255332
2342251
1421165
25087
24687
792268
112974
7000
-118949
-141358
-2658666
-1331992
-1953260
-1335689
388991
85476
685
37743
8616
350658
53558
25712
21118
12621
10800
388991
85476
200568
20666
3300
29973
22499
124240
144240
1912040
1050558
2342251
1421165
10-Q
2011-08-31
false
Elevate, Inc.
0001424415
--05-31
25086600
Smaller Reporting Company
No
Yes
No
2012
Q1
-1326674
-46231
1270
545642
87500
-69988
-29127
-1821
54765
7473
-732394
-46231
-78070
1002
-5864
-83934
1002
17366
44000
-20000
262113
23340
-150151
-23165
707000
816328
44175
-1054
4563
3509
749520
-196552
<!--egx--><p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"><b>Note 4. Loans Payable </b></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">During the three months ended August 31, 2011, the Company paid down a note in the amount of $20,000 previously due to a marketing company. This payment paid off the complete obligation.</p>
<!--egx--><p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"><b>Note 5. Loans Payable – Related Party</b></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p> <table width="100%" style="WIDTH:100%; BORDER-COLLAPSE:collapse" cellpadding="0" cellspacing="0"> <tr style="PAGE-BREAK-INSIDE:avoid; HEIGHT:15.75pt"> <td width="83%" colspan="3" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:83.76%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">Loans Payable with related parties consist of the following:</p></td> <td width="16%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:16.24%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid; HEIGHT:3.15pt"> <td width="64%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:64.86%; PADDING-RIGHT:5.4pt; HEIGHT:3.15pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="3%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:3%; PADDING-RIGHT:5.4pt; HEIGHT:3.15pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="15%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:15.9%; PADDING-RIGHT:5.4pt; HEIGHT:3.15pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="16%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:16.24%; PADDING-RIGHT:5.4pt; HEIGHT:3.15pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid; HEIGHT:3.15pt"> <td width="64%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:64.86%; PADDING-RIGHT:5.4pt; HEIGHT:3.15pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="3%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:3%; PADDING-RIGHT:5.4pt; HEIGHT:3.15pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="15%" style="BORDER-BOTTOM:windowtext 1pt solid; BORDER-LEFT:0px; PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:15.9%; PADDING-RIGHT:5.4pt; HEIGHT:3.15pt; BORDER-TOP:0px; BORDER-RIGHT:0px; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">August 31,</p></td> <td width="16%" style="BORDER-BOTTOM:windowtext 1pt solid; BORDER-LEFT:0px; PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:16.24%; PADDING-RIGHT:5.4pt; HEIGHT:3.15pt; BORDER-TOP:0px; BORDER-RIGHT:0px; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">May 31,</p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid; HEIGHT:2.65pt"> <td width="64%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:64.86%; PADDING-RIGHT:5.4pt; HEIGHT:2.65pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="3%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:3%; PADDING-RIGHT:5.4pt; HEIGHT:2.65pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="15%" style="BORDER-BOTTOM:windowtext 1pt solid; BORDER-LEFT:0px; PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:15.9%; PADDING-RIGHT:5.4pt; HEIGHT:2.65pt; BORDER-TOP:0px; BORDER-RIGHT:0px; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">2011</p></td> <td width="16%" style="BORDER-BOTTOM:windowtext 1pt solid; BORDER-LEFT:0px; PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:16.24%; PADDING-RIGHT:5.4pt; HEIGHT:2.65pt; BORDER-TOP:0px; BORDER-RIGHT:0px; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">2011</p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid; HEIGHT:2.65pt"> <td width="64%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:64.86%; PADDING-RIGHT:5.4pt; HEIGHT:2.65pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="3%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:3%; PADDING-RIGHT:5.4pt; HEIGHT:2.65pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="15%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:15.9%; PADDING-RIGHT:5.4pt; HEIGHT:2.65pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="16%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:16.24%; PADDING-RIGHT:5.4pt; HEIGHT:2.65pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid; HEIGHT:15.75pt"> <td width="64%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:64.86%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">Convertible debt with related party </p></td> <td width="3%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:3%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="15%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:15.9%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="16%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:16.24%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid; HEIGHT:15.75pt"> <td width="64%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:64.86%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">(company in which the CFO was also </p></td> <td width="3%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:3%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="15%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:15.9%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="16%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:16.24%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid; HEIGHT:15.75pt"> <td width="64%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:64.86%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">serving as CFO of the Company for </p></td> <td width="3%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:3%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="15%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:15.9%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="16%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:16.24%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid; HEIGHT:15.75pt"> <td width="64%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:64.86%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">the period represented by this report),</p></td> <td width="3%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:3%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="15%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:15.9%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="16%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:16.24%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid; HEIGHT:15.75pt"> <td width="64%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:64.86%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">no interest rate, conversion at </p></td> <td