**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

 

**FORM 10-K/A**

**Amendment No. 1**

 

**(Mark One)
**x**

**ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**FOR THE FISCAL YEAR ENDED May 31, 2011**

**OR**

** ̈**

**TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the transition period from       to**

 

**COMMISSION FILE NUMBER 333-161321**

 

**AXIOLOGIX EDUCATION CORPORATION**

(Exact name of registrant as specified in its charter)

 

**NEVADA**

 

**61-1585332**

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

**197 State Route 18 South, Suite 3000, Office 71**

**East Brunswick, NJ**

 

**08816**

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code:**(609) 646-2005**

Securities registered pursuant to Section 12(b) of the Act:

**None**

Securities registered pursuant to Section 12(g) of the Act:

**None**

                               
 

Indicate by check mark whether the registrant is a well-known seasoned issuer, as define in Rule 405 of the Securities Act).  Yes   ̈  No  x

Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes   ̈  No  x

Indicate by check mark whether the issuer (1)  filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   x    No    ̈

Indicate by check mark whether the issuer has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the past 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes   x    No    ̈

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     ̈    

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer        ̈

Accelerated Filer       ̈

 

 

Non-accelerated Filer           ̈                 

Smaller reporting company      x

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ̈  No  x

State the aggregate market value of the voting and non-voting equity held by non-affiliates of the Registrant computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of October 13, 2011:  $646,438

Indicate by check mark whether the issuer filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.  Yes   x    No    ̈

As of October 13, 2011, 173,487,039 shares of the Registrant’s Common Stock were outstanding.
 
 

                               
**EXPLANATORY NOTE**

is Amendment No. 1 on Form 10-K/A (this “Amendment”) amends the Registrant’s Amended Annual Report on Form 10-K for the fiscal Year ended May 31, 2011, which the Registrant previously filed with the Securities and Exchange Commission on October 14, 2011 (the “Original Filing”).  The Registrant is filing this Amendment to correct several inadvertent errors that it noted in the Original Filing.

**Axiologix Education Corporation**

**FORM 10-K**

**For the Fiscal Year Ended May 31, 2011**

**INDEX**

 

**PART I**

 

 

 

Item 1.

 

Business

3

Item 1A.

 

Risk Factors

7

Item 2.

 

Properties

7

Item 3.

 

Legal Proceedings

7

Item 4.

 

[Removed and Reserved]

7

 

 

 

 

**PART II**

 

 

 

Item 5.

 

Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

7

Item 6.

 

Selected Financial Information

7

Item 7.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

8

Item 8.

 

Financial Statements

11

Item 9.

 

Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

11

Item 9A.

 

Controls and Procedures

11

Item 9B.

 

Other Information

12

 

 

 

 

**PART III**

 

 

 

Item 10.

 

Directors, Executive Officers and Corporate Governance

13

Item 11.

 

Executive Compensation

16

Item 12.

 

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

17

Item 13.

 

Certain Relationships and Related Transactions, and Director Independence

19

 

 

 

 

Item 14.

 

Principal Accountant Fees and Services

19

Item 15.

 

Exhibits, Financial Statement Schedules

20

 

 

 

 

Signatures

20

 

2                 
              
 

 

**PART I**

 
**Item 1.          Description of Business.**

 

In addition to the historical information contained herein, the discussion in this Form 10-K contains certain forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, that involve risks and uncertainties, such as statements concerning: growth and anticipated operating results; developments in our markets and strategic focus; product development and reseller relationships and future economic and business conditions. The cautionary statements made in this Form 10-K should be read as being applicable to all related forward-looking statements whenever they appear in this Form 10-K. Our actual results could differ materially from the results discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed under the section captioned “Risk Factors” in Item 1.A. of this Form 10-K as well as those cautionary statements and other factors set forth elsewhere herein.

Information regarding market and industry statistics contained in this Form 10-K is included based on information available to us that we believe is accurate.  It is generally based on industry and other publications that are not produced for purposes of securities offerings or economic analysis.  We have not reviewed or included data from all sources, and cannot assure investors of the accuracy or completeness of the data included in this Form 10-K.  We do not assume any obligation to update any forward-looking statement.  As a result, investors should not place undue reliance on these forward-looking statements.

**General** 

We are a start-up company comprised of management and sales executives in education who have experience and a proven successful track record in sales performance over the past two decades.  Our main focus is on the new development, sales, and marketing of educational software titles serving schools with grade levels from Kindergarten through Higher Education.  We are concentrating on raising student achievement through research-based school designs, uniquely aligned assessment systems, interactive professional development, integrated use of technology, and other proven productivity applications in education.  

As a part of our expansion plans, we have targeted and made informal commitments for the hire of several top producers in sales, marketing, and managed software implementation in education technology.  These top producers have committed to come on board and become part of our educational software dealership that offers niche productivity solutions in the education market.  In August 2010, we hired three of these individuals, however we could not afford to maintain their moderate base salaries for the duration of the Education business cycle which lasts 12 to 18 month before marketing activities become sales in the industry. We have restructured our marketing plan together with the overhead and professional expenses of the company with 50% in budget cuts across all of the expenses and we plan to hire additional individuals as our capital resources permit. 

We are currently in the process of designing a project technology for the development of our own unique educational software title, We intend to have several potential exclusive reseller relationships with educational software companies for the re-sale of their on-line managed software applications that complement each other.  The strategic positioning of these products complementing each other, coupled with the proven track record of the aforementioned top-producing sales executives, is expected to propel our sales revenue.  This includes the sale of packaged on-line software licensing, consulting services, training and support, and other complimentary educational software tools.  

In August 2010, we entered into an exclusive reseller agreement with Edumedia Software Solutions Corporation (“Edumedia”) for the sale of E*pad, an on-line managed software application that manages performance assessments for teachers to be deployed among their students. In January 2011, we entered into an Asset Purchase Agreement to acquire the E*pad software from Edumedia. Under the terms of the agreement, we agreed to pay Edumedia $120,000.00 and to issue to Edumedia 10,000,000 shares of Common Stock. Our principal officer and a director, John P. Daglis, was formerly the Chief Executive Officer of Edumedia.

We are in discussion regarding formalizing our orally agreed resellership with Contour Data (for re-selling their Special Education Software), which is  described in the following Products below. Although this resellership has not been formalized with a written agreement yet, Contour Data has given us verbal authorization to begin representing their products and services in anticipation of us hiring the aforementioned “top producers” in sales, marketing, and managed software deployment.  We expect that terms will range from a 20% - 35% mark-up depending upon the amount of technical support, help desk services, and professional development we provide. 

Since the passage of the “No Child Left Behind” legislation to the recent commitments to Education in the latest stimulus plans from  the federal government, the education industry has been facing a growing premium on intellectual capital, education reform, and a focus on assessment and accountability.  Within the $767 billion stimulus plan that was passed in February 2009, $105.9 billion of it is allocated specifically to education. These funds took over a year to trickle into the education system.  According to the U.S. Department of Education, there was a balance of over $38 billion still left to be disbursed as of June 2010.  $600 million of the stimulus plan is focused on technology applications and well-rounded assessment using technology.  This movement has spawned increasing demand for solutions that yield performance results, namely: accountability, improved records and operational efficiency, better information, improved learning, and better methodologies of teaching-- results that our software solutions deliver.  

We were incorporated on April 29, 2009 under the laws of the state of Nevada.  We maintain our statutory registered agent's office at 4421 Edward Avenue, Las Vegas, Nevada 89108.  Our business office is located at 197 Route 18 South, Suite 3000, Office 71, East Brunswick, NJ 08816.  Our telephone number is 609-646-2005 and our fax number is 609-939-0717.  We pay rent of $1,088 per month.

3                
               
 

**Products**

 

Under our Asset Purchase Agreement with Edumedia, we own 100% of E*pad:

*E*pad*

E*pad features a multimedia student portfolio for students combined with a performance assessment manager which is a research-based approach to structuring the collection, interpretation, and assessment of evidence regarding student learning.

Key Features:

·

Assessments that are aligned to national and state standards and rubrics;

·

Provides structured activities for teachers to use with students ;

·

Allows teachers to create new assessments as well as to modify existing ones;

·

Focuses on improving the learning of all students;

·

Provides a highly interactive assessment environment;

·

Supports a collegial learning community for sharing materials and activities;

·

Contains an assessment framework to help educators make systematic use of evidence of learning;

·

Provides a structured process for analyzing evidence of student learning;

·

Allows students to develop a portfolio of their exemplary work; and

·

Supports an interactive educational environment where teachers can work collaboratively and share strategies with colleagues to improve future assessments.

Key Benefits:

·

User friendly;

·

Internet Based;

·

Encourages higher levels of student achievement;

·

Promotes student centered learning;

·

Facilitates interdisciplinary and collaborative teaching;

·

Fosters cooperative learning projects;

·

Allows students to create a “digital portfolio” of their exemplary accomplishments; and

·

Facilitates increased involvement of parents.

We are in an orally agreed resellership with Contour Data regarding the following product:

*The Student Tracker’s Special Education component*

Student Tracker is an Integrated Student Administration System that tracks attendance, scheduling, grading, and manages individual records for each student.  This application also has a Special Education component that maintains government mandated custom forms for Individualized Education Plans (IEP’s) for students enrolled in the schools’ child studies department.  

4                 
              Key Features: 
·

Attendance Module;

·

Special Education Module;

·

Grading Module;

·

Scheduling Module;

·

Document processing system provides forms, documents, and letters that can easily be modified to meet your specific state and district requirements;

·

Logs professional improvement hours for all staff members;

·

On-site training and technical support via toll-free telephone, electronic mail and Internet; and

·

Data conversion from paper or existing software available.

Key Benefits:

·

Records student attendance, discipline, grades, and medical history *(from the teacher’s desktop)*;

·

Allows the monthly attendance report to be completed in minutes instead of hours;

·

Automated parental notices for truancy;

·

Simplifies and automates grading and scheduling;

·

Generates student schedules from a master class list;

·

Allows for the electronic recording of grades and printing report cards;

·

Creates State compliant IEPs, evaluations & parental notices;

·

Gives educators complete control of document content and format;

·

Generates October, December, and end-of-year tables in minutes;

·

Retains chronological history of all IEPs, documents and parental contact; and

·

Discipline and Transportation Modules are also available.

 

5                
               
**Sales and Marketing Strategy**

 

*Product Positioning Strategy:*

We intend to position our products as complementary to Integrated Learning Systems (ILS) and other similar offerings.  ILSs provide instructional content, assessment and management tools, and allow students to study at their own level.  ILSs also pace and track students’ work and progress for teachers to review.  Given the mandate to achieve yearly progress in student outcomes under No Child Left Behind Legislation, the tracking feature of ILSs is likely to be welcomed by educational providers.  However, most ILSs lack performance assessments as content, and multimedia/digital portfolio features as well as teaching tools for tracking assignments online.  As such, we intend to position our products as complementary, add-on components that fill the gaps lacking in ILSs.  

*Customer Acquisition and Product Awareness:*

We plan on paying close attention to client servicing, especially on offering extensive training (in the form of workshops) to teachers and other educational institution staff on product usage.  

We intend to achieve product awareness by introducing our products to key purchase decision makers, typically a combination of the Superintendent, Federal Programs Administrator, Curriculum Supervisor and/or Technology Coordinator of the school district, which are all relationships that we have begun to establish and build.  

We will also provide ongoing staff development on technology in various Education Technology Training Centers, i.e., federally and state sponsored countrywide showrooms, for training New Jersey educators in new technologies.  These showrooms will provide an excellent opportunity for us to introduce the unique characteristics of our products to teachers, technology administrators, and coordinators. 

To strengthen product awareness further, we are planning on organizing regular conferences with Technology Coordinators and Curriculum Supervisors to provide hands-on-use of our software.  These conferences will initially take place in our initial target markets, namely New Jersey, Pennsylvania, Ohio, New York, and Delaware.  In addition, we plan on regularly attending National and Regional trade shows to cultivate and expand new business relationships. 

*Distribution Strategy:*

Given our current relationships and proximity to New Jersey and New York, we will initially distribute our products locally in New Jersey and expand to the surrounding states as well as Tennessee and Indiana during 2012.  In this initial Geographic area, New Jersey, New York and Pennsylvania are among the states that spend the most on education in the US.  We plan on following up these markets with the Mid Atlantic and Central states through 2012.  Our management believes that once a major market such as the Mid Atlantic States and Central States are penetrated, the model can be duplicated with Direct Marketing on a national level.  As such, a national and international marketing strategy is expected to be rolled-out toward year-end 2012.

We plan to utilize the following distribution channels: In-house sales representatives, authorized resellers, independent sales representatives, and national distributors.

