Equity

9 Months Ended

Nov. 30, 2013

Equity:

Stockholders' Equity Note Disclosure

(a)   Authorized capital

The Company is authorized to issue:

10,000,000 shares of Preferred stock, $0.0001 par value

2,000,000,000 shares of Common stock, $0.0001 par value

On October 28, 2013, the Articles of Incorporation were amended to increase the number of shares authorized to 2,000,000,000 common shares, par value $0.00001, and 10,000,000 preferred shares, par value $0.00001

Series A Preferred Stock:

At November 30, 2013, the Series A Preferred Stock outstanding consisted of Three Million (3,000,000) shares of $.00001 par value. The Series A Preferred ranked senior to the common stock and all other shares of preferred stock that may be later authorized. Each outstanding share of Series A Preferred Stock had two hundred fifty (250) votes on all matters submitted to the stockholders of the Company and votes with the common stock on all matters. The shares of Series A Preferred: (i) did not have any liquidation preference; (ii) did not accrue, earn, or participate in any dividends; and (iii) was subject to redemption by the Corporation at a price of two cents ($.02) per share.

As a result of the Settlement agreement with Gordon F. Lee, the former CEO, the Series A shares have been revoked and cancelled, and are no longer issued and outstanding.

Series B Non-Voting 6% Convertible Preferred Stock:

The Series B Non-Voting Convertible Preferred Stock consisted of Seven Million (7,000,000) authorized shares of $0.00001 par value and a stated value of $100 per share. There were 1,850 shares of Series B Preferred Stock issued and outstanding at November 30, 2013.

Conversion rights: Each share of Series B Non-Voting 6% Convertible Preferred Stock is convertible at any time at the election of the holder into that number of shares of the Company's common stock determined by dividing the stated value of such shares of preferred stock into the conversion price. The conversion price is defined as twenty percent (20%) of the lowest closing bid price of the Company's common stock during five (5) trading days immediately preceding a conversion date. At November 30, 2013, the conversion of the Series B Preferred Stock would have resulted in the issuance of approximately 144,531,250 common shares.

Dividend rights: The holders of the Series B Preferred are entitled to receive cumulative dividends at a rate per share of 6% per annum, or an annual aggregate total of $11,100, payable in arrears on June 30 and December 31, and on each conversion date, either in cash or at the Company's irrevocable option, in shares of the Company's common stock. The number of shares of Common Stock so issuable is defined as 50% of the previous ten (10) day variable weighted average price of the Company's common stock, with certain limitations. 

Dividends on the Series B Non-Voting 6% Convertible Preferred Stock accrue daily commencing on the original issuance date and are deemed to accrue from such date whether or not earned or declared and whether or not there are profits, surplus or other funds of the Company legally available for the payment of dividends.

As a result of the Settlement agreement with Gordon F. Lee, the former CEO, the Series B shares, and the common shares into which they were converted, have been revoked and cancelled, and are no longer issued and outstanding.

Series C Voting 6% Convertible Preferred Stock:

In October, 2013, Novation Holdings, Inc., (OTCIQ NOHO) subscribed for 1,000,000 shares of Series C Voting Convertible Preferred stock for total consideration of $65,000, to be paid in installments.  As of November 30, 2013, the Series C shares had not yet been issued. The Series C Preferred will carry voting power equal to sixty percent of the total voting power of all classes of stock entitled to vote on any matter, and is convertible after six months at the election of the holder into sixty percent of the total common shares then issued and outstanding after the conversion.  The Statement of Preferences for the Class C Convertible Preferred Stock will be filed with the Secretary of State of Nevada.

As a result of the settlement with Gordon F. Lee, the Class C Preferred Stock issued to NOHO will be the only class of preferred stock issued and outstanding.

(b)     Share issuances, returns and cancellations during the nine month periods ended November 30, 2013 and 2012:

On April 5, 2013, the Company received and approved a subscription from Gordon Lee, the Company’s Chief Executive Officer, for 5,000,000 units at $0.01 per unit for gross proceeds of $50,000 in a private placement. Each unit consisted of one common share and one transferable share purchase warrant that entitles the holder to purchase one additional common share at $0.02 per share for a period of five years. The fair value of the common shares was determined to be $295,000 and the fair value of the warrants was determined to be $268,021 at the subscription date. The fair value of each warrant issued was calculated using the Black-Scholes option pricing model with the following assumptions: expected life of 5.0 years; volatility of 123.25%; no dividend yield; and a risk free interest rate of 0.68%. The net proceeds of the financing of $50,000 was allocated on a relative fair value basis as $26,198 to common shares and $23,802 to warrants.  The difference between the issue price of the common shares of $26,198 and the fair value of the common shares as so determined of $295,000, and the issue price of the warrant of $23,802 and the market value of the warrant, of $268,021, has not been recorded in the books of the Company. 

