CONVERTIBLE DEBT	9 Months Ended
Feb. 29, 2012
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 to a third party together with 1,136,363 common shares and 1,850,000 warrants to other entities controlled by the noteholder. As security, the Company granted the third party 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 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 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. 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). Debt Modification On February 29, 2012, the Company entered into an agreement with the holder to extend the maturity date of the secured debenture to June 22, 2012 in exchange for 3,250,258 common shares. Additionally, the 1,100,000 1-year warrants issued in connection with the secured debenture were modified by (i) extending its expiration date for another twelve months to September 1, 2013 (ii) lowering the exercise price from $0.25 to $0.1275 per warrant share and (iii) increasing the number of common shares convertible from 1,100,000 shares to 2,200,000 shares. The Company evaluated the modification and determined that it was substantial and was therefore accounted as an extinguishment of debt. Consequently, the fair value of the common shares of $549,294, the fair value of the additional warrants and the incremental fair value of the modified warrants of $202,549 was recorded as loss on debt extinguishment during the nine months ended February 29, 2012. Simultaneously, the Holder converted $6,816 of the interest owed into 24,742 common shares. Fiscal year 2012 One Year Term Debentures On various dates from June 1, 2011 to February 29, 2012, the Company issued convertible debentures totaling $1,995,000 to third party and related party investors together with 1,995,000 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 1,885,000 common shares at the time of issuance was $366,980 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 On January 6, 2012, an investor converted $100,000 into 450,893 of the Company's common shares. The unamortized discount of $38,483 was expensed in the current period as interest expense. 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 February 29, 2012, all $780,000 of the convertible debentures remain unpaid and are incurring annual interest of 20%. These debentures are currently in default. For the nine months ended February 29, 2012 and February 28, 2011, amortization expense recorded to interest amounted to $1,197,496 and $234,552, 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 to a third party together with 1,136,363 common shares and 1,850,000 warrants to other entities controlled by the noteholder. As security, the Company granted the third party 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 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

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. 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).

Debt Modification

On February 29, 2012, the Company entered into an agreement with the holder to extend the maturity date of the secured debenture to June 22, 2012 in exchange for 3,250,258 common shares. Additionally, the 1,100,000 1-year warrants issued in connection with the secured debenture were modified by (i) extending its expiration date for another twelve months to September 1, 2013 (ii) lowering the exercise price from $0.25 to $0.1275 per warrant share and (iii) increasing the number of common shares convertible from 1,100,000 shares to 2,200,000 shares.

The Company evaluated the modification and determined that it was substantial and was therefore accounted as an extinguishment of debt. Consequently, the fair value of the common shares of $549,294, the fair value of the additional warrants and the incremental fair value of the modified warrants of $202,549 was recorded as loss on debt extinguishment during the nine months ended February 29, 2012. Simultaneously, the Holder converted $6,816 of the interest owed into 24,742 common shares.

Fiscal year 2012 One Year Term Debentures

On various dates from June 1, 2011 to February 29, 2012, the Company issued convertible debentures totaling $1,995,000 to third party and related party investors together with 1,995,000 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 1,885,000 common shares at the time of issuance was $366,980 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

On January 6, 2012, an investor converted $100,000 into 450,893 of the Company's common shares. The unamortized discount of $38,483 was expensed in the current period as interest expense.

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 February 29, 2012, all $780,000 of the convertible debentures remain unpaid and are incurring annual interest of 20%. These debentures are currently in default.

For the nine months ended February 29, 2012 and February 28, 2011, amortization expense recorded to interest amounted to $1,197,496 and $234,552, respectively.