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Document And Entity Information (USD $)
12 Months Ended
May 31, 2012
Document and Entity Information [Abstract]
Entity Registrant Name Artisanal Brands, Inc.
Document Type 10-K
Current Fiscal Year End Date --05-31
Entity Common Stock, Shares Outstanding 28,093,982
Entity Public Float $ 1,318,517
Amendment Flag false
Entity Central Index Key 0000945634
Entity Current Reporting Status Yes
Entity Voluntary Filers No
Entity Filer Category Smaller Reporting Company
Entity Well-known Seasoned Issuer No
Document Period End Date May 31, 2012
Document Fiscal Year Focus 2012
Document Fiscal Period Focus FY
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Consolidated Balance Sheets (USD $)
May 31, 2012
May 31, 2011
CURRENT ASSETS:
Cash $ 43,016 $ 43,547
Accounts receivable, net 173,496 317,751
Inventories 297,300 374,116
Prepaid expenses and other current assets 23,059 28,844
Total Current Assets 536,871 764,258
FIXED ASSETS, net 500,583 546,746
OTHER ASSETS 31,514 33,085
INTANGIBLES - at cost, net 3,468,179 3,552,179
Total Assets 4,537,147 4,896,268
CURRENT LIABILITIES:
Accounts payable 596,636 719,798
Note payable and current portion of long term debt 1,234,000 1,246,256
Prepaid gift certificates and other deferred revenue 58,778 51,296
Accrued expenses and other current liabilities 767,216 517,618
Accrued payroll taxes 1,093,483 622,570
Total Current Liabilities 3,750,113 3,157,538
LONG TERM DEBT, net of current portion 4,302,488 3,288,124
COMMITMENTS AND CONTINGENCY      
SHAREHOLDERS' DEFICIT
Preferred stock - $0.001 par value, 10,000,000 shares authorized, 6,514,154 and 6,405,660 shares issued and outstanding, respectively 6,514 6,405
Common stock - $0.001 par value, 100,000,000 shares authorized 28,093,982 and 24,200,316 shares issued and outstanding, respectively 28,094 24,200
Additional paid-in capital 19,368,435 17,028,389
Accumulated deficit (22,918,497) (18,608,388)
Total shareholders' deficit (3,515,454) (1,549,394)
Total Liabilities & Shareholders' Deficit $ 4,537,147 $ 4,896,268
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Consolidated Balance Sheets (Parentheticals) (USD $)
May 31, 2012
May 31, 2011
Preferred stock par value (in Dollars per share) $ 0.001 $ 0.001
Preferred stock, shares authorized 10,000,000 10,000,000
Preferred stock, shares issued 6,514,154 6,405,660
Preferred stock, shares outstanding 6,514,154 6,405,660
Common stock par value (in Dollars per share) $ 0.001 $ 0.001
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares issued 28,093,982 24,200,316
Common stock, shares outstanding 28,093,982 24,200,316
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Consolidated Statements of Operations (USD $)
12 Months Ended
May 31, 2012
May 31, 2011
SALES $ 3,563,144 $ 4,634,359
COST OF GOODS SOLD 2,816,209 3,369,178
GROSS PROFIT 746,935 1,265,181
SELLING, GENERAL AND ADMINISTRATIVE 3,292,041 3,083,952
ONE-TIME OPTION EXPENSE 976,628
DEPRECIATION AND AMORTIZATION 151,820 228,639
LOSS FROM OPERATIONS BEFORE INCOME TAXES AND INTEREST (3,673,554) (2,047,410)
OTHER INCOME( EXPENSES):
Interest income (expense) and other income (636,555) (492,257)
LOSS FROM OPERATIONS BEFORE INCOME TAXES (4,310,109) (2,539,667)
INCOME TAXES 0 0
NET LOSS (4,310,109) (2,539,667)
NET LOSS APPLICABLE TO COMMON SHARES $ (4,310,109) $ (2,539,667)
LOSS APPLICABLE PER COMMON SHARE
Basic (in Dollars per share) $ (0.17) $ (0.11)
Diluted (in Dollars per share) $ (0.17) $ (0.11)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
basic (in Shares) 25,140,116 24,022,649
diluted (in Shares) 25,140,116 24,022,649
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Consolidated Statement of Changes in Shareholders' Equity/(Deficit) (USD $)
Conversion of Preferred Stock by Investors [Member]
Preferred Stock [Member]
Conversion of Preferred Stock by Investors [Member]
Common Stock [Member]
Conversion of Preferred Stock by Investors [Member]
Additional Paid-in Capital [Member]
Conversion of Preferred Stock by Investors [Member]
