10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

Amendment No. 1

(Mark One)

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2011

OR

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from       to

AISystems, Inc.

(Exact name of registrant as specified in its charter)

Nevada	000-52296	20-2414965
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

2711 Centerville Road

Wilmington, DE 19808

(Address of principal executive offices) (Zip Code)

(302) 351 2515

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter time 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 o

Indicate by check mark whether the registrant 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 preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act

Large Accelerated Filer o                                                                                    Accelerated Filer o

Non-Accelerated Filer o(Do not check if smaller reporting company)       Smaller reporting company  x

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

As of August 19, 2011, there were 159,212,019 common shares, $0.001 par value, issued and outstanding.

Explanatory Note

AISystems, Inc. (the “Company”) is filing this Amendment No. 1 on Form 10-Q/A (the “Amendment”) to the Company’s quarterly report on Form 10-Q for the period ended June 30, 2011 (the “Form 10-Q”), filed with the Securities and Exchange Commission on August 22, 2011 (the “Original Filing Date”). Due to a scrivener’s error, Exhibit 101 included transcription errors. As such, the Amendment is being filed solely to furnish a revised Exhibit 101 to the Form 10-Q in accordance with Rule 405 of Regulation S-T. The revision to Exhibit 101 Exhibit 101 consists of the following materials from the Company’s Form 10-Q, formatted in XBRL (eXtensible Business Reporting Language):

101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Schema
101.CAL	XBRL Taxonomy Calculation Linkbase
101.DEF	XBRL Taxonomy Definition Linkbase
101.LAB	XBRL Taxonomy Label Linkbase
101.PRE	XBRL Taxonomy Presentation Linkbase

No other changes have been made to the Form 10-Q. This Amendment speaks as of the Original Filing Date, does not reflect events that may have occurred subsequent to the Original Filing Date, and does not modify or update in any way disclosures made in the Form 10-Q.

Pursuant to Rule 406T of Regulation S-T, the interactive data files attached as Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

ITEM 6. EXHIBITS

(a) Exhibits

Exhibit No.	Description
31.1*	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) as adopted under Section 302 of the Sarbanes-Oxley Act of 2002
32.1*+	Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS**	XBRL Instance Document
101.SCH**	XBRL Taxonomy Extension Schema Document
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB**	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE**	XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF**	XBRL Taxonomy Extension Definition Linkbase Document.

*	Previously filed or furnished, as applicable, with or incorporated by reference in, the Company’s quarterly report on Form 10-Q for the period ended June 30, 2011 (the “Form 10-Q”), filed with the Securities and Exchange Commission on August 22, 2011.
**	Furnished herewith. XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
+	In accordance with SEC Release 33-8238, Exhibit 32.1 is furnished and not filed.

SIGNATURES

Pursuant to the requirements 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.

	AI SYSTEMS INC.
Date: September  16, 2011	By:	/s/ Stephen C. Johnston
		Stephen C. Johnston
		Chief Executive Officer Chief Financial Officer (Duly Authorized Officer, Principal Executive Officer and Principal Financial Officer)

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Condensed Consolidated Balance Sheets Parenthetical	Jun. 30, 2011	Dec. 31, 2010
Preferred Stock, Shares Authorized	2,600,000	2,600,000
Common Stock, Shares Authorized	300,000,000	300,000,000
Common Stock, Shares Issued	157,335,141	147,732,455
Series B Preferred Stock
Preferred Stock, Shares Authorized	2,400,000	2,400,000
Preferred Stock, Shares Issued (Series B)	2,329,905	2,329,905

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Condensed Consolidated Statements of Operations (USD $)	3 Months Ended		6 Months Ended		67 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011
Revenue	$ 1,000,000	$ 0	$ 1,000,000	$ 0	$ 1,000,000
Operating expenses
Salaries and benefits	(381,520)	(648,416)	(888,068)	(1,276,798)	(17,692,707)
Outside Services	(350,024)	(822,625)	(835,697)	(1,517,570)	(12,572,020)
Travel, meals and entertainment	(11,917)	(62,246)	(51,978)	(113,554)	(2,672,733)
Office and general expense	10,705	(256,644)	(63,090)	(506,889)	(5,058,359)
Total Operating Expense	(732,756)	(1,789,931)	(1,838,833)	(3,414,811)	(37,995,819)
Other expenses
Depreciation and amortization	(26,797)	(48,243)	(53,594)	(93,198)	(1,158,896)
Stock Based Compensation	(429,446)	(92,504)	(655,521)	(284,806)	(28,207,130)
Total Other Expenses	(456,243)	(140,747)	(709,115)	(378,004)	(29,366,026)
Loss from operations	(188,999)	(1,930,678)	(1,547,948)	(3,792,815)	(66,361,845)
Other income/(expenses)
Interest expense	(117,922)	(68,304)	(323,099)	(156,922)	(3,964,419)
Interest income	0	0	0	0	114,610
Gain on extinguishment of debt	54,437	0	54,437	0	54,437
Other income (expense)	(10,964)	57,965	(56,634)	21,574	(58,240)
Total Other Income (Expense)	(74,449)	(10,339)	(325,296)	(135,348)	(3,853,612)
Net loss for the period	(263,448)	(1,941,017)	(1,873,244)	(3,928,163)	(70,215,457)
Deficit, beginning of the period	(69,952,009)	(63,327,999)	(68,342,213)	(61,340,853)	0
Deficit, end of the period	$ (70,215,457)	$ (65,269,016)	$ (70,215,457)	$ (65,269,016)	$ (70,215,457)
Net loss per share attributable to common stockholders
Basic and fully diluted	$ 0	$ (0.01)	$ (0.01)	$ (0.03)
Number of weighted average common shares outstanding basic and diluted	155,503,985	141,057,441	153,342,486	120,114,084

