Equity

3 Months Ended

May 31, 2012

Notes to Financial Statements

Equity

Note 13 – Equity

During the first quarter of fiscal 2012, we issued 2,275,000 shares of common stock to an accredited investor for $39,813 or $0.0175 per share. We also issued 375,000 shares of common stock in exchange for marketing service of $7,500, or $0.02 per share.

As discussed in Note 10, we entered into various transactions where we issued convertible notes to third parties in exchange for existing notes payable with various lenders as part of our debt reduction efforts. In several instances the third parties made a payment to our Lender that reduced the debt to our Lender at a ratio of approximately nine dollars for every one dollar paid, generated a gain on troubled debt restructuring and allowed the new debt holders to convert outstanding debt principal into shares of the Company’s common stock at a discount to the trading price of the common stock. To the extent, if any, that there was a beneficial conversion feature associated with these debts, the beneficial conversion feature was bifurcated from the host instrument and accounted for as a freestanding derivative. As a result of conversions of convertible debt into equity during the first quarter of fiscal 2012, we converted a total of $641,063 of outstanding debt principal into 32,961,078 shares of the Company’s common stock with a value of $1,149,913 at the time of conversion. As a result of such conversions during the second quarter of fiscal 2012, we converted $181,155 of outstanding debt principal into 13,155,273 shares of the Company’s common stock, with a value of $349,385 at the time of conversion.

During the second quarter, three debt holders settled outstanding debt and interest payable of $471,189 for 6,102,050 shares of our common stock, which was valued at $156,709 at the time of conversion, resulting in a net gain on the settlement of liabilities of $314,481.

In March 2012 we completed a private placement with accredited investors and issued 2,711,000 shares of common stock for $47,443, or $0.0175 per share. We also issued 625,000 shares of common stock in exchange for marketing services valued at $19,063, or $0.0305 per share.