**Competition**

There are several specific task software companies that offer niche based programs providing digital portfolios, curriculum alignment to state standards, assessment through rubrics with prescriptive learning, and lesson planning.  There is only one company currently working with automated on-line performance assessments, the Education Testing Service (ETS) in Princeton, New Jersey, which has not begun marketing theirs as of their last fiscal quarter.  Management has been unable to find any titles that have all of the aforementioned features in a single on-line package.  What differentiates the products offered by a specific task software company from the E*pad is the fact that they have not provided Performance Tasks to gain teacher acceptance, and they have not packaged all of the aforementioned features into one on-line application.  At this stage, it is too early to identify and assess the market performances of similar competing software programs with E*pad.  The national trend in educational techniques is just now maturing to permit commercial acceptance of Performance assessments into the market.  

Below is a more detailed description about competition as it relates to the other specific applications we plan to sell:

Student Tracker:  While there are also several individualized education plan (IEP) reporting titles available, the Student tracker has the unique feature of integrating the reporting feature with MS-Word, giving the user the added convenience of structuring the format of the resulting report with a customized appearance to each school district’s preference.

 

**Compliance with Government Regulation**

We are not currently subject to direct federal, state or local regulation and we do not believe that government regulation will have a material impact on the way we conduct our business.

**Employees**

We currently have two employees, one of which is in an administrative role, and our Chief Executive Officer and President. 

**Research and Development Expenditures**

 

We have incurred $742,045 on research and development of performance assessments for on-line educational software exercises with participating pilot partner school districts since our inception.

 

6                 
              
 

**Patents and Trademarks**

 

There is a trademark registration pending for the use of the Owl Logo of the company with the name Axiologix Education under it. We do not own, either legally or beneficially, any other patents or trademarks.

 
**Item 1A.       Risk Factors.**

 

Not applicable to smaller reporting companies.

 

**Item 2.**

**Description of Properties.**

 

**Offices**

 

Our business office is located at 197 Route 18 South, Suite 3000, Office 71, East Brunswick, NJ 08816.   We pay rent of $1,088 per month.  Our offices include a 650 square foot shared receptionist area, a 400 square foot office and a 530 square foot shared conference room for $50 per day usage.

 

We do not currently own or lease any other real property.

**Item 3.**

**Legal Proceedings.**

There are no other legal proceedings are currently pending or, to our knowledge, threatened against us that, in the opinion of our management, could reasonably be expected to have a material adverse effect on our business or financial condition or results of operations.

**Item 4.**

**(Removed and Reserved)**

 
**PART II**

 
**Item 5.**

**Market for Common Equity and Related Stockholder Matters.**

 

Our common stock is quoted on the OTC Bulletin Board under the symbol “AXLX.E” Our common stock was initially quoted on the OTC Bulletin Board on March 23, 2010.  Prior to July 15, 2010, no shares had been traded and there was no public market price for our shares

 

There were 267 holders of record of our common stock as of October 13, 2011**.**  The last sale price for our common stock as reported on October 13, 2011 was $0.006.

From March through October 2011, the Company entered into stock purchase agreements with accredited investors for the sale of 2,050,000 of its common stock at a purchase price of $0.01 per share generating proceeds of $20,500.

From March through October 2011, the Company entered into stock purchase agreements with accredited investors for the sale of 3,449,333 of its common stock at a purchase price of $0.02 per share generating proceeds of $67,220.

From March through October 2011, the Company entered into stock purchase agreements with accredited investors for the sale of 780,000 of its common stock at a purchase price of $0.04 per share generating proceeds of $31,200.

From March through October 2011, the Company issued 322,078 shares to Officers and Directors for compensation.  The shares were valued between $0.022 and $0.035 per share which was the price of the most recent sale of the Company’s stock at the time of issuance.

From March through October 2011, the Company issued 7,408,578 shares of common stock for services.

We did not pay dividends on our common stock for the fiscal year ended May 31, 2011 and have no plans to do so in the foreseeable future.

We do not have an equity compensation plan.

**Item 6.          Selected Financial Data.**

Not applicable.

**7                 
              
 

**Item 7.          Management’s Discussion and Analysis of Financial Condition and Results of Operations.**

 

**“Safe Harbor” Statement under the Private Litigation Reform Act of 1995**

 

This Annual Report, other than historical information, may include forward-looking statements, including statements with respect to financial results, product introductions, market demand, sales channels, industry trends, sufficiency of cash resources and certain other matters. These statements are made under the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 and involve risks and uncertainties which could cause actual results to differ materially from those in the forward-looking statements, including those discussed in the section entitled “Risk Factors” in Item 1.A. and elsewhere in this Annual Report on Form 10-K and other filings with the Securities and Exchange Commission.

 

This section of this report includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance.  Forward looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions or words which, by their nature, refer to future events.  You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report.  These forward looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.

 

**Overview**

 

Axiologix Education Corporation ("Axiologix", "the Company", “our” or "we") was incorporated in the State of Nevada as a for-profit company on April 29, 2009.  Axiologix is an educational software and services provider for school systems K-20.  Management plans to focus on raising student achievement through its research-based school design, uniquely aligned assessment systems, interactive professional development, integrated use of technology and other proven program features.  We do not have any subsidiaries.

We currently sell three software on-line managed software applications that were developed by other educational software providers.

In August 2010, we entered into an exclusive reseller agreement with Edumedia Software Solutions Corporation (“Edumedia”) for the sale of E*pad, an on-line managed software application that manages performance assessments for teachers to be deployed among their students.   Under the terms of the agreement, we have paid to Edumedia $104,300 as a research and development contribution, issued to Edumedia 940,000 shares of our common stock and agreed to pay to Edumedia 50% of the revenues we collect from the sale of their products.  The agreement has an initial term of 18 months.   During September 2010, the Company entered in Amendment #1 to its exclusive worldwide resellership agreement with Edumedia.  Pursuant to the Amendment, the Company issued an additional 4,500,000 shares of common stock to Edumedia.

 

On January 24, 2011, we entered into an asset purchase agreement with Edumedia to acquire Edumedia’s assets used or held for us in connection with its E*Pad software platform in exchange for 10,000,000 shares of our common stock and $120,000 in cash payable in equal weekly installments of $2,500.  We acquired intangible intellectual property including all software related to E*Pad, all intellectual property rights, rights to the name “E*Pad”, and internet domain addresses related to E*Pad.

 

In November 2010, we entered into a sales agent agreement with Seacliff Education Solutions.  The agreement will allow us to offer for sale two of Seacliff’s products:  eBoard and Curricuplan.  Under the agreement we will receive an agent fee equal to 50% of the total revenue amount for user licenses and any corresponding services invoiced to a new customer, minus the line-item dollar amount invoiced to cover Seacliff’s initial, one-time customer set-up fee.  The agreement may be terminated by either party at any time.

**Liquidity and Capital Resources**

As of May 31, 2011, we had cash and cash equivalents of $ - and a working capital deficiency of $606,058.  As of May 31, 2011 our accumulated deficit was $8,049,122.  For the year ended May 31, 2011 our net loss was $5,632,704.

Our loss has been funded by proceeds from the sale of our common stock and convertible promissory notes.  During the year ended May 31, 2011, we raised $855,780 of net proceeds through financing activities and our cash position decreased by $4,011.  During the year ended May 31, 2010, we raised $531,195 in net proceeds through financing activities.

We used net cash of $864,791 in operating activities for the year ended May 31, 2011 compared to $532,176 for the year ended May 31, 2010.  We did not use any money in investing activities for the year ended May 31, 2011.  

 During the year ended May 31, 2011 our monthly cash requirement was approximately $72,000 and we expect this to increase in coming months with the hiring of additional personnel.

We intend to meet our cash requirements for the next 12 months through external sources: a combination of debt financing and equity financing through private placements.  We are currently not in good short-term financial standing.  We anticipate that we may not generate any revenues in the near future and we will not have enough positive internal operating cash flow until we can generate substantial revenues, which may take the next few years to fully realize.  There is no assurance we will achieve profitable operations.  We have historically financed our operations primarily by cash flows generated from the sale of our securities and through cash infusions from officers and outside investors in exchange for debt and/or common stock.

These financial statements have been prepared on the assumption that we are a going concern, meaning we will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations.  Different bases of measurement may be appropriate when a company is not expected to continue operations for the foreseeable future.  Our continuation as a going concern is dependent upon our ability to attain profitable operations and generate funds there-from, and/or raise equity capital or borrowings sufficient to meet current and future obligations.  Management plans to raise equity and debt financings over the next twelve months to finance operations.  There is no guarantee that we will be able to complete any of these objectives.  We have incurred losses from operations since inception and at May 31, 2011, have a working capital deficiency and an accumulated deficit that creates substantial doubt about our ability to continue as a going concern.

8                 
              
We intend to continue to raise funds to meet our cash requirements from a combination of debt financing and equity financing through private placements.   There is no guarantee that we will be successful in raising any additional capital.  There is no assurance that we will be able to obtain such additional funds on favorable terms, if at all.  If we fail in raising capital, our business may fail and we may curtail or cease our operations.

**Results of Operations for the year ended May 31, 2011 and from inception to May 31, 2011.**

*No Material Revenues*

Since our inception on April 29, 2009 to May 31, 2011, we have not earned any meaningful revenues.  As of May 31, 2011, we have an accumulated deficit of $8,049,122.  At this time, our ability to generate any significant revenues continues to be uncertain.  Our financial statements contain an additional explanatory paragraph in Note 3, which identifies issues that raise substantial doubt about our ability to continue as a going concern.  Our financial statements do not include any adjustment that might result from the outcome of this uncertainty.

 

*Expenses*

Operating expenses totaled $5,133,212 for the year ended May 31, 2011 compared to $2,184,035 for year ended May 31, 2010.  Since our inception on April 29, 2009 to May 31, 2011, we have incurred total operating expenses of $7,491,422.

Our selling, general and administrative expenses consist of non-cash stock based compensation charges, bank charges, travel, meals and entertainment, office maintenance, communication expenses (internet, fax, and telephone), courier, postage costs, office supplies.  Our selling, general and administrative expenses for the year ended May 31, 2011 totaled $3,413,517 compared to $2,050,585 in the comparable period of the prior year.  Since our inception on April 29, 2009 until May 31, 2011, selling, general and administrative expenses have totaled $5,579,377.

Non-cash stock based compensation expense totaled $2,178,101 for the year ended May 31, 2011 and consists of shares of common stock issued for services   Non-cash stock based compensation expense totaled $1,321,364 for the year ended May 31, 2010 and consists of shares of common stock issued for services

We incurred $550,095 and $133,450 on research and development expenses for the years ended May31, 2011 and 2010, respectively.  

*Net Loss*

We incurred a net loss of $5,632,704 and $2,242,239 for the years ended May 31, 2011 and 2010, respectively.  From inception on April 29, 2009 to May 31, 2011, we have incurred a net loss of $8,049,122.  

**9                 
              
 

**Critical Accounting Policies**

The accounting policies and the use of accounting estimates are set forth in the footnotes to the financial statements.

In preparing our financial statements, we must select and apply various accounting policies. Our most significant policies are described in Note 2 – Summary of Significant Accounting Policies set forth in the notes to the unaudited financial statements. In order to apply our accounting policies, we often need to make estimates based on judgments about future events. In making such estimates, we rely on historical experience, market and other conditions, and on assumptions that we believe to be reasonable. However, the estimation process is by its nature uncertain given that estimates depend on events over which we may not have control. If market and other conditions change from those that we anticipate, our results of operations, financial condition and changes in financial condition may be materially affected. In addition, if our assumptions change, we may need to revise our estimates, or to take other corrective actions, either of which may also have a material effect on our results of operations, financial condition or changes in financial condition. Members of our senior management have discussed the development and selection of our critical accounting estimates, and our disclosure regarding them, with our board of directors, and do so on a regular basis.

We believe that the following estimates have a higher degree of inherent uncertainty and require our most significant judgments. In addition, had we used estimates different from any of these, our results of operations, financial condition or changes in financial condition for the current period could have been materially different from those presented.

 

**Share Based Payments**

Generally, all forms of share-based payments, including stock option grants, restricted stock grants and stock appreciation rights, are measured at their fair value on the awards’ grant date, and based on the estimated number of awards that are ultimately expected to vest.  Share-based payment awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable.  The expense resulting from share-based payments are recorded as non-cash stock based compensation, which is an operating expense.

