CAPITAL STOCK

3 Months Ended

May 31, 2013

Notes to Financial Statements

CAPITAL STOCK

In October, 2008, the Company increased its authorized common stock from 10,000,000 to 100,000,000 shares, and changed the par value of the common stock from no par to $0.001 par value. The Company also reverse split the outstanding shares of common stock at a ratio of 7.7 to 1, leaving a total of 150,079 shares of common stock issued and outstanding following the split.

Common Stock

During the quarter year ending May 31, 2013, the following share-related transactions occurred:

• 335,715 Common Shares valued at $123,237 were issued in payment of an account payable.

• 442,500 common shares were issued for consulting services to multiple providers. The shares were valued at various market prices ranging between $0.15 and $0.16 per share. The combined value of the shares was $67,375, of which $59,375 was expensed during the May Quarter.

During the fiscal year ending February 28, 2013, the following share-related transactions occurred:

• 206,718 Common Shares valued at $81,099 were issued in payment of an account payable.

• 1,508,644 common shares were issued for consulting services to multiple providers. The shares were valued at various market prices ranging between $0.35 and $0.45 per share. The combined value of the shares was $602,150, all of which was expensed during Fiscal 2013.

• 1,174,051 common shares were issued in connection with the conversion of the prior outstanding convertible note in the amount of $104,000.

During the fiscal year ending February 29, 2012, the following share-related transactions occurred:

• 3,277,637 common shares were sold to unrelated third parties in a private placement at $1.05 per share for net proceeds of $3,164,611.

• 304,721 common shares valued at $450,000 were issued to acquire assets.

• 466,310 common shares were sold to unrelated third parties in a private placement at an average of $1.02 per share for net proceeds of $474,000.

• 1,250,000 common shares were sold to unrelated third parties in a private placement at an average of $0.80 per share for net proceeds of $1,000,000.

• 625,000 common shares were sold to unrelated third parties in a private placement at an average of $0.40 per share for net proceeds of $250,000.

• 3,714,050 common shares were sold to unrelated third parties in a private placement at an average of $0.40 per share for net proceeds of $1,485,620.

• 479,880 common shares were issued for consulting services to multiple providers. The shares were valued at various market prices ranging between $0.49 and $1.05 per share. The combined value of the shares totaled $290,434. Of the total value, $168,454 was expensed during the year end February 29, 2012, and $121,980 was recorded as prepaid consulting and is being written off over the remaining terms of the contracts.

Total common shares issued and outstanding at May 31, 2013 was 29,171,042.

Preferred Stock

On October 19, 2012 the Company sold 1,428,571 shares of the Series A Convertible Preferred stock at a price per share of $1.05 for total proceeds of $1,500,000. The sale of the Series A Convertible Preferred stock included the issuance of 2,142,857 warrants. Based upon the Black Scholes pricing module the warrants have a fair value of $0.2106 per warrant. The portion of the proceeds allocated to warrants is $345,000. Each Preferred share is convertible into three shares of common stock. A deemed dividend of $259,285 was recorded which represents the intrinsic value of the conversion feature on the date of issuance. In addition, we filed an amendment to our articles of incorporation establishing the new Preferred Shares.