width="3%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:3%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="15%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:15.9%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="16%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:16.24%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid; HEIGHT:15.75pt"> <td width="64%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:64.86%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">market value on date of conversion, </p></td> <td width="3%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:3%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="15%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:15.9%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="16%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:16.24%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid; HEIGHT:15.75pt"> <td width="64%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:64.86%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">unsecured, due on demand</p></td> <td width="3%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:3%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="15%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:15.9%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">$ 1,176,670 </p></td> <td width="16%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:16.24%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">$ 1,050,558 </p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid; HEIGHT:15.75pt"> <td width="64%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:64.86%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="MARGIN:0in 0in 0pt"></p></td> <td width="3%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:3%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="MARGIN:0in 0in 0pt"></p></td> <td width="15%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:15.9%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="16%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:16.24%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid; HEIGHT:15.75pt"> <td width="64%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:64.86%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">Notes Payable with related party (company</p></td> <td width="3%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:3%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="15%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:15.9%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="16%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:16.24%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid; HEIGHT:15.75pt"> <td width="64%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:64.86%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">in which the owner is the spouse of the</p></td> <td width="3%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:3%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="15%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:15.9%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="16%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:16.24%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid; HEIGHT:15.75pt"> <td width="64%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:64.86%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">CEO of the Company,) no interest,</p></td> <td width="3%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:3%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="15%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:15.9%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="16%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:16.24%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid; HEIGHT:15.75pt"> <td width="64%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:64.86%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">unsecured, due upon demand</p></td> <td width="3%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:3%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="15%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:15.9%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">80,399 </p></td> <td width="16%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:16.24%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">~ </p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid; HEIGHT:15.75pt"> <td width="64%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:64.86%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="3%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:3%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="15%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:15.9%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="16%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:16.24%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid; HEIGHT:15.75pt"> <td width="64%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:64.86%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">Notes Payable for an asset purchase</p></td> <td width="3%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:3%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="15%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:15.9%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="16%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:16.24%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid; HEIGHT:15.75pt"> <td width="64%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:64.86%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">agreement with a related party</p></td> <td width="3%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:3%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="15%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:15.9%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="16%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:16.24%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid; HEIGHT:15.75pt"> <td width="64%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:64.86%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">(company in which the owner is also</p></td> <td width="3%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:3%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="15%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:15.9%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="16%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:16.24%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid; HEIGHT:15.75pt"> <td width="64%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:64.86%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">serving as an officer of the Company), no </p></td> <td width="3%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:3%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="15%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:15.9%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="16%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:16.24%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid; HEIGHT:15.75pt"> <td width="64%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:64.86%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">interest rate, unsecured, due by November 1, 2011</p></td> <td