Property and Equipment:

Property and equipment are recorded at historical cost and depreciated on a straight-line basis over their estimated useful lives of approximately five years once the individual assets are placed in service. The Company expenses all purchases of equipment with individual costs of under ~~$500.~~$500, and these amounts are not material to the financial statements.

~~Intangible~~Long-Lived Assets:

~~Goodwill represents~~In accordance with FASB ASC 360-10, the Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that their 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 ~~purchase price~~the carrying amount over ~~tangible~~the fair value, based on market value when available, or discounted expected cash flows, of those assets and ~~intangible assets acquired, less liabilities assumed arising from~~is recorded in the ~~acquisition of~~period in which the ~~train business on November 23, 2009. Goodwill~~determination is not amortized, but is reviewed for potential impairment on an annual basis at the reporting unit level. As required by the “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 themade. The Company’s ~~market capitalization (based on Level 1 inputs). For the six months ended September 30, 2013, the assessment for impairment found that~~management believes there ishas been no impairment of ~~goodwill. The Company has~~its long-lived assets during the three months ended June 30, 2014 or 2013. There can be no ~~accumulated impairment losses on goodwill.~~

~~Deposit with Union Pacific:~~

~~On November 8, 2012,~~assurance, however, that market conditions will not change or demand for 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 depositCompany’s business model will continue. Either of $600,000 and is 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. Failure to meet the conditions specified in the agreement willthese could result in the Company losing the $600,000 deposit. The Company elected to terminate this agreement on October 31, 2013 (see note 10). As a result, the Company has determined the $600,000 deposit is impaired and has expensed the amount during the quarter ended September 30, 2013 as a componentfuture impairment of ~~selling, general and administrative expenses.~~long-lived assets.

Income Taxes:

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 the deferred tax liability against 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 September 30, 2013 (unaudited) and March 31, 2013 was $64,945 and $55,914, respectively.

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 ~~September~~June 30, ~~2013~~2014 and March 31, ~~2013,~~2014, the Company has not established a liability for uncertain tax positions.

Basic and Diluted ~~Income (Loss)~~Loss Per Share:

In accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ~~ASC~~ASC”) 260, “Earnings Per Share,” the basic ~~income (loss)~~loss per common share is computed by dividing the net ~~income (loss)~~loss available to common stockholders after 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 earnings per share computation for the three ~~and six~~ months ended ~~September~~June 30, ~~2013~~2014 and ~~2012~~2013 as the amounts are anti-dilutive. As of ~~September~~June 30, ~~2013,~~2014, the Company had ~~2,000,000~~1,770,969 outstanding options which were excluded from the computation of net income per share because they are anti-dilutive. As of ~~September~~June 30, ~~2013,~~2014, the Company also had convertible debt of ~~$2,305,000 that is convertible into 46,100,000 shares of common stock~~$2,959,792 which was excluded from the computation. As of ~~September~~June 30, ~~2013,~~2014, the Company had ~~82,449,842~~2,315,649 outstanding warrants which were also excluded from the computation because they were anti-dilutive.

Share Based Payment:

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

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.” 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 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 performance completion.

The Company values stock options and warrants that do not qualify as derivative instruments using the Black-Scholes option pricing model. Assumptions used in the Black-Scholes model to value options and warrants issued during the three months ended June 30, 2014 are as follows. There were no options or warrants granted during the three ~~and six~~ months ended ~~September~~June 30, 2013 ~~or 2012~~ that were valued ~~used in~~using the Black-Scholes model.

	Three Months Ended
	June 30,
	2014

Expected life in years		2.5
Stock price volatility		170.94% - 178.31	%
Risk free interest rate		0.76% - 0.95	%
Expected dividends	NA
Forfeiture rate		0	%

Certain warrants qualify as derivative instruments and are valued using the binomial lattice method. See discussion below regarding accounting for derivative liabilities.

Derivative Liabilities:

In connection with the private placement of ~~Convertible Notes~~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~~On December 2, 2013, the Company effected a one-for-twenty reverse stock split of the Company’s issued and outstanding common stock ~~including warrants~~shares. As a result, the Company’s outstanding shares of common stock and common stock equivalents no longer exceeded the ~~conversion feature~~number of ~~notes payable, issued on and subsequent to November 30, 2012 are~~authorized shares. As a result, as of December 2, 2013, these instruments that were accounted for as derivative ~~liabilities.~~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 ~~two of the~~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 condensed statement of ~~operations.~~operations (see Note 6).

Fair Value of Financial Instruments:

The Company's financial instruments as defined by FASB ASC 825-10-50 include cash, notes payable and derivative liabilities. Derivative liabilities are recorded at fair value. The principal balance of notes payable approximates 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.

In determining the ~~absence~~appropriate fair value of ~~such information or if~~the goodwill and derivative liabilities, the Company ~~is not able to corroborate these prices by other available relevant market information,~~used the fair values are estimated using internal calculations or discounted cash flow techniques that incorporate prepayment rates, discount rates and delinquency and default and cumulative loss expectations, that are implied by market pricesfollowing input levels for ~~similar securities and collateral structure types. Because this~~its valuation technique relies on significant unobservable inputs, the fair value estimation is classified as Level 3. 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 the estimates of fair value, and the use of different assumptions as well as changes in market conditions could have a material effect on the results of operations or financial condition.
methodology.

		Fair Value		Fair Value Measurements at June 30, 2014
		as of		Using Fair Value Heirarchy
		June 30, 2014		Level 1		Level 2		Level 3

Liabilities:
Derivative liability	$	1,519,753	$	-	$	1,519,753	$	-

New Accounting Pronouncements:

There are no recent accounting pronouncements that management believes will have a material impact on the Company's present or future consolidated financial statements

(3) Property and Equipment

Property and equipment consisted of the following.

	September 30,			March 31,			June 30,			March 31,
	2013			2013			2014			2014
	(Unaudited)						(Unaudited)

Office equipment	$	51,458		$	40,921		$	65,084		$	61,611
Computer software		24,167			14,192			24,167			24,167
Transportation equipment under construction		439,610			354,557			635,686			621,802

		515,235			409,670			724,937			707,580

Less: accumulated depreciation		(19,243	)		(15,881	)		(25,609	)		(23,173	)

	$	495,992		$	393,789		$	699,328		$	684,407

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 ~~notes~~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 was scheduled to mature on June 30, 2014, bears interest at the rate of 10% per year payable ~~(the “Convertible Notes”)~~on maturity in cash or shares of common stock at the Company’s option (subject to ~~investors for total proceeds of $1,900,000. The Convertible Notes are~~certain conditions), and is convertible into shares of the Company’s common stock at ~~$0.05~~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 Company’s obligations under the Note are secured by substantially all of the Company’s assets. 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.

On April 11, 2014, the Company entered into a Note Exchange Agreement with the debt holder holding the $1,750,000 Note originally issued on November 22, 2013 under the Purchase Agreement. Under the terms of the Note Exchange Agreement, the original senior secured convertible promissory note and accrued interest 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 ~~share~~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. The difference between the book value of the principal and accrued interest of the old note of $1,818,055 and the value of the new note of $2,000,000 of $181,944 was recorded as interest expense during the three months ended June 30, 2014.

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 represented the amount outstanding on the Iconic Note as of March 31, 2014. At the option of the debt ~~holder.~~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. During the three months ended June 30, 2014, the Company borrowed an additional $100,000 under the Iconic Note. The ~~Convertible Notes~~outstanding principal balance as of June 30, 2014 amounted to $155,000.

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 June 30, 2014 and 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, and have~~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.