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Document and Entity Information	6 Months Ended
	Jun. 30, 2011	Aug. 19, 2011
Document and Entity Information [Abstract]
Amendment Description	AISystems, Inc. (the "Company") is filing this Amendment No. 1 on Form 10-Q/A (the "Amendment") to the Company's quarterly report on Form 10-Q for the period ended June 30, 2011 (the "Form 10-Q"), filed with the Securities and Exchange Commission on August 22, 2011 (the "Original Filing Date"). Due to a scrivener's error, Exhibit 101 included transcription errors. As such, the Amendment is being filed solely to furnish a revised Exhibit 101 to the Form 10-Q in accordance with Rule 405 of Regulation S-T. The revision to Exhibit 101 Exhibit 101 consists of the following materials from the Company's Form 10-Q, formatted in XBRL (eXtensible Business Reporting Language): 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Schema 101.CAL XBRL Taxonomy Calculation Linkbase 101.DEF XBRL Taxonomy Definition Linkbase 101.LAB XBRL Taxonomy Label Linkbase 101.PRE XBRL Taxonomy Presentation Linkbase No other changes have been made to the Form 10-Q. This Amendment speaks as of the Original Filing Date, does not reflect events that may have occurred subsequent to the Original Filing Date, and does not modify or update in any way disclosures made in the Form 10-Q. Pursuant to Rule 406T of Regulation S-T, the interactive data files attached as Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.
Amendment Flag	true
Current Fiscal Year End Date	--12-31
Document Period End Date	Jun. 30, 2011
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Registrant Name	AISystems, Inc.
Entity Central Index Key	0001328769
Entity Common Stock, Shares Outstanding		159,212,019
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q2
Document Type	10-Q

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Property and Equipment

6 Months Ended

Jun. 30, 2011

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment Disclosure [Text Block]

5.  Property and equipment

	June 30, 2011			December 31, 2010
Computer equipment	$	905,117		$	905,117
Office equipment		265,379			265,379
Vehicle		28,706			28,706
Computer software		115,042			115,042
		1,314,244			1,314,244
Less: accumulated depreciation		(1,069,489	)		(1,015,895	)
	$	244,755		$	298,349

Depreciation expense was $26,797, and $48,243 for the three months ended June 30, 2011 and 2010 respectively, and $53,594 and $93,198 for the six months ended June 30, 2011 and 2010 respectively.

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Income Taxes

6 Months Ended

Jun. 30, 2011

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

10.  Income taxes

The Company has made no provision for income taxes since inception and for the periods presented as the Company has incurred net losses. Based on statutory rates, the Company’s expected income tax benefit from these losses based on the accounting loss for the six months ended June 30, 2011 and 2010 and for the period from December 7, 2005 (inception) to June 30, 2011 would be approximately $650,400, $1,355,170 and $24,315,138 respectively.

The future benefit of net operating loss carry forwards to the Company may be limited by on an annual basis and in total by Section 382 of the United States Internal Revenue Code as a result of prior ownership changes and depending on the future ownership changes.

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Organization

6 Months Ended

Jun. 30, 2011

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block]

1.    Organization

Airline Intelligence Systems Inc. (“AIS”) was incorporated on December 7, 2005 under Delaware General Corporation Law. Since its inception, AIS’s efforts have been devoted to the development of the unique proprietary operating system jetEngine™, which management believes will be a new paradigm for strategic airline management that enables the integration and control of an airline’s schedule planning, revenue management,  and irregular operations functions, amongst other things. AIS has two wholly owned Canadian subsidiaries Airline Intelligence Systems Corp. and AIS Services Canada Inc. The subsidiaries provide management services and corporate services to the parent company.

AIS completed a 2 for 1 stock split on June 11, 2007. All amounts shown and incorporated in these condensed consolidated interim financial statements are shown on a post-split basis as if the stock split had occurred on the earliest reported date.

On March 19, 2010, AISystems, Inc. (the “Company”), formerly Wolf Resources Inc. (a publicly listed shell company), acquired AIS. In accordance with the Share Exchange Agreement, each issued and outstanding common share of AIS was converted for 0.95767068 common share of the Company and each issued and outstanding Series A preferred share of AIS was converted for one Series B preferred share of the Company (“reverse merger”). As a result of the transaction, the Company is no longer considered to be a shell company for reporting purposes.

The reverse merger has been accounted for as a recapitalization of the Company whereby the historical financial statements and operations of AIS became the historical financial statements of the Company, with no adjustment to the carrying value of the assets and liabilities. The accompanying condensed consolidated interim financial statements reflect the recapitalization of the stockholder’s equity as if the transaction occurred as of the beginning of the first period presented.  Accordingly, the Company has reflected the issuance of 38,754,000 common shares for the total net monetary liabilities of the shell company in the amount of $52,990 in the condensed consolidated statement of changes in stockholders' equity (deficit).

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Lease Obligations, Commitments, and Contingencies

6 Months Ended

Jun. 30, 2011

Leases [Abstract]

Leases of Lessee Disclosure [Text Block]

7 .    Lease obligations, commitments and Contingencies

(A) Lease obligations

The Company previously leased office space in Kirkland, Washington and currently leases office space in Bellevue, Washington and Toronto. The Toronto office lease is due to expire on May 2014 respectively and the Bellevue office lease began on February 14, 2011 and ended May 31, 2011.  From June 1, 2011 this lease reverted to a month to month lease. Total lease expense was $10,380 and $340,482 for the six months ended June 30, 2011 and 2010. In April 2011, the Company terminated its Kirkland Agreement and agreed to a settlement amount of $180,000 payable in monthly installments over a 36 payment period starting in July 2011. The expense for 2011 is a negative amount due to the write down related to the deferred lease obligation set up at the commencement of the lease.  The amount was written down due to the termination of the lease agreement as mentioned resulting in a negative lease expense for the three month period ending June 30, 2011 of $41,088.

