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

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2013June 30, 2014
Commission file number: 000-54648

LAS VEGAS RAILWAY EXPRESS, INC.
(Exact name of Registrant as Specified in its Charter)

Delaware56-646797
(State or other jurisdiction of incorporation or organization)(IRS Employer Identification Number)

6650 Via Austi Parkway, Suite 140
Las Vegas, NV  89119
 (Address of principal executive offices)

(702) 583-6715
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes [X]   No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes [X]   No [  ]
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes [  ]   No [X]

Number of outstanding shares of common stock as of February 12,August 14, 2014 was 9,219,708.26,702,072.

 
 
 
LAS VEGAS RAILWAY EXPRESS, INC.
TABLE OF CONTENTS

PART I FINANCIAL INFORMATIONPAGE
   
Item 1.Financial Statements:3
 Condensed Balance Sheets – December 31, 2013June 30, 2014 (Unaudited) and March 31, 20132014  3
 Condensed Statements of Operations  - for the Three and Nine Months Ended December 31,June 30, 2014 and 2013 and 2012 (Unaudited)  4
 Condensed Statements of Cash Flows - for the Three and Nine Months Ended December 31,June 30, 2014 and 2013 and 2012 (Unaudited)  5
 Notes to Condensed Financial Statements (Unaudited)  6
   
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations1618
   
Item 3.Quantitative and Qualitative Disclosures About Market Risk2425
   
Item 4.Controls and Procedures2425
   
PART II OTHER INFORMATION 
   
Item 1.Legal Proceedings2426
   
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds2426
   
Item 3.Defaults upon Senior Securities2426
   
Item 4.Mine Safety Disclosures2427
   
Item 5.Other Information2427
   
Item 6.Exhibits2527
   
SIGNATURES2528
 
 
2
 

PART I   FINANCIAL INFORMATION
 
 LAS VEGAS RAILWAY EXPRESS, INC.
CONDENSED BALANCE SHEETS
 
  December 31,  March 31, 
  2013  2013 
  (Unaudited)    
Assets      
       
Current assets      
Cash $804,070  $1,262,615 
Other current assets  137,501   471,772 
Total current assets  941,571   1,734,387 
         
Property and equipment, net of accumulated depreciation  673,248   393,789 
         
Other assets        
Deposit with Union Pacific  -   600,000 
   Other assets  22,655   25,958 
   Goodwill  843,697   843,697 
Total other assets  866,352   1,469,655 
Total assets $2,481,171  $3,597,831 
         
Liabilities and Stockholders' Deficit        
         
Current liabilities        
Short term notes payable $13,333  $13,333 
Accounts payable and accrued expenses  489,248   375,295 
Derivative liability  1,417,195   3,181,537 
Convertible notes payable, net of discount  2,963,629   116,042 
Liabilities of discontinued operations  -   194,041 
Total current liabilities  4,883,405   3,880,248 
Deferred tax liability  69,485   55,914 
Total liabilities  4,952,890   3,936,162 
         
Commitments and contingencies        
         
Stockholders' deficit        
Common stock, $0.0001 par value, 200,000,000 shares authorized, 8,965,705 and 7,705,584 shares issued and outstanding as of December 31, 2013 (unaudited) and March 31, 2013, respectively  897   770 
Additional paid-in capital  23,841,467   18,236,522 
Accumulated deficit  (26,314,083)  (18,575,623)
Total stockholders' deficit  (2,471,719)  (338,331)
Total liabilities and stockholders' deficit $2,481,171  $3,597,831 

See accompanying notes to condensed financial statements
3
LAS VEGAS RAILWAY EXPRESS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
  Three Months Ended  Nine Months Ended 
  December 31,  December 31,  December 31,  December 31, 
  2013  2012  2013  2012 
             
Operating Expenses:            
Compensation and payroll taxes $526,964  $1,492,873  $1,683,096  $2,602,385 
Selling, general and administrative  212,512   210,436   1,290,094   463,875 
Professional fees  509,427   500,067   1,453,936   1,043,532 
Depreciation expense  1,928   600   5,290   1,125 
  Total expenses  1,250,831   2,203,976   4,432,416   4,110,917 
                 
Loss from operations  (1,250,831)  (2,203,976)  (4,432,416)  (4,110,917)
                 
Other income (expense)                
Interest income (expense)  (1,326,916)  14,158   (4,862,209)  4,496 
Change in derivative liability  (3,340,399)  (65,791)  1,569,736   (20,824)
   Total other income (expense)  (4,667,315)  (51,633)  (3,292,473)  (16,328)
                 
Net loss from continuing operations before provision for income taxes  (5,918,146)  (2,255,609)  (7,724,889)  (4,127,245)
Provision for income taxes  (4,540)  (4,540)  (13,571)  (13,571)
Net loss from continuing operations  (5,922,686)  (2,260,149)  (7,738,460)  (4,140,816)
                 
Discontinued operations:                
Income (loss) from discontinued operations, net of income taxes  -   (3,741)  -   476,766 
                 
Net loss $(5,922,686) $(2,263,890) $(7,738,460) $(3,664,050)
                 
Net loss per share, continuing operations, basic and diluted $(0.67) $(0.38) $(0.92) $(0.85)
Net income (loss) per share, discontinued operations, basic and diluted $-  $(0.00) $-  $0.10 
Net loss per share, basic and diluted $(0.67) $(0.38) $(0.92) $(0.76)
Weighted average number of common shares outstanding, basic and diluted
  8,878,495   5,992,463   8,414,380   4,844,007 
  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 
 
See accompanying notes to condensed financial statements
                      -
3
LAS VEGAS RAILWAY EXPRESS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)

  Three Months Ended 
  June 30,  June 30, 
  2014  2013 
       
Operating Expenses:      
Compensation and payroll taxes $2,866,004  $849,329 
Selling, general and administrative  384,050   208,123 
Professional fees  769,388   581,788 
Depreciation expense  2,436   1,434 
Total expenses  4,021,878   1,640,674 
         
Loss from operations  (4,021,878)  (1,640,674)
         
Other income (expense)        
Interest expense  (1,402,041)  (2,521,627)
Change in derivative liability  870,199   950,245 
Total other income (expense)  (531,842)  (1,571,382)
         
Net loss from operations before provision for income taxes  (4,553,720)  (3,212,056)
Provision for income taxes  -   (4,491)
         
Net loss $(4,553,720) $(3,216,547)
         