On April 2, 2014, the Company entered into a convertible promissory note for $100,000 with Beaufort Capital Partners LLC with a maturity date of ~~February 1,~~October 2, 2014. ~~Prior to March 31, 2013,~~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 ~~holders converted $105,000~~holder holding the $1,750,000 senior secured convertible promissory note originally issued on November 22, 2013 under the Purchase Agreement. Under the terms of ~~outstanding principal into 2,100,000 shares of common stock. As a result, as of March 31, 2013,~~ the ~~remaining gross principal balance of convertible notes payable outstanding amounted to $1,795,000.~~

During the six months ended September 30, 2013, the Company issued additional Convertible Notes to investors for additional proceeds of $880,000, with the same terms as described above. During the six months ended September 30, 2013, the debt holders converted $370,000 of outstanding principal and $4,933 of accrued interest into 7,498,200 shares of common stock pursuant toNote Exchange Agreement, the original ~~terms~~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 ~~the agreements. As of September 30, 2013, the remaining principal balance of convertible notes payable amounted to $2,305,000, including $50,000 outstanding to a Director of the Company.~~

The Company does not have sufficient authorized shares to cover the conversion feature of the convertible notes. The conversion feature of the Convertible Notes issued on and after February 8, 2013 created a derivative liability for the Company. See Note 6, Derivative Instruments.

~~In connection with the Convertible Notes, the Company granted an aggregate of 53,600,000 (including 17,600,000 during the six months ended September 30, 2013) warrants to purchase additional~~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 entered into a convertible note payable with Vista Capital Investments, LLC 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, which represented the outstanding balance as of June 30, 2014.

On April 30, 2014, the Company entered into a convertible note payable with Redwood Management, LLC 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. The outstanding balance related to this note amounted to $166,667 as of June 30, 2014.

On May 6, 2014, the Company entered into a convertible note payable with KBM Worldwide, Inc. 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.

On May 12, 2014, the Company entered into a secured convertible promissory note with Typenex Co-Investment, LLC (the “Typenex 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 ~~$0.10~~$0.35 per ~~share and~~share. The outstanding balance related to this note amounted to $87,500 as of June 30, 2014.

On May 28, 2014, the Company issued into a ~~contractual life~~convertible promissory note with Beaufort Capital Partners LLC providing for borrowings of ~~3 years. Of~~$125,000. The convertible promissory note matures on August 28, 2014, at which point the ~~17,600,000 warrants granted~~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 ~~six months ended September 30, 2013, 1,000,000 were granted to a Director~~prior 20 trading days from the date of the ~~Company.~~conversion.

On June 13, 2014, the Company entered a convertible debenture agreement with Group 10 Holdings, LLC 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. In connection with the agreement, the Company ~~does not~~issued 50,000 shares of common stock as a commitment fee. The fair value of the common stock issued amounted to $8,500 and has been recorded as a discount to the note payable. The amount is being amortized into interest expense through the maturity date of June 13, 2015.

The above warrants issued with the Purchase Agreement and Typenex Note have ~~sufficient authorized~~anti-dilution clauses and variable exercise rates that prevent calculation of the ultimate number of shares ~~to satisfy~~that may be issued upon exercise, and all of the ~~exercise~~outstanding convertible note balances described above have variable conversion features that similarly prevented the calculation of ~~these warrants.~~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 ~~issued during~~as derivatives. The Company values these warrants and conversion features using the ~~six months ended September 30, 2013 were determined to be~~binomial lattice method. The resulting liability is valued at each reporting date and the change in the liability is reflected as change in derivative ~~liabilities which resulted~~liability in ~~additional derivative liabilities~~the statement of ~~$1,372,237. See Note 6, Derivative Instruments.~~operations.

The value of the derivative liabilities and discounts created through the issuance of the Convertible Notes and warrants during the six months ended September 30, 2013 as described above exceeded the proceeds of the Convertible Notes by $1,401,191. This excess was recorded as interest expense on the issuance dates of each note and warrant during the six months ended September 30, 2013.

The following summarizes the book value of the convertible notes payable outstanding as of ~~September~~June 30, ~~2013~~2014 and March 31, ~~2013.~~2014.

	September 30,			March 31,			June 30,			March 31,
	2013			2013			2014			2014
	(Unaudited)						(Unaudited)

Principal balance of convertible notes payable outstanding	$	2,305,000		$	1,795,000		$	2,959,792		$	2,023,000

Less: discount on convertible notes payable		(914,735	)		(1,678,958	)		(760,107	)		(601,016	)

Convertible notes payable, net	$	1,390,265		$	116,042		$	2,199,685		$	1,421,984

Future scheduled maturities of these notes payable are as follows:

	Year Ended		Year Ended
	March 31,		June 30,

2014	$	2,305,000
2015			$	2,702,167
2016				257,625
Total	$	2,305,000	$	2,959,792

The following is a summary of ~~$3,035.~~the Company’s stock option activity.

~~On October 31, 2013,~~

				Weighted-		Average
				Average		Remaining		Aggregate
				Exercise		Contractual		Intrinsic
	Options			Price		Life (Years)		Value

Outstanding at March 31, 2014		100,000		$	10.00		4.59	$	-
Granted		6,815,023			0.0001				2,446,581
Exercised		(5,144,054	)		0.0001				1,268,912
Outstanding at June 30, 2014 (unaudited)		1,770,969		$	0.56		4.73	$	166,930

Vested and expected to vest at June 30, 2014		1,770,969		$	0.56		4.73	$	166,930

Exercisable at June 30, 2014		1,770,969		$	0.56		4.73	$	166,930

As of June 30, 2014, the Company ~~opted to terminate its operating agreement with Union Pacific Railroad which required the Company to operate as an independent train between Los Angeles and Las Vegas.~~had no unvested stock options or unrecognized stock option expense. The ~~agreement called for a capital contribution to Union Pacific~~weighted average grant date fair value of $57 million dollars as well as approximately $9 million to be paid in cash up front by the Company. The $67 million capital requirement is eliminated with the termination of the Union Pacific agreement thus relieving the Company of the requirement to raise this capital out of its equity, which was the previous plan. An alternative off balance sheet plan is being developed by private investors to fund the capital requirements for operations of the Los Angeles to Vegas route. No funds are required from the Company to effect this financing.$0.36 per option.

The Company also has filed to effect its shareholder approved 20:1 reverse split. The Company expects this reverse split to become effective prior to the quarter ended December 31, 2013. Effecting this reverse split will eliminate a portion of the derivative liability currently stated on the Company’s balance sheet due to the excess of shares to be issued without sufficient authorized shares.following table summarizes information about stock options outstanding and exercisable at June 30, 2014.

		Options Outstanding						Options Exercisable
				Weighted		Weighted				Weighted
				Average		Average				Average
Exercise		Number		Remaining		Exercise		Number		Exercise
Price		of Shares		Life (Years)		Price		of Shares		Price

$	10.00		100,000		4.34	$	10.00		100,000	$	10.00
	0.0001		1,670,969		4.76		0.0001		1,670,969		0.0001
			1,770,969						1,770,969

(9) Related Party Transactions

During the three months ended June 30, 2014, the Company entered into short-term borrowings with the Chief Financial Officer and Chief Executive Officer amounting to a total of $59,000. The outstanding amounts accrue interest at a rate of 10% per month and are payable on demand.

(10) Subsequent Events

On July 1, 2014, the Company entered into a convertible promissory note with KBM Worldwide, Inc. for borrowings of $32,500 which bear interest at a rate of 8% per annum. The outstanding borrowings and accrued interest are payable on March 19, 2015. The outstanding amounts are convertible into shares of common stock at the debt holder’s option at a conversion rate equal to 61% of the average of the lowest three trading prices during the 10 trading days prior to the conversion.