On May 21, 2013, the Company received and approved a subscription from Gordon Lee, the Company’s Chief Executive Officer, for 15,000,000 units at $0.0033 per unit for gross proceeds of $50,000 by way of private placement. Each unit consisted of one common share and one transferable share purchase warrant that entitles the holder to purchase one additional common share at $0.01 per share for a period of five years. The fair value of the common shares was determined to be $85,500 and the fair value of the warrants was determined to be $67,608 at the subscription date. The fair value of each warrant issued was calculated using the Black-Scholes option pricing model with the following assumptions: expected life of 5.0 years; volatility of 124.74%; no dividend yield; and a risk free interest rate of 0.84%. The net proceeds of the financing of $50,000 was allocated on a relative fair value basis as $27,921 to common shares and $22,079 to warrants. The difference between the issue price of the common shares of $27,921 and the fair value of the common shares as so determined of $85,500, and the issue price of the warrant of $22,079 and the market value of the warrant, of $67,608, has not been recorded in the books of the Company.

On October 21, 2013, the Company entered into a Mutual Release and Settlement Agreement with the former CEO, Gordon F. Lee, pursuant to which Mr. Lee agreed to resign all positions with the Company after appointing Mr. Michael Gelmon as a second director of the Company, to terminate and rescind all employment agreements, consulting agreements, options and warrants held by Mr. Lee or entered into between Mr. Lee and the Company, to cancel and rescind the issuance of all stock issued to Mr. Lee by the Company after May 31, 2013, as well as to cancel and to rescind as of September 30, 2013, the consulting agreement between the Company and Victoria Blackburn.

The rescission actions also include the consulting agreements entered into between the Company and Mr. Lee’s companies, Carbon Energy Handling, Inc. and Gordon F. Lee Group, LLC.  In exchange for the resignations and termination of the several agreements and the cancellation of all shares issued to Mr. Lee after May 31, 2013, the Company agreed that Mr. Lee would retain 100,000,000 shares of common stock previously issued to him on conversion of preferred shares, with an agreed value of $200,000, the closing market price of the stock.  All outstanding warrants held by Mr. Lee also were cancelled as part of the settlement.

During the nine month period ended November 30, 2013, the Company issued 222,003,375 shares of its common stock for the exercise of conversions under the Company’s convertible securities in the amount of $312,072; 497,500 shares of its common stock for penalties of $53,484 related to non-payment of notes with a principal amount of $270,000; and 4,000,000 shares of its common stock for $46,000 of services.

On June 3, 2013, the Company redeemed 2,000,000 shares of its Series A Preferred Stock at $0.02 per share.

During the nine month period ended November 30, 2012, the Company:

Issued 1,041,262 shares of its common stock for the exercise of conversions under the Company’s convertible securities in the amount of $499,089 and 200,000 of its common stock as settlement for $554,826 of accrued fees on the Company’s September 14 and 19, 2012 promissory notes.

A total of 20 million shares of common stock issued to Gordon F. Lee and his affiliated companies will be cancelled as part of the Settlement Agreement with Mr. Lee.

(c)   Treasury stock

Pursuant to an agreement dated August 24, 2012 with a former director of the Company, the Company acquired 170,000 shares of its common stock at an aggregate purchase price of $129,200.  Pursuant to an agreement dated February 8, 2013 with the former shareholders of Fairfields, the Company acquired an additional 512,501 shares of its common stock at an aggregate fair value of $66,625.  The 682,501 shares of the Company’s common stock acquired during the year ended February 28, 2013 have been recorded as treasury stock using the cost method.  These shares will be cancelled during the quarter ended February 28, 2013.

(d)     Stock options

The Company has an incentive share option plan (the "Plan") that it adopted February 7, 2011, that allows it to grant incentive stock options to its officers, directors, employees and other persons associated with the Company. The Plan is intended to advance the best interests of the Company by providing those persons who have a substantial responsibility for its management and growth with additional incentive and by increasing their proprietary interest in the success of the Company, thereby encouraging them to maintain their relationships with the Company. Further, the availability and offering of stock options and common stock under the Plan supports and increases the Company's ability to attract and retain individuals of exceptional talent upon whom, in large measure, the sustained progress, growth and profitability of the Company depends. The board of directors reserved 500,000 shares of common stock for issuance under the Plan.

As of the fiscal year end, February 28, 2011, the board of directors had granted options to purchase 320,000 shares of common stock at $10 per share to 7 persons. Through the nine month periods ended November 30, 2013 and 2012 no further grants of options have been made under this plan.  All of the options granted to Gordon F. Lee and his affiliates have been cancelled as part of the settlement agreement with Mr. Lee.

Expiry date	Exercise price per share	Balance 2/28/2013	Granted	Forfeited	Expired/Cancelled	Balance11/30/2013
February 24, 2016	$10.00	320,000	-	-	-	320,000
		320,000	-	-	-	320,000

All 320,000 stock options granted were exercisable at November 30, 2013 and 2012.

