Note 6. Commitments and Contingencies

3 Months Ended

Nov. 30, 2011

Commitments and Contingencies Disclosure [Text Block]

Note 6.  Commitments and Contingencies

Legal Proceedings - In October 2010, a former employee commenced a lawsuit in the Superior Court of the State of Washington against the Company, its sole officer and director, and certain advisors to the Company.  The complaint alleges that the Company breached its employment agreement with the plaintiff and that the plaintiff was wrongfully discharged in violation of public policy.  The plaintiff seeks damages in an undefined amount, injunctive relief, and attorneys’ fees.  Additionally, the plaintiff also has asserted a claim against our sole officer and director, personally, for breach of a stock purchase agreement.  A trial date has been set in March 2012.  We have rejected the claims, filed a counterclaim and intend to defend the lawsuit vigorously.

In June 2011, an action was commenced by the former owner and co-founder of W K, Inc. (W K”), the company we acquired in 2010, in the Superior Court of the State of Washington, County of King, against our Company, our Chief Executive Officer, J’Amy Owens, and others. The plaintiff is seeking damages or the rescission of a Related Party Agreement and a Stock Purchase Agreement. The rescission of these agreements could result in the return of controlling ownership interest in W K. The Company and Ms. Owens believe they have meritorious defenses to the plaintiff’s claims, which they believe are without merit. The Company is vigorously defending against these claims and has asserted counterclaims for theft, fraud, misrepresentation and defamation. The Company is vigorously pursuing these counterclaims and is seeking damages in excess of $3 million.

From time to time, we may be subject to various legal proceedings and claims that may arise in the ordinary course of business. Our management currently believes that resolution of such legal matters will not have a material adverse impact on our consolidated financial position, results of operations or cash flows.

Terminated Stock Purchase Agreement - In May 2011, we entered into a stock purchase agreement with an investment fund that provided for, among other things, our issuance of approximately 6.1 million shares of common stock.  In July 2011, the stock purchase agreement was terminated and it was agreed that stock issued would be returned.  As of November 30, 2011, there are 500,000 shares not yet returned, and actions are being taken to ensure their sale, or return and cancellation.