On July 18, 2014, the Company entered into a convertible note payable with LG Capital Funding, LLC providing for total borrowings of $90,000, which is payable in 2 installments of $45,000, one upon execution of the note and one is the back end. Interest on the note equals 8% of the total principal balance. The Company received payment of $45,000 on July 22, 2014. The convertible note matures 12 months after the issuance, at which point the outstanding principal and interest is due. The outstanding amounts are convertible into shares of common stock at a conversion rate equal to 57% of the lowest trading price during the fifteen trading days prior to the conversion.

On July 24, 2014, the Company entered into a security purchase agreement with ADAR BAYS, LLC providing for total borrowings of $71,000, with the first note being of $36,000 and the second note being in the amount of $35,000. Interest on the note equals 8% of the total principal balance. The Company received payment of $36,000 on July 28, 2014. The convertible note matures 12 months after the issuance, at which point the outstanding principal and interest is due. The outstanding amounts are convertible into shares of common stock at a conversion rate equal to 57% of the lowest trading price during the fifteen trading days prior to the conversion.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

This Quarterly Report contains forward-looking statements about the Company's business, financial condition and prospects that reflect management's assumptions and beliefs based on information currently available. There can be no assurance that the expectations indicated by such forward-looking statements will be realized. If any of management's assumptions should prove incorrect, or if any of the risks and uncertainties underlying such expectations should materialize, Las Vegas Railway Express, Inc., actual results may differ materially from those indicated by the forward- looking statements.

The key factors that are not within the Company's control and that may have a direct bearing on operating results include, but are not limited to, managements' ability to raise capital in the future, the retention of key employees and changes in the regulation of our industry, as well as the risk factors identified in the Company’s Annual Report on Form 10-K for the year ended March 31, ~~2013,~~2014, filed with the SEC on ~~July 1, 2013.~~June 30, 2014.

When used in this Report, words such as, "believes," "expects," "intends," "plans," "anticipates," "estimates" and similar expressions are intended to identify and qualify forward-looking statements, although there may be certain forward-looking statements not accompanied by such expressions. However, the forward-looking statements contained herein are not covered by the safe harbors created by Section 21E of the Securities Exchange Act of 1934.

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

Business Overview

~~Our company,~~ Las Vegas Railway Express, Inc. (the “Company”, ~~dba The X Train, was founded on~~“we”, “us”, or “our”), formerly known as Liberty Capital Asset Management, Inc., acquired 100% of the ~~vision~~issued and outstanding stock of ~~establishing a new and innovative passenger train service between~~ 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 ~~metropolitan~~ area using existing railroad tracks and specialized rail cars that have been refurbished to resemble a casino style motif. These specialty cars would be attached to an existing regularly scheduled Amtrak train running between Los Angeles 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 ~~offer~~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 ~~First Class option to travelers much like the Pullman Car Company did for passenger rail travel~~total capacity of 160 trains per day. In short, they had capacity. Today, all locomotives are back in ~~the 1880’s. That concept of offering a first class service option has an application to Amtrak trains across the country. Amtrak runs mostly commuter type train~~ service and ~~does not offer~~BNSF is leasing 1,000 more. Oil is being hauled over this corridor and capacity is at a ~~first class option on most of~~premium with 120+ trains per day over the pass. With pending capacity issues, BNSF is reserving its ~~routes in~~rail franchise for freight and has closed off any access via the ~~US. There is a market demand~~Cajon pass.

During the development period for ~~a first class option to commuter rail service on multiple routes here in the US. It is upon this model that the Company has focused its resources. The X Train continues to pursue~~ the Los Angeles to Las Vegas route, ~~but that corridor has more complicated logistics~~the company became visible in the press and ~~financial requirements which may take~~ several ~~years to complete. For that reason, we have bifurcated our business plan into two segments. First is~~independently owned passenger rail companies discussed how the ~~deployment of a first class option~~Club X style could be deployed on existing ~~Amtrak trains connecting~~excursion lines. The Company began to ~~metropolitan areas. The second is working diligently~~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.

On April 23, 2014, the Company entered into an agreement with ~~Amtrak~~the Santa Fe Southern Railway, located in Santa Fe New Mexico, to ~~re establish service~~manage the passenger services on the Los Angeles to Vegas corridor which has been in the planning stage since 2010. Once established and operational, X Train cars would be attached to Amtrak’s train offering a first class option to Amtrak riders on the Los Angeles/Vegas route, just as it does with existing Amtrak routes.

The Company has also identified several routes, currently served by Amtrak trains, which originate from a metropolitan area and have a segment of the route, which passes through another metropolitan area.railroad. The Company will ~~construct~~be adding its Club X cars ~~for each route, which it will couple up~~ to the Amtrak trains and will serve as a First Class option for current Amtrak travelers. The Company will pay a fee to Amtrak to haul the cars and to couple and uncouple them at the destinations. This is a common practice with Amtrak through its Private Car Group and requires no master agreement or agreements with railroad companies. The origination and destination stations along the various routes already exist, so the Company will not need to construct any station facilities in order to operate these routes.train consists. Operations on the ~~first scheduled~~ route isare planned to commence ~~December 2, 2013.~~in August 2014. Subsequent routes will follow with a similar deployment format. ~~We have acquired~~

The Company owns outright a series of 16 bi-level passenger railcars ~~owned outright by the Company~~ as well as two leased cars acquired through an agreement with Mid America ~~leasing~~Leasing Company. These cars are planned for use in the deployment of cars on our ~~routes.~~

future affiliated routes and acquired companies. The re establishment of the Los Angeles to Vegas corridor requires the approvals of the Class 1 railroads of the Union Pacific Railroad and that of the BNSF Railroad to allow Amtrak to start service on this corridor again. Over the last 18 months, wefirst two cars have been ~~engaged in activities designed~~completed and are scheduled to ~~secure the necessary rights, equipment and facilities required to commence commercial~~go into service on the ~~Los Angeles to Las Vegas route~~Santa Fe Southern Railway in August of 2014. These include: securing operating rights to run our trains over tracks owned by private railroads with Amtrak; obtaining the capability to operate train equipment safely and in conformity with applicable government regulations; purchasing or leasing appropriate locomotive and passengerThe remaining cars designed to move passengers over the route in comfort; and securing leases on terminal facilities and passenger depots in Los Angeles and in Las Vegas. In addition, we have had discussions with Amtrak regarding coupling our casino style consists up to the new service of passenger trains on the LA to Vegas route we have identified. Based on these discussions, we believe this arrangement, under which we would pay the going rate fee for such accommodation, will be acceptable to Amtrak. Under this provision, X Train would not be required to make any capital improvements to existing railroads as that would be the responsibility of the operator, Amtrak. X Train would enter into a lease agreement to build a Las Vegas station facility for the Amtrak trains which would be operated by X Train. The station facility isare scheduled to be ~~located in North Las Vegas on a parcel owned by~~refurbished during the ~~City~~remainder of ~~North Las Vegas comprising some 20 acres.~~2014.

1718

We have executed a Memorandum of Understanding with the City of Fullerton for use of their station for a Southern California station of the LA/Las Vegas service, which was extended in October 2013 for an additional 6 months.

The Company’s common stock is currently quoted on the OTCQB under the symbol “XTRN”. The company website is www.vegasxtrain.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.

Critical Accounting Policies

The preparation of our condensed 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 impairment of ~~goodwill,~~long-lived 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 differences from the estimated amounts in the financial statements. There have been no material changes to these policies during the fiscal year.

