CONVERTIBLE DEBT	6 Months Ended
Nov. 30, 2011
CONVERTIBLE DEBT DISCLOSURE [Abstract]
CONVERTIBLE DEBT	NOTE 5 – CONVERTIBLE DEBT Six-Month Secured Convertible Debenture issued with warrants On August 22, 2011, the Company issued a $250,000 secured convertible debenture (“Secured Debenture”) to a third party (the “Holder”) together with 1,136,363 common shares and 1,850,000 warrants to other entities controlled by the Holder (“Holder Entities”). As security, the Company granted the Holder a first priority lien on all of the assets of the Company. The Secured Debenture bears annual interest at 18%, matures at the earlier of 1) six months and 2) upon the Company's receipt of $500,000 of debt or equity proceeds and, together with any unpaid interest, are convertible into common shares at a conversion rate of $0.25 per share. The Company also issued 1,850,000 warrants in connection with the issuance of convertible notes on August 22, 2011. 1,100,000 of the warrants have a one year term, 750,000 of the warrants have a three year term, and all 1,850,000 warrants are exercisable at $0.25 per share. At November 30, 2011, the weighted average remaining term of these warrants is 1.54 years, and the intrinsic value is $0. In the event the Company raises equity at less than $0.25 per share or convertible debt which may be converted into common shares at a conversion rate of less than $0.25 per share, the Holder and the Holder Entities shall receive the same terms as the terms of the new financing arrangement (which could decrease the conversion rate of the convertible debt and could decrease the exercise price of the warrants). As a result, the Company determined that the conversion feature of the Secured Debenture and related warrants are derivative liabilities (see Note 2). The relative fair value of the 1,136,363 shares of $73,017 and the fair value of the warrant liabilities and embedded conversion derivative liabilities of $300,876 was recognized as a discount to the full amount of the debt with the difference of $123,893 being recognized as a “day 1” derivative loss. The debt discount is accreted to interest expense over the life of the Secured Debenture. Fiscal year 2012 One Year Term Debentures On various dates from June 1, 2011 to November 30, 2011, the Company issued convertible debentures totaling $1,345,000 to third party and related party investors together with 1,345,000 common shares ($20,000 of these convertible debentures were issued to a related party – See Note 6). The convertible debentures bear annual interest at 18%, mature in one year and, together with any unpaid interest, are convertible into common shares at a conversion rate of $0.25 per share. The Company issued $60,000 of the convertible notes along with 60,000 common shares for services and recorded stock compensation expense of $119,500 (of which $39,500 was related party – see Note 6) based on the fair value of the common stock into which it could be converted. The Company also issued $50,000 of convertible notes for services to a third party and recorded $50,000 of expense based on the fair value of the services provided, and recorded stock-based compensation of $8,750 for the 50,000 common shares issued to the third party. The relative fair value of the remaining 1,235,000 common shares at the time of issuance was $267,827 and was recorded as a debt discount with a corresponding increase in equity. The discount is amortized to interest expense over the terms of the debentures using the effective interest method. The convertible debentures were analyzed for a beneficial conversion feature at which time it was concluded that a beneficial conversion feature existed for all of the convertible debentures. The beneficial conversion feature was measured using the commitment-date stock price and was determined to be $409,731. This amount was recorded as a debt discount and is being amortized to interest expense over the terms of the debentures. The Company analyzed the convertible debentures for derivative accounting consideration and determined that derivative accounting does not apply to these instruments. Fiscal year 2011 One Year Term Debentures On various dates from March 7, 2011 to May 31, 2011, the Company issued convertible debentures totaling $1,018,159 to third party and related party investors together with 1,018,159 common shares ($143,159 of these convertible debentures were issued to a related party, of which $50,000 was paid on November 3, 2011). (See Note 6.) The convertible debentures bear annual interest at 18%, mature in one year and, together with any unpaid interest, are convertible into common shares at a conversion rate of $0.25 per share. The relative fair value of the 1,018,159 common shares at the time of issuance was $255,814 and was recorded as a debt discount with a corresponding increase in equity. The discount is amortized to interest expense over the terms of the debentures using the effective interest method. The convertible debentures were analyzed for a beneficial conversion feature at which time it was concluded that a beneficial conversion feature existed for all of the convertible debentures. The beneficial conversion feature was measured using the commitment-date stock price and was determined to be $509,114. This amount was recorded as a debt discount and is being amortized to interest expense over the terms of the debentures. The Company analyzed the convertible debentures for derivative accounting consideration and determined that derivative accounting does not apply to these instruments Fiscal year 2010 One Year Term Debentures On various dates from December 1, 2009 to May 31, 2010, the Company issued convertible debentures totaling $800,000 to third party and related party investors together with 800,000 common shares ($300,000 of these convertible debentures were issued to a related party). The Company repaid $20,000 of these convertible notes during fiscal year 2011. The convertible debentures bear annual interest at 18%, mature in one year and, together with any unpaid interest, are convertible into common shares at a conversion rate of $0.25 per share. The relative fair value of the 800,000 common shares at the time of issuance was $130,662 and was recorded as a debt discount with a corresponding increase in equity. The discount was amortized to interest expense over the terms of the debentures using the effective interest method and was fully amortized during fiscal year 2011. The convertible debentures were analyzed for a beneficial conversion feature at which time it was concluded that a beneficial conversion feature existed for convertible debentures totaling $275,000. The beneficial conversion feature was measured using the commitment-date stock price and was determined to be $192,065. This amount was recorded as a debt discount and amortized to interest expense over the terms of the debentures, and was fully amortized during fiscal year 2011. The Company analyzed the convertible debentures for derivative accounting consideration and determined that derivative accounting does not apply to these instruments. At November 30, 2011, all $780,000 of the convertible debentures remain unpaid and are incurring annual interest of 20%. On October 10, 2011, the Company obtained waivers from all of these convertible debt holders which waived the default period for ninety days. For the six months ended November 30, 2011 and 2010, amortization expense recorded to interest amounted to $711,468 and $162,612, respectively.