**Recently Adopted and Recently Enacted Accounting Pronouncements**

In December 2010, the FASB issued FASB ASU No. 2010-28, "When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts," which is now codified under FASB ASC Topic 350, "Intangibles - Goodwill and Other." This ASU provides amendments to Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not a goodwill impairment exists. When determining whether it is more likely than not an impairment exists, an entity should consider whether there are any adverse qualitative factors, such as a significant deterioration in market conditions, indicating an impairment may exist. FASB ASU No. 2010-28 is effective for fiscal years (and interim periods within those years) beginning after December 15, 2010. Early adoption is not permitted. Upon adoption of the amendments, an entity with reporting units having carrying amounts which are zero or negative is required to assess whether is it more likely than not the reporting units' goodwill is impaired. If the entity determines impairment exists, the entity must perform Step 2 of the goodwill impairment test for that reporting unit or units. Step 2 involves allocating the fair value of the reporting unit to each asset and liability, with the excess being implied goodwill. An impairment loss results if the amount of recorded goodwill exceeds the implied goodwill. Any resulting goodwill impairment should be recorded as a cumulative-effect adjustment to beginning retained earnings in the period of adoption. This ASU is not expected to have any material impact to the Company's consolidated financial statements.

In December 2010, the FASB issued FASB ASU No. 2010-29, "Disclosure of Supplementary Pro Forma Information for Business Combinations," which is now codified under FASB ASC Topic 805, "Business Combinations." A public entity is required to disclose pro forma data for business combinations occurring during the current reporting period. This ASU provides amendments to clarify the acquisition date to be used when reporting the pro forma financial information when comparative financial statements are presented and improves the usefulness of the pro forma revenue and earnings disclosures. If a public company presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) which occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The supplemental pro forma disclosures required are also expanded to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. FASB ASU No. 2010-29 is effective on a prospective basis for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010, with early adoption permitted. The adoption of this ASU is not expected to have a material effect on the Company's consolidated statement of financial position, results of operations or cash flows. 

In May 2011, the FASB issued Accounting Standards Update (ASU) No. 2011-04, *Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs*. This update clarifies the application of certain existing fair value measurement guidance and expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. This update is effective on a prospective basis for annual and interim reporting periods beginning on or after December 15, 2011, which for the Company is January 1, 2012. The Company does not expect that adopting this update will have a material impact on its consolidated financial statements.

10                
              
 

**Inflation**

The amounts presented in the financial statements do not provide for the effect of inflation on our operations or financial position.  The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments. 

**Off-Balance Sheet Arrangements**

As of May 31, 2011, we had no off-balance sheet transactions 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.

**Quantitative and Qualitative Disclosures About Market Risk**

 

 We do not have any material exposure to market risk associated with our cash and cash equivalents. Our note payables are at a fixed rate and, thus, are not exposed to interest rate risk.

**Item 8.          Financial Statements.**

 

The information required by this item is included on pages F-1 through F-7.

 
**Item 9.         Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.**

 

Not applicable.

**Item 9A.       Controls and Procedures**

** **

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports made pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”)  is recorded, processed, summarized and reported within the timelines specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.   In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

 

As required by Rule 13a-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the fiscal year covered by this report.

 

Based on the foregoing, our Chief Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were not effective as of the end of period covered by this report in recording, processing, summarizing and reporting information required to be disclosed within the timelines specified in the Securities and Exchange Commission’s rules and forms and timely alerting him to material information relating to our company required to be disclosed in our periodic reports with the Securities and Exchange Commission.

 

  
11                 
              
 

 

**Management’s Report on Internal Control Over Financial Reporting**

 

Our Chief Executive Officer and Principal Financial Officer is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act.

 

Internal control over financial reporting is promulgated under the Exchange Act as a process designed by, or under the supervision of, our Chief Executive Officer and Principal Financial Officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

 

•         Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

 

•        Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

 

•        Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition or disposition of our assets that could have a material effect on the financial statements.

 

 Readers are cautioned that internal control over financial reporting, no matter how well designed, has inherent limitations and may not prevent or detect misstatements. Therefore, even effective internal control over financial reporting can only provide reasonable assurance with respect to the financial statement preparation and presentation.

 

 Our management, under the supervision and with the participation of our Chief Executive Officer and Principal Financial Officer, has evaluated the effectiveness of our internal controls over financial reporting as of the end of the period covered by this report based upon the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our evaluation, management concluded that our internal control over financial reporting was not effective as of May 31, 2011.  The Company identified material weaknesses related to segregation of duties, lack of staff with GAAP experience, and lack of SEC reporting experience.  In July 2010, we engaged Cardiff Partners to assist in establishing effective internal controls.

 

There were no changes in our internal controls over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that occurred during our fiscal year ended May 31, 2011, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. In the estimation of our senior management, none of the changes in the composition of management have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

**Item 9B.       Other Information**

 

None.

12               
              
 

**PART III**

 
**Item 10.          Directors and Executive Officers of Axiologix Education Corporation**

 

Our executive officer and directors and their ages as of October 13, 2011 are as follows:

  

**Director:**

 

**Name of Director**

 

**Age**

 

 

 

 

 

 

 

John P. Daglis

 

46

 

 

 

 

 

 

 

Wassim M. Ramadan

 

41

 

 

 

 

 

 

 

Remigio Romito

 

57

 

 

 

 

 

 

 

Dr. Vytas B. Siliunas

 

56

 

 

 

 

 

 

 

Dr. Rick Schafer

 

58

 

 

 

 

 

 

 

**Executive Officer:**

 

 

 

 

 

**Name of Officer**

 

**Age**

 

**Office**

 

 

 

 

 

John P. Daglis

 

46

 

President, Chief Executive Officer, Treasurer, Chief Financial Officer, Principal Accounting Officer

 

 

 

 

 

Helen Vassallo

 

26

 

Secretary

 

**Biographical Information**

 

Set forth below is a brief description of the background and business experience of our officers and our directors for the past five years.

 

*John P. Daglis, Director and President, Chief Executive Officer, Treasurer, and Chief Financial Officer.*

Since our inception on April 29, 2009, John P. Daglis has been our president, chief executive officer, treasurer, chief financial officer, and a member of the board of directors.

Since 1992, Mr. Daglis was the** **original founder of Edumedia, a private educational software company.  Before Edumedia, Mr. Daglis started his career in technology in 1984 with Tandy Corporation as a Retail Marketing Representative and an Educational Marketing Specialist.  In his six year history with Tandy Corporation, he advanced in Executive Management of the company in charge of Computer Hardware, Software, Networking, and Services Sales to School Systems out of 26 locations totaling over $14 million per year.  As the founder and President of Edumedia, he established the company’s accreditation as a Microsoft Solutions Provider in Education, an IBM Business Partner, a Certified Education Partner with Compaq, a Microsoft Academic Authorized reseller, a Hewlett-Packard Authorized Dealer, and a Symantec Enterprise Developer.  Additional authorizations include Intel, 3Com, and Nortel Networks, among others.  Mr. Daglis led the company to a 43% average growth rate in sales per year from 1992 to 1999.  During these years his company also gained recognition as the first to offer MPEG technology to schools in the state of New Jersey (August 1993), and was featured by local newspapers in cover page articles such as “Taking elementary students to the 21 st  Century”, and  “Local entrepreneur’s company helps schools secure technology grants.”  Mr. Daglis attended Stockton State College, majoring in Information Systems and Sciences.

  
13                 
              
 

*Wassim M. Ramadan, Director*

Mr. Ramadan is a member of our board of directors.  From 1997 to the present Mr. Ramadan has been an Exclusive Agent and Owner of Allstate Insurance Co./Ramadan Insurance Agency Inc. which is estimated at over $5 million by the Book of Business and holds over 5,000 accounts.  Mr. Ramadan brings to the company an extensive background of international relations.  He has published a number of articles concerning politics and international policy, as well as economics.  Mr. Ramadan has led several seminars at Allstate and has conducted a series of educational training to many Allstate agents.  He is also a real estate investment entrepreneur both locally and internationally and is fluent Arabic and French.  Mr. Ramadan has held positions such as the Manager of Economic Studies and Feasibility Analysis Department at I.C.M.I.F. in Beirut and Editor of the English Section of “The Economist,” a magazine of Arab Development.  Mr. Ramadan also has over 10 years of experience in insurance and is licensed in Property and Casualty, Life, Health and Accident, Series 6 and 63.  Mr. Ramadan is currently an exclusive agent and owner of Ramadan Insurance Agency.  Mr. Ramadan holds a BA in Political Science and Public Administration from the American University of Beirut located in Beirut, Lebanon, an MA in Political Science from Villanova University in Pennsylvania, and is currently pursuing his Ph.D. in Political Studies and International Law from Lebanese University also in Beirut

*Remigio Romito, Director*

Mr. Romito is member of our board of directors.  From August 2005 to the present, Mr. Romito has been an Account Manager for Gateway, Inc. responsible for sales to commercial and corporate entities.  From April 2004 to August 2005 he was an Executive Account Manager at Lexmark International responsible for sales in the New Jersey Public Sector.  From December 1996 to November 2003 Mr. Romito was a Major Account Manager at Dell, Inc., with responsibility for sales in New Jersey, Delaware, and Pennsylvania K-12 schools.  Mr. Romito has over 30 years experience in the education industry as a teacher, computer resource coordinator, and technology sales executive.  He is also a senior results oriented professional with experience in sales, marketing, and management of hardware, software, consultant services, technical services and value-added services.  Mr. Romito received his Bachelor of Arts Degree in Foreign Language Education from Youngstown State University, Youngstown, Ohio.  He has also completed 34 hours of coursework towards a Master’s Degree in Education at Youngstown State University.

*Dr. Vytas B. Siliunas, Director*

Mr. Siliunas is a member of our board of directors.  From January 2004 to the present, he was the Founder and Managing Partner of South Jersey ENT Surgical Associates, LLC, in Linwood, NJ.  From September 1994 to Present, he has been the President of ENT Surgical Practice.* * He has been a Section Chief of Otolaryngology of the AtlanticCare Regional Medical Center since 2003, as well as a member of the American Osteopathic Association, the Osteopathic College of Ophthalmology & Otolaryngology, the New Jersey Academy of Otolaryngology, the Pennsylvania Osteopathic Medical Association, and of the American Academy of Facial & Plastic Reconstruction Surgery.  Dr. Siliunas received his D.O. Degree from the Chicago College of Osteopathic Medicine, graduated in the top 5% of his class, and is a member of Sigma Sigma Phi (Honorary Society).

*Dr. Rick Schafer, Director*

Dr. Schafer is member our board of directors.  He is a graduate of both Indiana University and the Indiana University School of Medicine.  After graduating, Dr. Schafer accepted a position at Lawrence General Hospital located in Massachusetts in the Department of Pathology and Nuclear Medicine in 1983.  He was promoted to Chief of the Pathology and Nuclear Medicine Department in 1988, a position he held until 2009.  In addition to being Chief of Pathology and Nuclear Medicine, Dr. Schafer also served as Chair of the Committee on Quality of Medicine from 1992 through 2008, as well as holding office as the Vice President of the Medical Staff and a Member of the Medical Executive Committee, both positions he currently holds.  Additionally, Dr. Schafer served as Chair on a number of other committees including the Radiation Safety Committee and the Health Information Committee.  Dr. Schafer serves on the Committee of Continuing Medical Education for Lawrence General and Holy Family Hospitals.  He is a member of the American Medical Associates, the Massachusetts Medical Society, and the Society of Nuclear Medicine, as well as being an Inspector for College of American Pathologists.  In 1995, Dr. Schafer received the Massachusetts Medical Society Committee Chair Service Award in recognition of his outstanding financial leadership.  Dr. Schafer championed a successful three-year financial strategy to balance the Society’s operating budget, resulting in a balanced fiscal year operating budget in 2006.

 

  
14                
              
 

*Helen Vassallo, Secretary*

Ms. Vassallo was appointed our Secretary on March 29, 2010.  Since June 2009, Mrs. Vassallo has served as an executive assistant to Axiologix.  From September 2008 to June 2009, Mrs. Vassallo was a General Clerk at Manor Care Health Centre.  From 2002 to 2008 Mrs. Vassallo was a Special Event Coordinator for Vanguard LARP.  Ms. Vassallo has earned her Bachelor of Arts in English with an emphasis on Teaching from Rowan University.

 

To the best of our knowledge, our officers and directors have neither been convicted in any criminal proceedings during the past five years nor are parties to any judicial or administrative proceeding during the last five years that resulted in a judgment, decree or final order enjoining then from future violations of, or prohibiting activities subject to, federal or state securities laws or a finding of any violation of federal or state securities laws or commodities laws.  No bankruptcy petitions have been filed by or against any business or property of any of our directors or officers, nor has a bankruptcy petition been filed against a partnership or business association in which these persons were general partners or executive officers.

 

There are no family relationships among the directors and executive officers of Axiologix Education Corporation.

 

**Term of Office**

 

Our officers and our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. There have been no material changes to the procedures by which our stockholders may recommend nominees to our Board of Directors.

 

**Independent Directors**

 

The rules of the SEC require that we, because we are not listed on any national securities exchange, choose a definition of director “independence” for purposes of determining which directors are independent.  We have chosen to follow the definition of independence as determined by the Marketplace Rules of The Nasdaq National Market (“NASDAQ”).  Pursuant to NASDAQ’s definition, Wassim M. Ramadan, Remigio Romito, Dr. Vytas B. Siliunas and Dr. Rick Schafer are independent directors.

