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Going Concern Matters and Realization of Assets

3 Months Ended

Aug. 31, 2012

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Going Concern Matters and Realization of Assets

Note 2 – Going Concern Matters and Realization of Assets

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the ordinary course of business. However, the Company has sustained substantial losses from its continuing operations in recent years and as of August 31, 2012, the Company has negative working capital of $12,468,069 and a stockholders’ equity deficiency of $12,731,650. In addition, the Company is unable to meet its obligations as they become due and sustain its operations. The Company believes that its existing cash resources are not sufficient to fund its continuing operating losses, capital expenditures, lease and debt payments and working capital requirements.

We may not be able to raise sufficient additional debt, equity or other cash on acceptable terms, if at all. Failure to generate sufficient revenues, achieve certain other business plan objectives or raise additional funds could have a material adverse effect on our results of operations, cash flows and financial position, including our ability to continue as a going concern, and may require us to significantly reduce, reorganize, discontinue or shut down our operations.

In view of the matters described above, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon continued operations of the Company which, in turn, is dependent upon the Company’s ability to meet its financing requirements on a continuing basis, and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue in its existence. Management’s plans include:

1.

Seeking to raise debt or equity in the near term, and additional equity later in the year. With additional cash available to the Company, we can cover monthly cash losses and allocate funds toward marketing our products to achieve additional sales and consequently cut monthly operating losses.

2.

Continue to develop new uses and distribution channels for our voice-over-IP enabled voice service. Beginning in September 2012, our mobile VoIP application allows for low-cost calling to any landline or mobile phone in the world. We are now presenting the app to prepaid calling card companies, who are seeking the ability to sell a virtual product, because the app offers all the benefits and flexibility of a prepaid calling card without requiring a card to be printed. Conversely, we are also planning to offer a printed prepaid calling card for sale to a retail electronics firm, a mass merchant and several other retail shops, that have expressed an interest in selling our low-cost international calling plans to customers who would purchase the card by paying for it at a cash register.

3.

Continue to list new products on the Android Market to obtain new subscribers. We list our Android VoIP application on the Android Market to obtain new subscribers. In October 2012, activations of new Android devices are reported to be more than one million three hundred thousand each day. In order to capitalize on the rapid growth of Android devices, we are planning a video application that will allow users of Android devices to make video calls to other users of our video application.

4.

Leverage the production and marketing know-how of G3 Connect, LLC (“G3”). G3 has helped to fund our operating losses since October 2011. We have been informed that it plans to manufacture and sell new Android tablet devices that would utilize some of our services. Furthermore, it is marketing our mobile VoIP app to mobile wallet companies and retail establishments. We plan to continue to utilize the manufacturing, marketing and sales experience of G3 and to cooperate with their product development team.

There can be no assurance that we will be able to achieve our business plan objectives or that we will achieve or maintain cash-flow-positive operating results. If we are unable to generate adequate funds from operations or raise additional funds, we may not be able to repay our existing debt, continue to operate our network, respond to competitive pressures or fund our operations. As a result, we may be required to significantly reduce, reorganize, discontinue or shut down our operations. Our financial statements do not include any adjustments that might result from this uncertainty.

Disclosure of accounting policy for reporting when there is a substantial doubt about an entity's ability to continue as a going concern for a reasonable period of time (generally a year from the balance sheet date). Disclose: (a) pertinent conditions and events giving rise to the assessment of substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time, (b) the possible effects of such conditions and events, (c) management's evaluation of the significance of those conditions and events and any mitigating factors, (d) possible discontinuance of operations, (e) management's plans (including relevant prospective financial information), and (f) information about the recoverability or classification of recorded asset amounts or the amounts or classification of liabilities. If management's plans alleviate the substantial doubt about the entity's ability to continue as a going concern, disclosure of the principal conditions and events that initially raised the substantial doubt about the entity's ability to continue as a going concern would be expected to be considered. Disclose whether operations for the current or prior years generated sufficient cash to cover current obligations, whether waivers were obtained from creditors relating to the company's default under the provisions of debt agreements and possible effects of such conditions and events, such as: whether there is a possible need to obtain additional financing (debt or equity) or to liquidate certain holdings to offset future cash flow deficiencies. Disclose appropriate parent company information when parent is dependent upon remittances from subsidiaries to satisfy its obligations.

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