Net loss per share, basic and diluted $(0.34) $(0.40)
         
Weighted average number of common shares outstanding, basic and diluted
  13,357,337   8,003,339 
See accompanying notes to condensed financial statements
 
4
 
 
LAS VEGAS RAILWAY EXPRESS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 Nine Months Ended  Three Months Ended 
 December 31,  December 31,  June 30,  June 30, 
 2013  2012  2014  2013 
            
Cash flows from operating activities            
Net loss $(7,738,460) $(3,664,050) $(4,553,720) $(3,216,547)
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation and amortization  5,290   1,125   2,436   1,434 
Amortization of discounts on note payable  4,090,300   -   1,041,344   2,305,550 
Amortization of debt offering costs  568,141   -   - �� 155,391 
Impairment of Union Pacific deposit  600,000   - 
Deferred tax provision  13,571   13,571   -   4,491 
Change in value of derivative liability  (1,569,736)  20,824   (870,199)  (950,245)
Stock issued and subscribed for services  314,181   1,118,670   511,869   400,905 
Stock option compensation  -   60,393   2,446,615   - 
Stock issued in connection with exchange agreements  103,388   - 
Warrants issued for services  468,852   1,181,071   82,354   221,789 
                
Changes in operating assets and liabilities:                
Other current assets  237,881   37,483   12,264   20,531 
Other assets  3,303   (18,253)  885   (3,349)
Liabilities of discontinued operations, net  (194,041)  (584,014)  -   (109,000)
Accounts payable and accrued expenses  121,922   85,281   129,443   104,303 
                
Net cash used in operating activities  (3,078,796)  (1,747,899)  (1,093,321)  (1,064,747)
                
Cash flows from investing activities                
Purchases of property and equipment  (284,749)  (344,610)  (17,357)  (107,565)
Deposit with Union Pacific  -   (600,000)
Net cash used in investing activities  (284,749)  (944,610)  (17,357)  (107,565)
                
Cash flows from financing activities                
Proceeds from sale of stock  175,000   2,282,000 
Proceeds from exercise of warrants  -   9,000 
Proceeds from notes payable  2,730,000   705,000 
Payments on note payable  -   (25,000)
Proceeds from exercise of stock options  514   - 
Proceeds from convertible notes payable  1,006,667   880,000 
Proceeds from notes payable - related parties  59,000   - 
                
Net cash provided by financing activities  2,905,000   2,971,000   1,066,181   880,000 
                
Net change in cash  (458,545)  278,491   (44,497)  (292,312)
Cash, beginning of the period  1,262,615   53,632   87,910   1,262,615 
Cash, end of the period $804,070  $332,123  $43,413  $970,303 
                
Supplemental disclosure of cash flow information:                
Interest paid $-  $1,444  $-  $- 
Income taxes paid $-  $-  $-  $- 
                
Supplemental disclosure of non-cash investing and financing transactions:                
Stock issued to settle stock subscriptions $-  $640,000 
Stock issued as payment of accounts payable $38,771  $- 
Stock issued for debt and accrued interest $447,969  $1,547,051  $84,929  $270,911 
Warrants issued for payment of property and equipment $-  $12,763 

See accompanying notes to condensed financial statements

 
5
 

LAS VEGAS RAILWAY EXPRESS, INC.
NOTES TO CONDENSEDCONDENDED FINANCIAL STATEMENTS
(Unaudited)
 
(1) Organization and basis of presentation

Basis of Financial Statement Presentation:

The accompanying unaudited interim financial statements of Las Vegas Railway Express, Inc. (the "Company") have been prepared in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. These statements reflect all normal and recurring adjustments which, in the opinion of management, are necessary to present fairly the financial position, results of operations and cash flows of the Company for the interim periods presented. However, the results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the year ending March 31, 20142015 or any other future period. These interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2013.
Effective on December 2, 2013, the Company executed a one-for-twenty reverse split of the Company’s issued and outstanding shares of common stock.  All references to number of shares and per share amounts included in this report give effect to the reverse stock split.2014.

Going Concern:

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the accompanying financial statements, the Company had no revenue, ahas net losslosses of $7,738,460$4,553,720 for the ninethree months ended December 31, 2013 andJune 30, 2014. The Company also has an accumulated deficit of $26,314,083 through December 31, 2013,$36,181,363 and a negative working capital of $3,868,645 as of June 30, 2014, as well as outstanding convertible notes payable of $2,235,000 which are payable on February 1, 2014 and outstanding convertible notes payable of $1,750,000 payable on June 30, 2014.  As of December 31, 2013, the Company has a working capital deficit of $3,941,834.$2,959,792. Management believes that it will need additional equity or debt financing to fullybe able to implement the business plan. These matters raiseGiven 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.

DueManagement is attempting to a change in the business modelraise additional equity and debt to sustain operations until it can market its services and achieves profitability. The successful outcome of future activities cannot be determined at this time and there are no assurances that, if achieved, the Company and the elimination of capital expenditures for Union Pacific underwill have sufficient funds to execute its agreement of $67 million dollars for the Los Angeles to Las Vegas route, the Company is no longer seeking 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 passenger rail routes between selected cities in the United States with leased and refurbished cars.  The Company successfully completed a capital raise of $1.750 million from an institutional investor in November 2013.  These funds were in the form of a note and were secured by the assets of the Company. The Company intends to use them forintended business plan or generate positive operating capital for the deployment of its Club X rail cars beginning March 2014 on an existing route between Los Angeles and San Diego.

The Company is pursuing a means to run a charter train excursion service between Los Angeles to Las Vegas for special events being held in Las Vegas from time to time. The plan is to deploy Club X Train cars on the Los Angeles to Las Vegas route from time to time as a charter service and not regularly scheduled service. This service does not require the Company to pay for capital improvements to railroad infrastructure. This charter strategy is the primary approach to operating in the Los Angeles to Las Vegas corridor at this time.results.

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

6
 
(2) Summary of Significant Accounting Policies

Risks and Uncertainties:

The Company operates in an industry that is subject to intense competition and potential government regulations. Significant changes in regulations and the inability of the Company to establish contracts with rail services providers could have a materially adverse impact on the Company’s operations.
 
