Mike Johanns to serve on the Nebraska Transit and Rail Advisory Council from 2004 to 2006.  This committee completed the current rail Corridor Transit Study that is used by the Nebraska State Legislature for commuter rail solutions in Eastern Nebraska.*   He is a current memberserved on the Board of Directors of numerous public and private companies which he or his investors have invested in. Mr. Rebensdorf is highly experienced with corporate and SEC compliance standards. He graduated magna cum laude from Arizona State University, and holds a Juris Doctor degree from Creighton University School of Law. Since July 1996, Mr. Rebensdorf has been President of The Rebensdorf Group, Inc. (“TRGI”), a boutique investment banking and consulting firm dealing primarily with emerging growth companies. TRGI’s clients included companies of all sizes and in all stages of development. TRGI has advised numerous companies from start-up phases through the Omaha YMCA – Bulter Gast branchIPO process. Finance projects have ranged from $1 million to $140 million. Mr. Rebensdorf’s financial and served from 1994 to 1999 as a Trustee on Special Improvement District Board #236 (Candlewood).  He currently serves as a Council member for the City of Omaha and was elected as Director for the Board of Directors of LVRE, Inc. on May 8, 2012. Mr. Mulligan’s railroad industrybusiness executive knowledge and experience qualify him to serve on the Company’s board of directors.
 
Code of Ethics
The Company has not yet adopted a Code of Ethics that applies to the Company’s principal executive officer, principal financial officer and principal accounting officer, but expects to in the near future.officer.

Section 16(a) Beneficial Ownership Compliance

Our officers, directors and shareholders owning greater than ten percent (10%) of our shares are required to file beneficial ownership reports pursuant to Section 16(a) of the Securities and Exchange Act (the “Exchange Act”). To the Company’s knowledge, all such reporting obligations were complied with during the year ended March 31, 2012,2014, except that, Form 3’s for Mr. John McPherson, Mr. Joseph Cosio-Barron, and Mr. Michael A. Barron4’s were filed late.late for John O’Connor, John D. McPherson and George Rebensdorf.

45
Committees of the Board
The Board of Directors is in the process of forminghas formed two committees: audit and compensation committee. The Company does not have an audit committee financial expert, because of the small size and early stage of the CompanyCompany.

Nominating Committee

We do not have a separately designated nominating committee because the board makes all decisions regarding director nominations.

39

Involvement in Certain Legal Proceedings

Except as set forth below, to our knowledge, during the last ten years, none of our directors and executive officers have:

  ·Had a bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time.

  ·Been convicted in a criminal proceeding or been subject to a pending criminal proceeding, excluding traffic violations and other minor offenses.

  ·Been subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities.

  ·Been found by a court of competent jurisdiction (in a civil action), the SEC, or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.

  ·Been the subject to, or a party to, any sanction or order, not subsequently reverse, suspended or vacated, of any self-regulatory organization, any registered entity, or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.  

Shearson Financial Network, a mortgage company, filed for Chapter 11 bankruptcy protection in 2008. Michael A. Barron was CEO of the company at the time.

Indemnification of Directors and Officers

Section 145 of the Delaware General Corporation Law permits a corporation to indemnify its directors and officers against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with a pending or completed action, suit or proceeding if the officer or director acted in good faith and in a manner the officer or director reasonably believed to be in the best interests of the corporation.

Our certificate of incorporation provides that, except in certain specified instances, our directors shall not be personally liable to us or our stockholders for monetary damages for breach of their fiduciary duty as directors, except for the following:

  ●any breach of their duty of loyalty to our company or our stockholders;
 
  ●acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
 
  ●unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; and
 
  ●any transaction from which the director derived an improper personal benefit.
 
46
In addition, our certificate of incorporation and bylaws obligate us to indemnify our directors and officers against expenses and other amounts reasonably incurred in connection with any proceeding arising from the fact that such person is or was an agent of ours. Our bylaws also authorize us to purchase and maintain insurance on behalf of any of our directors or officers against any liability asserted against that person in that capacity, whether or not we would have the power to indemnify that person under the provisions of the Delaware General Corporation Law. We expect to continue to enter into agreements to indemnify our directors and officers as determined by our Board of Directors. These agreements provide for indemnification of related expenses including attorneys' fees, judgments, fines, and settlement amounts incurred by any of these individuals in any action or proceeding. We believe that these bylaw provisions and indemnification agreements are necessary to attract any retain qualified persons as directors and officers.

