SHAREHOLDERS' DEFICIT

12 Months Ended

May 31, 2012

SHAREHOLDERS' DEFICIT [Abstract]

SHAREHOLDERS' DEFICIT

9. SHAREHOLDERS' DEFICIT

Preferred Stock

The Company is authorized to issue 10,000,000 shares of preferred stock with a par value of 0.00001 per share.

The Company has not assigned any specific rights to the preferred stock, nor has any preferred stock been issued in the period from Inception (January 21, 1998) to May 31, 2012.

Common Stock and Warrants

The Company is authorized to issue 150,000,000 shares of common stock with a par value of $0.00001 per share.

The following shares of common stock and warrants were issued and warrants cancelled in the twelve months ending May 31, 2012 and 2011:

	Common Stock		Warrants
May 31, 2010		53,319,696		705,612
Issued for cash proceeds of $497,750		14,000,000		7,000,000
Issued to directors as compensation valued at $200,000		1,000,000		-
Issued to consultants as compensation valued at $725,776		9,670,000		-
Issued on conversion of notes payable with principal balances of $25,000 and accrued interest of $8,285		110,950		-
Warrants issued to broker		-		228,437
Warrants expired, unexercised		-		(2,187,500	)
May 31, 2011		78,100,646		5,546,549
Issued for cash proceeds of $615,000		6,221,429		3,110,715
Issued to directors as compensation valued at $175,000		1,750,000		-
Issued on the exercise of stock options - cashless exercise		350,000		-
Issued to consultants as compensation valued at $345,000		1,450,000		-
Issued on conversion of notes payable with principal balances of $2,142,500 and accrued interest of $588,886		13,960,558		-
Warrant issued to existing shareholder		-		500,000
Warrants exercised at $0.05 and $0.25 for $138,750		1,475,000		(1,475,000	)
Warrants expired, unexercised		-		(1,874,099	)
May 31, 2012		103,307,663		5,808,165

The following table summarizes information about warrants outstanding at May 31, 2012

Exercise Price	Warrants Outstanding		Weighted Average Life of Outstanding Warrants in Months
$0.10		1,000,000		12.0
$0.15		2,500,000		4.7
$0.16		947,450		39.1
$0.25		1,360,715		1.4
		5,808,165		10.8

Stock Options

In August 2008, the shareholders of the Company approved a Stock Option Plan (the "Plan"). Under the terms of the Plan, options to purchase up to 20,000,000 shares of Company common stock may be issued to officers, directors, key employees and consultants.

The following schedule presents the activity of Company options during the years ended May 31, 2012 and 2011:

	# of Options			Weighted-Average Exercise Price
Options outstanding, May 31, 2010		9,000,000		$	0.30
Granted		8,000,000			0.09
Cancelled		(6,000,000	)		0.32
Cancelled and replaced		(10,000,000	)		0.13
Replacement options		10,000,000			0.06
Options outstanding, May 31, 2011		11,000,000		$	0.06
Granted		6,500,000			0.17
Exercised		(561,534	)		0.65
Cancelled or forfeited		(2,000,000	)	$	(0.06	)
Options outstanding, May 31 2012		14,938,466		$	0.11
Options vested at May 31, 2012		14,438,466		$	0.11

The following table summarizes information about stock options outstanding at May 31, 2012:

Exercise Price	Options Outstanding	Options Exercisable	Intrinsic Value of Options Outstanding (1)	Intrinsic Value of Options Exercisable (1)	Weighted Average Life of Options Outstanding In Years	Weighted Average Life of Options Exercisable In Years
$0.065	7,438,456	7,438,456	$781,038	$781,038	3.8	3.8
$0.07	1,000,000	1,000,000	100,000	100,000	3.3	3.3
$0.16	3,500,000	3,000,000	35,000	30,000	5.0	5.0
$0.18	1,500,000	1,500,000	-	-	4.7	4.7
$0.185	1,000,000	1,000,000	-	-	4.4	4.4
$0.20	1,000,000	1,000,000	-	-	4.3	4.3
	14,938,466	14,438,466	$916,038	$911,038	4.2	4.1

(1) Based on closing share price of $0.17 at close of business on May 31, 2012

The total fair value of options issued during the years ended May 31, 2012 and 2011 were $1,059,999 and $580,000 respectively.

The fair value of options granted under the Plan are estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions during the twelve months ending May 31, 2012:

Weighted-average risk-free interest rate	0.75 - 1.25%
Weighted-average expected life	5 yrs
Weighted-average expected volatility	403% - 420%
Weighted-average expect dividends	$ 0

The Company also modified the exercise price of 10,000,000 options during the 2011 year and recorded additional cost of $210,000.

As at May 31, 2012, unrecognized compensation cost related to unvested options totaled $71,257 (2011 - $0) all of which will be recognized in full before May 31, 2013.

The Company expects to issue shares upon exercise of these options from its authorized shares of common stock.