The Company also leases photocopiers, computer equipment and previously leased an apartment, expiring at various dates from 2011 to 2014.

The total future minimum lease payments by year for all operating leases are as follows:

Lease obligations
December 31,	Total
2011		79,515
2012		159,031
2013		159,031
2014		74,364
Thereafter		-
	$	471,941

(B) Contingencies

There are no outstanding judgments against the Company or any consent decrees or injunctions to which the Company is subject or by which its assets are bound and there are no claims, proceedings, actions or lawsuits in existence, or to the Company’s knowledge threatened or asserted, against the Company or with respect to any of the assets of the Company that would materially and adversely affect the business, property or financial condition of the Company, including but not limited to environmental actions or claims. However, from time to time, the Company is involved in various lawsuits and legal proceedings which arise in the ordinary course of business.  Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

In 2010, AI Systems entered into consulting agreements with various investor relations firms and business development service firms in exchange for fees and/or common shares of the Company to be issued subsequent to December 31, 2010. Compensation for such services is to be expensed over the respective terms of the agreements, as services are rendered.

The summons and complaint that was outstanding with Devon James Associates Inc. and Colleen Aylward was settled on July 13, 2011

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Financial Instruments

6 Months Ended

Jun. 30, 2011

Financial Instruments [Abstract]

Financial Instruments [Text Block]

12.  Financial instruments

The Company, as part of its operations, carries a number of financial instruments. The Company is not exposed to significant interest, credit or currency risks arising from these financial instruments except as otherwise disclosed.

The Company’s financial instruments, including cash, accounts payable and accrued liabilities, notes payable to stockholders and loans payable to the controlling stockholder are carried at values that approximate their fair values due to their relatively short maturity periods.  The estimated fair value of related party loans is not practical to estimate, due to the related party nature of the underlying transactions.

Notes payable are carried at face value plus accrued interest in accordance to the agreements except where noted otherwise.

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Deferred and Recognized Revenue

6 Months Ended

Jun. 30, 2011

Deferred Recognized Revenue [Abstract]

Deferred Recognized Revenue [Text Block]

8.      Deferred and Recognized Revenue

The Company entered into a contract with an airline customer in June 2007, wherein the customer provided the Company with a $1,000,000 initial fee. The Company deferred recognition of revenue for this initial fee until deployment and acceptance of its product. The contract terms of the jetEngine Software License Agreement with this customer ended effective June 7, 2011 at which point, the initial fee of $1,000,000 was recognized as revenue as there were no further obligations to deliver any products or services .

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Notes Payable

6 Months Ended

Jun. 30, 2011

Notes Payable [Abstract]

Debt Disclosure [Text Block]

6.  Notes payable

Loans payable to Dynamic Intelligence Inc. (“Dynamic”)

The loans payable to the controlling stockholder, Dynamic, at June 30, 2011 are $1,029,074 (December 31, 2010: $1,009,627).  The loans carry an interest rate of 5% and are unsecured, with no fixed terms of repayment.

All accrued interest on these loans remains outstanding at June 30, 2011.  Interest expense on these loans was $9,725, for each of the three months ended June 30, 2011 and 2010 and $19,450 for each of the six months ended June 30, 2011 and 2010.

In addition, the Company owes Dynamic loans payable of $1,200,000 which are included in the notes payable to stockholders.

Notes payable with detachable warrants

The notes payable to stockholders with detachable warrants at June 30, 2011 are $3,758,750 (December 31, 2010: $3,773,750).  The notes carry interest rates ranging from 5% to 18% and are unsecured.

All accrued interest on these notes remains outstanding at June 30, 2011.

Guarantee Notes

The Company entered into a bond agreement during 2009 with a third party to provide a guarantee of notes to be issued by the Company. Under this bond, the Company issued $150,000 of notes bearing interest of 18%  that were due August 2010. These notes also included a total of 250,000 common stock warrants with a strike price of $0.001 and fair value of $39,894. Pursuant to the agreement, the Company is required to set aside in a separate bank account  5% of all the future funds raised in excess of $1,000,000.  On March 13, 2010, the Company repaid $60,000 of the amounts owing under this note. On April 13, 2010, the Company paid an additional $60,000 of the amounts owing under this note. Between May 3, 2011 and June 27, 2011, an additional $5,000 of the amounts owing were repaid.

Creditor Forbearance

In October 2009, the Company entered into a forbearance agreement to extend the maturity of debt to September 30, 2010 with certain debt holders whom collectively hold $2,467,500 of debt and accrued interest. In exchange for extending the described debt, the Company issued 2,467,500 warrants with an exercise price of $0.001 each, which expire at the earlier of a public listing, a corporate reorganization or specified expiry dates that range for the period from 2009 to 2014. The forbearance agreements were treated as a modification of the debt and accordingly the associated fees, representing the fair value of the warrants issued by the Company to the creditors, have been recorded as a discount on the debt and amortized over the new term to maturity with an additional charge to interest expense calculated in accordance with the effective interest method. Effective October 1, 2010, the company accrued interest at 12% on the $2,467,500 (previously accrued at 5% and 8%) in accordance with the forbearance agreement.  On May 16, 2011, $10,000 of this debt plus accrued interest was converted to common stock.

Demand Loan

In 2010, the Company had issued $200,000 non interest bearing unsecured notes. These notes were converted to 2,000,000 of common shares of the corporation in January 2011 in accordance with the conversion ratio as stipulated in the agreement.

During the period ended June 30, 2011, the Company settled in full a $264,000 promissory note that was due on demand, with principle plus accrued interest of $272,184, for 1,088,736 common shares. This resulted in a gain on extinguishment of debt of $54,437.