width="3%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:3%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="15%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:15.9%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">204,971 </p></td> <td width="16%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:16.24%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">~ </p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid; HEIGHT:15.75pt"> <td width="64%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:64.86%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="3%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:3%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="15%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:15.9%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="16%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:16.24%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid; HEIGHT:15.75pt"> <td width="64%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:64.86%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">Notes Payable for an asset purchase</p></td> <td width="3%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:3%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="15%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:15.9%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="16%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:16.24%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid; HEIGHT:15.75pt"> <td width="64%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:64.86%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">agreement with a related party</p></td> <td width="3%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:3%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="15%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:15.9%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="16%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:16.24%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid; HEIGHT:15.75pt"> <td width="64%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:64.86%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">(company in which a part owner is also</p></td> <td width="3%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:3%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="15%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:15.9%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="16%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:16.24%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid; HEIGHT:15.75pt"> <td width="64%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:64.86%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">serving as an officer of the Company), .37%</p></td> <td width="3%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:3%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="15%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:15.9%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="16%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:16.24%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid; HEIGHT:15.75pt"> <td width="64%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:64.86%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">interest rate, unsecured, due by December 31, 2011</p></td> <td width="3%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:3%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="15%" style="BORDER-BOTTOM:windowtext 1pt solid; BORDER-LEFT:0px; PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:15.9%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; BORDER-TOP:0px; BORDER-RIGHT:0px; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">450,000 </p></td> <td width="16%" style="BORDER-BOTTOM:windowtext 1pt solid; BORDER-LEFT:0px; PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:16.24%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; BORDER-TOP:0px; BORDER-RIGHT:0px; PADDING-TOP:0in" valign="bottom"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">~ </p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid; HEIGHT:15.75pt"> <td width="64%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:64.86%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="3%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:3%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="15%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:15.9%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="16%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:16.24%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid; HEIGHT:15.75pt"> <td width="64%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:64.86%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="3%" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:3%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="15%" style="BORDER-BOTTOM:windowtext 1.5pt double; BORDER-LEFT:0px; PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:15.9%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; BORDER-TOP:0px; BORDER-RIGHT:0px; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">$ 1,912,040 </p></td> <td width="16%" style="BORDER-BOTTOM:windowtext 1.5pt double; BORDER-LEFT:0px; PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:16.24%; PADDING-RIGHT:5.4pt; HEIGHT:15.75pt; BORDER-TOP:0px; BORDER-RIGHT:0px; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">$ 1,050,558 </p></td></tr></table>
<!--egx--><p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"><b>Note 6. Related Party Transactions</b></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">The Company has a note receivable with a company owned by an executive officer of the Company in the amount of $116,733. This note increased $78,175 during the three month period ended August 31, 2011.</p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">On May 20, 2011, the Company entered into an asset purchase agreement with an officer of the Company wherein the Company purchased various intangible assets with no carrying value for the value of $400,000. The excess of the purchase price over the historical cost basis was recorded as a deemed distribution to the officer. On June 28, 2011, the Company closed the agreement and made a down payment of $195,029. The remainder of the purchase price is to be paid on or before November 1, 2011. With the payment of this agreement, the related party receivable reported in the equity section of the audited financial statements for the period ended May 31, 2011, was applied toward the notes payable related party.</p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">On August 1, 2011, the Company signed a convertible promissory note in the amount of $450,000 with a shareholder of the Company for the purchase of various intangible assets consisting of developed software and other assets with no carrying value. The excess of the purchase price over the historical cost basis was recorded as a deemed distribution to the shareholder. The note is to be paid on or before December 31, 2011 with interest accruing at .37% per annum, due and payable upon maturity. The Company shall have the right, at its option, to convert the entire outstanding principal amount of the note and accrued interest thereon into fully paid and non-assessable shares of common stock, $0.001 par value of the Company at the conversion price, at any time before the maturity date by providing five (5) days’ notice to lender. The “conversion price” shall be determined by the fourteen (14) day average closing price based on the Company’s notice of conversion to the lender.</p>