Use of Estimates:

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

6
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.
Intangible Assets:

Goodwill represents$500, and these amounts are not material to the excess of purchase price over tangible and intangible assets acquired, less liabilities assumed arising from the acquisition of Liberty Capital Asset Management on November 23, 2009.  Goodwill 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 the Company’s market capitalization (based on Level 1 inputs). For the nine months ended December 31, 2013, the assessment for impairment found that there is no impairment of goodwill. The Company has no accumulated impairment losses on goodwill.financial statements.

Long-Lived Assets:

In accordance with FASB ASC 350-30,360-10, 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 the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made. The Company’s management currently believes there ishas been no impairment of its long-lived assets during the three or nine months ended December 31,June 30, 2014 or 2013. There can be no assurance, however, that market conditions will not change or demand for the Company’s business model will continue. Either of these could result in future impairment of long-lived assets.
Deposit with Union Pacific:

On November 8, 2012, the Company entered into an agreement with Union Pacific Railroad Company whereby the Company was granted a nonexclusive operating right to use Union Pacific railroad track between Daggett, California and Las Vegas, Nevada, subject to certain terms and conditions.  In connection with this agreement, the Company made an earnest money deposit of $600,000 and was required to meet certain financial conditions, including the provision of a letter of credit in favor of Union Pacific in the amount of $27,444,145 on or before October 31, 2013.   The Company elected to terminate this agreement on October 31, 2013 as it no longer planned to operate on the Union Pacific Railroad Company as a regularly scheduled passenger train.  As a result, the Company determined the $600,000 deposit was impaired and expensed the amount during the quarter ended September 30, 2013 as a component of selling, general and administrative expenses.

7
 
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 December 31, 2013 (unaudited) and March 31, 2013 was $69,485 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 December 31, 2013June 30, 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 ASCASC”) 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 nine months ended December 31,June 30, 2014 and 2013 and 2012 as the amounts are anti-dilutive. As of December 31, 2013,June 30, 2014, the Company had 100,0001,770,969 outstanding options which were excluded from the computation of net income per share because they are anti-dilutive. As of December 31, 2013,June 30, 2014, the Company also had convertible debt of $4,085,000 that is convertible into 4,846,111 shares of common stock$2,959,792 which was excluded from the computation. As of December 31, 2013,June 30, 2014, the Company had 4,422,4922,315,649 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.

7
The Company accounts for its share-based compensation to employees in accordance FASB ASC 718. Stock-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the requisite service period.

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.

8
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 nine months ended December 31,June 30, 2013 that were valued used inusing the Black-Scholes model.  Assumptions used in in the Black-Scholes model to value warrants issued during the nine months ended December 31, 2012 are as follows.

   Nine Nine
   Months Ended Months Ended
   December 31, December 31,
   2013 2012
      
Expected life in years NA 1.5 - 10 years
Stock price volatility NA 171.0% - 286.0%
Risk free interest rate NA 0.25% - 1.62%
Expected dividends NA None
Forfeiture rate NA 0%
Three Months Ended
June 30,
2014
Expected life in years2.5
Stock price volatility170.94% - 178.31%
Risk free interest rate0.76% - 0.95%
Expected dividendsNA
Forfeiture rate0%
 
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 Notesconvertible notes beginning in February 2013, the Company became contingently obligated to issue shares of common stock in excess of the 200 million authorized under the Company’s certificate of incorporation. Consequently, the ability to settle these obligations with shares would be unavailable causing these obligations to potentially be settled in cash. This condition creates a derivative liability.

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

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

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

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

8
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 (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.
9

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 absenceappropriate fair value of such information or ifthe 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 thisits 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.statements

9
(3) Property and Equipment

Property and equipment consisted of the following.

 December 31,  March 31,  June 30,  March 31, 
 2013  2013  2014  2014 
 (Unaudited)     (Unaudited)    
            
Office equipment $56,518  $40,921  $65,084  $61,611 
Computer software  24,167   14,192   24,167   24,167 
Transportation equipment under construction  613,734   354,557   635,686   621,802 
                
  694,419   409,670   724,937   707,580 
                
Less: accumulated depreciation  (21,171)  (15,881)  (25,609)  (23,173)
                
 $673,248  $393,789  $699,328  $684,407 
 
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(4) Notes payable

A summary of outstanding notes payable is as follows:
 
 December 31,  March 31,  June 30,  March 31, 
 2013  2013  2014  2014 
 (Unaudited)     (Unaudited)    
            
Secured promissory notes, dated May 17, 2011 through May 17, 2012 to an investor bearing interest at 8% per annum, payable on May 17, 2012. The Company is in default on this note.
 $13,333  $13,333 
Secured promissory notes, dated May 17, 2011 through May 17, 2012 to an investor bearing interest at 8% per annum, payable on May 17, 2012.
 $-  $13,333 
                
Total outstanding notes payable $13,333  $13,333  $-  $13,333 
 
As of December 31, 2013, the Company is in default on theThe above note payable for $13,333.  As of December 31, 2013, there has been no demand made for repayment ofwas repaid in full during the notes or accrued interest.three months ended June 30, 2014. Debt Securities Assignment and Purchase agreement (see Note 7).
 
(5) Convertible Notes Payable

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

During the three and nine months ended December 31, 2013, the Company issued additional Convertible Notes to investors for additional proceeds of $0 and $880,000, respectively, with the same terms as described above.  During the nine months ended December 31, 2013, the debt holders converted $440,000 of outstanding principal and $7,946 of accrued interest into 447,946 shares of common stock pursuant to the original terms in the agreements.  As of December 31, 2013, the remaining principal balance of Convertible Notes amounted to $2,235,000, including $50,000 outstanding to a Director of the Company.

In connection with the Convertible Notes, the Company granted an aggregate of 2,680,000 (including 0 and 880,000 during the three and nine months ended December 31, 2013, respectively) warrants to purchase additional shares of common stock at an exercise price of $2.00 per share and a contractual life of 3 years.  Prior to the Company’s reverse stock split on December 2, 2013, the Company did not have sufficient authorized shares to satisfy the exercise of these warrants.  As a result, the warrants issued during the nine months ended December 31, 2013 were determined to be derivative liabilities which resulted in additional derivative liabilities of $1,372,237.  The conversion option associated with the Convertible Notes was bifurcated and also recorded as a derivative liability. See Note 6, Derivative Instruments.

The value of the derivative liabilities and discounts created through the issuance of the Convertible Notes and warrants during the nine months ended December 31, 2013 as described above exceeded the proceeds of the Convertible Notes by $1,574,193. This excess was recorded as interest expense on the issuance dates of each note and warrant during the nine months ended December 31, 2013.