~~Intangible and~~ Long-Lived Assets:

~~We follow~~In accordance with Financial Accounting Standards Board ~~(“FASB”)~~ Accounting Standards Codification (“FASB ASC”) ~~Topic 360,~~ ~~“Property Plant and Equipment”, which establishes a “primary asset” approach to determine~~360-10, the ~~cash flow estimation period for a group of~~Company evaluates long-lived assets ~~and liabilities that represents the unit of accounting for a long lived asset to be held and used. Long-lived assets to be held and used are reviewed~~ for impairment whenever events or changes in circumstances indicate that ~~the carrying amount of an asset~~their net book value may not be recoverable. ~~The~~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 ~~a long-lived asset~~those assets and is ~~not recoverable if it exceeds~~recorded in the ~~sum~~period in which the determination is made.

Share Based Payment:

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 ~~undiscounted cash flows expected to result from~~award, and is recognized as expense over the ~~use and eventual disposition of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.~~requisite service period.

~~Goodwill is accounted~~The Company accounts for share-based compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC ~~Topic 350,~~ ~~“Intangibles – Goodwill and Other”. We assess the impairment~~505-50 “Equity - Based Payments to Non-Employees.” Measurement of ~~long-lived assets, including goodwill and intangibles on an annual basis or whenever events or changes in circumstances indicate that the fair value~~share-based payment transactions with non-employees is less than its carrying value. Factors that we consider important which could trigger an impairment review include poor economic performance relative to historical or projected future operating results, significant negative industry, economic or company specific trends, changes in the manner of our use of the assets or the plans for our business, market price of our common stock, and loss of key personnel. We have determined that there was no impairment of goodwill.

~~Stock-Based Compensation:~~

Transactions in which the Company exchanges its equity instruments for goods or services is accounted for using authoritative guidance for stock based compensation. This guidance also addresses transactions in which the Company incurs liabilities in exchange for goods or services that are based on the fair value of whichever is more reliably measurable: (a) the ~~Company’s~~goods or services received; or (b) the equity instruments ~~or that may be settled by the issuance of those equity instruments.~~

~~If the Company issues stock for services which are performed over a period of time, the Company records the~~issued. The final fair value ~~paid in the equity section~~ of the ~~Company’s financial statements as it~~share-based payment transaction is ~~a non-cash equity transaction. The Company accretes~~determined at the ~~expense to stock based compensation expense on a monthly basis for services rendered within the period.~~

~~We use~~performance completion date. For interim periods, the fair value ~~method~~is estimated and the percentage of completion is applied to that estimate to determine the cumulative expense recorded.

The Company values stock compensation based on the market price on the measurement date. As described above, for ~~equity instruments granted to non-employees and will use the Black-Scholes model for measuring the fair value of options, if issued. The stock based fair value compensation~~employees this is ~~determined as of~~ the date of ~~the~~ grant, orand for non-employees, this is the date ~~at which the~~of performance ~~of the services is completed (measurement date) and is recognized over the vesting periods.~~completion.

1819

The Company values stock options and warrants that do not qualify as derivative instruments using the Black-Scholes option pricing model. Assumptions used in the Black-Scholes model to value options and warrants issued during the three months ended June 30, 2014 are as follows. There were no options or warrants granted during the three months ended June 30, 2013 that were valued using the Black-Scholes model.

				Three Months Ended
				June 30,
				2014

Expected life in years				2.5
Stock price volatility				170.94% - 178.31%
Risk free interest rate				0.76% - 0.95%
Expected dividends				NA
Forfeiture rate				0%

Certain warrants qualify as derivative instruments and are valued using the binomial lattice method. See discussion below regarding accounting for derivative liabilities.

Derivative Liabilities:

~~Using this sequencing policy, all instruments convertible into~~On December 2, 2013, the Company effected a one-for-twenty reverse stock split of the Company’s issued and outstanding common stock ~~including warrants~~shares. As a result, the Company’s outstanding shares of common stock and common stock equivalents no longer exceeded the ~~conversion feature~~number of ~~notes payable, issued subsequent to February 8,~~authorized shares. As a result, as of December 2, 2013, ~~are~~these instruments that were accounted for as derivative ~~liabilities.~~liabilities were reclassified as equity.

~~New Accounting Pronouncements:~~

~~There are no recent accounting pronouncements that management believes will have a material impact on the Company's present or future consolidated financial statements.~~

~~Results of Operations for the Three Months Ended September 30, 2013 as Compared to the Three Months Ended September 30, 2012~~

~~The following is a comparison of the consolidated results of operations for the three months ended September 30, 2013 and 2012.~~

Three Months Ended
September 30, September 30,
2013 2012 $ Change % Change

Operating Expenses:
Compensation and payroll taxes $ 306,803 $ 544,671 $ (237,868 ) -43.7 %
Selling, general and administrative 869,459 163,659 705,800 431.3 %
Professional fees 362,721 421,600 (58,879 ) -14.0 %
Depreciation expense 1,928 365 1,563 428.2 %
Total expenses 1,540,911 1,130,295 410,616 36.3 %

Loss from continuing operations (1,540,911 ) (1,130,295 ) (410,616 ) 36.3 %

Other income (expense)
Interest expense (1,013,666 ) (2,326 ) (1,011,340 ) 43479.8 %
Change in derivative liability 3,959,890 (67,407 ) 4,027,297 -5974.6 %
Total other income (expense) 2,946,224 (69,733 ) 3,015,957 -4325.0 %

Net income (loss) from continuing operations before provision for income taxes 1,405,313 (1,200,028 ) 2,605,341 -217.1 %
Provision for income taxes (4,540 ) (4,540 ) - 0.0 %
Net income (loss) from continuing operations 1,400,773 (1,204,568 ) 2,605,341 -216.3 %

Discontinued operations:
Income from discontinued operations, net of income taxes - (3,914 ) 3,914 -100.0 %

Net income (loss) $ 1,400,773 $ (1,208,482 ) $ 2,609,255 -215.9 %

~~Operating Expenses~~

Compensation expense decreased by $237,868, or 43.7%, during the quarter ended September 30, 2013 as compared to the quarter ended September 30, 2012. The decrease is primarily due to a reversal of $302,619 in previously recorded stock based compensation costs relating to milestones defined in the employment agreements of certain key employees, which called for the issuance of stock upon certain operational goals being achieved. Given the change in our business plan in the current quarter, it was considered doubtful these milestones would ever be achieved. As a result, these amounts were reversed during the quarter ended September 30, 2013. The overall decrease in compensation expense was offset by increases related to the hiring of additional full-time employees and the additional board members as compared to the same period in 2012. Selling, general and administrative expenses increased by $705,800, or 431.3%, during the quarter ended September 30, 2013 as compared to the same period in 2012 primarily due to the impairment of our deposit 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 officers’ insurance and travel expenses related to raising capital. Professional fees decreased by $58,879, or 14.0%, during the quarter ended September 30, 2013 as compared to 2012 due primarily to the hiring of additional employees, thus cutting back on consulting expenses.

~~Other Income (Expense)~~Fair Value of Financial Instruments:

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.

~~Interest~~Results of Operations

The following is a comparison of the results of operations for the three months ended June 30, 2014 and 2013.