<!--egx--><p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"><b>Note 7. Preferred Stock</b></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">On August 31, 2011, the Board of Directors of the Company authorized, subject to stockholder approval, an amendment to the Articles of Incorporation to authorize 10,000,000 shares of Preferred Stock, $0.001 par value. At the Annual Meeting of the Stockholders meeting held on October 6, 2011, this amendment to the Articles of Incorporation was approved.</p>
<!--egx--><p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"><b>Note 8. Stockholders’ Deficit</b></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">During the three months ended August 31, 2011, the Company issued the following shares of $0.001 par value common stock:</p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">On June 17, 2011, 350,000 units to an accredited investor for a total purchase price of $700,000, all of which was paid in cash. Each unit consisted of one share of common stock and one three year warrant with an exercise price of $3.00.</p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">On June 21, 2011, per terms of the Employment Agreement with Rod Place, Chief Operating Officer, 50,000 common shares valued at $87,500.</p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">On August 17, 2011, per the terms of an investor relations contract, 150,000 shares of restricted common stock valued at $ 172,500 based on the closing price of the stock as of August 31, 2011. These shares are being held in escrow until the successful conclusion of the contract, on or about January 16, 2012. Based on this the Company has expensed $14,375 or the proportional value earned through August 31, 2011 and applied the value to additional paid in capital. Once shares are fully earned and released from escrow the shares will be deemed issued and outstanding.</p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">During the three months ended August 31, 2011, the Company received $7,000 cash for 3,500 shares of common stock that have not yet been issued due to the subscription agreement not yet being signed. This balance is recorded as Stock payable.</p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"><u>Deemed Distribution</u></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"><u><font style="TEXT-DECORATION:none"></font></u></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">On May 20, 2011, the Company entered into an asset purchase agreement with an officer of the Company wherein the Company purchased various intangible assets with no carrying value for the value of $400,000. The excess of the purchase price over the historical cost basis was recorded as a deemed distribution to the officer. The Company offset the purchase price of $400,000 against a note receivable from the officer. The Company recorded $299,520 and $100,480 in additional paid in capital during the period ended August 31, 2011 and May 31, 2011, respectively. The $100,480 recognized in May 31, 2011 represents receivable amount from the officer as of May 31, 2011. </p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">On August 1, 2011, the Company signed a convertible promissory note in the amount of $450,000 with a shareholder of the Company for the purchase of various intangible assets consisting of developed software and other assets with no carrying value. The excess of the purchase price over the historical cost basis was recorded as a deemed distribution to the shareholder. </p>
<!--egx--><p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"><b>Note 9. Stock Options Granted</b></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">On June 24, 2011, the Company granted 200,000 stock options which were valued using the Black Scholes model with an exercise price of $1.50, an expected term of 4 years, a volatility of 123% and a discount rate of 0.99%. The fair value of the stock options was $236,137. The compensation is for services to be rendered over a one year period. As such the company expensed $39,356 and recorded a prepayment for the remaining balance. These options were granted in lieu of cash for services to be rendered by an outside research investment company. </p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">On August 2, 2011, the Company granted 1,000,000 stock options which were valued using the Black Scholes model with an exercise price of $1.20, an expected term of 5 years, a volatility of 119% and a discount rate of 1.23%. The fair value of the stock options was $987,251 and only the vested portion of $491,682 was expensed. These stock options were issued to Calvin Fox, director of the Company.</p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">The following is a summary of the status of all of the Company’s stock options as of August 31, 2011 and changes during the three months ended on that date:</p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p> <table style="BORDER-COLLAPSE:collapse; MARGIN-LEFT:35.4pt" cellpadding="0" cellspacing="0"> <tr style="PAGE-BREAK-INSIDE:avoid"> <td width="250" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:2.6in; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="85" style="BORDER-BOTTOM:windowtext 1pt solid; BORDER-LEFT:0px; PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:63.55pt; PADDING-RIGHT:5.4pt; BORDER-TOP:0px; BORDER-RIGHT:0px; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">Number</p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">of Options</p></td> <td width="16" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:11.75pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="113" style="BORDER-BOTTOM:windowtext 1pt solid; BORDER-LEFT:0px; PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:84.5pt; PADDING-RIGHT:5.4pt; BORDER-TOP:0px; BORDER-RIGHT:0px; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">Weighted-Average</p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">Exercise Price</p></td> <td width="16" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:11.8pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="113" style="BORDER-BOTTOM:windowtext 1pt solid; BORDER-LEFT:0px; PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:84.6pt; PADDING-RIGHT:5.4pt; BORDER-TOP:0px; BORDER-RIGHT:0px; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">Weighted-Average</p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">Remaining Life (Years)</p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid"> <td width="250" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:2.6in; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">Outstanding at June 1, 2011</p></td> <td width="85" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:63.55pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">~</p></td> <td