The limitation of liability and indemnification provisions in our certificate of incorporation and bylaws may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and other stockholders. Furthermore, a stockholder's investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and officers as required by these indemnification provisions. At present, there is no pending litigation or proceeding involving any of our directors, officers or employees regarding, which indemnification is sought, and we are not aware of any threatened litigation that may result in claims for indemnification.

Insofar as the provisions of our certificate of incorporation or bylaws provide for indemnification of directors or officers for liabilities arising under the Securities Act of 1933, as amended, or the Securities Act, we have been informed that in the opinion of the Commission this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

40
Family Relationships

There are no family relationships between any of our directors or executive officers and any other directors or executive officers.officers, except that Dianne David Barron, the Company's Manager of Station Development is the spouse of the CEO, Michael A. Barron.

Item 11.  Executive Compensation.

SUMMARY COMPENSATION TABLE

Annual Compensation
 
Name and Principal
Position
Year Salary  Bonus  Other  
Long-term
Compensation
Shares Granted
  
All Other
Compensation
  Total 
                    
Michael A. Barron,2012 $180,000  $-  $-   -  $12,000  $192,000 
CEO, President2011 $180,000   -   -   -   12,000  $192,000 
and Director       -   -             
                          
Wanda Witoslawski2012 $120,000   -   -   -  $6,000  $126,000 
(appointed CFO on May 19, 2011)2011 $ 67,000   -   -   3,000,000   -  $67,000 
    -   -   -   -   -   - 
Name and        Share  All Other    
Principal Position (1)Year Salary  Bonus  Awards (2)  Compensation  Total 
                 
Michael A. Barron2014 $254,444  $-  $-  $12,000  $266,444 
CEO and Chairman2013 $246,967  $-  $70,000  $12,000  $328,967 
                      
Wanda Witoslawski2014 $230,000  $-  $220,000  $-  $450,000 
CFO and Treasurer2013 $142,055  $-  $255,000  $-  $397,055 
                      
Penny White2014 $182,778  $-  $170,000  $-  $352,778 
COO and President2013 $-  $-  $-  $-  $- 
(1)Penny White was appointed COO and President on February 11, 2014.  Prior to that, Michael Barron served as the President and CEO.
(2)  Stock value calculation based on the price of the stock at agreement date.
47
 
Employment Agreements

Our employment agreement with Michael Barron requires him to perform the duties of Chief Executive Officer at an annual salary of $180,000.00.$180,000.  Base salary will be increased to $300,000.00$300,000 based upon receipt of significant corporate or public funding.  In addition, Mr. Barron is entitled to receive an incentive or performance bonus as follows:  1) Upon the company’s execution of a definitive agreement with AMTRAK, ExecutiveMr. Barron shall be granted 1,000,000 shares, 2) Upon the company’s execution of a definitive agreement with BNSF, ExecutiveMr. Barron shall be granted 500,000 shares, 3) Upon the company’s execution of a definitive agreement with Union Pacific, ExecutiveMr. Barron shall be granted 500,000 shares, 4) Upon the company’s execution of a definitive agreement with a rail car provider, ExecutiveMr. Barron shall be granted 500,000 shares, 5) Upon the company’s completion of its operation of its first train between Los Angeles and Las Vegas, ExecutiveMr. Barron shall be granted 1,500,000 shares.  He is also entitled to a car allowance of $1,000 per month.  His employment agreement provides that if we terminate him without cause, he is entitled to receive a lump sum payment equal to twice his annual salary plus the present value of a performance bonus computed on the basis that we achieve all of LVRE’sour performance targets.  Mr. Barron’s employment agreement commenced as of February 1, 2012.