Conversion of Preferred Stock by Lender [Member]
Preferred Stock [Member]
Conversion of Preferred Stock by Lender [Member]
Common Stock [Member]
Conversion of Preferred Stock by Lender [Member]
Additional Paid-in Capital [Member]
Preferred Stock [Member]
Issuance of Preferred Stock to Lender [Member]
Preferred Stock [Member]
Issuance of Preferred Stock to Investors [Member]
Preferred Stock [Member]
Issuance of Preferred Stock Representing Interest [Member]
Preferred Stock [Member]
Common Stock [Member]
Issuance of Common Stock to Lender [Member]
Common Stock [Member]
Additional Paid-in Capital [Member]
Issuance of Common Stock to Lender [Member]
Additional Paid-in Capital [Member]
Issuance of Preferred Stock to Lender [Member]
Additional Paid-in Capital [Member]
Issuance of Preferred Stock to Investors [Member]
Additional Paid-in Capital [Member]
Issuance of Preferred Stock Representing Interest [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Issuance of Common Stock to Lender [Member]
Issuance of Preferred Stock to Lender [Member]
Issuance of Preferred Stock to Investors [Member]
Issuance of Preferred Stock Representing Interest [Member]
Total
Balance at May. 31, 2010 $ 6,419 $ 23,765 $ 16,820,913 $ (16,068,721) $ 782,376
Balance (in Shares) 6,405,660 24,200,316
Equity Based rights issued to lender 75,386 75,386
Conversion of preferred stock (14) 45 (31) 0
Conversion of preferred stock (in Shares) (13,500) 45,000
Equity-based compensation 390 132,121 132,511
Equity-based compensation (in Shares) 390,000
Net loss (2,539,667) (2,539,667)
Balance at May. 31, 2011 6,405 24,200 17,028,389 (18,608,388) (1,549,394)
Balance (in Shares) 6,514,454 28,093,982
Issuance of stock 50 800 278 341 23,669 49,950 799,450 277,266 24,010 50,000 800,250 277,544
Issuance of stock (in Shares) 50,000 800,250 277,544 341,000
Conversion of preferred stock (1,019) 3,398 (2,379)
Conversion of preferred stock (in Shares) (1,019,000) 3,397,666
Equity-based compensation 155 1,192,090 1,192,245
Equity-based compensation (in Shares) 155,000
Net loss (4,310,109) (4,310,109)
Balance at May. 31, 2012 $ 6,514 $ 28,094 $ 19,368,435 $ (22,918,497) $ (3,515,454)
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Consolidated Statements of Cash Flows (USD $)
12 Months Ended
May 31, 2012
May 31, 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (4,310,109) $ (2,539,667)
Adjustments to reconcile loss to net cash used in operating activities:
Depreciation 67,820 144,639
Amortization of intangibles 84,000 84,000
Amortization of debt discount 230,108 159,734
Equity based compensation 61,257
One-time option expense 976,628
Common stock issued for services 178,365 132,511
Changes in assets and liabilities
Accounts receivable 144,255 (28,748)
Inventory 76,816 (4,214)
Prepaid expenses and other assets 5,785 24,404
Accounts payable 154,382 207,990
Accrued expenses and other current liabilities 727,998 367,697
NET CASH USED IN OPERATING ACTIVITIES (1,602,695) (1,451,654)
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale/(Purchase) of fixed assets (21,657) (74,948)
Increase in security deposit 1,571
NET CASH USED IN INVESTING ACTIVITIES: (20,086) (74,948)
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Increase/(Decrease) in notes payable 582,000 770,000
Sale of preferred stock 800,250 (84,849)
Proceeds/(Payment) of term loan (60,000)
Payment of long term debt 0 0
Proceeds from Shareholder loan 300,000 500,000
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,622,250 1,185,151
NET DECREASE IN CASH (531) (341,451)
CASH AT BEGINNING OF PERIOD 43,547 384,998
CASH AT END OF PERIOD 43,016 43,547
Cash paid during the period for:
Interest 2,920 8,007
Income taxes 0 0
Non-cash financing activies:
Conversion of Preferred Shares to Common Shares 1,019,300
Preferred shares issued for interest $ 277,544
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Note 1 - Description of Business
12 Months Ended
May 31, 2012
Business Description and Basis of Presentation [Text Block]
1.            DESCRIPTION OF BUSINESS