 

**Organization of the Board of Directors**

*Board Committees***.   **There currently no committees of our board of directors due to our relatively small size.  As we implement and achieve our business plan, our board of directors expects to appoint an audit committee, nominating committee and compensation committee, and to adopt charters relative to each such committee.  We intend to appoint such persons to the board of directors and committees of the board of directors as are expected to be required to meet the corporate governance requirements imposed by a national securities exchange, although we are not required to comply with such requirements until we elect to seek listing on a securities exchange.

 

*Code of Ethics for Chief Executive Officer and Senior Financial Officers*. We intend to adopt a code of ethics that applies to our officers, directors and employees, including our Chief Executive Officer and Chief Financial Officer, but have not done so to date due to our relatively small size.

15               
              
 

*Directors’ and Officers’ Liability Insurance***.  **When our financial resources, permit, we anticipate that we will obtain directors’ and officers’ liability insurance insuring our directors and officers against liability for acts or omissions in their capacities as directors or officers, subject to certain exclusions.  Such insurance is expected to insure us against losses which we may incur in indemnifying our officers and directors.  In addition, we have entered into indemnification agreements with our executive officers and directors and such persons also have indemnification rights under applicable laws, and our articles of incorporation and bylaws.

** **

**Section 16(a) Beneficial Ownership Reporting Compliance**

  

Due to our status as a Section 15(d) reporting company, our executive officers, directors, and persons who beneficially own more than 10% of a registered class of our equity securities are not required to file with the SEC reports of ownership and changes in ownership of our equity securities pursuant to Section 16(a) of the Securities Exchange Act of 1934.

   
**Compensation of Directors**

  

We do not currently pay any cash fees to our directors, but we pay directors’ expenses in attending board meetings. During the fiscal year ended May 31, 2011, no director expenses were incurred.

 

We do issue equity awards to our directors for services.   See Item 11 for further discussion on compensation to directors.
**Significant Employees**

 

There are no persons other than our officers and directors above who are expected by us to make a significant contribution to our business.

   
**Item 11.        Executive Compensation.**

 

The table below summarizes all compensation awarded to, earned by, or paid to our executive officer by any person for all services rendered in all capacities to us for the fiscal years ended May 31, 2011 and 2010.

 

16              
               
**SUMMARY COMPENSATION TABLE**

**Name and Principal Position****Year** **Salary ($)****Bonus ($)****Stock Awards ($)****Option Awards ($)****Non-Equity Incentive Plan Compensation ($)****Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)****All Other Compensation ($)****Total (S)****John P. Daglis**201171,769NoneNoneNoneNoneNone26,881$98,650 President, CEO, Treasurer and a director       (151,515 units)(2)  2010118,194None474,008NoneNoneNoneNone$592,202     (23,700,395 shares Common Stock)(1)     **Helen Vassallo**201149,661NoneNoneNoneNoneNone4,552$54,213 Secretary       (30,305 units)(2)  201038,436None7,000NoneNoneNoneNone$45,436     (350,000 shares Common Stock)(1)     **Wassim M. Ramadan**, director2011NoneNone41,250NoneNoneNone262,899$262,899 ** **   (3,125,000 shares Common Stock)(1)   (1,675,755 units)(2) ** **2010NoneNone167,715NoneNoneNone282,977$450,692 ** **   (8,385,760 shares Common Stock)(1)   (11,000,000 units)(2) **Remigio Romito**, director2011NoneNone9,000NoneNoneNoneNone$9,000 ** **   (322,078 shares Common Stock)(1)     ** **2010NoneNone25,906NoneNoneNoneNone$25,906 ** **   (1,259,320 shares Common Stock)(1)     **Dr. Vytas B. Siliunas**, director2011NoneNoneNoneNoneNoneNone49,701$49,701 ** **       (348,485 units)(2) ** **2010NoneNone175,996NoneNoneNone25,725$201,721 ** **   (8,799,800 shares Common Stock)(1)   (1,000,000 units)(2) **Dr. Rick Schaffer**, director2011NoneNoneNoneNoneNoneNoneNoneNone** **         ** **2010NoneNone113,194NoneNoneNoneNone$113,194 ** **   (5,659,705 shares Common Stock)(1)     

 

 

(1)

Shares issued for services provided to Axiologix

 

(2)

Represents units consisting of one common share and one warrant which were sold to Directors at a discount to market.

 

**Outstanding Equity Awards at Fiscal Year-End**

 

As of October 13, 2011, there were no outstanding equity awards held by any named executive officer.

   

**Employment Agreements**

 

As of October 13, 2011, we were not a party to any employment agreement with any named executive officer.

* 
*Compensation Committee Interlocks and Insider Participation*

   

Due to the limited number of directors constituting our Board of Directors, the full Board of Directors considers and participates in the compensation of our executive officers.

   
**Item 12.**

**Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.**

 

The following table sets forth certain information regarding beneficial ownership of our common stock as of October 13, 2011:

  
17               
              
 

 

·

by each person who is known by us to beneficially own more than 5% of our common stock;

 

·

by each of our executive officers and directors; and

 

·

by all of our executive officers and directors as a group.

  

**Title of****Name and address****Amount of beneficial****Percent****Class****of  beneficial owner****Ownership****of class (1)****Common Stock**John P. Daglis24,043,59513.86%** **Chief Executive Office** **197 Route 18 South, Ste 3000, Office 71 East Brunswick, NJ 08816    **Common Stock**Wassim M. Ramadan (2)20,275,61511.69%** **Director** **197 Route 18 South, Ste 3000, Office 71 East Brunswick, NJ 08816  . **Common Stock**Remigio Romito1,297,3200.75%** **Director** **197 Route 18 South, Ste 3000, Office 71 East Brunswick, NJ 08816    **Common Stock**Dr. Vytas B. Siliunas10,029,0755.78%** **Director** **197 Route 18 South, Ste 3000, Office 71 East Brunswick, NJ 08816    **Common Stock**Dr. Rick Schafer9,751,7395.62%** **Director** **197 Route 18 South, Ste 3000, Office 71 East Brunswick, NJ 08816    **Common Stock**Helen Vassallo350,000Less than 1%** **Corporate Secretary** **197 Route 18 South, Ste 3000, Office 71 East Brunswick, NJ 08816    **Common Stock**CEDE & CO21,724,61612.52%** **PO Box 20 Bowling Green Station New York, NY 10004Common StockAll Officers and Directors as a  group65,757,344 shares37.90 (1)
 

(1)

The percent of class is based on 173,487,034 shares of common stock issued and outstanding as of as of October 13, 2011.

 

(2)

Includes 7,599,860 shares owned in his own name, and 12,675,755 owned with his wife, Sawsan K. Ramadan.

 
**18                
              
 

**Item 13.       Certain Relationships and Related Transactions.**

 

During the year ended May 31, 2011, the Company entered into unit purchase agreements with Directors and Officers of the Company at $0.033 per unit.  Each unit consists of one common share and one warrant.  2,206,060 units were sold generating proceeds of $72,800.  The fair value of the common stock issued ranged from $0.11 to $0.14 per share depending on the varying dates of issuances.  The warrants were valued at $189,930 according to the Black-Scholes model and the fair value of the common stock was $226,903. Because the selling price of the unit (common shares and warrants) was determined to be below fair market value and the units were issued to board of directors, the Company recorded stock based compensation expense of $344,033 for the incremental difference between the sales price of the unit and the fair market value of common stock and warrants issued. 

During the year ended May 31, 2011, the Company’s Chief Executive Officer, John Daglis loaned the Company $9,714 and was repaid $26,614, of which $16,900 related to prior year borrowings.  There is no balance outstanding at May31, 2011.   Interest expense was not imputed as the amount was deemed to be immaterial.

During the year ended May 31, 2011, the Company entered into Secured Promissory Notes with Wassim Ramadan, a Director, for a total of $19,000.  The notes carry interest rates of 58% per annum and are convertible to common stock at the rate of $0.04 per share.  The Company has evaluated the conversion feature of the notes and determined that there was a $7,500 beneficial conversion feature on certain notes as the fixed conversion price of $0.04 was less than the fair value of the common stock at the time of issuance.   The beneficial conversion feature was recorded as a debt discount on the accompanying balance sheet.  These notes  remain outstanding at May 31, 2011.

 
**Item 14.        Exhibits.**

 

 

(a)

**Financial Statements.**

 

The following financial statements of Axiologix Education Corporation are submitted as a separate section of this report (See F-pages), and are incorporated by reference in Item 7:

 

Report Of Independent Registered Public Accounting Firm

 

F-2

 

 

 

Balance Sheets –  May 31, 2011 and 2010

 

F-3

 

 

 

Statements of Operations – For the Years Ended May 31, 2011 and 2010 and for the period of inception, from April 29, 2009 through May 31, 2011

 

F-4

 

 

 

Statements of Cash Flows - For the Years Ended May 31, 2011 and 2010 and for the period of inception, from April 29, 2009 through May 31, 2011

 

F-5

 

 

 

Statement of Stockholders’ Equity (Deficit)  – For the period of inception, from April 29, 2009 through May 31, 2011

 

F-6

 

 

 

Notes to Financial Statements

 

F-7

  

 

(b)**           Exhibits**

 

The following Exhibits are filed herewith pursuant to Item 601 of Regulation S-K or incorporated herein by reference to previous filings as noted:

**Exhibit No.**

 

**Identification of Exhibit**

 

 

 

3.1

 

Articles of Incorporation  (1)

3.2

 

By-Laws  (1)

10.1

 

Investment Agreement, dated May 17, 2010, between the Registrant and Dutchess Equity Fund, LP (2)

10.2

 

Registration Rights Agreement, dated May 17, 2010, between the Registrant and Dutchess Equity Fund, LP (2)

10.3

 

Amendment to the Investment Agreement, dated July 13, 2010, between the Registrant and Dutchess Equity Fund, LP (2)

23.1*

 

Consent of M&K CPAs, PLLC

31.1*

 

Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934

32.1*

 

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

*  Filed herewith

(1)

Incorporated herein by reference to the registrant’s Registration Statement on Form S-1 filed with the SEC on August 13, 2009.

(2)

Incorporated herein by reference to the registrant’s Current Report on Form 8-K filed with the SEC on August 13, 2010.

 
**19                 
              
 

**Item 15.        Principal Accountant Fees and Services**

 

On June 30, 2009, our Board of Directors approved the engagement of M&K CPAs, PLLC (“M&K”) to serve as our principal independent public accountant to audit our financial statements.  Audit fees billed by our principal independent public accountants for services rendered for the audit of our annual financial statements and review of our quarterly financial statements included in Form 10-Q for the last two fiscal years are presented below.  Audit-related fees, tax fees, and other fees for services billed by our principal independent public accountant during each of the last two fiscal years are also presented in the following table:

**Years Ended May 31,**

 

 

**2011**

**2010**
M&K CPAz, PLLCAudit Fees$    29,188$    7,000Audit-realted fees (a)--Tax fees (b)--Registration Statement Fees-14,650All Other Fees--
 

(a)

Audit-related fees primarily include research services to validate certain accounting policies.

 

 

(b)

Tax fees include costs for the preparation of our corporate income tax return.

 

Our Board of Directors established a policy whereby the outside auditors are required to seek pre-approval on an annual basis of all audit, audit-related, tax and other services by providing a prior description of the services to be performed. For the year ended May 31, 2011, 100% of all audit-related services were pre-approved by the Board of Directors, which concluded that the provision of such services by M&K was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions.

 

 
**SIGNATURES**

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Dated: October 14, 2011

AXIOLOGIX EDUCATION CORPORATION

 

(Registrant)

 

 

 

By:

/s/ John P. Daglis

 

 

 

President, Chief Executive Officer,

Treasurer, Chief

Financial Officer and Director

 

 

 

*(Principal Executive Officer)*

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

**Signature**

 

**Title**

 

**Date**

 

 

 

 

 

/s/ John P. Daglis

 

President, Chief Executive Officer, Treasurer, Chief Financial Officer and Director

(*Principal Executive Officer and Principal Financial and Accounting Officer)*

 

October 14, 2011

John P. Daglis

 

 

 

 

 

 

 

 

 

/s/ Dr. Wassim M. Ramadan

 

Director

 

October 14, 2011

Dr. Wassim M. Ramadan

 

 

 

 

 

 

 

 

 

/s/ Remigio Romito

 

Director

 

October 14, 2011

Remigio Romito

 

 

 

 

 

 

 

 

 

/s/ Dr. Rick Schafer

 

Director

 

October 14, 2011

Dr. Rick Schafer

 

 

 

 

 

 

 

 

 

/s/ Dr. Vytas B. Siliunas

 

Director

 

October 14, 2011

Dr. Vytas B. Siliunas

 

 

 

 

 

 

**SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED**

**PURSUANT TO SECTION 15(d) OF THE EXCHANGE ACT BY NON-REPORTING ISSUERS**

 

1.