(e)     2012 Stock & Stock Option Compensation Plan

On October 15, 2012 the Company adopted an incentive share option plan referred to as the 2012 Stock  & Stock Option Compensation Plan (the "2012 Plan"), for employees, directors and other persons associated with the Company, and is intended to advance the best interests of the Company by providing those persons who have a substantial responsibility for its management and growth with additional incentive and by increasing their proprietary interest in the success of the Company, thereby encouraging them to maintain their relationships with the Company.  The board of directors or a committee of the board of directors are responsible for administration of the 2012 Plan and have full power to grant stock options and common stock, construe and interpret the 2012 Plan, establish rules and regulations and perform all other acts, including the delegation of administrative responsibilities, it believes reasonable and proper. The Committee may cancel any stock options awarded under the 2012 Plan if an optionee conducts himself in a manner which the Committee determines to be inimical to the best interest of the Company.

The board of directors reserved 2,500,000 shares of common stock for issuance under the 2012 Plan. Through February 28, 2013, the board of directors had granted 500,000 shares of common stock to one consultant under the 2012 Plan.  During the nine month period ended November 30, 2013, no grants were made under the 2012 Plan.

(f)      Share purchase warrants

The continuity of share purchase warrants is as follows:

Expiry date	Exercise price per share	Balance February 28, 2013	Issued	Exercised	Expired	BalanceNovember 30,2013
Class A
December 19, 2013	$3.00	6,667	-	-	6,667	expired
June 12, 2014	$8.00	5,000	-	-	-	5,000
October 14, 2016	$10.00	7,500	-	-	-	7,500
Class B
December 15, 2013	$5.00	33,333	-	-	33,333	expired
April 4, 2018*	$0.02	-	5,000,000		5,000,000	cancelled
May 20, 2018*	$0.01	-	15,000,000	-	15,000,000	cancelled
June 2, 2018	$0.10	-	5,000,000	-	-	5,000,000
June 2, 2018	$0.20	-	5,000,000	-	-	5,000,000
Promissory Note Warrants
October 25, 2014	$3.00	33,333	-	-	-	33,333
March 22, 2015	$4.00	125,000	-	-	-	125,000
July 23, 2015	$1.40	71,429	-	-	-	71,429
Total Warrants Outstanding		282,262	30,000,000	-	20,040,000	10,242,262
Weighted average exercise price		$            3.55	$                0.0617	$           -	$           -	$               0.22
Average remaining contractual term (years)						1.52

*All of the warrants granted to Gordon F. Lee and his affiliates have been cancelled as part of the settlement agreement with Mr. Lee.

The Company has issued the following classes of warrants as set out below:

        Class A warrant           Are non-transferrable, exercisable for cash and have no acceleration of the expiry date.

Class B warrant         Are transferrable, each warrant entitles the holder to purchase one additional common share at the exercise price per share set out in the table above, subject to acceleration provisions and with a cashless exercise provision based upon the 20 day volume weighted average price per share at closing day (VWAP) the day prior to exercise. The June 2, 2018 warrants are not subject to acceleration and their cashless exercise provision uses a 5 day VWAP in its calculation.

Note  Warrants          

October 24, 2014 &

July 23, 2015              Are transferrable and entitle the holder to purchase one additional common share for a period of three years.  In lieu of the cash payment the holder has the right to convert this warrant in whole or in part without payment of any kind into that number of shares of common stock of the Company equal to the quotient obtained by dividing the aggregate of the closing price of the Company’s common stock on the day immediately preceding the conversion less the aggregate purchase price of the shares being exercised divided by the closing price of the Company’s common stock on the day immediately preceding the conversion.

March 22, 2015         Transferable with the approval of the Company.  At any time after September 22, 2012, in lieu of the cash payment the holder has the right to convert this warrant in whole or in part without payment of any kind into that number of shares of common stock of the Company equal to the quotient obtained by dividing the aggregate of the VWAP price of the Company’s common stock on the day immediately preceding the conversion less the aggregate purchase price of the shares being exercised divided by the VWAP of the Company’s common stock on the day immediately preceding the conversion.  The March 22, 2015 warrants provide the warrant holder with down round protection where the Company issues any shares, or grants any warrant or convertible security, or re-prices a security, at less than the effective exercise price of the March 22, 2015 warrant at that time, then the effective exercise price shall be lowered to such lesser amount. As at November 30, 2013, the Company has estimated the re-priced warrant from 125,000 common shares at $4.00 per share to 151,515,152 common shares at $0.0033 per share.

During the nine month period ended November 30, 2013, the Company approved unit subscriptions for an aggregate of 20,000,000 (2012 – nil) Class B warrants as part of a private placement of units and, as a part of a professional services engagement with Weed & Co., the Company granted a five year common stock warrant to acquire 5,000,000 shares of our common stock at $0.10 per share and 5,000,000 shares of our common stock at $0.20 per share.  All of the Class B warrants have either expired or been cancelled, except for the Weed & Co warrants expiring on June 2, 2018.