Promissory Note

From January to March 2011, the Company issued $52,500 in 8% unsecured promissory notes.

In June 2011, the Company issued a 30 day promissory note of $50,000.  The principle plus $5,000 in interest and the issuance of 100,000 common shares were due at the end of the 30 day term (July 2011). The principle amount plus interest was repaid on the due date however the shares have not yet been issued.

In 2011, the Company converted $10,000 plus accrued interest of the 5% promissory notes for 22,764 common shares yet to be issued, in accordance with the conversion ratio as stipulated in the agreement.

In 2011, the Company converted $237,000 plus accrued interest of the 8% promissory notes for 4,178,543 common shares, already issued, and 3,780,000 common shares, yet to be issued, in accordance with the conversion ratio as stipulated in the agreement.

In summary, from January to June 2011, the Company issued in connection with the demand loans and promissory notes above, a total of 6,178,543 common shares with a total value of $345,700 in connection with conversions of notes payable to stockholders.

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Condensed Consolidated Statements of Changes in Stockholders' Equity Parenthetical (USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2011	Dec. 31, 2010	Dec. 31, 2009
Statement of Stockholders' Equity [Abstract]
Shares issued from subscrition advances .20	$ 0.20
Shares issued for debt conversions .25	$ 0.25
Shares issued for debt conversions.0347	$ 0.0347
Shares issued for debt conversions .0269	$ 0.0269
Shares issued for debt conversions .0343	$ 0.0343
Shares issued for debt conversions .0277	$ 0.0277
Shares issued for debt conversions 0.20	$ 0.20
Shares issued for debt conversions .025	$ 0.025
Shares Issued For Cash ($0.75), Fair Market Value			$ 0.75
Shares Issued For Cash ($0.10), Fair Market Value	$ 0.10	$ 0.10	$ 0.10
Shares Issued For Cash ($0.25), Fair Market Value		$ 0.25	$ 0.25
Shares Issued For Cash ($0.20), Fair Market Value	$ 0.20	$ 0.20
Shares Issued from subscription advances $0.16, Fair Market Value	$ 0.16
Shares Issued For Cash ($0.15), Fair Market Value	$ 0.15
Shares Issued For Services ($0.45), Fair Market Value		$ 0.45
Shares Issued For Services ($0.50), Fair Market Value		$ 0.50
Shares Issued For Services ($0.42), Fair Market Value		$ 0.42
Shares Issued For Services ($0.49), Fair Market Value		$ 0.49
Shares Issued For Services ($0.27), Fair Market Value		$ 0.27
Shares Issued For Services ($0.24), Fair Market Value		$ 0.24
Shares Issued For Services ($0.25), Fair Market Value	$ 0.25
Shares Issued For Debt Conversions, $0.10, Fair Market Value	$ 0.10
Shares Issued For Debt Conversions $0.056, Fair Market Value	$ 0.056
Shares Issued For Debt Conversions $0.0533, Fair Market Value	$ 0.0533

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Going Concern and Management's Plan

6 Months Ended

Jun. 30, 2011

Going Concern and Managements Plan [Abstract]

Going Concern and Managements Plan [Text Block]

2.   Going concern and management’s plans

The accompanying unaudited condensed consolidated interim financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) which contemplate continuation of the Company as a going concern. The Company has yet to fully commercialize its technologies and consequently has incurred significant losses since its inception. At June 30, 2011, the Company’s deficit accumulated during the development stage is approximately $70.2 million, and the Company had utilized cash in operating activities of approximately $31.3 million. The Company has funded theses losses and cash flows through the sale of equity securities, the issuance of debt and from credit granted by vendors. The Company is also in arrears to certain creditors and in default under certain agreements which may have a material adverse effect on operations or lead to the ceasing of operations.

There is no assurance that the Company will be able to raise the necessary funds to continue operations as envisioned or that such funds can be raised on favorable terms to existing stockholders. This could result in significant dilution or a loss of investment to any current or future stockholders. Any funds raised will be used to engage potential customers, to fund product development, to offer working capital, to repay debt and for other corporate purposes. If the Company is unable to raise sufficient funds on the required timelines its ability to implement its vision will be hindered and this could result in the entire loss of any investment in the Company.

These factors raise substantial doubt about the ability of the Company to continue as a going concern. There can be no assurance that the Company will have adequate capital resources to fund planned operations or that any additional funds will be available to the Company when needed, or if available, will be available on favorable terms in the amounts required by the Company. If the Company is unable to obtain adequate capital resources to fund operations, it may be required to delay, scale back or eliminate some or all of its operations, which may have a material adverse effect on the Company’s business, results of operations and ability to continue as a going concern. These unaudited condensed consolidated interim financial statements do not include any adjustments that might result from the outcome of these uncertainties.

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Interim Financial Statements

6 Months Ended

Jun. 30, 2011

Interim Financial Statements [Abstract]

Interim Financial Statements [Text Block]

3.  Interim Financial Statements

These unaudited condensed consolidated interim financial statements as of June 30, 2011 and for the three and six months ended June 30, 2011 and 2010 and for the period from December 7, 2005 (inception) to June 30, 2011 have been prepared in accordance with the instructions to quarterly reports on Form 10-Q. These unaudited condensed consolidated interim financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial position of the Company as at June 30, 2011, and the results of its operations and its cash flows for the three and six month periods ending June 30, 2011 and 2010 and for the period from December 7, 2005 (inception) to June 30, 2011. The financial data and other information disclosed in these notes to the unaudited condensed consolidated interim financial statements related to these periods are unaudited and certain information and footnote data necessary for fair presentation of financial position and results of operations in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. Therefore it is suggested that these unaudited condensed consolidated interim financial statements be read in conjunction with the financial statements and notes thereto, included in a Form 10-K filed April 15, 2011. The results for the three and six months ended June 30, 2011 are not necessarily indicative of the results to be expected for any subsequent quarter of the entire year ended December 31, 2011. The balance sheet as at December 31, 2010 has been derived from the audited financial statements at that date.