No annual report to security holders covering the company’s fiscal year ended May 31, 2011, has been sent as of the date of this report.

 

2.

No proxy soliciting material has been sent to the company’s security holders with respect to the 2009 annual meeting of security holders.

 

3.

If such report or proxy material is furnished to security holders subsequent to the filing of this Report on Form 10-K, the company will furnish copies of such material to the Commission at the time it is sent to security holders.

 

 

20                 
              
 

**ANNUAL REPORT ON FORM 10-K
**ITEM 7**

**FINANCIAL STATEMENTS**

**FISCAL YEARS ENDED MAY 31, 2011 and 2010**

**AXIOLOGIX EDUCATION CORPORATION**

**EAST BRUNSWICK, NJ**

 

**AXIOLOGIX EDUCATION CORPORATION**

**Financial Statements**

 

**Page**

 

 

 

Report of Independent Registered Public Accounting Firm

 

F-2

 

 

 

Balance Sheets –  May 31, 2011 and 2010

 

F-3

 

 

 

Statements of Operations – For the Years Ended May 31, 2011 and 2010 and the for the period of inception, from April 29, 2009 through May 31, 2011

 

F-4

 

 

 

Statements of Cash Flows - For the Years Ended May 31, 2011 and 2010 and the for the period of inception, from April 29, 2009 through May 31, 2011

 

F-5

 

 

 

Statement of Stockholders’ Equity (Deficit)  – For the period of inception, from April 29, 2009 through May 31, 2011

 

F-6

 

 

 

Notes to Financial Statements

 

F-7

 

F-1                
              
 

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

**To the Board of Directors**

**Axiologix Education Corporation**

**(A Development Stage Enterprise)**

  

We have audited the accompanying balance sheets of Axiologix Education Corporation (a development stage company) as of May 31, 2011 and 2010, and  the related statements of operations, changes in stockholders' deficit, and cash flows for the years then ended and for the period from inception (April 9, 2009) through May 31, 2011. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Axiologix Education Corporation as of May 31, 2011 and 2010, and the results of its operations, changes in stockholders' deficit and cash flows for the periods described above in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company had a loss from operations for the year ended May 31, 2011 and a working capital deficit at May 31, 2011, which raises substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters also are described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ M&K CPAS, PLLC 

www.mkacpas.com

Houston, Texas

October 13, 2011

 

 

F-2               
              
 

**Axiologix Education Corporation**

**(A Development Stage Company)**

**Condensed Balance Sheets**

**ASSETS**

 

 

 

 

 

 

 

 

 

 

 

 

**May 31, 2011**

 

 

**May 31, 2010**
**Current Assets**Cash** $ **                               - **$**                    4,011 Accounts receivable                           400                           -   Prepaid expense and other current assets                        1,698                           -   Total Current Assets                        2,098                     4,011 Other intangibles, net                               -                             - **Total Assets**** $ **                        2,098  $                     4,011 
**LIABILITIES AND STOCKHOLDERS' DEFICIT**
**Current Liabilities**Accounts payable and accrued expenses** $ **                    137,630 **$**                  78,912 Accrued interest                      31,980                   31,101 Notes payable                    112,500                           -   Convertible notes payable, net of debt discount of $56,569 and $0, respectively                    234,431                117,000 Convertible notes payable, owed to related party, net of discount of $4,994 and $0, respectively
14,006

-
Derivative liability                      77,609                             - Due to related party                               -                   16,900 **Total Liabilities**                    608,156                 243,913 **Stockholders' Deficit**Common stock,  $0.001 par value; 750,000,000 shares authorized,    172,000,373 and 96,871,385 shares issued and outstanding, as of May 31, 2011 and May 31, 2010, respectively                    172,000                   96,871 Common stock payable, 7,800,000 shares issueable, as of May 31, 2010                               -                 156,000 Common stock subscription receivable                               -                  (36,000)Additional paid-in capital                 7,271,064              1,959,645 Accumulated deficit during the development stage               (8,049,122)            (2,416,418)**Total Stockholders' Deficit**                  (606,058)               (239,902)**Total Liabilities and Stockholders' Deficit**** $ **                        2,098  $                     4,011
**See notes to financial statements**

  
F-3                
               
**Axiologix Education Corporation**

**(A Development Stage Company)**

**Condensed Statements of Operations**

 

 

 

 

**For the Period From **

 

 

**For the Years Ended**

 

**April 29, 2009 (Inception)**

 

 

**May 31, 2011**

 

**May 31, 2010**

 

**to May 31, 2011**

 

 

 

 

 
**Revenue** $                          400  $                             -    $                                    400 ** Cost of Revenue **                               -                                   -                                            -   ** Gross Profit **                             400                                 -                                          400 **Operating expenses**Selling, general and administrative                   3,413,517                    2,050,585                              5,579,377 Depreciation and amortization                        26,000                                 -                                     26,000 Research and development                      550,095                       133,450                                 742,045 Impairment of intangible asset
 1,144,000 

 

 - 

 

 1,144,000 
   Total operating expenses                   5,133,612                   2,184,035                             7,491,422**Loss from operations **                 (5,133,212)                  (2,184,035)                           (7,491,022)**Other (income) expense**Interest income                               -                            (1,847)                                  (2,100)Interest expense                      397,491                         60,051                                 458,199 Change in fair market value of derivatives                          3,379                                 -                                       3,379                                                                                Loss on settlement of debt                        98,622                                 -                                     98,622 **Loss before provision for income taxes** $              (5,632,704) $               (2,242,239) $                        (8,049,122)Provision for income  taxes                               -                                   -                                            -   **Net loss **** $              (5,632,704)**** $               (2,242,239)**** $                        (8,049,122)****Net loss per share  - basic and diluted**** $                       (0.05)**** $                        (0.26)****Weighted average number of shares outstanding****  - basic and diluted****               116,554,229****                   8,590,839**
**See notes to financial statements**

 

F-3                
               
**Axiologix Education Corporation**

**(A Development Stage Company)**

**Condensed Statements of Cash Flows**

**For the Period From **

 

**For the Years Ended**

 

**April 29, 2009 (Inception)**

 

**May 31, 2011**

 

**May 31, 2010**

 

** to May 31, 2011**
**Cash Flows From Operating Activities:**Net loss $            (5,632,704) $            (2,242,239) $                        (8,049,122)Adjustment to reconcile net loss to net cash used in operations      Non-cash stock based compensation                 2,178,101                  1,321,364                              3,658,565       Common stock issued pursuant to reseller agreement                    660,000                     111,250                                 771,250       Common stock issuable for services                             -                       150,000                                          -         Change in fair market value of derivative liabilities                        3,379                              -                                       3,379       Amortization of debt discount                    291,650                              -                                   291,650       Loss on debt settlement                      98,622                              -                                     98,622       Impairment loss on intangible asset                 1,144,000                              -                                1,144,000       Depreciation and amortization                      26,000                              -                                     26,000       Bad debt expense                      10,000                              -                                     10,000       Non-cash consulting services                    200,000                              -                                   200,000   Changes in operating assets and liabilities:     Prepaid expense                             -                           1,765                                          -        Due from related party                             -                         10,153                                          -        Accounts receivable                         (400)                             -                                        (400)     Accounts payable and accrued expenses                      58,718                       50,479                                 137,630      Accrued Interest                    102,843                       65,052                                 168,551 **Net Cash  Used In Operating Activities****                  (859,791)****                  (532,176)****                           (1,539,875)****Cash Flows From Financing Activities:**Equity offering costs                               -                     (28,498)                                (28,498)Net borrowings from related parties                      19,000                       16,900                                   40,900 Repayments from related party loan                    (16,900)                      (5,000)                                (21,900)Cash received from subscription receivable                      26,000                                -                                   26,000 Proceeds from issuance of note payable                    183,000                     179,500                                 382,500 Payment of note payable                    (14,500)                      (3,200)                                (17,700)Proceeds from issuance of units                      72,800                     120,000                                 192,800 Common stock redeemed and cancelled                               -                     (97,900)                                (97,900)Proceeds from sale of common stock                    586,380                     349,393                              1,063,673 **Net Cash Provided by Financing Activities****                    855,780****                    531,195****                             1,539,875****Net Increase (Decrease) in Cash**                      (4,011)                         (981)                                           - Cash at Beginning of Period                        4,011                         4,992                                            - **Cash at End of Period**** $                             -**** $                     4,011**** $                                        -****Supplemental disclosure of cash flow information:**********************************************Cash paid for interest $                            -  $                            -  $                                        - Cash paid for taxes $                            -  $                            -  $                                        - **Supplemental disclosure of non-cash investing and financing activities:**********************************************Common shares rescinded $                            -  $                     8,653  $                                 8,653 Common stock issued  for conversion of notes payable and accrued interest $                 304,344  $                            -  $                             418,250 Common stock issued for common stock payable $                 156,000  $                            -  $                             156,000 Subscription receivable for common shares issued $                            -  $                            -  $                               36,000 Beneficial conversion feature of convertible note payable $                 274,697  $                            -  $                             274,697 Settlement of derivative liability to additional paid in capital $                     5,604  $                            -  $                                 5,604 Discount on convertible debt due to derivative liability $                   78,516  $                            -  $                               78,516 Issuance of notes and common stock for purchase of assets $              1,170,000  $                            -  $                          1,170,000
 

**See notes to financial statements**

  
F-5                
               
**Axiologix Education Corporation**

**(A Development Stage Company)**

**Condensed Statement of Changes in Stockholders' Deficit**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

** Deficit    **

 

 

** Common stock **

 

 

** Common stock payable **

 

** Additional **

** accumulated during **

** Total **

 

 

 

 

 

 

 

** Subscription **

** Paid-in **

** development **

** Stockholders' **

 

** Shares **

** Amount **

 

 

** Shares **

** Amount **

** Receivable **

** Capital **

** stage **

** Deficit **
** Balance April 29, 2009 (Inception)**                       -  $                    -                           -  $                    -  $                       -  $                        -  $                                    -  $                        -  Common stock issued to founders ($0.02/Sh)       43,700,000              43,700                           -                        -                           -                 (43,700)                                       -                            -  Common stock issued for cash ($0.02/Sh)         6,395,000                6,395                           -                        -                           -                121,505                                        -                 127,900  Common stock issued for services ($0.02/Sh)              18,000                     18                           -                        -                           -                       342                                        -                        360  Stock based compensation to founders                        -                        -                           -                        -                           -                    8,740                                        -                     8,740  Net loss for the period April 29, 2009 (Inception ) to May 31, 2009                        -                        -                           -                        -                           -                            -                           (174,179)              (174,179)          ** Balance May 31, 2009  ****      50,113,000****             50,113****                          -****                       -****                          -****                 86,887****                          (174,179)****                (37,179)** Shares rescinded      (43,263,000)            (43,263)                          -                        -                           -                  43,263                                        -                            -  Common stock issued for cash and subscription receivable ($0.02/Sh)       18,720,000              18,720                           -                        -                (30,000)               355,673                                        -                 344,393  Common stock issued for executive compensation ($0.02/Sh)       35,990,980              35,991                           -                        -                           -                683,829                                        -                 719,820  Common stock issued for services ($0.02/Sh)       13,817,190              13,817                           -                        -                           -                262,527                                        -                 276,344  Common stock payable for services ($0.02/Sh)                        -                        -             7,500,000            150,000                           -                            -                                        -                 150,000  Common stock payable for conversion of note payable and accrued interest ($0.02/Sh)                        -                        -                300,000                6,000                           -                            -                                        -                     6,000  Common stock issued for cash ($0.066/Sh)            166,670                   166                           -                        -                  (6,000)                 10,834                                        -                     5,000  Units consisting of common stock and warrants issued for cash ($0.01/unit)       12,000,000              12,000                           -                        -                           -                416,702                                        -                 428,702  Common stock issued for services ($0.066/Sh)            250,000                   250                           -                        -                           -                  16,250                                        -                   16,500  Common stock issued pursuant to resellership agreement ($0.02/Sh and $0.066/Sh)         4,700,000                4,700                           -                        -                           -                106,550                                        -                 111,250  Common stock issued for services related to equity offering            454,545                   455                           -                        -                           -                      (455)                                       -                            -  Common stock issued for notes payable and accrued interest converted to stock         5,395,485                5,395                           -                        -                           -                102,511                                        -                 107,906  Common stock redeemed and cancelled        (1,473,485)              (1,473)                          -                        -                           -                 (96,427)                                       -                 (97,900) Equity offering costs                        -                        -                           -                        -                           -                 (28,498)                                       -                 (28,498) Net loss for the year ended May 31, 2010                        -                        -                             -                        -                           -                            -                        (2,242,239)           (2,242,239)** Balance, May 31, 2010  ****      96,871,385**** $          96,871**** **** ****            7,800,000**** $        156,000**** $            (36,000)**** $         1,959,645**** $                    (2,416,418)**** $           (239,902)** Cash received for subscription receivable                       -                        -                           -                        -                   26,000                         -                                        -                    26,000  Uncollectible subscription receivable                      -                        -                           -                        -                     10,000                         -                                        -                      10,000  Common stock issued for common stock payable         7,800,000                7,800           (7,800,000)          (156,000)                        -                  148,200                                      -                            -    Common stock issued for conversion of note payable and accrued interest ($0.02/Sh)         7,704,560                7,705                         -                        -                           -                  146,336                                      -                   154,041  Common stock issued for conversion of note payable and accrued interest ($0.066/Sh)         2,277,323                2,277                         -                        -                           -                  148,026                                      -                   150,303  Common stock issued for cash ($0.066/Sh)         6,253,941                6,254                         -                        -                           -                  406,506                                      -                   412,760  Common stock issued for cash ($0.04/Sh)         2,280,000                2,280                         -                        -                           -                    88,920                                      -                     91,200  Common stock issued for cash ($0.02/Sh)         3,096,000                3,096                         -                        -                           -                    58,824                                      -                     61,920  Common stock issued for cash ($0.01/Sh)         2,050,000                2,050                         -                        -                           -                    18,450                                      -                     20,500  Common stock issued for services ($0.066/Sh)       13,523,700              13,524                         -                        -                           -                  879,040                                      -                   892,564  Units consisting of common stock and warrants issued for cash ($0.033/unit)         2,206,060                2,206                         -                        -                           -                  414,627                                      -                   416,833  Common stock issued for services ($0.11/Sh)         1,874,245                1,874                         -                        -                           -                  204,293                                      -                   206,167  Common stock issued for services       10,063,159              10,063                         -                        -                           -                  725,274                                      -                   735,337  Common stock issued pursuant to resellership agreement ($0.11/Sh)         6,000,000                6,000                         -                        -                           -                  654,000                                      -                   660,000  Common stock issued pursuant to asset purchase agreement ($0.105/Sh)       10,000,000              10,000                         -                        -                           -               1,040,000                                      -                1,050,000  Loss on settlement of debt                      -                        -                           -                        -                           -                    98,622                                      -                     98,622  Beneficial conversion feature of convertible note payable                      -                        -                           -                        -                           -                  274,697                                      -                   274,697 Settlement of derivative liability                      -                        -                           -                        -                           -                   5,604                                     -                     5,604 Net loss for the year ended May 31, 2011                      -                        -                             -                        -                           -                            -                          (5,632,704)           (5,632,704)** Balance, May 31, 2011 ****    172,000,373**** $        172,000****                        -  **** $                  -  **** $                     -  ****            7,271,064**** $                    (8,049,122)**** $           (606,058)** 
**See notes to financial statements**

