NOTE 9- SUBSEQUENT EVENTS
On October 1, 2012, the Company drew
down $15,000 in funds under the Investment Agreement and issued 620,000 Shares to Fairhills and paid a commission of $1,500 to
On November 6, 2012, Fairhills assigned
all of its rights, duties, and obligations under the Investment Agreement, the Registration Rights Agreement, and other associated
documents (the Assignment), to Deer Valley Management, LLC, a Delaware limited liability company (Deer Valley),
and the Company consented to the Assignment. Fairhills and Deer Valley share the same ownership and management and there
will not be any substantial change to our arrangement under the Investment Agreement as a result of the Assignment.
On September 28, 2012, the Fairhills
note was due and payable. The Company does not currently have sufficient funds to pay the note due. The
note is not convertible into our common stock and we have agreed that we will not use the funds raised in the Fairhills/Deer Valley
financing to repay this note. The note is secured by 3,333,333 shares of the Companys restricted common stock
owned by the Companys director and officer, Rick Walchuk, which are being held in escrow by Fairhillss counsel. As
the Company is in default of this loan, Fairhills has the right to the shares held in escrow, however, at the current price of
the shares, the sale of the escrowed shares will not be sufficient to retire the debt. As of the filing of this report,
of which these financial statements form a part, Fairhills has not exercised its right to claim such shares held in escrow.
In accordance with ASC Topic 855-10, the Company has analyzed
its operations subsequent to October 31, 2012 to the date these financial statements were issued, and has determined that it does
not have any material subsequent events to disclose in these financial statements other than the events described above.