Our employment agreement with Wanda Witoslawski requires her to perform the duties of Chief Financial Officer and Treasurer of the Company for the duration of the employment agreement.  During the term of this Agreement, the Company agrees to pay ExecutiveMs. Witoslawski a base salary at the rate of $120,000.00$120,000 per year.  Base salary will be increased to $200,000.00$200,000 per year based only upon receipt of significant corporate or public funding.  Additionally, a total of 1 million shares per year will be vested quarterly, in arrears, for a total period of 3 years for a total of 3 million shares.  In addition, Mrs. Witoslawski is entitled to receive an incentive or performance bonus as follows:  1) Upon the company‘s execution of a definitive agreement with AMTRAK, ExecutiveMs. Witoslawski shall be granted 500,000 shares, 2) Upon the company’s execution of a definitive agreement with BNSF, ExecutiveMs. Witoslawski shall be granted 250,000 shares, 3) Upon the company’s execution of a definitive agreement with Union Pacific, ExecutiveMs. Witoslawski shall be granted 250,000 shares, 4) Upon the company’s execution of a definitive agreement with a rail car provider, ExecutiveMs. Witoslawski shall be granted 250,000 shares, 5) Upon the company’s completion of its operation of its first train between Los Angeles and Las Vegas, ExecutiveMs. Witoslawski shall be granted 750,000 shares.  She is also entitled to a car allowance of $500 per month.  Her employment agreement provides that if we terminate her without cause, she is entitled to receive a lump sum payment equal to twice her annual salary plus the present value of a performance bonus computed on the basis that we achieve all of our performance targets.  Mrs. Witoslawski’s employment agreement commenced as of February 1, 2012.

41

Our employment agreement with Penny White requires her to perform the duties of President and Chief Operating Officer of the Company for the duration of the employment agreement.  During the term of this Agreement, the Company agrees to pay Ms. White a base salary at the rate of $150,000 per year.  Additionally, a total of 1 million shares per year will be vested quarterly, in arrears, for a total period of 3 years for a total of 3 million shares.  Her employment agreement provides that if we terminate her without cause, she is entitled to receive a lump sum payment equal to twice her annual salary plus the present value of a performance bonus computed on the basis that we achieve all of our performance targets.  Mrs. White’s employment agreement commenced as of August 15, 2012.
Director Compensation for Year Ended March 31, 20122014

The following table sets forth director compensation for the year ended March 31, 20122014 (excluding compensation to our executive officers set forth in the summary compensation table above).

Name
(a)
 
Fees
Earned or
Paid in
Cash
($)
(b)
  
Stock
Awards
($)
(c)
  
Total
($)
(h)
  
Fees
Earned or
Paid in
Cash
($)
  
Stock
Awards
($)
(1)
  
Total
($)
 
John D. McPherson  12,000   31,500   43,500 
George Rebensdorf  12,000   -   12,000 
Thomas Mulligan(2)  11,000   -   12,000 
Gilbert H. Lamphere  6,000   12,000   18,000   12,000   47,500   59,500 
John D. McPherson  3,000   50,000   53,000 
John H. Marino  3,000   50,000   53,000 
Thomas Mulligan  0   0   0 
John O’Connor  12,000   -   12,000 

(1)  Stock value calculation based on the price of the stock at agreement date.
(2)  Resigned as a board member on June 18, 2014. 
48
We currently compensate our directors for being a Board member the equivalent of an initial 500,00025,000 shares of common stock plus $12,000 annual fee for each member.  Thomas Mulligan resigned as a director on June 18, 2014.

Outstanding Equity Awards at 20122014 Fiscal Year-End
 
The following table sets forth outstanding equity awards to our named executive officers as of March 31, 2012:2014:
 
OPTION AWARDSOPTION AWARDS STOCK AWARDS OPTION AWARDS STOCK AWARDS 
Name
(a)
 
Number of Securities Underlying Unexercised Options
(#)
Exercisable
(b)
 
Number of
Securities Underlying Unexercised
Options
(#) Unexercisable
(c)
 
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options
(#)
(d)
 
Option Exercise Price
($)
(e)
 
Option Expiration Date
(f)
 
Number of Shares or Units of Stock That Have Not Vested
(#)
(g)
 
Market Value of Shares or Units of Stock That Have Not Vested
($)
(h)
 
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested
(#)
(i)
 
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
(#)
(j)
  
Number of Securities Underlying
Unexercised
 Options
(#)
Exercisable
 
Number of
Securities
 Underlying
Unexercised
Options
(#) Unexercisable
 
Equity Incentive Plan Awards: Number of Securities
Underlying
Unexercised
 Unearned
 Options
(#)
 
Option
 Exercise Price
($)
 
Option
 Expiration Date
 
Number of Shares
or Units of
Stock That
 Have Not
Vested
(#)
 
Market Value
 of Shares
or Units of
 Stock That
 Have Not
 Vested
($)
 
Equity Incentive
Plan Awards:
Number of
Unearned
Shares, Units
 or Other
Rights That
Have Not
 Vested
(#)
 
