My Voip Pass Rate is about 3%. I have one FE and one client. I created about 1200 users and ran it with 100 users and all 1200 users for 1 hour each and pass rate is 3%. 

Here is a snapshot of 1200 user test

Total Voip calls in Progress 13834

Total Number of incoming Voip calls attempted 10073

Total Number of outgoing Calls routed successfullly 10891

Total Number of Outgoing Voip calls Failed to participate 69966

Total 400 Responses received 187112

Total 404 Responses received 68526

Total 480 Response received 11

Time to establish the call (milliseconds) 67196

etc ...

I looked around quite a bit to look for interpretation of these performance counters and came across here http://technet.microsoft.com/en-us/library/gg679088(v=ocs.14).aspx There is not really that much information out there online on Lync Performance Tool result interpretation and troubleshooting.

Can someone tell me please why there is so much 400 errors. 

I am aware of the hardware spec. Yes I am running it on VM. I tried even low number of users like 1 - 200 and still pass rate is really low. I did use snooper tool to look closer at the warnings and errors. To my surprise I found 2 strange things happenning. 

1. my users i created for some reason tries to connect to user groups I did not even create or specified to use. It was in 4000 - 4999 range.

So Let us say I had lync users LyncUser0 - LyncUser200 but for some reason it will try to connect to LyncUser1 to LyncUser4039 or something like that. I am not sure why it is doing that. So in snooper it gets 404 or Not found error. Which makes sense cuz those users do not exist. So I got around the problem by creating users from 4000 to 4999 and that eliminated those 404 errors or problems. But still does not explain why that specific range of users(4000-4999) was selected whether I run the test with 100 or 1000 users.

2. The second issue is it is trying to dial out to randomly generated phone numbers. These numbers were generated I believe in Lync Server User Creation Tool's Voip tab where you specify area code of US phone number to be generated. Like 206 would generate 2060000001 and so on.

But in snooper what I see is one of LyncUser for example will try to dial out to 2060000001 and then got SIP/2.0 403 Forbidden. and then SIP 2.0 481 Call Leg Does Not Exist errors. I am not sure where you disable your lync users from dialing out. I want them to do just PC to PC calls only. From Lync control panel I made sure my lync users' telephony is PC-to-PC only. 

Any help will be greatly appreciated.

Hi, it looks like you are asking a question about Lync Server performance. I am moving the question to the appropriate Lync Server forum on TechNet.

Which part of the forum are you moving it to ?

Did you install the Lync Server in VM?

Please check the used the recommended server hardware platforms.

http://technet.microsoft.com/en-us/library/gg398835.aspx

Please monitor the CPU and the memory usage on the client computers. If the CPU is consistently more than 90%, reduce the number of users.