width="16" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:11.75pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="113" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:84.5pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">$ 0.00</p></td> <td width="16" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:11.8pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="113" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:84.6pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">~</p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid"> <td width="250" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:2.6in; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">Granted</p></td> <td width="85" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:63.55pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">1,200,000</p></td> <td width="16" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:11.75pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="113" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:84.5pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">$ 1.25</p></td> <td width="16" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:11.8pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="113" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:84.6pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">4.74</p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid"> <td width="250" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:2.6in; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">Exercised</p></td> <td width="85" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:63.55pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">~</p></td> <td width="16" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:11.75pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="113" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:84.5pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">$ 0.00</p></td> <td width="16" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:11.8pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="113" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:84.6pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">~</p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid"> <td width="250" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:2.6in; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">Cancelled</p></td> <td width="85" style="BORDER-BOTTOM:windowtext 1pt solid; BORDER-LEFT:0px; PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:63.55pt; PADDING-RIGHT:5.4pt; BORDER-TOP:0px; BORDER-RIGHT:0px; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">~</p></td> <td width="16" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:11.75pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="113" style="BORDER-BOTTOM:windowtext 1pt solid; BORDER-LEFT:0px; PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:84.5pt; PADDING-RIGHT:5.4pt; BORDER-TOP:0px; BORDER-RIGHT:0px; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">$ 0.00</p></td> <td width="16" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:11.8pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="113" style="BORDER-BOTTOM:windowtext 1pt solid; BORDER-LEFT:0px; PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:84.6pt; PADDING-RIGHT:5.4pt; BORDER-TOP:0px; BORDER-RIGHT:0px; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">~</p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid"> <td width="250" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:2.6in; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">Outstanding at August 31, 2011</p></td> <td width="85" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:63.55pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">1,200,000</p></td> <td width="16" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:11.75pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="113" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:84.5pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">$ 1.25</p></td> <td width="16" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:11.8pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="113" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:84.6pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">4.74</p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid"> <td width="250" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:2.6in; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">Exercisable at August 31, 2011</p></td> <td width="85" style="BORDER-BOTTOM:windowtext 1.5pt double; BORDER-LEFT:0px; PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:63.55pt; PADDING-RIGHT:5.4pt; BORDER-TOP:windowtext 1.5pt double; BORDER-RIGHT:0px; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">700,000</p></td> <td width="16" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:11.75pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="113" style="BORDER-BOTTOM:windowtext 1.5pt double; BORDER-LEFT:0px; PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:84.5pt; PADDING-RIGHT:5.4pt; BORDER-TOP:windowtext 1.5pt double; BORDER-RIGHT:0px; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">$ 1.25</p></td> <td width="16" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:11.8pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="113" style="BORDER-BOTTOM:windowtext 1.5pt double; BORDER-LEFT:0px; PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:84.6pt; PADDING-RIGHT:5.4pt; BORDER-TOP:windowtext 1.5pt double; BORDER-RIGHT:0px; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">4.74</p></td></tr></table>
<!--egx--><p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"><b>Note 10. Stock Warrants Granted</b></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">On June 17, 2011, the Company sold 350,000 units to an investor for a total purchase price of $700,000. Each unit consisted of 1 share of common stock and 1 warrant. The warrants have an exercise price of $3 and expire on June 17, 2014. </p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">The following is a summary of the status of all of the Company’s stock warrants as of August 31, 2011 and changes during the three months ended on that date:</p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p> <table style="BORDER-COLLAPSE:collapse; MARGIN-LEFT:35.4pt" cellpadding="0" cellspacing="0"> <tr style="PAGE-BREAK-INSIDE:avoid"> <td width="290" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:217.5pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="86" style="BORDER-BOTTOM:windowtext 1pt solid; BORDER-LEFT:0px; PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:0.9in; PADDING-RIGHT:5.4pt; BORDER-TOP:0px; BORDER-RIGHT:0px; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">Number</p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">of Options</p></td> <td width="16" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:11.9pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="121" style="BORDER-BOTTOM:windowtext 1pt solid; BORDER-LEFT:0px; PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:90.45pt; PADDING-RIGHT:5.4pt; BORDER-TOP:0px; BORDER-RIGHT:0px; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">Weighted-Average</p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">Exercise