Equity Incentive
 Plan Awards:
 Market or
Payout Value
 of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
(#)
 
Michael A. Barron 1,000,000 - - $ 0.50 10/31/13 - - - -  50,000 - - $ 10.00 November 1, 2018  - - - - 
Joseph Cosio-Barron 1,000,000 - -  $0.50 10/31/13 - - - - 
 
42

Stock Option Plan

Our Board of Directors has adopted a stock option plan and reserved an aggregate of 20,000,0001,000,000 shares of common stock for grants of restricted stock and stock options under the plan.  The purpose of the plan is to enhance the long-term stockholder value of the Company by offering opportunities to officers, directors, employees and consultants of the Company to participate in our growth and success and to encourage them to remain in the service of the Company and acquire and maintain stock ownership in the Company.

The plan is currently administered by our Board of Directors, which has the authority to select individuals who are to receive grants under the plan and to specify the terms and conditions of each restricted stock grant and each option to be granted, the vesting provisions, the option term and the exercise price.  Unless otherwise provided by the Board of Directors, an option granted under the plan expires 10 years from the date of grant (5 years in the case of an incentive option granted to a holder of 10% or more of the shares of the Company’s outstanding common stock) or, if earlier, three months after the optionee’s termination of employment or service.  Options granted under the plan are not generally transferable by the optionee except by will or the laws of descent and distribution and generally are exercisable during the lifetime of the optionee only by such optionee.  The plan is subject to the approval of the stockholders within 12 months after the date of its adoption.

49
The plan will remain in effect for 10 years after the date of its adoption by our Board of Directors.  The plan may be amended by the Board of Directors without the consent of the “Company’s stockholders, except that any amendment, although effective when made, will be subject to stockholder approval if required by any Federal or state law or regulation or by the rules of any stock exchange or any automated quotation system on which the Company’s common stock may then be listed or quoted.  The number of shares received under the plan and the number of shares subject to outstanding options are subject to adjustment in the event of stock splits, stock dividends and other extraordinary corporate events.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table sets forth certain information regarding the beneficial ownership of the Company’s Common Stock as of March 31, 20122014 by (a) each of the Company's directors and executive officers, (b) all of the Company's directors and executive officers as a group and (c) each person known by the Company to be the beneficial owner of more than five percent of its outstanding common stock.

 Name and Address of Beneficial Owner (1)
 
 
Number of Shares
Beneficially Owned (2)
  
% of Common
Stock Beneficially Owned (3)
 
Gilbert H. Lamphere, Chairman (5)  100,000   0.21%
Allegheny Nevada Holdings Corporation (6)  1,98,866   4.07  %
Michael A. Barron, CEO and President (1)  2,642,857   5.43%
JMW Fund LLC (4)  2,584,477   5.38%
John D. McPherson, Director  600,000   1.23%
John Marino, Director  1,000,000   2.06%
Wanda Witoslawski, CFO, Secretary and Treasurer  1,000,000   2.06  %
Officers and Directors as a group  5,342,857   10.99%
  
Amount and
Nature of
    
Directors and Officers (1) 
Beneficial
Ownership (2)
  
Percent
of Class (3)
 
       
       
Michael Barron, CEO and Chairman (4)  1,258,214   7.60%
Wanda Witoslawski, CFO and Treasurer  186,429   1.16%
Penny White, President and COO (5)  150,000   0.93%
John McPherson, Director  95,833   0.60%
Gilbert H. Lamphere, Director (6)  1,298,601   7.98%
Thomas Mulligan, Director (7)  50,000   0.31%
John O'Conner, Director  158,260   0.99%
George Rebensdorf, Director (8)  96,544   0.60%
         
All directors and executive officers as a group  3,293,881   20.17%
 
 (1)The address of each of the beneficial owners is 6650 Via Austi Parkway, Suite 170,140, Las Vegas, Nevada 89119, except as indicated.89119.
   
 (2)In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options held by that person that are currently exercisable, or become exercisable within 60 days are deemed outstanding. However, such shares are not deemed outstanding for purposes of computing the percentage ownership of any other person.
   
 (3)Based on 48,653,53016,041,142 shares outstanding as of March 31, 2012.2014.
   
 (4)The addressIncludes 328,103 shares held by Allegheny Nevada Holdings Corporation which is 4 Richland Place, Pasadena, CA  91103in the sole control of Michael Barron. Also includes warrants to purchase 519,396 shares of Common Stock.
   