Artisanal Brands, Inc. (the “Company”) markets and distributes a wide line of specialty, artisanal and farmstead cheese products and other related specialty food products under its own brand “Artisanal Premium Cheese” to food wholesalers and retailers and directly to consumers through its catalog and website www.artisanalcheese.com.

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Note 2 - Summary of Significant Accounting Principles
12 Months Ended
May 31, 2012
Significant Accounting Policies [Text Block]
2.            SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

a.           Basis of Presentation - The accompanying audited consolidated financial statements of Artisanal Brands, Inc. (the “Company”) have been prepared in accordance with generally accepted accounting principles for financial information and with the instructions to Form 10-K and Regulation SX.  In the opinion of management, all adjustments considered necessary for a fair presentation (consisting of normal recurring accruals) have been included.

b.           Principles of Consolidation - The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. All material intercompany accounts and transactions have been eliminated on consolidation.

c.           Cash and Cash Equivalents -  The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash equivalents include investments in money market funds and are stated at cost, which approximates market value. Cash at times may exceed FDIC insurable limits.

d.           Trade Accounts Receivable and Other Receivables, Net - The Company's accounts receivable consist primarily of amounts due from customers for the sale of its products. The Company records an allowance for doubtful accounts based on management's estimate of collectability of such trade and notes receivables outstanding. The allowance for doubtful accounts represents an amount considered by management to be adequate to cover potential losses, if any. The recorded allowance at May 31, 2012 and 2011 was $20,000 and $15,000, respectively.

e.           Inventories – Inventories are stated at the lower of cost or market.  Cost is determined using first-in, first-out (FIFO) method for cheese, accessories and packing materials, all finished goods.

f.           Property and Equipment - Property and equipment acquired in the Artisanal acquisition is carried at net book value which approximates fair market value at the date of the acquisition. Amounts incurred for repairs and maintenance are charged to operations in the period incurred. Depreciation is calculated on a straight-line basis over the following useful lives:

Equipment (years)
    3 - 5  
             
Furniture and fixtures (years)
    5 - 7  
             
Leasehold improvements (years)
    5 - 10  
             
Software (years)
    2 - 5  

g.           Goodwill and Intangible Assets - Intangible assets at May 31, 2012 relates to the assets acquired by the Company in August 2007.

The Company reviews long-lived assets, certain identifiable assets and any impairment related to those assets at least annually or whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recoverable.

h.           Fair Value of Financial Instruments - The accounting guidance establishes a fair value hierarchy based on whether the market participant assumptions used in determining fair value are obtained from independent sources (observable inputs) or reflect the Company's own assumptions of market participant valuation (unobservable inputs). A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The accounting guidance establishes three levels of inputs that may be used to measure fair value:

Level 1—Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2—Quoted prices for identical assets and liabilities in markets that are inactive; quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly; or

Level 3—Prices or valuations that require inputs that are both unobservable and significant to the fair value measurement.

