The following discussion should be read in conjunction with our consolidated financial statements, including the notes thereto, appearing elsewhere in this Annual Report. The discussions of results, causes and trends should not be construed to imply any conclusion that these results or trends will necessarily continue into the future.

Forward-Looking Statements

This Annual Report contains certain forward-looking statements. All statements other than statements of historical fact are "forward-looking statements" for the purposes of these provisions, including any projections of earnings, revenues or other financial items; any statements of the plans, strategies, and objectives of management for future operation; any statements concerning proposed new products, services or developments; any statements regarding future economic conditions or performance; statements of belief; and any statement of assumptions underlying any of the foregoing. Such forward-looking statements are subject to inherent risks and uncertainties and actual results could differ materially from those anticipated by the forward-looking statements.

Liquidity and Capital Resources

As of May 31, 2009, we had cash of $3,320 in our bank accounts and a working capital deficit of $503,417 compared to a working capital deficit of $192,990 for the year ended May 31, 2008. As of May 31, 2009, we had total assets of $138,910 and total liabilities of $532,526.

Our net loss of $3,825,203 from January 22, 2007 (date of inception) to May 31, 2009 was mostly funded by a combination of private placements and loans. From January 22, 2007 (date of inception) to May 31, 2009, we raised net proceeds of $2,075,495 in cash from the issuance of common stock. Since January 22, 2007 (date of inception) to May 31, 2009, we raised net proceeds of $2,325,495 in cash from financing activities.

We used net cash of $1,028,422 in operating activities for the year ended May 31, 2009 compared to $1,129,998 for the year ended May 31, 2008. We used net cash of $2,166,540 in operating activities for the period from January 22, 2007 (date of inception) to May 31, 2009

We used net cash of $85,734 in investing activities for the year ended May 31, 2009 compared to net cash of $56,703 in investing activities for the year ended May 31, 2008. The increase in cash used in investing activities is due to increased costs of acquisition of property and equipment.

We received net cash of $1,091,275 from financing activities for the year ended May 31, 2009 compared to $1,198,920 for the year ended May 31, 2008. For the year ended May 31, 2009, $841,275 of cash from financing activities was from the issuance of our common stock and $250,000 from the issuance of convertible debentures. During the year ended May 31, 2008, all cash received from financing activities was generated from the issuance of our common stock.

During the year ended May 31, 2009 we had a change in cash position of a decrease of $22,881 compared to an increase of $12,219 for the year ended May 31, 2008. Our monthly cash requirements for the year ended May 31, 2009 was approximately $82,285. At our current cash position and if this cash requirement continues, we do not have sufficient cash to cover our expenses for one month.

On October 16, 17 and 28, 2008, we issued three convertible debentures for total proceeds of $250,000 which bear interest at 10% per annum, are unsecured and due one year from date of issuance. The unpaid amount of principal and accrued interest can be converted at any time at the holder's option into 625,000 shares of our common stock at a price of $0.40 per share. We also issued 250,000 detachable, non-transferable share purchase warrants. Each share purchase warrant entitles the holder to purchase one additional share of our common stock for a period of two years from the date of the issue at an exercise price of $0.50 per share. As at May 31, 2009, we recorded accretion expense of $27,548, increasing the carrying value of the convertible debentures to $231,618.

We expect that our total expenses will increase over the next year as we increase our business operations. We have not been able to reach the break-even point since our inception and have had to rely on outside capital resources. We do not anticipate making significant revenues for the next year. Over the next 12 months, we plan to primarily concentrate on commercializing our ERC technology and associated projects.

Description                             Estimated expenses
                                                ($)
Research and Development                     275,000
Consulting Fees                              100,000
Acquisition of new technologies              500,000
Commercialization of ERC                    1,200,000
Shareholder communication and awareness      250,000
Professional Fees                            200,000
Wages and Benefits                           150,000
Management Fees                              400,000
Total                                       3,075,000

In order to fully carry out our business plan, we need additional financing of approximately $3,075,000 for the next 12 months. In order to improve our liquidity, we intend to pursue additional equity financing from private placement sales of our equity securities or shareholders' loans. We do not presently have sufficient financing to undertake our planned business activities. Issuances of additional shares will result in dilution to our existing shareholders.