 (5)
The address is 220 East 42nd St., 29th Floor, New York, NY 10017
Includes warrants to purchase 100,000 shares of Common Stock to be issued per employment agreement.
   
 (6)The address is 6650 Via Austi Parkway Suite 170 Las Vegas, Nevada 89119
Includes 350,000 shares of Common Stock registered in the name of American Pension Services, Inc. for the benefit of Gilbert H. Lamphere. Also includes warrants to purchase 223,601 shares of Common Stock.
(7)Includes warrants to purchase 25,000 shares.  Thomas Mulligan resigned as a director on June 18, 2014.
 
(8)Includes 4,877 shares owned by Auric Trading, LLC.
50

Item 13.  Certain Relationships and Related Transactions and Director Independence

FourTwo of our directors, John McPherson and John O’Connor, are independent directors, using the NASDAQ definition of independence.
 
Certain officers and directors have a beneficial ownership and are officers and directors companies which are or have been parties to financial transactions. We may be subject to various conflicts of interest in our relationship with Mr. Barron, Mr. Rebensdorf and Mr. Cosio-BarronLamphere and their other business enterprises. Mr. Lamphere and Mr. Rebensdorf own or are partners other business enterprises that entered into advisory or consulting agreements with Las Vegas Railway Express, Inc. and Mr. Barron is executive officer, CEO, of the Company. The following is a description of transactions and relationships between us, our executive officers and our directors and each of their affiliates.
 
Michael A. Barron, ourthe CEO and President of the Company, is a 100% owner and President of Allegheny Nevada Holdings Corporation, “Allegheny”.  The Company iswas indebted to Allegheny by a certain promissory note, dated January 6, 2009, of which Allegheny loaned the Company funds for working capital needs.   Said Agreement was amended on October 1, 2009 and a portion was converted to 1,564,719 shares of the Company’s common stock at $0.05 per share.  As of March 31, 20122014 and 2011,2013, the balance of the note was $89,186$0 and $107,562.62,$124,301, respectively.
43
  This note was included in liabilities of discontinued operations on the balance sheet. . During the year ended March 31, 2014, the Company paid $124,301 to pay off principal balance and $27,272 for interest at the rate of 10%.
 
On November 23, 2009, the Company entered into an Asset Purchase Agreement with Las Vegas Railway Express, a Nevada Corporation, of which Allegheny iswas owner of 28.6% and Mr. Barron is a 28.6% owner, independent of Allegheny.  On January 21, 2010, by shareholder approval the Company acquired Las Vegas Railway Express for 20,000,0001,000,000 shares of the Company’s stock, of which 4,000,000 has been200,000 were issued on April 23, 2010.  The remaining 800,000 shares 16,000,000 are to bewere issued uponon August 15, 2012.

Dianne David Barron, the completionCompany’s Manager of certain milestone operating agreements, by and betweenStation Development is the Company.  These agreements are deemed necessary for the continued operationspouse of the Company’s proposed railway service.  AsCEO, Michael A. Barron and receives an annual salary of March 31, 2012, Allegheny Nevada Holdings has a 4.07% beneficial ownership in the Company.
As of March 31, 2012 and 2011, Mr. Barron had accrued wages of $71,563 and $65,734, respectively.$96,000.
 
Joseph Cosio-Barron, former President, Secretary and Director of the Company is a 100% owner of CBS Consultants “CBS”, a Nevada Corporation.  CBS had a 22.9% ownership of Las Vegas Railway Express at the time of acquisition on October 1, 2009, the Company entered into a promissory note with Mr. Cosio-Barron for $86,709.  The Company converted 867,085 shares of the Company’s stock at $0.05 per share, resulting in a balance at March 31, 20122014 and 20112013 of $46,102$0 and $57,198,$69,740, respectively.   AsThis note was included in liabilities of discontinued operations on the balance sheet.  During the year ended March 31, 20122014, the Company paid $69,740 to pay off principal balance and 2011, Mr. Cosio-Barron had accrued wages$14,592 for interest at the rate of $57,800 and $51,971, respectively.10%.

Gilbert H. Lamphere, a Director of the Company, is a partner of FlatWorld Capital, a company that entered into Advisory Agreement with Las Vegas Railway Express, Inc.  As compensation FlatWorld Capital was issued 494,396 warrants which are exercisable into shares of common stock at exercise prices ranging from $2 to $11 per share.

