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Common Stock Purchase Warrants

3 Months Ended

May 31, 2011

Common Stock Purchase Warrants

NOTE 3: COMMON STOCK PURCHASE WARRANTS

Common Stock

During the quarter ended May 31, 2011, the Company issued 50,000 shares of restricted common stock to a consultant for services rendered, valued at $15,500 based on the estimated fair value of the common stock on the date of the grant.

Contributed Executive Services

The President of the Company elected not to accept his salary until the Company has become profitable. Although the Company has achieved profitable operations, he continued to not accept his salary. Accordingly, the Company recorded $2,500, the contractual value of these services, which is included in selling, general and administrative expenses and additional paid-in capital for the quarter ended May 31, 201

Warrants

The Company has determined the estimated value of warrants granted using the Black-Scholes pricing model. The amount of the expense charged to operations for warrants was $88,804 for the three months ended May 31, 2011 and $-nil- for the three months ended May 31, 2010. All outstanding warrants are expected to vest in December 2015.

A summary of warrant activity for the three months ended May 31, 2011 is as follows:

						Weighted-
						Average
		Warrants				Exercise
		Outstanding				Price
Outstanding at February 28, 2011			8,467,221				0.21
Granted			-				-
Exercised			-				-
Forfeited			-				-
Outstanding at May 31, 2011			8,467,221				0.21
Vested at May 31, 2011			0				0.21
Exercisable at May 31, 2011			0				0.21

The following table summarizes significant ranges of outstanding warrants as of May 31, 2011:

			Warrants Outstanding							Warrants Exercisable
					Weighted			Weighted					Weighted
					Average			Average					Average
	Exercise		Number		Remaining			Exercise		Number			Exercise
			Outstanding		Life (Years)			Price		Outstanding			Price
$	0.21		8,467,221		9.54		$	0.21		8,467,221		$	0.21

			8,467,221		9.54		$	0.21		8,467,221		$	0.21

Tabular disclosure of warrants or rights issued. Warrants and rights outstanding are derivative securities that give the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame. Warrants are often included in a new debt issue to entice investors by a higher return potential. The main difference between warrants and call options is that warrants are issued and guaranteed by the company, whereas options are exchange instruments and are not issued by the company. Also, the lifetime of a warrant is often measured in years, while the lifetime of a typical option is measured in months. Disclose the title of issue of securities called for by warrants and rights outstanding, the aggregate amount of securities called for by warrants and rights outstanding, the date from which the warrants or rights are exercisable, and the price at which the warrant or right is exercisable.

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