Price</p></td> <td width="16" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:11.95pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p></td> <td width="120" style="BORDER-BOTTOM:windowtext 1pt solid; BORDER-LEFT:0px; PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:1.25in; PADDING-RIGHT:5.4pt; BORDER-TOP:0px; BORDER-RIGHT:0px; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">Weighted-Average</p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">Remaining Life (Years)</p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid"> <td width="290" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:217.5pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">Outstanding at June 1, 2011</p></td> <td width="86" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:0.9in; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">~</p></td> <td width="16" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:11.9pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="121" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:90.45pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">$ 0.00</p></td> <td width="16" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:11.95pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="120" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:1.25in; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">~</p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid"> <td width="290" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:217.5pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">Granted</p></td> <td width="86" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:0.9in; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">350,000</p></td> <td width="16" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:11.9pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="121" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:90.45pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">$ 3.00</p></td> <td width="16" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:11.95pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="120" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:1.25in; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">2.80</p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid"> <td width="290" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:217.5pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">Exercised</p></td> <td width="86" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:0.9in; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">~</p></td> <td width="16" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:11.9pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="121" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:90.45pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">$ 0.00</p></td> <td width="16" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:11.95pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="120" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:1.25in; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">~</p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid"> <td width="290" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:217.5pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">Cancelled</p></td> <td width="86" style="BORDER-BOTTOM:windowtext 1pt solid; BORDER-LEFT:0px; PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:0.9in; PADDING-RIGHT:5.4pt; BORDER-TOP:0px; BORDER-RIGHT:0px; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">~</p></td> <td width="16" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:11.9pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="121" style="BORDER-BOTTOM:windowtext 1pt solid; BORDER-LEFT:0px; PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:90.45pt; PADDING-RIGHT:5.4pt; BORDER-TOP:0px; BORDER-RIGHT:0px; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">$ 0.00</p></td> <td width="16" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:11.95pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="120" style="BORDER-BOTTOM:windowtext 1pt solid; BORDER-LEFT:0px; PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:1.25in; PADDING-RIGHT:5.4pt; BORDER-TOP:0px; BORDER-RIGHT:0px; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">~</p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid"> <td width="290" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:217.5pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">Outstanding at August 31, 2011</p></td> <td width="86" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:0.9in; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">350,000</p></td> <td width="16" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:11.9pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="121" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:90.45pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">$ 3.00</p></td> <td width="16" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:11.95pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="120" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:1.25in; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">2.80</p></td></tr> <tr style="PAGE-BREAK-INSIDE:avoid"> <td width="290" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:217.5pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">Exercisable at August 31, 2011</p></td> <td width="86" style="BORDER-BOTTOM:windowtext 1.5pt double; BORDER-LEFT:0px; PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:0.9in; PADDING-RIGHT:5.4pt; BORDER-TOP:windowtext 1.5pt double; BORDER-RIGHT:0px; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">350,000</p></td> <td width="16" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:11.9pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="121" style="BORDER-BOTTOM:windowtext 1.5pt double; BORDER-LEFT:0px; PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:90.45pt; PADDING-RIGHT:5.4pt; BORDER-TOP:windowtext 1.5pt double; BORDER-RIGHT:0px; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">$ 3.00</p></td> <td width="16" style="PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:11.95pt; PADDING-RIGHT:5.4pt; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right"></p></td> <td width="120" style="BORDER-BOTTOM:windowtext 1.5pt double; BORDER-LEFT:0px; PADDING-BOTTOM:0in; PADDING-LEFT:5.4pt; WIDTH:1.25in; PADDING-RIGHT:5.4pt; BORDER-TOP:windowtext 1.5pt double; BORDER-RIGHT:0px; PADDING-TOP:0in" valign="top"> <p style="TEXT-ALIGN:right; MARGIN:0in 0in 0pt" align="right">2.80</p></td></tr></table>