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 “Promissory“JMJ Note”). Upon closingAs of the agreement,March 31, 2014, the Company had borrowed $100,000, which represents the outstanding amount as of December 31, 2013.$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.

11
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 matureswas 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 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.

10
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 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 under the Note are secured by substantially all of the Company’s assets, pursuantexcluding 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 securitytotal 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 datedwith 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. 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 (the “Security Agreement”)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), betweenand 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 andat a price lower than the Investor.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.

11
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 $0.35 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 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 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 anti-dilution clauses and variable exercise rates that prevent calculation of the ultimate number of shares that may be issued upon exercise, and all of the Note and Promissory Noteoutstanding convertible note balances described above have variable conversion features that similarly prevented the calculation of the number of shares into which they were convertible. As a result, the Company accounts for both the conversion feature associated with these notes and the warrants as derivatives. The Company values these warrants and conversion features using the binomial lattice method. The resulting liability is valued at each reporting date and the change in the liability is reflected as change in derivative liability in the statement of operations.
12
 
The following summarizes the book value of the convertible notes payable outstanding as of December 31, 2013June 30, 2014 and March 31, 2013.2014.

  December 31,  March 31, 
  2013  2013 
  (Unaudited)    
       
 Principal balance of convertible notes payable outstanding $4,085,000  $1,795,000 
         
 Less: discount on convertible notes payable  (1,121,371)  (1,678,958)
         
 Convertible notes payable, net $2,963,629  $116,042 

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  June 30,  March 31, 
  2014  2014 
  (Unaudited)    
       
Principal balance of convertible notes payable outstanding $2,959,792  $2,023,000 
         
Less: discount on convertible notes payable  (760,107)  (601,016)
         
Convertible notes payable, net $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 $2,235,000 
2015  1,750,000  $2,702,167 
2016  100,000   257,625 
Total $4,085,000  $2,959,792 
 
In connection with the Convertible Notes, the Company incurred debt issuance costs, which primarily represented commissions paid to acquire the debt.  These costs have been capitalized and are being amortized through the maturity date of the notes.  During the nine months ended December 31, 2013, the Company capitalized an additional $521,351 of debt issuance costs, including the fair value of 238,000 warrants issued on April 29, 2013 as commission.  Amortization of these capitalized debt issuance costs amounted to $201,613 and $568,141 for the three and nine months ended December 31, 2013, respectively, which is reflected as interest expense on the accompanying statement of operations.  As of December 31, 2013 and March 31, 2013, the remaining amount of capitalized debt issuance costs amounted to $69,539 and $116,329, respectively, which are included as a component of other current assets on the accompanying consolidated balance sheets.

(6) Derivative Instruments

Excess Shares

In connection with the private placement of Convertible Notesconvertible notes beginning in February 2013, (see Note 5), the Company became contingently obligated to issue shares of common stock in excess of the 200 million shares 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 hashad a sequencing policy regarding share settlement wherein instruments with the earliest issuance date would be settled first. The sequencing policy also considers contingently issuable additional shares, such as those issuable upon a stock split or anti-dilution, to have an issuance date to coincide with the event giving rise to the additional shares.

Using this sequencing policy, all instruments convertible into common stock, including warrants and the conversion feature of notes payable, issued on and subsequent to November 30, 20132012 were classified as derivative liabilities.

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

13
Other Derivatives

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

13
The derivative liability, as it relates to the different instruments, is shown in the following table.

 Nine Months Ended December 31, 2013  Nine Months Ended December 31, 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  3,201,118   2,377,040   5,578,158   94,020   -   94,020   148,903   1,043,031   1,191,934   2,472,282   1,364,711   3,836,993 
Exercised/converted  -   (307,693)  (307,693)  (172,591)  (29,439)  (202,030)  -   -   -   -   (266,459)  (266,459)
Reclassification to equity  (3,909,986)  (1,555,085)  (5,465,071)  -   -   - 
Change in derivative liability  (687,206)  (882,530)  (1,569,736)  24,162   (3,338)  20,824   (247,591)  (622,608)  (870,199)  22,441   (972,686)  (950,245)
Ending balance, December 31 $267,320  $1,149,875  $1,417,195  $80,382  $2,931  $83,313 
Ending balance, June 30 $106,560  $1,413,193  $1,519,753  $4,158,117  $1,643,709  $5,801,826 
 
The derivative liability was valued using the binomial lattice method with the following inputs.

  Nine  Nine
  Months Ended  Months Ended Three Months Ended Three Months Ended
  December 31, 2013  December 31, 2012 June 30, 2014 June 30, 2013
        
Expected life in years  0.13 - 9.41 years  0.36 - 5.1 years 0.25 - 5 years 0.59 - 4.43 years
Stock price volatility  112.3% - 347.2%  46.8% - 191.5% 160.4% - 256.7% 112.3% - 270.1%
Discount rate  0.03% - 2.59%  0.05% - 0.91% 0.04% - 1.68% 0.09% - 1.20%
Expected dividends  None  None None None
Forfeiture rate 0% 0% 0% 0%

(7) Equity

Common Stock

The Company is authorized to issue 200,000,000 shares of common stock and no other class of stock at this time. The holders of common stock are entitled to one vote per share on all matters submitted to a vote of stockholders and are not entitled to cumulate their votes in the election of directors. The holders of common stock are entitled to any dividends that may be declared by the Board of Directors out of funds legally available therefore subject to the prior rights of holders of any outstanding shares of preferred stock and any contractual restrictions we have against the payment of dividends on common stock. In the event of our liquidation or dissolution, holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities and the liquidation preferences of any outstanding shares of preferred stock. Holders of common stock have no preemptive or other subscription rights and no right to convert their common stock into any other securities.
 
During the ninethree months ended December 31,June 30, 2013, the Company issued an aggregate of 447,946270,911 shares of common stock for the conversion of $447,946$270,911 in convertible notes payable and accrued interest. This included 200,000 shares of common stock for the conversion of a $200,000 convertible note payable held by a related party entity owned by a Director of the Company. During the ninethree months ended December 31, 2012,June 30, 2014 the Company issued an aggregate of 1,322,050785,000 of common stock for the conversion of $1,547,051$69,875 of outstanding notes payable and accrued interest.payable.