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Stock Option Plans

6 Months Ended

Jun. 30, 2011

Stock Option Plans [Abstract]

Stock Option Plans [Text Block]

11.  Stock option plans

The Company has issued stock options to employees, consultants and advisors under three Stock Option Plans, (i) The 2005 Stock Option Plan, (ii) The 2008 Stock Option Plan and (iii) The 2010 Equity Incentive Plan. The Company has also issued Non-Plan stock options to certain consultants and advisors.

The Company’s 2005 Stock Option Plan, dated December 8, 2005 (as amended from time to time) has reserved 6,000,000 Common Shares for issuance. The Company’s 2008 Stock Option Plan, dated May 30, 2008, has reserved 5,000,000 Common Shares for issuance and the Company’s 2010 Equity Incentive Plan dated October 4, 2010 has reserved 25,000,000 Common Shares for issuance. Additionally, the Company has reserved 841,500 Common Shares for outstanding non-plan stock options.

(A) Consolidated Schedule of Stock Option Plans

A summary of the Company’s stock options from December 31, 2010 to June 30, 2011 is presented below:

	Shares under option			Weighted Average Exercise Price		Average Remaining Contractual Life (Years)		Weighted Average Grant Date Fair Value
Outstanding at December 31, 2009 (post conversion)		9,004,977		$	0.26		5.20	$	2.18
Exercisable at December 31, 2009 (post conversion)		5,884,246		$	0.26		5.00	$	2.54
Granted		5,871,025		$	0.27		9.23	$	0.07
Exercised		-			-		-		-
Expired					-		-		-
Cancelled		(3,607,784	)	$	0.26		-		-
Forfeited		-			-		-		-
Outstanding at December 31, 2010		11,268,218		$	0.27		5.80	$	1.67
Exercisable at December 31, 2010		9,168,806		$	0.27		5.02	$	1.86
Granted		15,043,068		$	0.13		9.74	$	0.03
Exercised		-			-		-		-
Expired		(3,481,133	)		0.29				-
Cancelled		(949,931	)		0.54		-		-
Forfeited		-			-		-		-
Outstanding at June 30, 2011		21,880,222		$	0.17		8.90	$	0.13
Exercisable at June 30, 2011		20,154,422		$	0.17		9.04	$	0.09

The fair value of stock options granted during the period ended June 30, 2011 was estimated using the Black-Scholes option pricing model with the assumption that no dividends are to be paid on common shares, a weighted average volatility factor for the Company’s share price of 20% (2010 – 20%), a weighted average risk free interest rate of 3.4% (2010 – 2.5%) over an expected term of 10 years (2010 - 10 years).

In 2011, the Company granted 993,068 stock options with strike prices ranging from $0.10 to $0.25 per common share and fair values ranging from $0.03 to $0.06 to employees. The fair values of these options get expensed over their vesting periods through 2014.

Also, in 2011, the Company granted 14,050,000 stock options with strike prices ranging from $0.10 to $0.25 per common share and fair values ranging from $0.01 to $0.06 to management and advisors. The fair values of these options are expensed over their vesting periods through 2014.

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Significant Accounting Policies

6 Months Ended

Jun. 30, 2011

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

4.  Significant accounting policies

Recent accounting pronouncements

Changes to accounting principles generally accepted in the United States of America (U.S. GAAP) are established by the Financial Accounting Standards Board (FASB) in the form of accounting standards updates (ASU’s) to the FASB’s Accounting Standards Codification.

The Company considers the applicability and impact of all ASU’s. ASU’s not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial position and results of operations.

In October 2009, the Financial Accounting Standards Board (“FASB”) issued a new accounting standard which provides guidance for arrangements with multiple deliverables (ASC 605-25). Specifically, the new standard requires an entity to allocate consideration at the inception of an arrangement to all of its deliverables based on their relative selling prices. In the absence of the vendor-specific objective evidence or third-party evidence of the selling prices, consideration must be allocated to the deliverables based on management’s best estimate of the selling prices. In addition, the new standard eliminates the use of the residual method of allocation. In October 2009, the FASB also issued a new accounting standard which changes revenue recognition for tangible products containing software and hardware elements. Specifically, tangible products containing software and hardware that function together to deliver the tangible products’ essential functionality are scoped out of the existing software revenue recognition guidance and will be accounted for under the multiple-element arrangements revenue recognition guidance discussed above. Both standards were effective for the Company beginning on January 1, 2011. The adoption of these standards did not have a material impact on the Company’s condensed consolidated financial statements.