NOTE 5 – CONVERTIBLE DEBT

Six-Month Secured Convertible Debenture issued with warrants

On August 22, 2011, the Company issued a $250,000 secured convertible debenture (“Secured Debenture”) to a third party (the “Holder”) together with 1,136,363 common shares and 1,850,000 warrants to other entities controlled by the Holder (“Holder Entities”). As security, the Company granted the Holder a first priority lien on all of the assets of the Company. The Secured Debenture bears annual interest at 18%, matures at the earlier of 1) six months and 2) upon the Company's receipt of $500,000 of debt or equity proceeds and, together with any unpaid interest, are convertible into common shares at a conversion rate of $0.25 per share. The Company also issued 1,850,000 warrants in connection with the issuance of convertible notes on August 22, 2011. 1,100,000 of the warrants have a one year term, 750,000 of the warrants have a three year term, and all 1,850,000 warrants are exercisable at $0.25 per share. At November 30, 2011, the weighted average remaining term of these warrants is 1.54 years, and the intrinsic value is $0. In the event the Company raises equity at less than $0.25 per share or convertible debt which may be converted into common shares at a conversion rate of less than $0.25 per share, the Holder and the Holder Entities shall receive the same terms as the terms of the new financing arrangement (which could decrease the conversion rate of the convertible debt and could decrease the exercise price of the warrants). As a result, the Company determined that the conversion feature of the Secured Debenture and related warrants are derivative liabilities (see Note 2).

The relative fair value of the 1,136,363 shares of $73,017 and the fair value of the warrant liabilities and embedded conversion derivative liabilities of $300,876 was recognized as a discount to the full amount of the debt with the difference of $123,893 being recognized as a “day 1” derivative loss. The debt discount is accreted to interest expense over the life of the Secured Debenture.

