STOCKHOLDERS' EQUITY

9 Months Ended

Feb. 29, 2012

Stockholders Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

NOTE 13. STOCKHOLDERS’ EQUITY

Beginning in March 2011, Red Mountain commenced a private placement of its shares of common stock at an offering price of $1.00 per share, which terminated in November 2011. Through November 2011, Red Mountain had sold 16,206,000 shares of its common stock raising gross proceeds of $16,206,000.  For the six month period ended November 30, 2011 the Company received gross proceeds of $10,136,000 from the private placement offering subsequent to closing of the reverse merger.

Offering expenses during the nine months ended February 29, 2012 totaled $3,687,084 including $1,038,382 paid in cash and $171,250 paid in common stock for offering costs and broker commissions.  In addition, the Company also issued 1,763,000 warrants during the nine month period valued at $801,323.  Each warrant (i) is exercisable for one share of Company’s common stock, (ii) has an exercise price of $1.20 per share, and (iii) will expire on April 30, 2014.  Management determined the fair value of the warrants based upon cash transactions using a Black-Scholes option model with a volatility based on the historical closing of industry peers and Company market price at date of issuance.

On July 20, 2011, the Company determined to offer to any investor that invested at least $2,000,000 in the private placement the right to purchase an additional $3,000,000 of shares of the Company’s common stock.  Accordingly, the Company granted to three investors the right to purchase an additional 3,000,000 of shares of the Company’s common stock. The Company recorded $2,221,938 of issuance costs representing grant date fair value.  If exercised, the shares would be sold to the investor at a price equal to the lesser of (i) $1.10 per share or (ii) the average closing price of the Company’s common stock during the period from five days prior to the investor exercising its right to purchase the shares and ending five days after such exercise.  The Company accounts for the warrants as a derivative liability since the final exercise price is contingent upon market prices.  Changes in fair value are recorded as unrealized gain on warrant liability in the statement of operations.  Management determined the fair value of the warrants using a probability weighted Black-Scholes option model with a volatility based on the historical closing of industry peers and Company market traded price per common share. The Company transferred $1,253,168 from warrant liability to equity during the three months ended February 29, 2012.

On December 21, 2011, an investor exercised its right and purchased an aggregate of 2,727,272 shares which were sold at $1.10 per share.  The Company extended the expiry date of the option agreements held by the remaining two investors, or their assignees, to April 30, 2012. $381,000 of shares were exercised in late February 2012 at $1.10, resulting in 346,364 unissued shares at February 29, 2012.

On June 22, 2011, as part of the acquisition of Black Rock, SSG, of which Mr. Alan Barksdale, the Chief Executive Officer and a director of the Company, is the sole shareholder, was issued 27,000,000 shares of the Company's restricted common stock, of which SSG assigned 9,000,000 shares, leaving it with 18,000,000 shares. On June 22, 2011, Mr. Barksdale and SSG entered into a lock-up agreement with the Company regarding the availability of the 18,000,000 shares for sale. Per the lock-up agreement, 3,000,000 shares were to be released on June 21, 2012 and the remaining 15,000,000 on December 21, 2012. On September 12, 2011, SSG assigned 7,000,000 shares subject to the lock-up agreement to several third parties after receiving the consent from the Company to release it from the lockup restrictions with respect to such shares, leaving it with 11,000,000 shares. As a result, the lock-up agreement now covers 11,000,000 shares, of which 3,000,000 shares may not be sold until June 21, 2012 and 8,000,000 shares may not be sold until December 21, 2012. In connection with the assignment, the transferees agreed to have cancelled an aggregate of 100,000 shares in exchange for the Company releasing the shares from the lockup restrictions.