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Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) (USD $)	Preferred Stock	Common Stock	Additional Paid-in Capital	Subscriptions Advanced (Receivable)	Retained Earnings	Total
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Beginning Balance at Dec. 31, 2004
Shares issued in consideration of Intellectual Property ("IP")	$ 0	$ 19,153	$ (19,143)	$ 0	$ 0	$ 10
Shares issued in consideration of Intellectual Property ("IP") (Shares)	0	19,153,414	0	0	0	0
Shares issued for cash during the year, net of issuance costs of NIL	0	1,313	341,397	0	0	342,680
Shares issued for cash during the year, net of issuance costs of NIL (Shares)	0	1,312,698	0	0	0	0
Net Loss	0	0	0	0	(64,350)	(64,350)
Balance at Dec. 31, 2005	0	20,466	322,224	0	(64,350)	278,340
Balance (Shares) at Dec. 31, 2005	0	20,466,112	0	0	0	0
Shares issued in consideration of Intellectual Property ("IP")	0	7,661	(7,661)	0	0	0
Shares issued in consideration of Intellectual Property ("IP") (Shares)	0	7,661,365	0	0	0	0
Special distribution in consideration of IP	0	0	(4,000,000)	0	0	(4,000,000)
Shares issued for cash during the year	0	6,519	3,490,881	0	0	3,497,400
Shares issued for cash during the year (Shares)	0	6,518,673	0	0	0	0
Shares issued upon exercise of options	0	163	42,337	0	0	42,500
Shares issued upon exercise of options (Shares)	0	162,804	0	0	0	0
Stock-based compensation	0	0	234,065	0	0	234,065
Net Loss	0	0	0	0	(2,899,295)	(2,899,295)
Balance at Dec. 31, 2006	0	34,809	81,846	0	(2,963,645)	(2,846,990)
Balance (Shares) at Dec. 31, 2006	0	34,808,954	0	0	0	0
Shares issued for cash during the year	0	6,264	8,768,637	0	0	8,774,901
Shares issued for cash during the year (Shares)	0	6,264,028	0	0	0	0
Stock-based compensation	0	0	17,245,216	0	0	17,245,216
Net Loss	0	0	0	0	(24,382,325)	(24,382,325)
Balance at Dec. 31, 2007	0	41,073	26,095,699	0	(27,345,970)	(1,209,198)
Balance (Shares) at Dec. 31, 2007	0	41,072,982	0	0	0	0
Shares issued in consideration of Intellectual Property ("IP")	0	1,915	(1,915)	0	0	0
Shares issued in consideration of Intellectual Property ("IP") (Shares)	0	1,915,341	0	0	0	0
Shares issued for cash during the year	0	1,618	8,447,028	0	0	8,448,646
Shares issued for cash during the year (Shares)	0	1,618,204	0	0	0	0
Issuance of preferred shares	2,330	0	0	0	0	2,330
Issuance of preferred shares (Shares)	2,329,905	0	0	0	0	0
Dividend on common shares	0	0	(2,330)	0	0	(2,330)
Common share warrants issued in connection with debt	0	0	1,534,260	0	0	1,534,260
Shares issued in connection with exercise of warrants	0	30	280	0	0	310
Shares issued in connection with exercise of warrants (Shares	0	29,707	0	0	0	0
Shares issued upon exercise of options	0	19	19,981	0	0	20,000
Shares issued upon exercise of options (Shares)	0	19,153	0	0	0	0
Stock-based compensation	0	0	3,742,156	0	0	3,742,156
Net Loss	0	0	0	0	(16,343,658)	(16,343,658)
Balance at Dec. 31, 2008	2,330	44,656	39,835,158	0	(43,689,628)	(3,807,484)
Balance (Shares) at Dec. 31, 2008	2,329,905	44,655,387	0	0	0	0
Shares issued $0.75 per share for cash during the year	0	552	431,948	0	0	432,499
Shares issued $0.75 per share for cash during the year (Shares)	0	552,256	0	0	0	0
Shares issued $0.10 for cash during the period	0	14,680	1,518,196	0	0	1,532,876
Shares issued $0.10 for cash during the period (Shares)	0	14,679,904	0	0	0	0
Shares issued $0.25 per share for cash during the year	0	3,972	1,033,044	0	0	1,037,016
Shares issued $0.25 per share for cash during the year (Shares)	0	3,972,480	0	0	0	0
Consideration received for cancellation of IP	0	0	800,000	0	0	800,000
Cancellation of shares issued for IP	0	(1,915)	1,915	0	0	0
Cancellation of shares issued for IP (Shares)	0	(1,915,341)	0	0	0	0
Conversion of warrants for anti dilution	0	6,459	(6,459)	0	0	0
Conversion of warrants for anti dilution (Shares)	0	6,459,189	0	0	0	0
Share issued on conversion of debt	0	2,215	1,732,113	0	0	1,734,328
Share issued on conversion of debt (Shares)	0	2,214,553	0	0	0	0
Common share warrants issued in connection with debt	0	0	1,179,347	0	0	1,179,347
Stock based compensation	0	9,098	5,790,211	0	0	5,799,309
Stock based compensation (Shares)	0	9,097,871	0	0	0	0
Shares issued in connection with exercise of warrants	0	5,248	(3,891)	0	0	1,357
Shares issued in connection with exercise of warrants (Shares	0	5,248,493	0	0	0	0
Net Loss	0	0	0	0	(17,651,225)	(17,651,225)
Balance at Dec. 31, 2009	2,330	84,965	52,311,582	0	(61,340,853)	(8,941,976)
Balance (Shares) at Dec. 31, 2009	2,329,905	84,964,792	0	0	0	0
Series A shares delivered (Note 1)	(2,330)	0	0	0	0	(2,330)
Series A shares delivered (Note 1) (Shares)	(2,329,905)	0	0	0	0	0
Series B shares issued (Note 1)	2,330	0	0	0	0	2,330
Series B shares issued (Note 1) (Shares)	2,329,905	0	0	0	0	0
Shares issued $0.10 for cash during the period	0	8,736	903,457	0	0	912,193
Shares issued $0.10 for cash during the period (Shares)	0	8,735,810	0	0	0	0
Shares issued $0.25 per share for cash during the year	0	1,781	463,219	0	0	465,000
Shares issued $0.25 per share for cash during the year (Shares)	0	1,781,267	0	0	0	0
Shares issued $0.20 for cash during the period	0	1,035	205,965	0	0	207,000
Shares issued $0.20 for cash during the period (Shares)	0	1,035,000	0	0	0	0
Subscriptions receivable	0	1,915	189,619	(191,534)	0	0
Subscriptions receivable (Shares)	0	1,915,341	0	0	0	0
Subscriptions advances	0	0	0	105,676	0	105,676
Shares issued in connection with exercise of warrants	0	4,906	(91)	0	0	4,815
Shares issued in connection with exercise of warrants (Shares	0	4,906,239	0	0	0	0
Acquisition of Wolf Resources Inc.	0	38,754	(91,744)	0	0	(52,990)
Acquisition of Wolf Resources Inc. (Shares)	0	38,754,000	0	0	0	0
Shares issued $ 0.45 per share for services during the year	0	25	11,225	0	0	11,250
Shares issued $ 0.45 per share for services during the year (Shares)	0	25,000	0	0	0	0
Shares issued $ 0.50 per share for services during the year	0	1,450	723,550	0	0	725,000
Shares issued $ 0.50 per share for services during the year (Shares)	0	1,450,000	0	0	0	0
Shares issued $ 0.42 per share for services during the year	0	2,200	921,800	0	0	924,000
Shares issued $ 0.42 per share for services during the year (Shares)	0	2,200,000	0	0	0	0
Shares issued $ 0.49 per share for services during the year	0	1,625	794,629	0	0	796,254
Shares issued $ 0.49 per share for services during the year (Shares)	0	1,625,007	0	0	0	0
Shares issued $ 0.27 per share for services during the year	0	300	80,700	0	0	81,000
Shares issued $ 0.27 per share for services during the year (Shares)	0	300,000	0	0	0	0
Shares issued $ 0.24 per share for services during the year	0	40	9,360	0	0	9,400
Shares issued $ 0.24 per share for services during the year (Shares)	0	40,000	0	0	0	0
Stock-based compensation	0	0	530,863	0	0	530,863
Net Loss	0	0	0	0	(7,001,360)	(7,001,360)
Balance at Dec. 31, 2010	2,330	147,733	57,054,133	(85,858)	(68,342,213)	(11,223,875)
Balance (Shares) at Dec. 31, 2010	2,329,905	147,732,456	0	0	0	0
Shares issued $0.10 for cash during the period	0	250	24,750	0	0	25,000
Shares issued $0.10 for cash during the period (Shares)	0	250,000	0	0	0	0
Shares issued $0.20 for cash during the period	0	1,450	288,550	0	0	290,000
Shares issued $0.20 for cash during the period (Shares)	0	1,450,000	0	0	0	0
Shares issued $0.15 for cash during the period	0	340	50,660	0	0	51,000
Shares issued $0.15 for cash during the period (Shares)	0	340,000	0	0	0	0
Shares issued $0.16 from subscription advances	0	95	15,581	(15,676)	0	0
Shares issued $0.16 from subscription advances (Shares)	0	95,406	0	0	0	0
Shares issued $0.20 from subscription advances	0	200	39,800	(40,000)	0	0
Shares issued $0.20 from subscription advances (Shares)	0	200,000	0	0	0	0
Shares issued $ 0.25 per share for debt conversions	0	1,089	216,658	0	0	217,747
Shares issued $ 0.25 per share for debt conversions (Shares)	0	1,088,736	0	0	0	0
Shares issued $ 0.10 per share for debt conversions	0	2,000	198,000	0	0	200,000
Shares issued $ 0.10 per share for debt conversions (Shares)	0	2,000,000	0	0	0	0
Shares issued $ 0.056 per share for debt conversions	0	268	14,732	0	0	15,000
Shares issued $ 0.056 per share for debt conversions (Shares)	0	267,857	0	0	0	0
Shares issued $ 0.0533 per share for debt conversions	0	281	14,719	0	0	15,000
Shares issued $ 0.0533 per share for debt conversions (Shares)	0	281,426	0	0	0	0
Shares issued $ 0.0347 per share for debt conversions	0	432	14,568	0	0	15,000
Shares issued $ 0.0347 per share for debt conversions (Shares)	0	432,277	0	0	0	0
Shares issued $ 0.0269 per share for debt conversions	0	840	21,760	0	0	22,600
Shares issued $ 0.0269 per share for debt conversions (Shares)	0	840,149	0	0	0	0
Shares issued $ 0.0343 per share for debt conversions	0	437	14,563	0	0	15,000
Shares issued $ 0.0343 per share for debt conversions (Shares)	0	437,318	0	0	0	0
Shares issued $ 0.0277 per share for debt conversions	0	541	14,459	0	0	15,000
Shares issued $ 0.0277 per share for debt conversions (Shares)	0	541,516	0	0	0	0
Shares issued $ 0.20 per share for debt conversions	0	78	15,522	0	0	15,600
Shares issued $ 0.20 per share for debt conversions (Shares)	0	78,000	0	0	0	0
Shares issued $ 0.025 per share for debt conversions	0	1,300	31,200	0	0	32,500
Shares issued $ 0.025 per share for debt conversions (Shares)	0	1,300,000	0	0	0	0
Subscriptions advances	0	0	0	276,864	0	276,864
Shares to be issued for debt conversion	0	0	0	105,880	0	105,880
Stock-based compensation	0	0	655,525	0	0	655,525
Net Loss	0	0	0	0	(1,873,244)	(1,873,244)
Balance at Jun. 30, 2011	$ 2,330	$ 157,335	$ 58,685,179	$ 241,210	$ (70,215,457)	$ (11,129,403)
Balance (Shares) at Jun. 30, 2011	2,329,905	157,335,141	0	0	0	0

