3.	GOING CONCERN AND LIQUIDITY

As shown in the accompanying financial statements, we have experienced continuing losses since Inception (January 21, 1998), and as at May 31, 2012, have a working capital deficit of $3,065,712, accumulated losses of $24,550,629 since Inception (January 21, 1998), recurring negative cash flows from operations and presently do not have sufficient resources to meet our outstanding liabilities or accomplish our objectives during the next twelve months.

As at May 31, 2012, we were in default on repayment of convertible promissory notes with principal balances of $575,000 together with accrued interest of $263,923 totaling $838,923.

Moreover, effective May 23, 2012, we amended our Settlement Agreement and Payment Agreement with our former attorneys. As result of the amendment, the payment of the initial installment of $403,554, originally due on May 24, 2012, was extended to July 24, 2012. In addition, commencing May 23, 2012, interest accrued on the amount due, which is $1,614,216, at the rate of 5% per annum. We were unable to make the scheduled payment of $403,554 and accrued interest on July 24, 2012 and are now in default under the terms of this agreement, and the entire amount, including interest, is now due and payable. We have contacted our former attorneys to cure the default and obtain an extension of time to pay the amounts due, and as of their September 12, 2012 response, our proposal is under review by the firm. We expect a response in the near future and we will promptly file a Form 8-K upon receipt. We cannot predict whether will be successful in obtaining another extension from our former attorneys. If we are unable to do so, the firm will be able to avail itself of all rights and privileges under the existing agreements with us and under the laws of Mexico and the United States.

At the time of this report, we do not have the funding available to repay the convertible promissory notes or make the payment required under the amended agreement with our former attorneys.

These conditions raise substantial doubt about our ability to continue as a going concern.

In our audited financial statements for the fiscal years ended May 31, 2012 and 2011, contained in our Annual Report, the Report of the Independent Registered Public Accounting Firm includes an explanatory paragraph that describes substantial doubt about our ability to continue as a going concern.

Our present plans to overcome these difficulties, the realization of which cannot be assured, include, but are not limited to, continuing efforts to raise new funding in the public and private markets, to sell some or all of our assets and to initiate a renegotiation of the terms of scheduled repayments to our creditors.