During the year ended March 31, 2014, the Company issued an additional 125,000 warrants as payment of directors’ services.  The warrants are exercisable into shares of the Company’s common stock at exercise prices between $2 and $3 per share.  The Company also issued 200,000 shares of common stock for the conversion of a $200,000 convertible note payable held by a related party entity owned by a Director of the Company. 

During the year ended March 31, 2014, the Company incurred $53,822 of legal and administrative expenses relating to the formation of a limited partnership, of which the Company holds a 20% interest and is the general partner.

51
John H. Marino, a former Director of the Company through March 10, 2014, is a 100% owner of Transportation Management Services, Inc., a company that entered into consulting agreement with the Company. During the year ended March 31, 2013 Transportation Management Services, Inc. was issued 30,000 shares of common stock, as well as $13,500 in cash, which resulted in total consulting expense of $43,500.  During the year ended March 31, 2014, the Company issued Transportation Management Services, Inc. 13,125 shares of common stock as payment for services provided which resulted in consulting expense of $10,500.  During the year ended March 31, 2013, the Company acquired four of its railcars from Transportation Management Services, Inc. for a total purchase price of $29,000, along with warrants to purchase 6,050 shares of common stock which were valued at $12,763.
Item 14.  Principal Accountant Fees and Services
 
In accordance with the SEC’s definitions and rules, “audit fees” are fees for professional services for the audit and review of our annual financial statements, and can includeincludes fees for the audit and review of our annual financial statements included in a registration statement filed under the Securities Act as well as issuance of consents and for services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements except those not required by statute or regulation.  ”Audit-related fees” are fees for assurance and related services that were reasonably related to the performance of the audit or review of our financial statements, including attestation services that are not required by statute or regulation, due diligence and services related to acquisitions.  “Tax fees”fees��� are fees for tax compliance, tax advice and tax planning, and “all other fees” are fees for any services not included in the first three categories.The fees reported for 2012 only include fees paid to BDO, our current auditor and for 2011 to Hamilton, our predecessor auditor.

Audit Fees

The aggregate fees billed by the Company's auditorsauditor for the professional services rendered in connection with the audit of the Company's annual financial statements, and reviews of the financial statements included in the Company's Forms 10-Qs for fiscal 20122014 and 20112013 were approximately $57,645$80,750 and $81,000,$78,825, respectively.

Audit Related Fees
 
There were no audit related fees for the fiscal yearsyear ended March 31, 20122014 and 2011.
2013.
 
Tax Fees
 
There were no fees for the fiscal years ended March 31, 2012 and 2011 for professional services rendered for tax compliance, tax advice and tax planning.None.

All Other Fees

NoneNone.
 
44

PART IV

Item 15.Item 15.  Exhibits and Financial Statement Schedules.
 
 
(1)
Financial Statements: The following financial statements are included in Item 8 of this report:
  ●Balance Sheets as of March 31, 20122014 and 2011.2013.
   
  ●Statements of Operations for the fiscal years ended March 31, 20122014 and 2011.2013.
   
  ●Statements of Cash Flows for the fiscal years ended March 31, 20122014 and 2011.2013.
   
  ●Statement of Stockholders’ Equity (Deficit) for the fiscal years ended March 31, 20122014 and 2011.2013.
   
  ●Notes to Consolidated Financial Statements.
   
  ●Reports  Report of Independent Registered Public Accounting Firms.Firm.


52
 (3)(2)  Exhibits:

Exhibit No. Description
   
3.2 Articles of Incorporation (incorporated herein by reference to Form SB-2, filed on July 31, 2007.)2007)
3.3 By-Laws of the Registrant (incorporated herein by reference to Form SB-2, filed on July 31, 2007.)2007)
3.4A Amended By-Laws of the Registrant dated November 3, 2008 (incorporated herein as referenced on Form 10-K, as filed on June 30, 2010.)2010)
3.4B Amended Articles of Incorporation (incorporated herein as referenced on Form 10-K, as filed on June 30, 2010.)2010)
3.5 Amended Articles of Incorporation as dated March 19, 2010 (incorporated herein as referenced on Form 10-K, as filed on June 30, 2010.)2010)
3.6 Certificate of Merger, as dated March 19, 2010, by and between Liberty Capital Asset Management, Inc. and Las Vegas Railway Express (incorporated herein as referenced on Form 10-K, as filed on June 30, 2010.)2010)
3.7 Amended Articles of Incorporation as dated April 19, 2010 (incorporated herein as referenced on Form 10-K, as filed on June 30, 2010.)2010)
3.8 Amended By-Laws of the Registrant (incorporated herein as referenced on Form 10-K, as filed on June 30, 2010.)2010)
10.1 Advisory Agreement, by and between E/W Capital and Las Vegas Railway Express, Inc., dated July 1, 2010 (incorporated herein as referenced to Exhibit 12 on Form 8-K, as filed July 8, 2010)
10.2 Employment Agreement with Michael A. Barron, dated February 1, 2012 (incorporated herein as referenced on Form 10-K, as filed on July 10, 2012)
10.3 Employment Agreement with Wanda Witoslawski, dated February 1, 2012 (incorporated herein as referenced on Form 10-K, as filed on July 10, 2012)
10.4 Memorandum of Understanding with T-UPR (The Plaza Hotel & Casino), dated May 1, 2012.2012 (incorporated herein as referenced on Form 10-K, as filed on July 10, 2012)
10.5 Union Pacific Railroad Company Public Project Reimbursement Agreement, dated December 1, 2010. 2010 (incorporated herein as referenced on Form 10-K/A, as filed on June 28, 2011)
10.6 Memorandum of Understanding with National Railroad Passenger Corporation, dated January 13, 2011.2011 (incorporated herein as referenced on Form 10-K/A, as filed on June 28, 2011)
10.7Form of Subscription Agreement (filed as exhibit to 8-K filed on March 19, 2013 and incorporated herein by reference).
10.8Form of Note (filed as exhibit to 8-K filed on March 19, 2013 and incorporated herein by reference).
10.9Form of Investor Warrant (filed as exhibit to 8-K filed on March 19, 2013 and incorporated herein by reference).
10.10 Employment Agreement with Penny White, dated June 20, 2012.
10.11Asset Purchase Agreement, dated November 23, 2009, closing on January 21, 2010, between the Company and Las Vegas Railway Express, a Nevada corporation.
10.12Consulting Agreement between the Company and Transportation Management Services, Inc. dated May 1, 2013.
10.13Advisory Agreement between the Company and FlatWorld Capital dated November 30, 2012.
10.14Leasing Agreement with Mid America Leasing Company dated September 5, 2013.
10.15Agreement with Masterpiece Cuisine dated November 25, 2013
 
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101 INSXBRL Instance Document**
101 SCHXBRL Schema Document**
101 CALXBRL Calculation Linkbase Document**
101 DEFXBRL Definition Linkbase Document*
101 LABXBRL Labels Linkbase Document**
101 PREXBRL Presentation Linkbase Document**
101 DEFXBRL Definition Linkbase Document**

**           The XBRL related information in Exhibit 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.
 
SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

By :/s/ Michael A. Barron
June 10, 2013
Chief Executive Officer
(Principal Executive)
By: /s/Wanda Witoslawski
June 10, 2013
Chief Financial Officer
(Principal Financial and Accounting Officer)


 
4553
 
 
SIGNATURES
 
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on June 28, 2012.July 1, 2013.


LAS VEGAS RAILWAY EXPRESS, INC.
  
  
By:
/s/Michael A. Barron
 
Michael A. Barron, Chief Executive Officer
Principal Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated:

NameTitleDate
     
Name Title Date
     
/s/Michael A. Barron
 Chief Executive Officer, DirectorChairman (principal executive officer) June 10, 201330, 2014
Michael A. Barron    
     
     
/s/ /s/Wanda Witoslawski Chief Financial Officer (principal financial and accounting officer) June 10, 201330, 2014
Wanda Witoslawski    
     
     
/s/John D. McPherson  ChairmanDirector June 10, 201330, 2014
John D. McPherson    
     
    
/s/John H. Marino Director
June 10, 2013
John H. Marino
 
/s/Gilbert H. Lamphere
 Director June 10, 201330, 2014
Gilbert H. Lamphere
/s/Thomas Mulligan DirectorJune 10, 2013
Thomas Mulligan
/s/ John O’Connor DirectorJune 10, 2013
 John O'Connor    
     
     
/s/ George RebensdorfJohn O’Connor Director June 10, 201330, 2014
George RebensdorfJohn O’Connor    
     
/s/George RebensdorfDirectorJune 30, 2014
George Rebensdorf
54