The Company considers an active market to be one in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis, and views an inactive market as one in which there are few transactions for the asset or liability, the prices are not current, or price quotations vary substantially either over time or among market makers. Where appropriate the Company's or the counterparty's non-performance risk is considered in determining the fair values of liabilities and assets, respectively.

i.           Revenue Recognition – The Company recognizes revenues associated with the sale of its products at the time of delivery to customers, when the price is fixed or determinable, persuasive evidence of an arrangement exists and collectability of the resulting receivable is reasonably assured.

In the current fiscal year the Company with its largest distributor, began to purchase from a foreign manufacturer and resell coolers for product displays. The sale of the coolers are recorded once delivery is tendered to the distributor.

j.           Shipping and Handling Costs – Shipping and handling costs are included in cost of sales.

k.           Advertising Costs – All advertising costs are expensed as incurred.  Advertising expenses charged to operations for the years ended May 31, 2012 and 2011 amounted to approximately $128,567 and $297,691, respectively.

l.           Interest Income/(Expense) - Interest expense relates to interest owed on the Company's debt. Interest expense is recognized over the period the debt is outstanding at the stated interest rates.

m.           Income Taxes - Income taxes have been provided using the liability method. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured by applying estimated tax rates and laws to taxable years in which such differences are expected to reverse. The deferred tax asset attributed to the net operating losses has been fully reserved, since the Company has yet to achieve recurring income from operations.

n.           Use of Estimates – The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period.  Actual results could differ from those estimates.

o.           Equity-Based Compensation - The Company accounts for equity-based compensation in accordance with guidance issued by the FASB, Share-Based Payment.  The Company records compensation expense using a fair-value-based measurement method for all awards granted. In computing the impact, the fair value of each option is estimated on the date of grant based on the Black-Scholes options-pricing model utilizing certain assumptions for a risk free interest rate; volatility; and expected remaining lives of the awards. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and the Company uses different assumptions, the Company’s equity-based compensation expense could be materially different in the future. In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. In estimating the Company’s forfeiture rate, the Company analyzed its historical forfeiture rate, the remaining lives of unvested options, and the amount of vested options as a percentage of total options outstanding. If the Company’s actual forfeiture rate is materially different from its estimate, or if the Company reevaluates the forfeiture rate in the future, the equity-based compensation expense could be significantly different from what we have recorded in the current period.  Equity-based compensation for the years ended May 31, 2012 and May 31, 2011, was $1,216,254 and $131,121, respectively.  Of the equity-based compensation booked during the year ended May 31, 2012, $976,628  is attributable to the vesting of 4,440,000 common stock options that had been granted to KeHE Distributors in connection with the marketing and distribution agreement entered in February 2011 and amended in May 2011 and $24,020 is attributable to the vesting of 550,000 common stock options that had been granted to board members to replace those options which expired earlier in the year.

p.            Net Income/(Loss) Per Share – In accordance with the FASB guidance for, "Earnings Per Share", basic net income/(loss) per share is computed using the weighted average number of common shares outstanding during each period. For the year ended May 31, 2012, diluted loss per share is the same as basic loss per share since the inclusion of the 5,430,000 outstanding stock options would be antidilutive.

q.           Segment Disclosure – Management believes the Company operates as one segment.

r.           Recent Accounting Pronouncements – Any new accounting pronouncements issued but not yet effective have been deemed not to be relevant to the operations of the Company, hence the effects of such undisclosed new accounting pronouncements will have no effect on the Company.