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During the ninethree months ended December 31,June 30, 2013, the Company issued an aggregate of 452,342129,500 shares of common stock as payment for services, directors’ and employee compensation resulting in total expense of $314,181.$318,550. During the ninethree months ended December 31, 2012,June 30, 2014, the Company issued an aggregate of 351,8681,390,000 shares of common stock as payment for services, directors’ and employee compensation resulting in an expense of $1,118,670.$511,870. The fair value of the directors’ and employees’ service was determined by the closing price of the stock on date of grant and board of director minutes authorizing the shares.
 
14
During the ninethree months ended December 31,June 30, 2013, and 2012, the Company issued 9,823 and 45,000 shares of common stock respectively, for the exercise of warrants. There were no warrants exercised during the three months ended June 30, 2014.

During the ninethree months ended December 31, 2013,June 30, 2014, the Company sold an aggregate total of 350,000issued 5,144,054 shares of common stock tofor the exercise of stock options. There were no stock options exercised during the three months ended June 30, 2013.

On May 30, 2014, the Company entered into a directorDebt Securities Assignment and Purchase agreement, along with a Securities Exchange and Settlement Agreement with Beaufort Capital Partners LLC (“Beaufort”). Per the terms of the agreements, the Company assigned $38,771 of outstanding accounts payable to Beaufort, in exchange for total proceedsallowing Beaufort to convert the amounts into common stock, at a date of $175,000.their choosing, at a rate equal to 40% of the lowest traded price over the 20 days previous to the conversion date. During the ninethree months ended December 31, 2012,June 30, 2014, Beaufort elected to convert the Company issued 2,282,000amount into 646,176 shares of common stock per the terms of the agreement. The difference between the conversion amount of $38,771 and the fair value of the shares issued amounted to $103,388, and was recorded as partinterest expense during the three months ended June 30, 2014.

On May 30, 2014, the Company entered into additional Debt Securities Assignment and Purchase and Securities Exchange and Settlement Agreements with Beaufort which provide for the assignment of $66,485 of liabilities from the Company to Beaufort, including $51,432 of outstanding account payables, outstanding note payable balance of $13,333 (see Note 4) and $1,720 of accrued interest. In connection with the agreements, the amounts are payable to Beaufort in common stock at a private placement for total proceedsdate of $2,282,000.Beaufort’s choosing, at a rate equal to 40% of the lowest traded price over the 20 days previous to the conversion date. As of June 30, 2014, the amount of $66,485 is still outstanding as Beaufort has not elected to convert the amounts yet. As the amounts are required to be paid in common stock, the Company has classified these amounts as a component of stockholders equity on the accompanying condensed balance sheet as of June 30, 2014.

Warrants

During the ninethree months ended December 31,June 30, 2013, the Company issued an aggregate of 880,000 warrants in connection with the Convertible Notes issued during the period, as well as 238,000 warrants for the payment of commissions associated with acquiring the Convertible Notes. The Company also issued 300,000These warrants in connection with the senior convertible promissory note granted on November 22, 2013, which have been accounted for as derivative liabilities (see Note 6).

During the ninethree months ended December 31,June 30, 2013, the Company issued an additional 100,000 warrants as payment of directors’ services. The warrants have been accounted for as derivative liabilities prior to the reverse stock split on December 2, 2013 (see Note 6).

During the ninethree months ended December 31, 2012,June 30, 2014, the Company issued warrants in connection with the Typenex Note (see Note 5) granting the debt holder 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 aggregate totalexercise price of 1,074,842 warrants for services and the purchase of fixed assets.$0.35 per share. The warrants issued during the nine months ended December 31, 2012 resulted in an aggregate of $1,181,071 of expense,have been accounted for as well as an increase to property and equipment of $12,763 for the purchase of transportation equipment.  These warrants are exercisable into shares of the Company’s common stock at exercise prices ranging from $1.00 to $11.00 per share.derivative liabilities (see Note 6).
 
(8) Stock Option Plan:

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

As of DecemberJune 30, 2014 and March 31, 2013,2014, the Company had 100,000 fully vested options outstanding under the 2011 Stock Option Plan at an exercise price of $10.00 per share. TheseThe options were fully vested as of March 31, 2013, and therefore there no further compensation cost was recorded during the nine months ended December 31, 2013.  Stock option compensation cost recorded during the nine months ended December 31, 2012 amounted to $60,393.  No options were granted or exercised during the nine months ended December 31, 2013 and 2012.  The outstanding options will expire in November 2018.
(9)             Discontinued Operations:
Prior to January 21, 2010, the Company had been actively engaged in acquiring underperforming mortgage loan portfolios and generating revenues from re-performing, sale of loans and fee revenue.  As of January 21, 2010, the Company changed its primary business and abandoned the prior business. Accordingly, the assets and liabilities and results of operation related to this business have been classified as discontinued operations in the financial statements for all periods presented.  During the nine months ended December 31, 2013 and 2012, the Company had net income from discontinued operations of $0 and $476,766, respectively, which resulted from the write down of payables.

 
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On April 1, 2014, the Company adopted the 2014 Stock Option Plan which provides for the grant of options to certain members of management totaling an aggregate of 20% of the total issued and outstanding shares of common stock. The options are considered granted on each day that the Company issues shares, at which point the Company values the options using the Black-Scholes method and records the applicable share-based compensation expense. On April 1, 2014, the Company also issued stock options to directors as compensation which provides for the purchase of an aggregate total of 2,000,000 shares of common stock. All options granted have an exercise price of $0.0001 per share. The stock options are fully vested on the date of issuance and have a contractual life of 5 years.
The following is a summary of the Company’s stock option activity.

     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 had no unvested stock options or unrecognized stock option expense. The weighted average grant date fair value of $0.36 per option.

The following table summarizes the liabilities classified as discontinued operations in the accompanying balance sheets:information about stock options outstanding and exercisable at June 30, 2014.
 
  December 31,  March 31, 
  2013  2013 
  (Unaudited)    
       
Notes payable, related party $-  $194,041 
  $-  $194,041 
The Company entered into forbearance agreements with investors holding the notes that are included in liabilities to be disposed of.  The Company paid the notes in full during the nine months ended December 31, 2013.
   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     

(10)
16

(9) Related Party Transactions

During the three months ended December 31, 2013,June 30, 2014, the Company incurred $51,684 of legalentered into short-term borrowings with the Chief Financial Officer and administrative expenses relating to the formation of a limited partnership, of which the Company holds a 20% interest and is the general partner.