  

  
F-6                
              
 

**AXIOLOGIX EDUCATION CORPORATION**

**(A Development Stage Company)**

**NOTES TO FINANCIAL STATEMENTS**

**NOTE 1 – ORGANIZATION AND BUSINESS OPERATIONS**

Axiologix Education Corporation was incorporated under the laws of Nevada, USA, on April 29, 2009.  The Company has limited operations and in accordance with ASC 915, is considered a development stage company that has had no revenues from inception to date.

Initial operations have included organization, capital formation, target market identification, and marketing plans.  Management is planning to commence operation as educational software and services provider for school systems K-20 by focusing on raising student achievement through its research-based school design, uniquely aligned assessment systems, interactive professional development, integrated use of technology and other proven program features.

**NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

 

**Basis of presentation**

 

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP").

 

**Forward stock split**

 

On October 4, 2010, the Company completed a one-for-five forward stock split of the Company’s common stock and an increase in the number of authorized shares of common stock from 150,000,000 to 750,000,000.  The share and per-share information disclosed within this Form 10-K reflects the completion of this stock split and all historical periods have been retroactively restated.

 

**Reclassification**

Certain amounts from prior periods have been reclassified to conform to the current period presentation.  There is no effect on net loss, cash flows or stockholders’ deficit as a result of these reclassifications.

**Use of estimates**

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make certain estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Estimates are adjusted to reflect actual experience when necessary. Significant estimates and assumptions affect many items in the financial statements. These include estimates of fair value of common stock and related impact to stock-based compensation. Actual results may differ from those estimates and assumptions, and such results may affect income, financial position or cash flows.

 

**Cash and cash equivalents**

 

The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents.  There were no cash equivalents at May 31, 2011 and 2010, respectively.

The Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution.  The balance at times may exceed federally insured limits.  At May 31, 2011 and May 31, 2010, respectively, the balance did not exceed the federally insured limit. 

 

F-7                
              
 

**Risks and Uncertainties**

The Company's operations are subject to significant risk and uncertainties including financial, operational, technological, and regulatory risks including the potential risk of business failure.  

Also see Note 3 regarding going concern matters.

***Derivative Financial Instruments***

The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks.

 

The Company reviews the terms of the common stock, warrants and convertible debt it issues to determine whether there are embedded derivative instruments, including embedded conversion options, which are required to be bifurcated and accounted for separately as derivative financial instruments.  In circumstances where the host instrument contains more than one embedded derivative instrument, including the conversion option, that is required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.

 

Bifurcated embedded derivatives are initially recorded at fair value and are then revalued at each reporting date with changes in the fair value reported as non-operating income or expense. The Company uses a lattice model for valuation of the derivative.  When the equity or convertible debt instruments contain embedded derivative instruments that are to be bifurcated and accounted for as liabilities, the total proceeds received are first allocated to the fair value of all the bifurcated derivative instruments.  The remaining proceeds, if any, are then allocated to the host instruments themselves, usually resulting in those instruments being recorded at a discount from their face value.

The discount from the face value of the convertible debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to interest expense, using the effective interest method.

Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether net cash settlement of the derivative instrument could be required within the 12 months of the balance sheet date.

**Loss per share**

 

In accordance with accounting guidance now codified as FASB ASC Topic 260, *“Earnings per Share,”  *basic earnings (loss) per share is computed by dividing net income (loss) by weighted average number of shares of common stock outstanding during each period.  Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period.

Since the Company reflected a net loss for the year ended May 31, 2011 and 2010, respectively, the effect of considering any common stock equivalents, if outstanding, would have been anti-dilutive.  A separate computation of diluted earnings (loss) per share is not presented.

 

The company issued 2,206,060 units in the year ended May 31, 2011.  Each unit consists of one common share and one warrant. The warrants have a strike price of $0.033 per share, vest immediately, and have a one year term. The fair value of the warrants was determined to be $189,930 using the Black-Scholes model. Key inputs used in the Black-Scholes valuation model were a strike price of $0.033, term of one year, volatility of 134% to 209%, and a discount rate of 0.25% to 0.32%.  No warrants were issued in 2010.  No warrants have been exercised as of May 31, 2011.

Net loss per share - basic and diluted                  $                   (0.05)$                        (0.26)Weighted average number of shares outstanding - basic and diluted                                116,554,2298,590,839 
The securities listed below were not included in the computation of diluted earnings per share as the effect from their conversion would have been anti-dilutive:

F-8                
              
 

 

**For the Year Ended**

 

**May 31,**

 

**2011**

 

**2010**

 

 

 

 

**Convertible notes payable**

**    9,243,105**

 

**         7,405,050**

 

 

 

 

**Outstanding warrants to purchase common stock**

**  14,206,060**

 

**       12,000,000**

 

 

 

 

**Total**

**  23,449,165**

 

**       19,405,050**

 

 

**Share Based Payments**

Generally, all forms of share-based payments, including stock option grants, restricted stock grants and stock appreciation rights, are measured at their fair value on the awards’ grant date, and based on the estimated number of awards that are ultimately expected to vest.  Share-based payment awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable.  The expense resulting from share-based payments are recorded as non-cash stock based compensation, which is an operating expense.

 

***Research and Development Costs***

 

The Company is engaged in ongoing research and development ("R&D") activities. The Company accounts for R&D under standards issued by the Financial Accounting Standards Board ("FASB"). Under these standards, all R&D costs must be charged to expense as incurred. Accordingly, internal R&D costs are expensed as incurred. Third-party R&D costs are expensed when the contracted work has been performed or as milestone results have been achieved. The costs associated with equipment or facilities acquired or constructed for R&D activities that have alternative future uses are capitalized and depreciated on a straight-line basis over the estimated useful life of the asset. The amortization and depreciation for such capitalized assets are charged to R&D expenses.

 

***Beneficial conversion features***

 

From time to time, the Company may issue convertible notes that may contain an imbedded beneficial conversion feature. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portion of the note proceeds to the fair value of the warrants, if related warrants have been granted. The intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the life of the note using the effective interest method.

 

***Intangible Assets***

 

Intangible assets acquired pursuant to the purchase agreement with Edumedia Software (See Note 7) are reported at their initial fair value less accumulated amortization. The intangible assets are amortized based on estimated useful lives of 15 years.

 

***Impairment of Long-Lived Assets***

 

The Company has adopted Accounting Standards Codification subtopic 360-10, Property, Plant and Equipment ("ASC 360-10"). ASC 360-10 requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company evaluates its long-lived assets for impairment annually or more often if events and circumstances warrant. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses or a forecasted inability to achieve break-even operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should impairment in value be indicated, the carrying value of long-lived assets will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset. ASC 360-10 also requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less costs to sell.

 

F-9                
              
***Revenue Recognition***

 

The Company recognizes revenue in accordance with accounting principles generally accepted in the United States of America. The Company’s current revenue stream consists of marketing consulting services.  Consulting services are sold on a fixed fee or time-and-materials basis. Revenue is recognized when the services are performed.

 

Revenues are recognized when persuasive evidence of an arrangement exists, the fees to be paid by the customer are fixed or determinable, collection of the fees is probable, delivery of the service and or product has occurred, and no other significant obligations on the part of the Company remain.

 

In future periods, the Company plans to recognize most of its revenue in accordance with software industry specific GAAP.

 

***Prepaid Expenses***

The Company has capitalized pre-payments pursuant to consulting agreements.  The prepaid expenses are amortized over the term of the consulting agreements.

***Income Taxes***

 

The Company accounts for income taxes in accordance with standards of disclosure propounded by the FASB, and any related interpretations of those standards sanctioned by the FASB.  Accordingly, deferred tax assets and liabilities are determined based on differences between the financial statement and tax bases of assets and liabilities, as well as a consideration of net operating loss and credit carry forwards, using enacted tax rates in effect for the period in which the differences are expected to impact taxable income.  A valuation allowance is established, when necessary, to reduce deferred tax assets to the amount that is more likely than not to be realized.

 

No provision for income taxes has been recorded due to the net operating loss carryforwards totaling approximately $4,291,103 as of May 31, 2011 that will be offset against future taxable income.  The available net operating loss carry forwards of approximately $4,291,103 expire in various years through 2029.  No tax benefit has been reported in the financial statements because the Company believes there is a 50% or greater chance the carry forwards will expire unused.  There were no uncertain tax positions taken by the Company.

 

 

Deferred tax asset and the valuation account is as follows:

**May 31,**

 

 

 

 

**2011**

**2010**

 

 

 

 

 
Deferred tax asset:   NOL Carryforward$1,458,051283,486   Valuation allowances(1,458,051)(283,486)   Total$--The components of income tax epense are as follows:Current Federal Tax$--Current State Tax--Change in NOL benefit1,174,565227,353Change in valuation allowance(1,174,565)(227,353)$--

F-10                
              
 

**Recent Accounting Pronouncements**

In December 2010, the FASB issued FASB ASU No. 2010-28, "When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts," which is now codified under FASB ASC Topic 350, "Intangibles - Goodwill and Other." This ASU provides amendments to Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not a goodwill impairment exists. When determining whether it is more likely than not an impairment exists, an entity should consider whether there are any adverse qualitative factors, such as a significant deterioration in market conditions, indicating an impairment may exist. FASB ASU No. 2010-28 is effective for fiscal years (and interim periods within those years) beginning after December 15, 2010. Early adoption is not permitted. Upon adoption of the amendments, an entity with reporting units having carrying amounts which are zero or negative is required to assess whether is it more likely than not the reporting units' goodwill is impaired. If the entity determines impairment exists, the entity must perform Step 2 of the goodwill impairment test for that reporting unit or units. Step 2 involves allocating the fair value of the reporting unit to each asset and liability, with the excess being implied goodwill. An impairment loss results if the amount of recorded goodwill exceeds the implied goodwill. Any resulting goodwill impairment should be recorded as a cumulative-effect adjustment to beginning retained earnings in the period of adoption. This ASU is not expected to have any material impact to the Company's consolidated financial statements.