Fiscal year 2012 One Year Term Debentures

On various dates from June 1, 2011 to November 30, 2011, the Company issued convertible debentures totaling $1,345,000 to third party and related party investors together with 1,345,000 common shares ($20,000 of these convertible debentures were issued to a related party – See Note 6). The convertible debentures bear annual interest at 18%, mature in one year and, together with any unpaid interest, are convertible into common shares at a conversion rate of $0.25 per share.

The Company issued $60,000 of the convertible notes along with 60,000 common shares for services and recorded stock compensation expense of $119,500 (of which $39,500 was related party – see Note 6) based on the fair value of the common stock into which it could be converted. The Company also issued $50,000 of convertible notes for services to a third party and recorded $50,000 of expense based on the fair value of the services provided, and recorded stock-based compensation of $8,750 for the 50,000 common shares issued to the third party. The relative fair value of the remaining 1,235,000 common shares at the time of issuance was $267,827 and was recorded as a debt discount with a corresponding increase in equity. The discount is amortized to interest expense over the terms of the debentures using the effective interest method.

The convertible debentures were analyzed for a beneficial conversion feature at which time it was concluded that a beneficial conversion feature existed for all of the convertible debentures. The beneficial conversion feature was measured using the commitment-date stock price and was determined to be $409,731. This amount was recorded as a debt discount and is being amortized to interest expense over the terms of the debentures.

The Company analyzed the convertible debentures for derivative accounting consideration and determined that derivative accounting does not apply to these instruments.

Fiscal year 2011 One Year Term Debentures

On various dates from March 7, 2011 to May 31, 2011, the Company issued convertible debentures totaling $1,018,159 to third party and related party investors together with 1,018,159 common shares ($143,159 of these convertible debentures were issued to a related party, of which $50,000 was paid on November 3, 2011). (See Note 6.) The convertible debentures bear annual interest at 18%, mature in one year and, together with any unpaid interest, are convertible into common shares at a conversion rate of $0.25 per share. The relative fair value of the 1,018,159 common shares at the time of issuance was $255,814 and was recorded as a debt discount with a corresponding increase in equity. The discount is amortized to interest expense over the terms of the debentures using the effective interest method.

The convertible debentures were analyzed for a beneficial conversion feature at which time it was concluded that a beneficial conversion feature existed for all of the convertible debentures. The beneficial conversion feature was measured using the commitment-date stock price and was determined to be $509,114. This amount was recorded as a debt discount and is being amortized to interest expense over the terms of the debentures.

The Company analyzed the convertible debentures for derivative accounting consideration and determined that derivative accounting does not apply to these instruments

Fiscal year 2010 One Year Term Debentures

On various dates from December 1, 2009 to May 31, 2010, the Company issued convertible debentures totaling $800,000 to third party and related party investors together with 800,000 common shares ($300,000 of these convertible debentures were issued to a related party). The Company repaid $20,000 of these convertible notes during fiscal year 2011. The convertible debentures bear annual interest at 18%, mature in one year and, together with any unpaid interest, are convertible into common shares at a conversion rate of $0.25 per share. The relative fair value of the 800,000 common shares at the time of issuance was $130,662 and was recorded as a debt discount with a corresponding increase in equity. The discount was amortized to interest expense over the terms of the debentures using the effective interest method and was fully amortized during fiscal year 2011.

The convertible debentures were analyzed for a beneficial conversion feature at which time it was concluded that a beneficial conversion feature existed for convertible debentures totaling $275,000. The beneficial conversion feature was measured using the commitment-date stock price and was determined to be $192,065. This amount was recorded as a debt discount and amortized to interest expense over the terms of the debentures, and was fully amortized during fiscal year 2011.

The Company analyzed the convertible debentures for derivative accounting consideration and determined that derivative accounting does not apply to these instruments.

At November 30, 2011, all $780,000 of the convertible debentures remain unpaid and are incurring annual interest of 20%. On October 10, 2011, the Company obtained waivers from all of these convertible debt holders which waived the default period for ninety days.

For the six months ended November 30, 2011 and 2010, amortization expense recorded to interest amounted to $711,468 and $162,612, respectively.