Of the 1,218,000 warrants granted during the nine months ended December 31, 2013, 50,000 were grantedChief Executive Officer amounting to a Directortotal of the Company in connection with$59,000. The outstanding amounts accrue interest at a convertible note payable.  The convertible noterate of 10% per month and are payable balance outstanding from this Director amounted to $50,000 as of December 31, 2013.on demand.
 
(11)
(10) Subsequent Events

On January 8,July 1, 2014, the Company issued 50,000 sharesentered into a convertible promissory note with KBM Worldwide, Inc. for borrowings of its common stock to$32,500 which bear interest at a service provider as partrate of a consulting agreement.

During January 2014, two investors converted their promissory notes of $20,000 plus8% per annum. The outstanding borrowings and accrued interest are payable on March 19, 2015. The outstanding amounts are convertible into 21,318 shares of common stock.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 January 8,July 18, 2014, the Company issued 13,125entered 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 its common stock at a conversion rate equal to Transportation Management Services per a consulting agreement.57% of the lowest trading price during the fifteen trading days prior to the conversion.

On January 30,July 24, 2014, the Company issued 169,560entered 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 its common stock in exchange for 188,400 warrants.at a conversion rate equal to 57% of the lowest trading price during the fifteen trading days prior to the conversion.

17
 
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.

16
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 visionissued 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 offerAmtrak, 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 traveltotal 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 passenger rail routes across the country. Amtrak runs mostly commuter type train service and does not offerBNSF is leasing 1,000 more. Oil is being hauled over this corridor and capacity is at a first class option on most ofpremium with 120+ trains per day over the pass. With pending capacity issues, BNSF is reserving its routes inrail franchise for freight and has closed off any access via the US. There is a market demandCajon pass.
During the development period for a first class option to commuter rail service on multiple routes 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 logisticsthe company became visible in the press and financial requirements which may take an extended period to complete. For that reason, we have bifurcated our business plan into two segments. First isseveral independently owned passenger rail companies discussed how the deployment of a first class optionClub X style could be deployed on existing excursion lines. The Company began to focus its infrastructure towards acquiring independently owned passenger trains connectingrail 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 the Santa Fe Southern Railway, located in Santa Fe New Mexico, to metropolitan areas.  The second is to operate specialty charter servicemanage the passenger services on the Los Angeles to Las Vegas corridor which has been in the planning stage in 2013. The Company intends to operate its first Los Angeles to Las Vegas excursion charter during 2014. 
The Company has also identified several routes, currently served by various passenger rail entities, which originate from a metropolitan area and have a segment of the route passing through another metropolitan area.railroad. The Company will constructbe adding its Club X cars for each route, which it will couple up to the trains and will serve as a First Class option for current travelers. The Company will pay a fee to the agency operating the trains 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 Februaryin 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 leasingLeasing Company. These cars are planned for use in the deployment of cars on our routes.future affiliated routes and acquired companies. The first two cars have been completed and delivered forare scheduled to go into service startingon the Santa Fe Southern Railway in MarchAugust of 2014. The remaining cars are scheduled to be refurbished during the remainder of 2014.
 
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 may or may not seek renewal of this MOU.

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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.

17
Intangible and Long-Lived Assets:

We followIn 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 determine360-10, the cash flow estimation period for a group ofCompany 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 assettheir net book value may not be recoverable. TheWhen 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 assetthose assets and is not recoverable if it exceedsrecorded in the sumperiod 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 fromaward, 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 accountedThe 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 impairment505-50 “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 valueshare-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’sgoods 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 theissued. The final fair value paid in the equity section of the Company’s financial statements as itshare-based payment transaction is a non-cash equity transaction. The Company accretesdetermined at the expense to stock based compensation expense on a monthly basis for services rendered within the period.
We useperformance completion date. For interim periods, the fair value methodis 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 equityemployees this is the date of grant, and for non-employees, this is the date of performance completion.

19
The Company values stock options and warrants that do not qualify as derivative instruments granted to non-employees and will useusing the Black-Scholes option pricing model. Assumptions used in the Black-Scholes model for measuringto value options and warrants issued during the fair value ofthree months ended June 30, 2014 are as follows. There were no options if issued. The stock based fair value compensation is determined as ofor warrants granted during the date ofthree months ended June 30, 2013 that were valued using the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods. Black-Scholes model.

Three Months Ended
June 30,
2014
Expected life in years2.5
Stock price volatility170.94% - 178.31%
Risk free interest rate0.76% - 0.95%
Expected dividendsNA
Forfeiture rate0%
 
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 Notesconvertible notes beginning in February 2013, the Company became contingently obligated to issue shares of common stock in excess of the 200 million authorized under the Company’s certificate of incorporation. Consequently, the ability to settle these obligations with shares would be unavailable causing these obligations to potentially be settled in cash. This condition creates a derivative liability.

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

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

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

18
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 thefour 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.

New Accounting Pronouncements:
20
Fair Value of Financial Instruments:

ThereThe Company's financial instruments as defined by FASB ASC 825-10-50 include cash, notes payable and derivative liabilities. Derivative liabilities are no recent accounting pronouncements that management believes will have a material impact onrecorded at fair value. The principal balance of notes payable approximates fair value because current interest rates and terms offered to the Company's present or future consolidated financial statements.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.
Results of Operations for the Three Months Ended December 31, 2013 as Compared to the Three Months Ended December 31, 2012

The following is a comparison of the consolidated results of operations for the three months ended December 31, 2013June 30, 2014 and 2012.2013.