In December 2010, the FASB issued FASB ASU No. 2010-29, "Disclosure of Supplementary Pro Forma Information for Business Combinations," which is now codified under FASB ASC Topic 805, "Business Combinations." A public entity is required to disclose pro forma data for business combinations occurring during the current reporting period. This ASU provides amendments to clarify the acquisition date to be used when reporting the pro forma financial information when comparative financial statements are presented and improves the usefulness of the pro forma revenue and earnings disclosures. If a public company presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) which occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The supplemental pro forma disclosures required are also expanded to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. FASB ASU No. 2010-29 is effective on a prospective basis for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010, with early adoption permitted. The adoption of this ASU is not expected to have a material effect on the Company's consolidated statement of financial position, results of operations or cash flows. 

In May 2011, the FASB issued Accounting Standards Update (ASU) No. 2011-04, *Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs*. This update clarifies the application of certain existing fair value measurement guidance and expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. This update is effective on a prospective basis for annual and interim reporting periods beginning on or after December 15, 2011, which for the Company is January 1, 2012. The Company does not expect that adopting this update will have a material impact on its consolidated financial statements.

**NOTE 3 – GOING CONCERN**

As reflected in the accompanying financial statements, the Company has a net loss of $5,632,704 and net cash used in operations of $859,791 for the year ended May 31, 2011.  The Company had a working capital deficit of $606,058 and a stockholders’ deficit of $8,049,122 at May 31, 2011.

The Company plans to seek additional funds to finance its immediate and long-term operations through debt and/or equity financing.  The successful outcome of future financing activities cannot be determined at this time and there is no assurance that if achieved, the Company will have sufficient funds to execute its intended business plan or generate positive operating results.

These factors, among others, raise doubt about the Company’s ability to continue as a going concern.  The accompanying financial statements do not include any adjustments related to recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.

The ability of the Company to emerge from the development stage is dependent upon the Company's successful efforts to raise sufficient capital and then attaining profitable operations.

In response to these problems, management has planned the following actions:

· Management intends to raise additional funds through public or private placement offerings. 

·Management is currently formulating plans with its educational software developers to generate sales.  There can be no assurances, however, that management’s expectations of future sales will be realized.

 

F-11                
              
**NOTE 4 – FAIR VALUE**

The Company has categorized its assets and liabilities recorded at fair value based upon the fair value hierarchy specified by GAAP.  All assets and liabilities are recorded at historical cost which approximates fair value, and therefore, no items were valued according to these inputs.

The levels of fair value hierarchy are as follows:

 

·

Level 1 inputs utilize unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access;

 

·

Level 2 inputs utilize other-than-quoted prices that are observable, either directly or indirectly.  Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs such as interest rates and yield curves that are observable at commonly quoted intervals; and

 

·

Level 3 inputs are unobservable and are typically based on our own assumptions, including situations where there is little, if any, market activity.

 

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.  In such cases, the Company categorizes such financial asset or liability based on the lowest level input that is significant to the fair value measurement in its entirety.  Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

Both observable and unobservable inputs may be used to determine the fair value of positions that are classified within the Level 3 category.  All assets and liabilities are at cost which approximates fair value and there are not items that were required to be valued on a non-recurring basis.

The Following liability was valued at fair value as of May 31, 2011. No other items were valued at fair value on a recurring basis as of May 31, 2011 or 2010.

 

**Carrying**

**Fair Value Measurments Using**

 

**Value**

**Level 1**

**Level 2**

**Level 3**

**Total**
Derivative liabilities
$     77,609
$          -$          -
$      77,609

$   77,609
Totals$          -$          -
$      77,609

$   77,609

**NOTE 5 – CONVERTIBLE NOTES PAYABLE**

 

On April 9, 2009, the Company entered into a Secured Promissory Note with an individual for a loan of $20,000.  The note carries an annual interest rate of 20%, and was due on August 12, 2010.  On August 16, 2010, the Company entered into an amendment of the Note whereby the fixed conversion price was reduced from $0.066 to $0.02 per share.   The note holder converted this debt and accrued interest for common shares at $0.02 per share after the amendment.  The company recorded a loss on settlement of debt of $98,622 during the year ended May 31, 2011 for the fair value of the additional common shares issuable pursuant to this amendment.

 

During the year ended May 31, 2011, the Company entered into certain Secured Promissory Notes with third parties for a total of $73,500.  The notes carry monthly interest rates ranging from 5%-10% compounding 30-360 days and are convertible to common stock at the rate of $0.066 per share.  The Company has evaluated the conversion feature of the notes and determined that there was a $50,288 beneficial conversion feature on certain notes as the fixed conversion price of $0.066 was less than the fair value of the common stock at the time of issuance.   The beneficial conversion feature was recorded as a debt discount on the accompanying balance sheet.  These notes were converted to common stock during the nine months ended May 31, 2011.

During the year ended May 31, 2011, the Company entered into certain Secured Promissory Notes with third parties for a total of $28,000.  The notes carry interest rates of 58% per annum and are convertible to common stock at the rate of $0.04 per share.  The Company has evaluated the conversion feature of the notes and determined that there was a $15,000 beneficial conversion feature on certain notes as the fixed conversion price of $0.04 was less than the fair value of the common stock at the time of issuance.   The beneficial conversion feature was recorded as a debt discount on the accompanying balance sheet.   These notes remain outstanding at May 31, 2011.

During the year ended May 31, 2011, the Company entered into Secured Promissory Notes with related parties for a total of $19,000.  The notes carry interest rates of 58% per annum and are convertible to common stock at the rate of $0.04 per share.  The Company has evaluated the conversion feature of the notes and determined  there was no beneficial conversion feature on certain notes as the fixed conversion price of $0.04 was greater than the fair value of the common stock at the time of issuance. .   These notes remain outstanding at May 31, 2011.

During the year ended May 31, 2011, the Company entered into a Secured Promissory note with a third party for a total of $11,500.  The note carries weekly interest rate of 10% compounding 7 days and is convertible to common stock at the rate of $0.066 per share.  The Company has evaluated the conversion feature of the notes and determined that there was a $9,410 beneficial conversion feature on the note as the fixed conversion price of $0.066 was less than the fair value of the common stock at the time of issuance.   The beneficial conversion feature was recorded as a debt discount on the accompanying balance sheet.  This note was converted to common stock during the nine months ended May 31, 2011.

 

During the year ended May 31, 2011, the Company entered into a Secured Promissory note with a third party for a total of $45,000.  The note carries an annual interest rate of 8% and is convertible into common stock at a variable conversion rate.  The conversion feature is available 180 days after closing.  The variable conversion rate is 58% of the average of the three lowest closing bid prices of the Company’s common stock during the previous 10 trading days from the notice of conversion. Based on the variable conversion price, this note was determined to have an embedded derivative liability. (See note 10). This note remains outstanding at May 31, 2011.

During the year ended May 31, 2011, the Company entered into a Secured Promissory note with a third party for a total of $25,000.  The note carries an interest rate of 20% per annum and is convertible to common stock at the lessor of $.02 or 70% of the average closing price of the previous 20 trading days.  Based on the variable conversion price, this note was determined to have an embedded derivative liability. (See note 10). This note remains outstanding at May 31, 2011.

 

On September 7, 2010, the Company entered into Convertible Promissory Notes pursuant to two consulting agreements with third parties.  The notes carry an annual interest rate of 15% and are convertible into common stock at a variable conversion rate.  The variable conversion rate is 50% of the lowest closing price for the Company’s common stock during the previous 20 trading days from the notice of conversion.  The note holders agreed that they will not submit conversion notices or enforce conversion rights requiring the Company to issue a number of common shares which exceeds the unissued authorized common shares of the Company.  The Company has evaluated the conversion feature of the notes and determined that there was a $200,000 beneficial conversion feature on these notes as the conversion price was less than the fair value of the common stock at the time of issuance.   The beneficial conversion feature was recorded as a debt discount on the accompanying balance sheet.   The Convertible Promissory Notes have a maturity date of March 15, 2011 and remain outstanding at May 31, 2011.  As of May 31, 2011, these notes are considered to be in default.

During the year ended May 31, 2011, the Company converted $117,000 of Secured Promissory Notes into common stock at a $0.02 conversion price plus accrued interest of $37,041 resulting in the issuance of 7,704,560 common shares.  Additionally, the Company converted $85,000 of Secured Promissory Notes into common stock at a $0.066 conversion price plus accrued interest of $65,303 resulting in the issuance of 2,277,323 common shares.  Conversions were according to the terms of the convertible note agreements so no gain or loss was recorded at the time of conversion. (See Note 6).

 

F-12                
              
  
**PrincipalBalance**

 

**Less Discount**

 

**Carrying Amount**
Convertible notes payable - May 31, 2010$117,000$-$117,000Issuance of convertible notes402,00(286,736)115,264Authorization of debt discount and beneficial conversion feature-225,173225,173Conversion of notes payable (209,000)-(209,000)Conversion of notes payable - May 31, 2011$310,000$(61,563)$248,437
 

As of May 31, 2011 and May 31, 2010, the Company had accrued interest payable of $31,980 and $31,101, respectively.  Interest expense totaled $397,491 and $60,051 for the years ended May 31, 2011 and 2010, respectively.

 

**NOTE 6 – STOCKHOLDERS’ DEFICIT** 

On October 4, 2010, the Company completed a one-for five forward stock split of the Company’s common stock and an increase in the number of authorized shares of common stock from 150,000,000 to 750,000,000.  The payment date for the stock split was October 15, 2010 to holders of record as of October 4, 2010.

 

The Company is authorized to issue up to 750,000,000 shares of its $0.001 common stock.  At May 31, 2011, there were 172,000,373 shares issued and outstanding.  At May 31, 2010, there were 96,871,385 shares issued and outstanding.

As of May 31, 2009, the Company issued 43,700,000 shares of common stock to its founders at par. 43,263,000 shares were rescinded in fiscal year 2010 and the difference of 437,000 shares were valued at $0.02 and recorded as stock-based compensation during the period ended May 31, 2009.

During the period ended May 31, 2009, the Company entered into stock purchase agreements with various accredited investors for the sale of 6,395,000 shares of its common stock at a purchase price of $0.02 per share generating proceeds of $127,900.

During the period ended May 31, 2009, the Company issued 18,000 shares of common stock for services.  The value of the shares was $360 or $0.02 per share which was the price of the most recent sale of the Company’s stock at the time of issuance.

During the year ended May 31, 2010, the Company entered into stock purchase agreements with various accredited investors for the sale of 18,720,000 shares of its common stock at a purchase price of $0.02 per share generating proceeds of $344,393 and a subscription receivable of $30,000.  

During the year ended May 31, 2010, the Company issued 35,990,980 shares of common stock for executive compensation.  The shares were valued at $0.02 per share at the time issuance which was the price of the most recent sale of the Company’s stock at the time of issuance and accordingly the Company recorded $719,820 of stock based compensation.

During the year ended May 31, 2010, the Company issued 13,817,190 shares of common stock for services.  The shares were valued at $0.02 per share at the time issuance which was the price of the most recent sale of the Company’s stock at the time of issuance and accordingly the Company recorded $276,344 of stock based compensation.

During the year ended May 31, 2010, the Company entered into stock purchase agreements with various accredited investor for the sale of 166,670 shares of its common stock at a purchase price of $0.066 per share generating proceeds of $5,000 and a subscription receivable of $6,000.

 

F-13                
              
During the year ended May 31, 2010, the Company entered into unit purchase agreements with Directors and Officers of the Company at $0.01 per unit.  Each unit consists of one common share and one warrant.  12,000,000 units were sold generating proceeds of $120,000.  The fair value of the common stock was $240,000 or $0.02 per share.  The warrants were valued at $188,702 according to the Black-Scholes model.  Because the selling price of the unit (common shares and warrants) were determined to be below fair market value and the units were issued to Directors and Officers, the Company recorded stock based compensation expense of $308,702 for the incremental difference between the sales price of the unit and the fair market value of common stock and warrants.

During the year ended May 31, 2010, the Company issued 250,000 shares of common stock for services valued at $0.066 per share.  The value of the shares was $0.066 per share which was the price of the most recent sale of the Company’s stock at the time of issuance.  The Company recorded $16,500 of stock based compensation for these issuances.

  

During the year ended May 31, 2010, the Company issued 4,325,000 shares to Edumedia pursuant to the exclusive resellership agreement.  At the time of issuance, it was determined that the fair value of the common stock was $0.02 per share, accordingly, the Company recorded a stock based compensation expense of $86,500. The value of the shares was $0.02 per share which was the price of the most recent sale of the Company’s stock at the time of issuance.  The agreement entailed no disincentive for non-performance therefore these shares were expensed upon issuance.

During the year ended May 31, 2010, the Company incurred $28,498 in equity offering costs.