We currently do not have any arrangements in place for the completion of any further private placement financings and there is no assurance that we will be successful in completing any further private placement financings. If we are unable to achieve the necessary additional financing, then we plan to reduce the amounts that we spend on our business activities and administrative expenses in order to be within the amount of capital resources that are available to us.

Results of Operations

Our results of operations are summarized below:

Period from January 22, 2007

                               Year Ended        Year Ended       (inception) to
                               May 31, 2009      May 31, 2008       May 31, 2009
                               $                 $                 $

Revenues                       $      17,118     $           0     $       17,118

Total Operating Expenses       $   1,752,627     $   2,016,018     $    3,799,239

Net Loss                       $  (1,778,591 )   $  (2,016,018 )   $   (3,825,203 )

Loss per common share             (0.07 )           (0.10 )
(basic and assuming dilution)

Lack of Significant Revenues

We have had limited operational history since our inception on January 22, 2007. Since our inception to May 31, 2009 we have generated $17,118 in revenues. All revenues were generated during the year ended May 31, 2009. Since our inception to May 31, 2009 we have accumulated a deficit of $3,825,203 during the development stage. We anticipate that we will incur substantial losses over the next year and our ability to generate any revenues in the next 12 months continues to be uncertain.

Expenses

For the year ended May 31, 2009, we had total operating expenses of $1,752,627, including $61,864 in consulting and advisory fees, $269,266 in professional fees, $424,615 in management fees, $309,309 in shareholder communications and awareness, $137,997 in wages and benefits, $125,771 in general and administrative expenses, and $169,025 in research and development.

By comparison, for the year ended May 31, 2008, we had total operating expenses of $2,016,018, including $340,185 in consulting and advisory fees, $192,255 in professional fees, $259,967 in management fees, $183,912 in shareholder communications and awareness, $197,559 in travel and promotion, $172,651 in general and administrative expenses and $82,428 in research and development.

Since our inception on January 22, 2007 to May 31, 2009, we accumulated total expenses of $3,799,239, including $405,007 in consulting and advisory fees, $461,521 in professional fees, $684,582 in management fees, $493,221 in shareholder communications and awareness, $255,278 in travel and promotion, $311,181 in general and administrative expenses and $251,453 in research and development.

Our general and administrative expenses consist of office occupation expenses, communication expenses (cellular, internet, fax and telephone), bank charges, foreign exchange, courier, postage costs and office supplies. Our professional fees include legal, accounting and auditing fees. Business development, consulting and advisory costs include fees paid, shares issued and options granted to contractors and advisory board members

Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders.

Inflation

The effect of inflation on our revenue and operating results has not been significant.

Critical Accounting Policies

Our financial statements are impacted by the accounting policies used and the estimates and assumptions made by management during their preparation. A complete summary of these policies is included in note 2 of the notes to our financial statements. We have identified below the accounting policies that are of particular importance in the presentation of our financial position, results of operations and cash flows, and which require the application of significant judgment by management.

Use of Estimates

The preparation of financial statements in conformity with US generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We regularly evaluate estimates and assumptions related to allowance for doubtful accounts, the recoverability of intangible and long lived assets, valuation of convertible debt, stock-based compensation and deferred income tax asset valuation allowances. We base our estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by us may differ materially and adversely from our estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

Long-lived Assets

In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", we test long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.

Stock-based Compensation

We record stock-based compensation in accordance with SFAS No. 123R, "Share Based Payments", using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

We use the Black-Scholes option pricing model to calculate the fair value of stock-based awards. This model is affected by our stock price as well as assumptions regarding a number of subjective variables. These subjective variables include, but are not limited to our expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the consolidated statement of operations over the requisite service period.