 Three Months Ended        Three Months Ended       
 December 31,  December 31,        June 30,  June 30,       
 2013  2012  $ Change  % Change  2014  2013  $ Change  % Change 
                        
Operating Expenses:                        
Compensation and payroll taxes $526,964  $1,492,873  $(965,909)  -64.7% $2,866,004  $849,329  $2,016,675   237.4%
Selling, general and administrative  212,512   210,436   2,076   1.0%  384,050   208,123   175,927   84.5%
Professional fees  509,427   500,067   9,360   1.9%  769,388   581,788   187,600   32.2%
Depreciation expense  1,928   600   1,328   221.3%  2,436   1,434   1,002   69.9%
Total expenses  1,250,831   2,203,976   (953,145)  -43.2%  4,021,878   1,640,674   2,381,204   145.1%
                                
Loss from continuing operations  (1,250,831)  (2,203,976)  953,145   -43.2%  (4,021,878)  (1,640,674)  (2,381,204)  145.1%
                                
Other income (expense)                                
Interest expense  (1,326,916)  14,158   (1,341,074)  -9472.2%  (1,402,041)  (2,521,627)  1,119,586   -44.4%
Change in derivative liability  (3,340,399)  (65,791)  (3,274,608)  4977.3%  870,199   950,245   (80,046)  -8.4%
Total other income (expense)  (4,667,315)  (51,633)  (4,615,682)  8939.4%  (531,842)  (1,571,382)  1,039,540   -66.2%
                                
Net loss from continuing operations before provision for income taxes  (5,918,146)  (2,255,609)  (3,662,537)  162.4%
Net loss from operations before provision for income taxes  (4,553,720)  (3,212,056)  (1,341,664)  41.8%
Provision for income taxes  (4,540)  (4,540)  -   0.0%  -   (4,491)  4,491   -100.0%
Net loss from continuing operations  (5,922,686)  (2,260,149)  (3,662,537)  162.0%
                
Discontinued operations:                
Loss from discontinued operations, net of income taxes  -   (3,741)  3,741   -100.0%
                
Net loss $(5,922,686) $(2,263,890) $(3,658,796)  161.6% $(4,553,720) $(3,216,547) $(1,337,173)  41.6%
21
 
Operating Expenses

Compensation expense decreasedincreased by $965,909,$2,016,675, or 64.7%237.4%, during the quarter ended December 31, 2013June 30, 2014 as compared to the quarter ended December 31, 2012.June 30, 2013. The decreaseincrease in compensation expense during the quarter ended June 30, 2014 is primarily due to the impactissuance of warrants issued for services during the three months ended December 31, 2012, which resultedstock options to employees and Board members resulting in additional expenses of approximately $1.1 million.$2,446,615. The decreaseincrease in compensation expenseexpenses in 20132014 was offset an increase in salary expense dueby 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 hiring of additional full-time employees and the additional board membersquarter ended June 30, 2014 as compared to the same period in 2012.  Selling, general2013 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 administrative expensesUse Agreement with Santa Fe Railroad which we expect to start operating in August 2014. Professional fees increased slightly by $2,076,$187,600, or 1.0%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 December 31, 2013June 30, 2014 as compared to the same period in 2012 as our administrative spending was consistent between the periods.  Professional fees increased slightly by $9,360, or 1.9%, during the quarter ended December 31, 2013 as compared to 2012 as our professional services required were consistent between the periods.     
19
Other Income (Expense)
Interest expense increased by $1,341,074 during the quarter ended December 31, 2013 as compared to the same period in 2012.2013. The increasedecrease is due primarily to the increase in debt outstanding induring the current year as comparedquarter ended June 30, 2013 due to 2012 from the issuance of convertible notes payable.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 December 31,June 30, 2013 of $1,044,886.  In addition, we had capitalized debt issuance costs related to these convertible notes payable, which are being amortized over the maturity date of the notes of February 1, 2014, which resulted in additional interest expense during the three months ended December 31, 2013 of $201,613.   These amounts did not exist during the same period in 2012.
The change in the value of derivative liabilities amounted to $3,340,399 for the three months ended December 31, 2013 as compared to $65,791 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, as well as from convertible notes issued during the three months ended December 31, 2013.  These derivative liabilities did not exist during the three months ended December 31, 2012. 

Results of Operations for the Nine Months Ended December 31, 2013 as Compared to the Nine Months Ended December 31, 2012

The following is a comparison of the consolidated results of operations for the nine months ended December 31, 2013 and 2012.
  Nine Months Ended       
  December 31,  December 31,       
  2013  2012  $ Change  % Change 
             
             
Operating Expenses:            
Compensation and payroll taxes $1,683,096  $2,602,385  $(919,289)  -35.3%
Selling, general and administrative  1,290,094   463,875   826,219   178.1%
Professional fees  1,453,936   1,043,532   410,404   39.3%
Depreciation expense  5,290   1,125   4,165   370.2%
  Total expenses  4,432,416   4,110,917   321,499   7.8%
                 
Loss from continuing operations  (4,432,416)  (4,110,917)  (321,499)  7.8%
                 
Other income (expense)                
Interest expense  (4,862,209)  4,496   (4,866,705)  -108245.2%
Change in derivative liability  1,569,736   (20,824)  1,590,560   -7638.1%
   Total other income (expense)  (3,292,473)  (16,328)  (3,276,145)  20064.6%
                 
Net loss from continuing operations before provision for income taxes  (7,724,889)  (4,127,245)  (3,597,644)  87.2%
Provision for income taxes  (13,571)  (13,571)  -   0.0%
Net loss from continuing operations  (7,738,460)  (4,140,816)  (3,597,644)  86.9%
                 
Discontinued operations:                
Income from discontinued operations, net of income taxes  -   476,766   (476,766)  -100.0%
                 
Net loss $(7,738,460) $(3,664,050) $(4,074,410)  111.2%
20

Operating Expenses

Compensation expense decreased by $919,289, or 35.3%, during the nine months ended December 31, 2013 as compared to the nine months ended December 31, 2012.  The decrease is primarily due to the impact of warrants issued for services during the nine months ended December 31, 2012, which resulted in additional expenses of approximately $1.1 million.  The decrease in compensation expense in 2013 was offset an increase in salary expense due 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 $826,219, or 178.1%, during the nine months ended December 31, 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 $410,404, or 39.3%, during the nine months ended December 31, 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 $247,061 related to the amortization of expenses related to warrants issued to consultants.  
Other Income (Expense)
Interest expense increased by $4,866,705 during the nine months ended December 31, 2013 as compared to the same period in 2012.  The increase is due primarily to the increase in debt outstanding in the current year as compared to 2012 from the issuance of convertible notes payable.  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 nine months ended December 31, 2013 of $4,090,300.$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 $568,141.  These amounts did not exist during$155,391. We had no additional interest expense from the same periodamortization 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 $1,569,736 for the nine months ended December 31, 2013 as compared to ($20,824) 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, as well as from convertible notes issued during the three months ended DecemberJune 30, 2014 amounted to $870,199, which represents the change in the fair value of the derivative liabilities since the year ended March 31, 2014. The change in value of the derivative liabilities for the three months ended June 30, 2013 amounted to $950,245, which represents the change in the fair value of the derivative liabilities since the year ended March 31, 2013. TheseThe decrease in the value of the derivative liabilities did not existduring these periods was primarily due to the decline of our stock price during the nine months ended December 31, 2012.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 stockequity 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 no revenue, ahas net losslosses of $7,738,460$4,553,720 for the ninethree months ended December 31, 2013 andJune 30, 2014. The Company also has an accumulated deficit of $26,314,083 through December 31, 2013,$36,181,363 and a negative working capital of $3,868,645 as of June 30, 2014, as well as outstanding convertible notes payable of $2,235,000 which are payable on February 1, 2014 and outstanding convertible notes payable of $1,750,000 payable on June 30, 2014.  As of December 31, 2013, the Company has a working capital deficit of $3,941,834.$2,959,792. Management believes that it will need additional equity or debt financing to be able to implement the business plan. These matters raiseGiven 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 is no longer seeking 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 passenger rail routes with leased and refurbished cars. The Company successfully completed a capital raise of $1.750 million from an institutional investor in November 2013. These funds were in the form of a note and were secured by the assets of the Company. The Company intends to use them for operating capital for the deployment of its Club X rail cars beginning March 2014 on an existing route between Los Angeles and San Diego.