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Condensed Consolidated Statements of Cash Flows (USD $)	6 Months Ended		67 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011
Operating activities
Net Loss	$ (1,873,244)	$ (3,928,163)	$ (70,215,457)
Adjustments for non-cash items
Depreciation and amortization	53,594	93,198	1,158,896
Accretion of discount on notes	0	15,478	2,476,135
Stock Based Compensation	655,521	284,806	28,207,129
Deferred revenue	(1,000,000)	0	0
Deferred lease obligation	(77,791)	(11,472)	0
Interest expense on notes payable to stockholders	302,522	0	302,522
Interest expense on loans payable to controlling stockholder	19,450	19,450	447,048
Gain on extinguishment of debt	(54,437)	0	(54,437)
Adjustments to reconcile changes in working capital
Prepaid expenses and other current assets	5,246	(37,250)	(17,879)
Common shares issued for services	614,000	0	(436,626)
Accounts payable and accrued liabilities	621,641	1,467,345	6,815,987
Net cash used in operating activities	(733,498)	(2,096,608)	(31,316,682)
Investing activities
Licensing of intellectual property from controlling stockholders	0	0	(10)
Purchase of property and equipment	0	(1,824)	(1,269,992)
Net cash used in investing activities	0	(1,824)	(1,270,002)
Financing activities
Proceed from issuance and subscription of common shares	642,864	1,099,097	25,954,644
Proceeds on notes payable to stockholders	94,603	263,901	4,808,294
Repayment on loans payable to controlling stockholders	0	0	(130,138)
Receivable from controlling stockholders	0	0	(32,454)
Loan receivable from employees	0	243	(445,675)
Shares issued for services rendered	0	0	2,546,904
Proceeds from loan to related party	0	39,846	44,444
Proceeds from (repayments of) loan	(3,828)	(1,842)	5,704
Bank indebtedness	0	47,345	0
Payment on obligation under capital lease	0	0	(153,437)
Net cash provided by financing activities	733,639	1,448,590	32,598,286
Net increase (decrease) in cash	141	(649,842)	11,602
Cash, beginning of period	11,461	652,081	0
Cash, end of period	$ 11,602	$ 2,239	$ 11,602