	Three Months Ended
	June 30,			June 30,
	2014			2013			$ Change			% Change

Operating Expenses:
Compensation and payroll taxes	$	2,866,004		$	849,329		$	2,016,675			237.4	%
Selling, general and administrative		384,050			208,123			175,927			84.5	%
Professional fees		769,388			581,788			187,600			32.2	%
Depreciation expense		2,436			1,434			1,002			69.9	%
Total expenses		4,021,878			1,640,674			2,381,204			145.1	%

Loss from continuing operations		(4,021,878	)		(1,640,674	)		(2,381,204	)		145.1	%

Other income (expense)
Interest expense		(1,402,041	)		(2,521,627	)		1,119,586			-44.4	%
Change in derivative liability		870,199			950,245			(80,046	)		-8.4	%
Total other income (expense)		(531,842	)		(1,571,382	)		1,039,540			-66.2	%

Net loss from operations before provision for income taxes		(4,553,720	)		(3,212,056	)		(1,341,664	)		41.8	%
Provision for income taxes		-			(4,491	)		4,491			-100.0	%
Net loss	$	(4,553,720	)	$	(3,216,547	)	$	(1,337,173	)		41.6	%

Operating Expenses

Compensation expense increased by ~~$1,011,340~~$2,016,675, or 237.4%, during the quarter ended ~~September~~June 30, 2014 as compared to the quarter ended June 30, 2013. The increase in compensation expense during the quarter ended June 30, 2014 is primarily due to the issuance of stock options to employees and Board members resulting in additional expenses of $2,446,615. The increase in expenses in 2014 was offset by additional expenses during the quarter ended June 30, 2013 of $221,789 for the issuance of warrants as compensation to Board members. Selling, general and administrative expenses increased by $175,927, or 84.5%, during the quarter ended June 30, 2014 as compared to the same period in ~~2012.~~2013 primarily due to increases in rental expense for two railcars that we began leasing in August 2013, as well as increased expenses associated with our Assignment and Use Agreement with Santa Fe Railroad which we expect to start operating in August 2014. Professional fees increased by $187,600, or 32.2%, during 2014 as compared to 2013 due primarily to increases in legal fees, consulting services, accounting and financial advisory related to the implementation of the business plan and raising funds.

Other (Expense) Income

Interest expense decreased by $1,119,586, or 44.4%, during the quarter ended June 30, 2014 as compared to the same period in 2013. The ~~increase~~decrease is due primarily to the increase in debt outstanding during the quarter ended ~~September~~June 30, 2013 ~~as compared to 2012~~ due to the issuance of convertible notes payable from February 2013 through June 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 additional interest expense during the three months ended ~~September~~June 30, 2013 of ~~$739,864.~~$2,305,550. 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 in 2013 of ~~$211,137. These amounts did not exist during~~$155,391. We had no additional interest expense from the ~~same period~~amortization of capitalized debt issuance costs in ~~2012.~~2014. During the three months ended June 30, 2014, we had no remaining capitalized debt issuance costs and amortization of debt discounts amounted to $1,041,344.

The change in ~~the~~ value of the derivative liabilities ~~amounted to $3,959,890~~ for the three months ended September 30, 2013 as compared to ($67,407) for the same period of 2012. The increase was primarily to the increase in derivative liabilities outstanding resulting from the issuance of convertible notes and warrants from February 2013 through June 2013. The amounts are being treated as derivative liabilities as we became contingently obligated to issue shares of common stock in excess of the 200 million shares authorized under the Company’s certificate of incorporation. This condition did not exist during the three months ended September 30, 2012. Between June 30, ~~2013 and September 30, 2013,~~2014 amounted to $870,199, which represents the ~~fair value per share of our common stock decreased from $0.08 to $0.04. As a result,~~change in the fair value of the derivative liabilities ~~decreased as well.~~

~~Results of Operations for~~since the ~~Six Months Ended September 30, 2013 as Compared to the Six Months Ended September 30, 2012~~

~~The following is a comparison of the consolidated results of operations for the six months~~year ended ~~September 30, 2013 and 2012.~~

Six Months Ended
September 30, September 30,
2013 2012 $ Change % Change

Operating Expenses:
Compensation and payroll taxes $ 1,156,132 $ 1,109,513 $ 46,619 4.2 %
Selling, general and administrative 1,077,582 253,397 824,185 325.3 %
Professional fees 944,509 543,465 401,044 73.8 %
Depreciation expense 3,362 525 2,837 540.4 %
Total expenses 3,181,585 1,906,900 1,274,685 66.8 %

Loss from continuing operations (3,181,585 ) (1,906,900 ) (1,274,685 ) 66.8 %

Other income (expense)
Interest expense (3,535,293 ) (16,096 ) (3,519,197 ) 21863.8 %
Change in derivative liability 4,910,135 (44,967 ) 4,955,102 -11019.4 %
Total other income (expense) 1,374,842 (61,063 ) 1,435,905 -2351.5 %

Net loss from continuing operations before provision for income taxes (1,806,743 ) (1,967,963 ) 161,220 -8.2 %
Provision for income taxes (9,031 ) (9,030 ) (1 ) 0.0 %
Net loss from continuing operations (1,815,774 ) (1,976,993 ) 161,219 -8.2 %

Discontinued operations:
Income from discontinued operations, net of income taxes - 480,506 (480,506 ) -100.0 %

Net loss $ (1,815,774 ) $ (1,496,487 ) $ (319,287 ) 21.3 %

~~Operating Expenses~~

Compensation expense increased by $49,619, or 4.2%, during the six months ended September 30, 2013 as compared to the six months ended September 30, 2012. The increase in compensation expense during the six months ended September 30, 2013 is related to the hiring of additional full-time employees and the additional board members as compared to the same period in 2012. In addition, we issued warrants as compensation to Board members resulting in additional expenses of $221,789 during the six months ended September 30, 2013. These increases were offset by a reversal of $302,619 in previously recorded stock based compensation costs relating to milestones defined in the employment agreements of certain key employees, which called for the issuance of stock upon certain operational goals being achieved. Given the change in our business plan in the current quarter, it was considered doubtful these milestones would ever be achieved. As a result, these amounts were reversed during the quarter ended September 30, 2013. Selling, general and administrative expenses increased by $824,185, or 325.3%, during the six months ended September 30, 2013 as compared to the same period in 2012 primarily due to the impairment of our deposit 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 officers’ insurance and travel expenses related to raising capital. Professional fees increased by $401,044, or 73.8%, during the six months ended September 30, 2013 as compared to 2012 due primarily to increases in legal fees, consulting services, accounting and financial advisory related to the implementation of the business plan and raising funds, as well as $164,709 related to the amortization of expenses related to warrants issued to consultants.

~~Other Income (Expense)~~

Interest expense increased by $3,519,197 during the six months ended September 30, 2013 as compared to the same period in 2012. The increase is due primarily to the increase in debt outstanding during the six months ended September 30, 2013 due to the issuance of convertible notes payable from February 2013 through June 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 additional interest expense during the six months ended September 30, 2013 of $3,045,414. 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 in 2013 of $366,528. These amounts did not exist during the same period in 2012.

March 31, 2014. The change in ~~the~~ value of the derivative liabilities for the three months ended June 30, 2013 amounted to ~~$4,910,135 for~~$950,245, which represents the ~~six months ended September 30, 2013 as compared to ($44,967) for the same period of 2012. The increase was primarily due to the increase~~change in derivative liabilities outstanding resulting from the issuance of convertible notes and warrants from February 2013 through June 2013. The amounts are being treated as derivative liabilities as we became contingently obligated to issue shares of common stock in excess of the 200 million shares authorized under the Company’s certificate of incorporation. This condition did not exist during the six months ended September 30, 2012. Between March 31, 2013 and September 30, 2013, the fair value per share of our common stock decreased from $0.10 to $0.04. As a result, the fair value of the derivative liabilities ~~decreased as well.~~since the year ended March 31, 2013. The decrease in the value of the derivative liabilities during these periods was primarily due to the decline of our stock price during the period, which has driven the reduction in value.

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 ~~stock~~equity to fund operations.