<!--egx--><p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"><b>Note 11. Subsequent Events</b></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">On September 12, 2011, the Company rescinded the triangular merger with Rite Wire, Inc. completed on May 25, 2011.</p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">n September 15, 2011, the Company signed a one year office rental lease for 4,500 sq feet of office space at 180 Avenida La Pata, San Clemente, CA. The lease expires on September 16, 2012. The lease payment is $4,500 for months one to three, $5,625 for months four through eight; and $6,750 for months nine through twelve.</p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">On September 29, 2011, the Company received funds of $100,000 from an outside investor for the purchase of 50,000 shares common stock and common warrant to purchase common stock at the price of $3.00 for the next three years.</p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">On October 6, 2011, the Company held an Annual Meeting of Stockholders to vote on the following matters:</p> <ul> <li> <div style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">Election of Directors – Wright W. Thurston, Calvin Fox, and Kathleen Roberts</div></li> <li> <div style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">Amend the Company’s Articles of Incorporation to change the name of the Company to “Elevate, Inc.” or any other similar name.</div></li> <li> <div style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">Amend the Company’s Articles of Incorporation to authorize 10,000,000 shares of preferred stock, par value $0.001 per share</div></li> <li> <div style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">Approve the 2011 Stock Incentive Plan</div></li> <li> <div style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">Ratify DeJoya Griffith & Company, LLC as the Company’s independent registered public accounting firm for the fiscal year ending May 31, 2012</div></li></ul> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">All items were ratified at the meeting with approximately 62% of the stockholders’ shares voting. </p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">On October 11, 2011, the Company entered into a separation agreement and release with Mr. Alex Chester wherein he agreed that as of October 10, 2011, he shall cease to be employed by the Company and any of its subsidiaries. Pursuant to the separation agreement, the Company agreed to pay Mr. Chester a severance payment. In addition, the Company agreed to pay health insurance premium payments for nine months for him and his eligible dependents. The Company also agreed that Mr. Chester would be vested with a portion of his common stock as part of his severance, with the remaining unvested shares being returned to the Company treasury. Pursuant to the agreement Mr. Chester has an obligation to properly follow the parameters of market sales that are included in the agreement. If he breaches or threatens to breach any such obligation or restriction pursuant to the agreement, he will immediately forfeit any remaining shares not previously released and will forfeit the ability to earn any additional shares. As additional consideration, Mr. Chester will have the ability to receive additional shares of the Company common stock if certain parameters are met regarding new equity or convertible debt funding being invested into the Company on or before December 31, 2012.</p>
<!--egx--><p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"><b>Note 1. The Company</b></p> <p style="TEXT-ALIGN:justify; TEXT-INDENT:0.5in; MARGIN:0in 0in 0pt"></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"><u>The Company and Nature of Business</u></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"><u><font style="TEXT-DECORATION:none"></font></u></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">Elevate Marketing Group, LLC (“Elevate”) was founded in 2008. The Company began selling its wireless broadband service together with a fully integrated VolP telecommunications service in the fall of 2008. The Company’s broadband provides internet access with data transfer speeds up to 10 mbps, offers wireless distribution and is connected to a 4G hybrid mesh network. The Company’s Stack (five premium digital services bundled into one premium service) expanded in 2009 by adding monitored cellular two-way voice home security. In April, 2009, IALARM, LLC was created as a wholly owned subsidiary of the Company. In June 2010, IALARM was incorporated as a Utah corporation. </p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">On February 2, 2011, Elevate Marketing Group, LLC (“Elevate”), a Utah limited liability company entered into a reverse triangular merger by and among HGLB Sub Co. (“SUB CO”), a Nevada corporation and Highland Business Services, Inc. (“HGLB”), a Nevada corporation. Highland Business Services, Inc. (“HGLB”) was incorporated under the laws of the State of Nevada on February 24, 2006. Pursuant to the terms of the merger, SUB CO was merged with Elevate wherein SUB CO ceased to exist and Elevate became a wholly owned subsidiary of the HGLB.</p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">On March 2, 2011, the HGLB completed the reverse triangular merger whereby Elevate became a wholly owned subsidiary of the Company. HGLB issued 19,000,000 shares to the members of Elevate in exchange for 100% interest in Elevate. As part of the merger, former management of HGLB agreed to cancel 36,000,000 shares of common stock. For accounting purposes, the acquisition of Elevate by HGLB has been recorded as a reverse acquisition of a public company and recapitalization of Elevate based on the factors that Elevate represents the accounting acquirer. The prior period historical information has been replaced by Elevate’s financial information for comparability purposes.</p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">As a result of the merger, the Company’s main focus has been redirected to the operations of Elevate. The Company now owns 100% of Elevate, which is a premier digital services provider with an array of IP and wireless residential services. Elevate Broadband offers wireless residential Internet service with up to 10 mbps service. Elevate also offers a fully integrated suite of home security products and services that include Elevate Interactive, a complete home security management system operated online or through a wireless mobile App. Elevate Entertainment is both an IP based TV and Satellite TV service offered in cooperation with DirecTV™ and DISH Network™. Elevate Mobile provides mobile services that offer the latest smart phone technologies.</p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">Through its carrier-level agreements with many of the nation’s major infrastructure providers, Elevate is able to offer technologically agnostic product ‘Stacks’ – product configurations that aren’t limited to a single delivery infrastructure. Elevate Certifiable Geniuses can choose component products from among all locally available carriers and infrastructure technologies to create cost-effective, custom product packages that meet the unique needs of each of their customers. Independent Elevate owners bring made-to-order digital services to local communities, one living room at a time. Elevate provides digital services to 22 major U.S. markets and will open 28 more in 2012.</p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">On May 2, 2011, HGLB entered into a triangular merger by and among HSB Sub Co., (“HSB SUB CO”), a Nevada corporation and wholly owned subsidiary of the Company, and Rite Wire, Inc. (“RITEWIRE”), a Nevada corporation. Pursuant to the terms of the merger, HSB SUB CO would be merged with RITEWIRE wherein SUB CO shall cease to exist and RITEWIRE would become a wholly owned subsidiary of the Company.</p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">On September 12, 2011, HGLB and RITEWIRE mutually agreed to rescind the triangular merger.</p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">At the Annual Meeting of the Stockholders held on October 6, 2011, it was approved to amend the Articles of Incorporation to change the name of the Company to Elevate, Inc.</p>