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Stockholders' Equity

6 Months Ended

Jun. 30, 2011

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

9.     Stockholders’ equity

The authorized capital of the Company consisted of: (i) 300,000,000 common shares (as amended on March 25, 2010), 157,335,141 shares of which were issued and outstanding at June 30, 2011 (December 31, 2010 – 147,732,455) and (ii) 20,000,000 shares of preferred stock of the Company, which have been designated as Series B Preferred Stock (“Series B Preferred”), with 2,329,905 issued at June 30, 2011 (December 31, 2010 – 2,329,905). The common shares issued to the former stockholders of AIS became free trading shares one year following the completion of the merger.

 Exchange Right Agreement

In January 2010, the Company and Merus Capital I, L.P. (“Merus”) entered into an exchange right agreement (the “Agreement”), whereby Merus provided funding to the Company in exchange for, amongst other things, a right in liquidation for Merus to exchange common shares held by Merus at the time of the conversion (“Merus Securities”) into an unsecured promissory note with aggregate principle up to $5,000,000 paying interest at a rate of 5.00% per annum.  The term of the Agreement is the earlier of: (i) 36 months following a Going Public Transaction (as defined in the Agreement); (ii) Merus receiving the Note after exercising their rights under the Agreement; and (iii) Merus transferring any of the Merus Securities without the prior authorization of the Company. Management has reviewed the terms of the exchange right agreement and has determined that permanent equity classification is appropriate because all conditions under which the exchange right could be enforced are solely within the control of the Company.  

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Subsequent events

6 Months Ended

Jun. 30, 2011

Subsequent Events [Abstract]

Subsequent Events [Text Block]

13. Subsequent events

In early July 2011, the Company entered into an agreement to allow certain investors to sell certain notes with principal and interest of $505,655 to a third party. The Company agreed with the third party to exchange these notes for a convertible note with certain redemption conditions attached to it. The notes bear interest at 10% and are due on March 5, 2012. 1,231,058 common shares related to this agreement have been issued as of August 19, 2011.

In early July 2011 the Company entered into equity subscription agreements with certain investors at a price of $0.50 per share resulting in 1,011,310 common shares which are yet to be issued.

The Company also entered into another transaction in which it sold a convertible note for $150,000.The note bears interest at 10% and is due March 5, 2012.

The Company issued 645,820 common shares in connection with $129,164 of subscription advances that were outstanding as at June 30, 2011. These shares were subscribed at $0.20 per share.

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Condensed Consolidated Balance Sheets (USD $)	Jun. 30, 2011	Dec. 31, 2010
Cash
Cash	$ 11,260	$ 11,261
Restricted cash	342	200
Total current cash assets	11,602	11,461
Prepaid expenses and other current assets	454,506	1,073,752
Total Current Assets	466,108	1,085,213
Property and equipment, net	244,755	298,349
Intellectual property	10	10
Total Assets	710,873	1,383,572
Current
Accounts payable and accrued liabilities	6,631,783	5,720,388
Notes payable to stockholders	4,179,419	4,795,813
Loans payable to controlling stockholder	1,029,074	1,009,627
Deferred revenue	0	1,000,000
Current portion of equipment loan	0	3,828
Total Current Liabilities	11,840,276	12,529,656
Deferred lease obligation	0	77,791
Total Liabilities	11,840,276	12,607,447
Stockholders' Deficiency
Preferred shares (Authorized 5,000,000 with 2,400,000 designated as Series B, Issued: 2,329,905 Series B	2,330	2,330
Common shares (Authorized: 300,000,000) Issued June 30, 2011: 157,335,141 and December 31, 2010: 147,732,455	157,335	147,733
Additional paid-in capital	58,685,179	57,054,133
Subscription advance (receivable)	241,210	(85,858)
Deficit accumulated during the development stage	(70,215,457)	(68,342,213)
Total Stockholders' Deficiency	(11,129,403)	(11,223,875)
Total Liabilities and Stockholders' Deficiency	$ 710,873	$ 1,383,572