During the year ended May 31, 2010, the Company issued an additional 375,000 shares to Edumedia pursuant to the exclusive resellership agreement.  At the time of issuance, it was determined that the fair value of the common stock was $0.066 per share, accordingly, the Company recorded a stock based compensation expense of $24,750.  The value of the shares was $0.066 per share which was the price of the most recent sale of the Company’s stock at the time of issuance.

The Company entered into an Investment Agreement with Dutchess Opportunity Fund, II, L.P. (“Dutchess”) on May 17, 2010 and an amendment to that Agreement on July 13, 2010 (collectively, the “Investment Agreement”).    The aggregate number of shares issuable by the Company and purchasable by Dutchess under the Investment Agreement is 18,000,000, which was determined by the Company’s Board of Directors.  In connection with the preparation of the Investment Agreement and the Registration Rights Agreement, the Company issued Dutchess 454,545 shares of the Company’s common stock as a document preparation fee.   These shares were treated as an equity offering cost and value of such shares was charged to additional paid in capital.  On November 29, 2010, the Company terminated its Investment Agreement with Dutchess Opportunity Fund II, L.P.  Prior to termination, the Company had not sold any shares of its common stock to Dutchess pursuant to the Investment Agreement.

During the year ended May 31, 2010, the company issued 5,395,485 shares of common stock to convertible note holders reducing its principal obligation by $84,300 and accrued interest of $29,606.  All notes were converted at a fixed conversion price of $0.02.

During the year ended May 31, 2010, the Company redeemed and cancelled 1,473,485 shares of its common stock for a total of $97,900.  These shares were purchased from one investor at a price of $0.066 per share.  This represented a premium on this purchase of $0.046 over the Company’s prior cash sales of common stock at $0.02 per share.

As of May 31, 2010, the Company had $36,000 of subscription receivables related to the sale of 1,500,000 shares at $0.02 per share and 90,910 shares at $0.066 per share.

As of May 31, 2010, the Company was obligated to issue 7,500,000 shares of common stock for $150,000 of services and 300,000 shares were owed for a debt conversion related to fiscal year 2010.

During the year ended May 31, 2011, the Company issued 7,800,000 shares of common stock which were payable as of May 31, 2010.

During the year ended May 31, 2011, the Company received $26,000 for subscription receivable and $10,000 of the subscription receivable was not collected and charged to expense. 

 

During the year ended May 31, 2011, the Company issued 7,704,560 shares of common stock to convertible note holders reducing its principal obligation by $117,000 and accrued interest of $37,041.  All of these notes were converted at a fixed conversion price of $0.02.

F-14                
              
 

During the year ended May 31, 2011, the Company issued 2,277,323 shares of common stock to convertible note holders reducing its principal obligation by $85,000 and accrued interest of $65,303.  All notes of these notes were converted at a fixed conversion price of $0.066.

During the year ended May 31, 2011, the Company entered into stock purchase agreements with various accredited investors for the sale of 6,253,941 shares of its common stock at a purchase price of $0.066 per share generating proceeds of $412,760.

During the year ended May 31, 2011, the Company entered into stock purchase agreements with various accredited investors for the sale of 2,280,000 shares of its common stock at a purchase price of $0.04 per share generating proceeds of $91,200.

During the year ended May 31, 2011, the Company entered into stock purchase agreements with various accredited investors for the sale of 3,096,000 shares of its common stock at a purchase price of $0.02 per share generating proceeds of $61,920.

During the year ended May 31, 2011, the Company entered into stock purchase agreements with various accredited investors for the sale of 2,050,000 shares of its common stock at a purchase price of $0.01 per share generating proceeds of $20,500.

During the year ended May 31, 2011, the Company issued 13,523,700 shares of common stock for services.  The shares were valued at $0.066 per share at the time of issuance which was the price of the most recent sale of the Company’s stock and accordingly the Company recorded $892,564 of stock based compensation.

During the year ended May 31, 2011, the Company entered into unit purchase agreements with Directors and Officers of the Company at $0.033 per unit.  Each unit consists of one common share and one warrant.  2,206,060 units were sold generating proceeds of $72,800.  The fair value of the common stock issued ranged from $0.11 to $0.14 per share depending on the varying dates of issuances.  The warrants were valued at $189,930 according to the Black-Scholes model and the fair value of the common stock was $226,903. Because the selling price of the unit (common shares and warrants) was determined to be below fair market value and the units were issued to board of directors, the Company recorded stock based compensation expense of $344,033 for the incremental difference between the sales price of the unit and the fair market value of common stock and warrants issued.

During the year ended May 31, 2011, the Company issued 1,874,245 shares of common stock for services.  The shares were valued at $0.11 per share at the time issuance which was the closing trading price of the Company’s common stock and accordingly the Company recorded $206,167 of stock based compensation.

During the year ended May 31, 2011, the Company issued 10,063,159 shares of common stock for services.  The shares were valued at the closing trading price of the Company’s common stock at the time of issuance and accordingly the Company recorded $735,337 of stock based compensation.

During September 2010, the Company entered in Amendment #1 to its Exclusive Worldwide Resellership Agreement with Edumedia Software Solutions Corporation (“Edumedia”).  Pursuant to the Amendment, the Company issued 6,000,000 shares of common stock to Edumedia. The shares issued were valued on the grant dates based on the closing price of the shares.  This resulted in an expense of $660,000 related to this issuance.  Additionally, the Company made cash payments of $56,354 in second and third fiscal quarter of the current year.  These payments are reflected in the statement of operations as of and for the year ended May 31, 2011.

On January 24, 2011, the Company issued 10,000,000 shares to Edumedia pursuant to the asset purchase agreement. These shares were valued at $1,050,000 on the grant date based on the closing price of the shares. See Note 7 for further discussion.

F-15                
               
**NOTE 7 – INTANGIBLE ASSET PURCHASE AGREEMENT**

 

On January 24, 2011, The Company entered into an asset purchase agreement with Edumedia Software Solutions Corporation to acquire Edumedia’s assets used or held for the Company in connection with its E*Pad software platform in exchange for 10,000,000 shares of the Company’s common stock and $120,000 in cash payable in equal weekly installments of $2,500.

The Company acquired intangible intellectual property including all software related to E*Pad, all intellectual property rights, rights to the name “E*Pad”, and internet domain addresses related to E*Pad. The transaction was deemed to be an asset acquisition of research and development pursuant to the FASB standards.

 

The following table summarizes the entry recording the intangible assets acquired:

 

Intellectual property – software

 

$

1,170,000

 

Common stock

 

 

(10,000)

 

Additional paid in capital

 

 

(1,040,000)

 

Note payable

 

 

(120,000)

 

 

 

$

—

 
 
The useful lives of the acquired intangibles are 15 years.  Amortization expense totaled $26,000 and $0 for the years ended May 31, 2011 and 2010, respectively.

As of May 31, 2011, the company determined the intangible assets acquired were fully impaired.  Accordingly, the company recorded a loss on impairment of intangible assets totaling $1,044,000 during the year ended May 31, 2011 which is reflected on the Statement of Operations.

**NOTE 8 – RELATED PARTY TRANSACTIONS**

During the year ended May 31, 2011, the Company entered into unit purchase agreements with Directors and Officers of the Company at $0.033 per unit.  Each unit consists of one common share and one warrant.  2,206,060 units were sold generating proceeds of $72,800.  The fair value of the common stock issued ranged from $0.11 to $0.14 per share depending on the varying dates of issuances.  The warrants were valued at $189,930 according to the Black-Scholes model and the fair value of the common stock was $226,903. Because the selling price of the unit (common shares and warrants) was determined to be below fair market value and the units were issued to board of directors, the Company recorded stock based compensation expense of $344,033 for the incremental difference between the sales price of the unit and the fair market value of common stock and warrants issued. 

During the year ended May 31, 2011, the Company’s Chief Executive Officer, John Daglis loaned the Company $9,714 and was repaid $26,614, of which $16,900 related to prior year borrowings.  There is no balance outstanding at May31, 2011.   Interest expense was not imputed as the amount was deemed to be immaterial.

During the year ended May 31, 2011, the Chief Executive Officer, John Daglis loaned the Company $9,714.  The balance was repaid during the year ended May 31, 2011.

 

During the year ended May 31, 2011, the Company paid $26,614 to the Chief Executive Officer, John Daglis, for an outstanding loan.

During the year ended May 31, 2011, the Company entered into Secured Promissory Notes with Wassim Ramadan, a Director, for a total of $19,000.  The notes carry interest rates of 58% per annum and are convertible to common stock at the rate of $0.04 per share.   These notes  remain outstanding at May 31, 2011.

F-16                
              
**NOTE 9 – COMMITMENTS**

***Consulting Agreement***

In September 2010, the Company entered into two four-month consulting agreements with unrelated third parties to provide consulting services.  In exchange for the services provided, the Company issued two convertible promissory notes totaling $200,000 due March 15, 2011.  See Note 5 for further discussion on the convertible promissory notes.

**NOTE 10 – DERIVATIVE LIABILITY**

The Company evaluated the conversion feature embedded in the convertible notes to determine if such conversion feature should be bifurcated from its host instrument and accounted for as a freestanding derivative.  Due to the note not meeting the definition of a conventional debt instrument because it contained a diluted issuance provision, the convertible notes were accounted for in accordance with ASC 815.  According to ASC 815, the derivatives associated with the convertible notes were recognized as a discount to the debt instrument, and the discount is being amortized over the life of the note and any excess of the derivative value over the note payable value is recognized as additional interest expense at issuance date.  The company also evaluated all common stock equivalents to determine if these instruments were tainted due to the embedded derivative.

Further, and in accordance with ASC 815, the embedded derivatives are revalued at each balance sheet date and marked to fair value with the corresponding adjustment as a “gain or loss on change in fair value of derivatives” in the statement of operations.  As of May 31, 2011, the fair value of the embedded derivatives included on the accompanying balance sheet was $77,609.  During the year ended May 31, 2011, the Company recognized a loss on change in fair value of derivative liability totaling $3,379.  Key assumptions used in the valuation of derivative liabilities associated with the convertible notes at May 31, 2011 were as follows:

·

The stock price would fluctuate with an annual volatility ranging from 281% to 326% based on the historical volatility for the company.

·

An event of default would occur 1% of the time, increasing 1.00% per month to a maximum of 10%.

·

Alternative financing for the convertible notes would be initially available to redeem the note 10% of the time and increase monthly by 0.2% to a maximum of 20%.

·

The holder would automatically convert the notes at maturity if the registration was effective and the company was not in default.

 

  

The Company classifies the fair value of these securities under level three of the fair value hierarchy of financial instruments. The fair value of the derivative liability was calculated using a lattice model that values the compound embedded derivatives based on a probability weighted discounted cash flow model. This model is based on future projections of the various potential outcomes. The embedded derivatives that were analyzed and incorporated into the model included the conversion feature with the full ratchet reset, and the redemption options.

The components of the derivative liability on the Company’s balance sheet at May 31, 2011 and 2010 are as follows:

 

 

**For the years ended May 31,**

 

 

**2011**

**2010**
Embedded conversion features - convertible promissory notes (principal balance $70,000)72,831-Tainted instruments - convertible promissory notes (principal balance $40,000)4,778-77,609-
**F-17                
              NOTE 11 – SUBSEQUENT EVENTS
 

On June 2, 2011, the Company entered into a subscription agreement for 1,133,333 shares of common stock in exchange for past due trade payables of $17,000.

On June 7, 2011, the Company entered into stock purchase agreements with an accredited investor for the sale of 353,333 shares of its common stock at a purchase price of $0.015 per share generating proceeds of $5,300.

On June 13, 2011, the Company closed on a securities purchase agreement with an accredited investor raising $30,000 in net proceeds.  The Company issued a Convertible Promissory Note totaling $32,500 which is due December 10, 2011.  The note carries an annual interest rate of 8% and is convertible into common stock at a variable conversion rate.  The conversion feature is available 180 days after closing.  The variable conversion rate is 58% of the average of the three lowest closing bid prices of the Company’s common stock during the previous 10 trading days from the notice of conversion.

During June 2011, the Company entered into Secured Promissory notes with third parties totaling $16,000.  The notes carry interest rates of 20% per annum and are convertible to common stock at the lessor of $.007 or 70% of the average closing price of the previous 20 trading days.

During June 2011, the Company entered into Secured Promissory notes with third parties totaling $11,857.  The notes carry interest rates of 20% per annum and are convertible to common stock at the lessor of $.01 or 70% of the average closing price of the previous 20 trading days.

During July 2011, the Company entered into Secured Promissory notes with third parties totaling $23,241.  The notes carry interest rates of 20% per annum and are convertible to common stock at the lessor of $.007 or 70% of the average closing price of the previous 20 trading days.

During August 2011, the Company entered into a Secured Promissory notes with a third party totaling $25,000.  The note carries an interest rate of 15% per annum and is convertible to common stock at a rate of $.007 per share.

 

F-18                
              
 ***************