<!--egx--><p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"><b>Note 2. Summary of Significant Accounting Policies</b></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"><u>Principles of Consolidation</u></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"><u><font style="TEXT-DECORATION:none"></font></u></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">The consolidated interim financial statements include the accounts of Highland Business Services, Inc. (Nevada Corporation), Elevate Marketing Group, LLC (Utah Limited Liability Company), and IALARM, LLC (Utah Corporation). All significant intercompany balances and transactions have been eliminated. Highland Business Services, Inc., Elevate Marketing Group, LLC and IALARM LLC will be collectively referred herein to as the “Company”.</p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">The consolidated interim financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.</p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">These statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these consolidated interim financial statements be read in conjunction with the financial statements of the Company for the years ended May 31, 2011 and 2010 and notes thereto included in the Company’s 10-K filed on September 20, 2011. The Company follows the same accounting policies in the preparation of interim reports.</p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">Results of operations for the interim period are not indicative of annual results.</p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"><u>Use of Estimates</u></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Generally, matters subject to estimation and judgment include amounts related to asset impairments, useful lives of fixed assets and capitalization of costs for software developed for internal use. Actual results could differ from those estimates.</p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"><u>Cash and Cash Equivalents</u></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">The Company considers highly liquid investments with insignificant interest rate risk and original maturities of three months or less to be cash equivalents. Cash equivalents consist primarily of interest-bearing bank accounts and money market funds. The Company’s cash positions represent cash on deposit in checking accounts. These assets are generally available on a daily basis and are highly liquid in nature.</p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"><u>Accounts Receivable</u></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">Accounts receivable are reported at the customers' outstanding balances less any allowance for doubtful accounts. Interest is not accrued on overdue accounts receivable. The Company evaluates receivables on a regular basis for potential reserve. Beginning in the three months ended August 31, 2011, the Company began invoicing an estimated 10% of the sales. The invoices are generated at time of sale and recorded as a receivable. The other 90% of the sales are automatically deducted from or charged to each customer’s bank or credit card account. The accounts receivable balance was $2,119 as of August 31, 2011 and $685 as of May 31, 2011. </p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"><u>Inventory</u></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">The Company purchases ready to sell inventory directly from manufacturers. Inventory is stated at the lower of cost (first-in, first-out) or net realizable value.</p> <p style="TEXT-ALIGN:justify; TEXT-INDENT:0.5in; MARGIN:0in 0in 0pt"></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"><u>Revenue Recognition</u></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">For recognizing revenue, the Company applies the provisions of the Revenue Recognition Topic of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 605 Revenues are generated from digital IP and wireless residential services and products and from commercial video and audio integration projects. The Company recognized revenue from sales of $60,550 and $42,878 for the three months ended August 31, 2011 and 2010, respectively.</p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"><u>Recent Pronouncements</u></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">From time to time, new accounting pronouncements are issued by FASB that are adopted by the Company as of the specified effective date. Management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company’s financial statements upon adoption.</p>
<!--egx--><p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"><b>Note 3. Going Concern</b></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">The financial statements have been presented on a going concern basis, which contemplates, but does not include adjustments for the realization of assets and satisfaction of liabilities in the normal course of business. The Company has a limited operating history and limited funds. As shown in the financial statements, the Company incurred a net loss of $1,326,674 and cash used by operations of $732,394 for the three months ended August 31, 2011, and had a working capital deficit of $1,991,593 as of August 31, 2011. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company believes that it is appropriate for the financial statements to be prepared on a going concern basis. The accompanying 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 result from the outcome of this uncertainty.</p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt"></p> <p style="TEXT-ALIGN:justify; MARGIN:0in 0in 0pt">The Company is dependent upon debt and equity financing to continue operations. It is management’s plans to raise necessary funds via private placements of its common stock to satisfy the capital requirements of the Company’s business plan. There is no assurance that the Company will be able to obtain the necessary funds through continuing debt and equity financing to have sufficient operating capital to support a level of operations to obtain a level of cash flow to sustain continuing operations. If the Company is successful in raising the necessary funds, there is no assurance that the Company will successfully implement its business plan. The Company’s continuation as a going concern is dependent on the Company’s ability to raise additional funds through a private placement of its common stock or debt sufficient to meet its obligations on a timely basis and ultimately to attain profitable operations.</p>
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