~~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 ~~had a~~has net ~~loss~~losses of ~~$1,815,774~~$4,553,720 for the ~~six~~three months ended ~~September~~June 30, ~~2013 and~~2014. The Company also has an accumulated deficit of ~~$20,391,397 through September~~$36,181,363 and a negative working capital of $3,868,645 as of June 30, ~~2013,~~2014, as well as outstanding convertible notes payable of ~~$2,305,000 which are payable on February 1, 2014. As of September 30, 2013, the Company has a working capital deficit of $3,771,280.~~$2,959,792. Management believes that it will need additional equity or debt financing to be able to implement the business plan. ~~These matters raise~~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.

Due to a change in the business model of the Company and the elimination of capital expenditures for Union Pacific under its agreement of $67 million dollars for the Los Angeles to Las Vegas route, the Company no longer requires approximately $100 million in new financing. The Company’s focus is to begin deployment of its specialized upscale Club X style rail cars on existing Amtrak routes with leased and refurbished cars. As such, the Company estimates that it will need to obtain $1 million in additional capital to begin operations of its planned train service on these Amtrak routes. The Company intends 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 intends to use them for operating capital for the deployment of its Club X rail cars beginning December 2013 on an Amtrak existing route. The Company estimates that the operating capital generated from the deployment of its railcars on this route would fund the operating costs of the Company overhead going forward.

An alternative off balance sheet plan is being developed by private investors to fund the capital requirements for operations on the Los Angeles to Vegas route. This proposed private financing eliminates the Company’s burden to raise an additional $100 million in financing from Company equity thus dramatically reducing the operating capital required by the company to meet its business plan. There can be no assurance that the private financing for the Los Angeles to Las Vegas route from investors will be available to fund operations on this single route, if at all. If such funds are available, there can be no assurance that the terms of such funding will be acceptable to the Company.

We continue 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 acceptable to us or at all.

We believe that the successful growth and operation of our business is dependent upon our ability to do 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.

~~There~~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 ~~assurance~~assurances that, weif achieved, the Company will ~~be successful~~have sufficient funds to execute its intended business plan or generate positive operating results.

Cash Flows

Net cash used in ~~achieving our long-term plans as set forth above, or that such plans, if consummated, will enable us~~operating activities for the three months ended June 30, 2014 and 2013 were $1,093,321 and $1,064,747, respectively. Cash used in operating activities for the three months ended June 30, 2014 and 2013 were primarily due to ~~obtain profitable operations or continue~~net losses of $4,553,720 and $3,216,547, respectively. During the three months ended June 30, 2014, the net loss included significant non-cash expenses of $511,869 in stock issued for services, $1,041,344 in amortization of discounts on notes payable, and $2,446,615 in stock option compensation. During the ~~long-term.~~three months ended June 30, 2013, the net loss included significant non-cash expenses of $400,905 for stock issued for services, $221,789 in warrants issued for services, and $2,305,550 in amortization of discounts on notes payable.

Net cash used in investing activities during the three months ended June 30, 2014 amounted to $17,357, 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 three months ended June 30, 2013 was $107,565 primarily due to the acquisition of rail cars and other capitalized costs towards the railroad project.

Net cash provided by financing activities for the three months ended June 30, 2014 amounted to $1,066,181 which consisted of $1,006,667 in proceeds from the issuance of convertible notes payable, $59,000 in proceeds from related party notes payable, and $514 from the exercise of stock options. Net cash provided by financing activities for the three months ended June 30, 2013 was $880,000 which consisted of proceeds from convertible notes payable.

Description of ~~Outstanding Debt~~Indebtedness

WeFor a complete description of our outstanding debt as of June 30, 2014 and March 31, 2014, see Notes 4 and 5 to the condensed financial statements.

On October 1, 2013, the Company entered into a promissory note with JMJ Financial which provides for the Company to borrow up to $350,000 in principal (the “JMJ Note”). As of March 31, 2014, the Company had borrowed $150,000 under this Promissory Note. 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, subject to other adjustments in the agreement. During the three months ended June 30, 2014, the Company borrowed an additional $40,000 under the JMJ Note. During the three months ended June 30, 2014, JMJ Financial converted $69,785 of outstanding principal into 785,000 shares of common stock under the terms of the agreement. As of June 30, 2014, the outstanding balance of the JMJ Note amounted to $120,125.

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 was scheduled to mature 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 Company’s obligations under the Note are secured by substantially all of the Company’s assets. The Warrants have ~~outstanding~~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.

On April 11, 2014, the Company entered into a Note Exchange Agreement with the debt holder holding the $1,750,000 Note originally issued on November 22, 2013 under the Purchase Agreement. Under the terms of the Note Exchange Agreement, the original senior secured convertible ~~notes~~promissory note and accrued interest 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 ~~$2,305,000,~~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. The difference between the book value of the principal and accrued interest of the old note of $1,818,055 and the value of the new note of $2,000,000 of $181,944 was recorded as interest expense during the three months ended June 30, 2014.

On March 24, 2014, the Company entered into a Convertible Promissory Note with Iconic Holdings, LLC (the “Iconic Note”) in which ~~earn~~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 represented 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. During the three months ended June 30, 2014, the Company borrowed an additional $100,000 under the Iconic Note. The outstanding principal balance as of June 30, 2014 amounted to $155,000.

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 June 30, 2014 and ~~mature~~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.

On April 2, 2014, the Company entered into a convertible promissory note for $100,000 with Beaufort Capital Partners LLC 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. 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 May 6, 2014, the Company entered into a convertible note payable with KBM Worldwide, Inc. 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 ~~1, 2014.~~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.

On May 12, 2014, the Company entered into a secured convertible promissory note with Typenex Co-Investment, LLC (the “Typenex 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. The outstanding balance related to this note amounted to $87,500 as of June 30, 2014.

On May 28, 2014, the Company issued into a convertible promissory note with Beaufort Capital Partners LLC 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 entered a convertible debenture agreement with Group 10 Holdings, LLC providing for total borrowing of $55,000 which accrue interest at the rate of ~~$0.05~~12% per ~~share~~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 ~~debt holder.~~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. In connection with the agreement, the Company issued 50,000 shares of common stock as a commitment fee. The fair value of the common stock issued amounted to $8,500 and has been recorded as a discount to the note payable. The amount is being amortized into interest expense through the maturity date of June 13, 2015.

~~We have~~The Company also has outstanding short-term borrowings from its Chief Financial Officer and Chief Executive Officer amounting to an ~~outstanding~~aggregate of $59,000. The amounts are payable on demand and bear interest at a rate of 10% per month.

On July 1, 2014, the Company entered into a convertible promissory note ~~payable~~with KBM Worldwide, Inc. for borrowings of ~~$13,333~~$32,500 which ~~was due on May 17, 2012 and earns~~bear interest at a rate of 8% per annum. The ~~Company is in default~~outstanding borrowings and accrued interest are payable on ~~this note payable. As of September 30, 2013, there has been no demand made for repayment of the notes or accrued interest.~~

~~Cash Flows~~

Net cash used in operating activities for the six months ended September 30, 2013 was $1,989,576 as compared to net cash used in operating activities for the six months ended September 30, 2012 of $1,115,076.March 19, 2015. The ~~primary reasons for the differences between our net loss of $1,815,774 and net cash used in operating activities for the six months ended September 30, 2013 were amortization of discounts on~~outstanding amounts are convertible notes payable of $3,045,414, amortization of debt offering costs of $366,528, impairment of our deposit with Union Pacific of $600,000, the non-cash stock issued for compensation and services of $188,731, and the non-cash issuance of warrants for services of $386,498, offset by a decrease in our derivative liabilities of $4,910,135. The changes in assets and liabilities compared to 2012 related to the timing of payments for operating items, primarily payroll, as well as the payment of $111,000 of liabilities from discontinued operations.