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The Company is pursuing a means to run a charter excursion service between Los Angeles to Las Vegas for special events being held in Las Vegas from time to time. The plan is to deploy Club X Train cars on the Los Angeles to Las Vegas route from time to time as a charter service and not regularly scheduled service. This service does not require the Company to pay for capital improvements to railroad infrastructure. This charter strategy is the primary approach to operating in the Los Angeles to Las Vegas corridor at this time. 

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.
 
ThereManagement 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 assuranceassurances that, weif achieved, the Company will be successfulhave sufficient funds to execute its intended business plan or generate positive operating results.

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Cash Flows

Net cash used in achieving our long-term plans as set forth above, or that such plans, if consummated, will enable usoperating 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 continuenet 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 DebtIndebtedness

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 outstandinga 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.

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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 notespromissory 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 $2,235,000,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 earnthe 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 matureMarch 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 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 1, 2014.12, 2015 along with any unpaid accrued interest. The outstanding principal and accrued interest areis 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.
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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 $1.0010% per shareannum. 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.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.

We have an outstandingOn May 28, 2014, the Company issued into a convertible promissory note payablewith Beaufort Capital Partners LLC providing for borrowings of $1,750,000$125,000. The convertible promissory note matures on August 28, 2014, at which was issued on November 22, 2013.  The amounts earnpoint the Company owes $187,500 which includes a total of $62,500 in interest at 10% per annum and are due on June 30, 2014.expense. The outstanding amounts are convertible into shares of common stock at the option of the debt 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 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 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 Company also has outstanding short-term borrowings from its Chief Financial Officer and Chief Executive Officer amounting to an aggregate of $59,000. The amounts are payable on demand and bear interest at a rate of $0.7010% per share, subject to potential adjustments.month.

We have anOn 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 noteborrowings and accrued interest are payable of $100,000 which was issued on October 1, 2013.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 debt holder at the lower of $0.90 per share, or 60%average of the lowest three trading price inprices during the 2510 trading days previousprior to the conversion date.  The Company is able to borrow up to $350,000 under the agreement, and any outstanding borrowings are due on October 1, 2015.
We have 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.conversion.

Cash Flows
Net cash used in operating activities for the nine months ended December 31, 2013 was $3,078,796 as compared to net cash used in operating activities for the nine months ended December 31, 2012 of $1,747,899.  The primary reasons for the differences between our net loss of $7,738,460 and net cash used in operating activities for the nine months ended December 31, 2013 were amortization of discounts on convertible notes payable of $4,090,300, amortization of debt offering costs of 568,151, impairment of our deposit with Union Pacific of $600,000, the non-cash stock issued for compensation and services of $314,181, and the non-cash issuance of warrants for services of $468,852, offset by a decrease in our derivative liabilities of $1,569,736.  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 $194,041 of liabilities from discontinued operations.

Cash used in investing activities during the nine months ended December 31, 2013 were expenditures of $284,749 for the purchase of property and equipment.  During the nine months ended December 31, 2012, we had purchases of property and equipment of $344,610 for the acquisition of transportation equipment.
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Net cash provided by financing activities was $2,905,000 for the nine months ended December 31, 2013 consisting of proceeds from the issuance of convertible notes payable of $2,730,000 and proceeds from the sale of common stock of $175,000.  During the nine months ended December 31, 2012, we had net cash provided by financing activities of $2,971,000, which represented $2,282,000 in proceeds from the sale of common stock, $705,000 in proceeds from the issuance of notes payables, and $9,000 in proceeds from the exercise of warrants, offset by repayments of $25,000 payment for a note payable. 

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 SeptemberJune 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 December 31, 2013,June 30, 2014, our disclosure controls and procedures were effective.

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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 December 31, 2013June 30, 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.

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

During the 3 months ended December 31, 2013,June 30, 2014, the Company issued shares of its common stock as follows:

·73,036785,000 shares issued to convertible promissory notenotes holders for conversion of $69,875 of outstanding notes and accrued interest for a total value of $73,036.payable.

·350,000 shares issued to a director for cash proceeds of $175,000
·  20,0001,390,000 shares issued for services of $13,950$511,870.
·5,144,054 shares issued 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 December 31, 2013, there has been no demand made for repayment of the notes or accrued interest.None.

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Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information.
 
None
 
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Item 6. Exhibits.

Exhibit
No.
Description
  
31.1Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act Of 2002.
  
31.2Certification 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.INSXBRL INSTANCE DOCUMENT
  
EX-101.SCHXBRL TAXONOMY EXTENSION SCHEMA DOCUMENT
  
EX-101.CALXBRL TAXONOMY EXTENSION CALCULATION LINKBASE
 
EX-101.DEFXBRL TAXONOMY EXTENSION DEFINITION LINKBASE
  
EX-101.LABXBRL TAXONOMY EXTENSION LABELS LINKBASE
  
EX-101.PREXBRL TAXONOMY EXTENSION PRESENTATION LINKBASE

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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: February 12,August 14, 2014Las Vegas Railway Express, Inc.
  
 
By:By: /s/ Michael A. Barron
 Chief Executive Officer (principal executive officer)
  
Date: February 12,August 14, 2014 
 
By: /s/ Wanda Witoslawski
 Chief Financial Officer (principal financial officer)

 
 
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