Cash used in investing activities during the six months ended September 30, 2013 were expenditures of $105,565 for the purchase of property and equipment. During the six months ended September 30, 2012, we had purchases of property and equipment of $216,827 for the acquisition of transportation equipment.

Net cash provided by financing activities was $880,000 for the six months ended September 30, 2013 consisting of proceeds from the issuance of convertible notes payable. During the six months ended September 30, 2012, we had net cash provided by financing activities of $2,266,000, which represented $2,282,000 in proceeds from the saleinto shares of common stock ~~and $9,000 in proceeds from~~at the ~~exercise~~debt holder’s option at a conversion rate equal to 61% of ~~warrants, offset by repayments~~the average of ~~$25,000 payment for a note payable.~~ the lowest three trading prices during the 10 trading days prior to the conversion.

~~Management currently believes that cash flows from current and future equity investments will be sufficient to meet the Company’s liquidity and capital needs at least through fiscal 2014.~~

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures and Changes in Internal Control over Financial Reporting

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of ~~September~~June 30, ~~2013.~~2014. In designing and evaluating our disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applied its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, our chief executive officer and chief financial officer concluded that, as of ~~September~~June 30, ~~2013,~~2014, our disclosure controls and procedures were effective.

Management’s Responsibility for Financial Statements

Our management is responsible for the integrity and objectivity of all information presented in this Quarterly Report on Form 10-Q. The consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America and include amounts based on management’s best estimates and judgments. Management believes the consolidated financial statements fairly reflect the form and substance of transactions and that the financial statements fairly represent the Company’s financial position and results of operations.

Changes in Internal Control Over Financial Reporting

There were no changes during the three months ended ~~September~~June 30, ~~2013~~2014 in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II - OTHER INFORMATION

Item 1. 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 quarterly report on Form 10-Q, there have been no material changes to any legal proceedings relating to the Company which previously were not reported.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the 3 months ended ~~September~~June 30, ~~2013,~~2014, the Company issued shares of its common stock as follows:

·	●	~~2,080,444~~785,000 shares issued to convertible promissory notes holders for conversion of $69,875 of outstanding notes ~~and accrued interest for a total value of $104,022.~~payable.

·	●	~~6,050,000~~1,390,000 shares issued for services of ~~$244,500, including 3,000,000~~$511,870.

·	5,144,054 shares issued ~~in connection with employment agreements.~~to employees and Board of Director members for the exercise of stock options.

·	664,917 shares issued as payment of outstanding accounts payable of $38,771

The above referenced issuances were made in reliance on the exemption from registration provided by Section ~~4(a)(2)~~4(2) of the Securities Act of 1933, as amended, for transactions not involving a public offering.

Item 3. Default Upon Senior Securities

The Company has an outstanding note payable of $13,333 which was due on May 17, 2012 and earns interest at 8% per annum. The Company is in default on this note payable. As of September 30, 2013, there has been no demand made for repayment of the notes or accrued interest.None.

2426

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information.

None

Item 6. Exhibits.

Exhibit No.	Description

31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act Of 2002.

31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act Of 2002.

32.	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act Of 2002

EX-101.INS	XBRL INSTANCE DOCUMENT

EX-101.SCH	XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT

EX-101.CAL	XBRL TAXONOMY EXTENSION CALCULATION LINKBASE

EX-101.DEF	XBRL TAXONOMY EXTENSION DEFINITION LINKBASE

EX-101.LAB	XBRL TAXONOMY EXTENSION LABELS LINKBASE

EX-101.PRE	XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: ~~November 12, 2013~~ August 14, 2014	Las Vegas Railway Express, Inc.

	By: /s/ Michael A. Barron
	Chief Executive Officer (principal executive officer)


Date: ~~November 12, 2013~~August 14, 2014
	By: /s/ Wanda Witoslawski
	Chief Financial Officer (principal financial officer)

Delaware	56-646797
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification Number)

	Large accelerated filer	[ ]	Accelerated filer	[ ]
	Non-accelerated filer	[ ]	Smaller reporting company	[X]

	September 30,			March 31,
	2013			2013
	(Unaudited)
Assets

Current assets
Cash	$	47,474		$	1,262,615
Other current assets		431,992			471,772
Total current assets		479,466			1,734,387

Property and equipment, net of accumulated depreciation		495,992			393,789

Other assets
Deposit with Union Pacific		-			600,000
Other assets		22,860			25,958
Goodwill		843,697			843,697
Total other assets		866,557			1,469,655
Total assets	$	1,842,015		$	3,597,831

Liabilities and Stockholders' Deficit

Current liabilities
Short term notes payable	$	13,333		$	13,333
Accounts payable and accrued expenses		470,030			375,295
Derivative liability		2,294,077			3,181,537
Convertible notes payable, net of discount		1,390,265			116,042
Liabilities of discontinued operations		83,041			194,041
Total current liabilities		4,250,746			3,880,248
Deferred tax liability		64,945			55,914
Total liabilities		4,315,691			3,936,162

Commitments and contingencies

Stockholders' deficit
Common stock, $0.0001 par value, 200,000,000 shares authorized, 170,446,550 and 154,111,882 shares issued and outstanding as of September 30, 2013 (unaudited) and March 31, 2013, respectively		17,045			15,411
Additional paid-in capital		17,900,676			18,221,881
Accumulated deficit		(20,391,397	)		(18,575,623	)
Total stockholders' deficit		(2,473,676	)		(338,331	)
Total liabilities and stockholders' deficit	$	1,842,015		$	3,597,831

	June 30,			March 31,
	2014			2014
	(Unaudited)
Assets

Current assets
Cash	$	43,413		$	87,910
Other current assets		88,986			101,250
Total current assets		132,399			189,160

Property and equipment, net of accumulated depreciation		699,328			684,407

Other assets
Other assets		21,500			22,385
Total other assets		21,500			22,385
Total assets	$	853,227		$	895,952

Liabilities and Stockholders' Deficit

Current liabilities
Short term notes payable	$	-		$	13,333
Accounts payable and accrued expenses		480,231			442,711
Derivative liability		1,519,753			1,198,018
Notes payable - related parties		59,000			-
Current portion of convertible notes payable, net of discount		1,942,060			1,271,984
Total current liabilities		4,001,044			2,926,046
Long-term portion of convertible debt, net of current portion		257,625			150,000
Total liabilities		4,258,669			3,076,046

Commitments and contingencies

Stockholders' deficit
Common stock, $0.0001 par value, 200,000,000 shares authorized, 24,075,114 and 16,041,143 shares issued and outstanding as of June 30, 2014 (unaudited) and March 31, 2014, respectively		2,408			1,604
Additional paid-in capital		32,707,028			29,445,945
Common stock payable		66,485			-
Accumulated deficit		(36,181,363	)		(31,627,643	)
Total stockholders' deficit		(3,405,442	)		(2,180,094	)
Total liabilities and stockholders' deficit	$	853,227		$	895,952

	Six Months Ended						Three Months Ended
	September 30,			September 30,			June 30,				June 30,
	2013			2012			2014				2013
				(Restated)
Cash flows from operating activities
Net loss	$	(1,815,774	)	$	(1,496,487	)	$	(4,553,720	)		$	(3,216,547	)
Income from discontinued operations		-			480,506
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		3,362			525			2,436				1,434
Amortization of discounts on note payable		3,045,414			1,865			1,041,344				2,305,550
Amortization of debt offering costs		366,528			-			-		��		155,391
Impairment of Union Pacific deposit		600,000			-
Deferred tax provision		9,031			9,030			-				4,491
Change in value of derivative liability		(4,910,135	)		44,967			(870,199	)			(950,245	)
Stock issued and subscribed for services		188,731			340,130			511,869				400,905
Stock option compensation		-			40,262			2,446,615				-
Stock issued in connection with exchange agreements								103,388				-
Warrants issued for services		386,498			77,138			82,354				221,789

Changes in operating assets and liabilities:
Other current assets		145,003			(1,905	)		12,264				20,531
Other assets		3,098			-			885				(3,349	)
Liabilities of discontinued operations, net		(111,000	)		(587,756	)		-				(109,000	)
Accounts payable and accrued expenses		99,668			(23,351	)		129,443				104,303

Net cash used in operating activities		(1,989,576	)		(1,115,076	)		(1,093,321	)			(1,064,747	)

Cash flows from investing activities
Purchases of property and equipment		(105,565	)		(216,827	)		(17,357	)			(107,565	)
Net cash used in investing activities		(105,565	)		(216,827	)		(17,357	)			(107,565	)

Cash flows from financing activities
Proceeds from sale of stock		-			2,282,000
Proceeds from exercise of warrants		-			9,000
Proceeds from exercise of stock options								514				-
Proceeds from convertible notes payable		880,000			-			1,006,667				880,000
Payments on note payable		-			(25,000	)
Proceeds from notes payable - related parties								59,000				-

Net cash provided by financing activities		880,000			2,266,000			1,066,181				880,000

Net change in cash		(1,215,141	)		934,097			(44,497	)			(292,312	)
Cash, beginning of the period		1,262,615			53,632			87,910				1,262,615
Cash, end of the period	$	47,474		$	987,729		$	43,413			$	970,303

Supplemental disclosure of cash flow information:
Interest paid	$	-		$	1,944		$	-			$	-
Income taxes paid	$	-		$	-		$	-			$	-

Supplemental disclosure of non-cash investing and financing transactions:
Stock issued for debt	$	374,933		$	559,200
Stock issued for reduction of liabilities from discontinued operations	$	-		$	156,239
Stock issued as payment of accounts payable							$	38,771			$	-
Stock issued for debt and accrued interest							$	84,929			$	270,911

PART I FINANCIAL INFORMATION		PAGE

Item 1.	Financial Statements:	3

	Condensed Balance Sheets – ~~September~~June 30, ~~2013~~2014 (Unaudited) and March 31, ~~2013~~2014	3

	Condensed Statements of Operations - for the Three ~~and Six~~ Months Ended ~~September~~June 30, ~~2013~~2014 and ~~2012~~2013 (Unaudited)	4

	Condensed Statements of Cash Flows - for the Three ~~and Six~~ Months Ended ~~September~~June 30, ~~2013~~2014 and ~~2012~~2013 (Unaudited)	5

	Notes to Condensed Financial Statements (Unaudited)	6

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	1718

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2325

Item 4.	Controls and Procedures	2425

PART II OTHER INFORMATION

Item 1.	Legal Proceedings	2426

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2426

Item 3.	Defaults upon Senior Securities	2426

Item 4.	Mine Safety Disclosures	2527

Item 5.	Other Information	2527

Item 6.	Exhibits	2527

SIGNATURES		2528

For the three months ended September 30, 2012:
	As Previously
	Reported			Adjustments			Restated

Revenues	$	102		$	(102	)	$	-

Cost of Sales		60			(60	)		-

Gross Profit		42			(42	)		-

Operating Expenses:
Compensation and payroll taxes		239,632			305,039			544,671
Selling, general and administrative		160,659			3,000			163,659
Professional fees		463,166			(41,566	)		421,600
Depreciation expense		365			-			365
Total expenses		863,822			266,473			1,130,295

Loss from operations		(863,780	)		(266,515	)		(1,130,295	)
Other income (expense)
Interest expense		(2,326	)		-			(2,326	)
Change in derivative liability		-			(67,407	)		(67,407	)
Total other income (expense)		(2,326	)		(67,407	)		(69,733	)
Net loss from continuing operations before tax provision		(866,106	)		(333,922	)		(1,200,028	)
Provision for income taxes		-			(4,540	)		(4,540	)
Net loss from continuing operations		(866,106	)		(338,462	)		(1,204,568	)
Discontinued operations:
Loss from discontinued operations, net of income tax		(3,914	)		-			(3,914	)
Net loss	$	(870,020	)	$	(338,462	)	$	(1,208,482	)

For the six months ended September 30, 2012:
	As Previously
	Reported			Adjustments			Restated

Revenues	$	102		$	(102	)	$	-

Cost of Sales		60			(60	)		-

Gross Profit		42			(42	)		-

Operating Expenses:
Compensation and payroll taxes		565,747			543,766			1,109,513
Selling, general and administrative		253,397			-			253,397
Professional fees		608,531			(65,066	)		543,465
Depreciation expense		525			-			525
Total expenses		1,428,200			478,700			1,906,900

Loss from operations		(1,428,158	)		(478,742	)		(1,906,900	)
Other income (expense)
Interest expense		(12,879	)		(3,217	)		(16,096	)
Change in derivative liability		-			(44,967	)		(44,967	)
Total other income (expense)		(12,879	)		(48,184	)		(61,063	)
Net loss from continuing operations before tax provision		(1,441,037	)		(526,926	)		(1,967,963	)
Provision for income taxes		-			(9,031	)		(9,031	)
Net loss from continuing operations		(1,441,037	)		(535,957	)		(1,976,994	)
Discontinued operations:
Income from discontinued operations, net of income tax		480,507			-			480,507
Net loss	$	(960,530	)	$	(535,957	)	$	(1,496,487	)

	Six Months Ended September 30, 2013									Six Months Ended September 30, 2012									Three Months Ended June 30, 2014									Three Months Ended June 30, 2013
				Conversion Feature									Conversion Feature									Conversion Feature								Conversion Feature
				of									of									of								of
	Warrants			Notes Payable			Total			Warrants			Notes Payable			Total			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		$	205,248		$	992,770		$	1,198,018		$	1,663,394	$	1,518,143		$	3,181,537
Additional issuances		2,961,925			1,364,711			4,326,636			54,035			-			54,035			148,903			1,043,031			1,191,934			2,472,282		1,364,711			3,836,993
Exercised/converted		-			(303,961	)		(303,961	)		(172,591	)		(29,439	)		(202,030	)		-			-			-			-		(266,459	)		(266,459	)
Change in derivative liability		(2,630,493	)		(2,279,642	)		(4,910,135	)		44,967			-			44,967			(247,591	)		(622,608	)		(870,199	)		22,441		(972,686	)		(950,245	)
Ending balance, September 30	$	1,994,826		$	299,251		$	2,294,077		$	61,202		$	6,269		$	67,471
Ending balance, June 30																			$	106,560		$	1,413,193		$	1,519,753		$	4,158,117	$	1,643,709		$	5,801,826

	Six			Six
	Months Ended			Months Ended			Three Months Ended	Three Months Ended
	September 30, 2013			September 30, 2012			June 30, 2014	June 30, 2013

Expected life in years	0.38 - 9.41 years			0.17 - 5.04 years			0.25 - 5 years	0.59 - 4.43 years
Stock price volatility		112.3% - 273.7	%		47.5% - 191.6	%	160.4% - 256.7%	112.3% - 270.1%
Discount rate		0.03% - 2.47	%		0.07% - 0.63	%	0.04% - 1.68%	0.09% - 1.20%
Expected dividends	None			None			None	None
Forfeiture rate		0	%		0	%	0%	0%