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Note 3 - Accounts Receivable
12 Months Ended
May 31, 2012
Loans, Notes, Trade and Other Receivables Disclosure [Text Block]
3.             ACCOUNTS RECEIVABLE

As of May 31, accounts receivable consist of the following:

    2012     2011  
Trade accounts receivable
  $ 188,669     $ 327,566  
Employees
    4,827       5,185  
      193,496       332,751  
Less allowance for doubtful accounts
    (20,000 )     (15,000 )
    $ 173,496     $ 317,751  

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Note 4 - Inventories
12 Months Ended
May 31, 2012
Inventory Disclosure [Text Block]

4.             INVENTORIES


Inventories are valued on a first-in-first-out (FIFO) basis.  Inventory at May 31, consisted of the following:

    2012     2011  
Cheese Inventory
  $ 60,701     $ 152,185  
Shipping/Packing Material Inventory
    166,716       188,183  
Accessories & Books Inventory
    67,986       31,421  
Beverage
    1,897       2,327  
    $ 297,300     $ 374,116  

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Note 5 - Prepaid Expenses
12 Months Ended
May 31, 2012
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Table Text Block]
5.             PREPAID EXPENSES

As of May 31,  2012, the Company had prepaid expenses of $23,059, which consisted primarily of prepaid insurance of $13,207, prepaid interest of $5,978, and other operating expense of $3,874.   As of May 31, 2011, the Company had prepaid expenses of $28,844, which consisted primarily of prepaid insurance.

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Note 6 - Fixed Assets
12 Months Ended
May 31, 2012
Property, Plant and Equipment Disclosure [Text Block]
6.             FIXED ASSETS

Fixed Assets, net consist of the following:

    2012     2011  
Furniture and fixtures
  $ 179,435     $ 178,665  
Kitchen Equipment
    275,203       274,485  
Computer Equipment
    121,460       114,551  
Software & Web Design
    32,496       39,996  
Cheese Clock by Artisanal tm
    151,971       131,211  
Leasehold Improvement
    356,396       356,396  
      1,116,961       1,095,304  
Less:  Accumulated Depreciation & Amortization
    (616,378 )     (548,558 )
    $ 500,583     $ 546,746  

Depreciation expense recorded for the years ended May 31, 2012 and 2011 was $67,820 and $144,639, respectively.

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Note 7 - Intangible Assets
12 Months Ended
May 31, 2012
Goodwill and Intangible Assets Disclosure [Text Block]
7.             INTANGIBLE ASSETS

Intangible assets consist of the following:

 
Amortizable life
 
2012
   
2011
 
Trade name
Indefinite
  $ 1,720,000     $ 1,720,000  
Non-competition  agreement
5 years
    110,000       110,000  
Non-contractual customer relationships
10 years
    620,000       620,000  
Goodwill
Indefinite
    1,420,678       1,420,678  
Total intangible assets
      3,870,678       3,870,678  
Accumulated amortization
      (402,499 )     (318,499 )
      $ 3,468,179     $ 3,552,179  

The Company has recorded amortization on its intangibles for the years ended May 31, 2012 and 2011 of $84,000 and $84,000, respectively.

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Note 8 - Notes Payable and Current Portion of Long Term Debt
12 Months Ended
May 31, 2012
Debt Disclosure [Text Block]
8.             NOTES PAYABLE and CURRENT PORTION OF LONG TERM DEBT

Notes payable and current portion of long-term debt at May 31 consisted of:

   
2012
   
2011
 
             
Bridge Loan, (a)
 
$
150,000
   
$
150,000
 
Term Loan, (b)
   
834,000
     
894,000
 
KeHE Loan-current portion, (c)
   
250,000
     
250,000
 
Total Notes payable
 
$
1,234,000
   
$
1,294,000
 

 
 (a)
In July 2009, we secured from an existing shareholder a $150,000 bridge loan at an annual interest rate of nine percent (9%) which matured on September 8, 2009 (the "Bridge Loan").  The Company has defaulted on repayment of the Bridge Loan by the maturity date, however, the lender has agreed to forbear collection until such time as the Company completes a secondary offering.  As of May 31, 2012,and May 31, 2011, the total amount due under the Bridge Loan including interest is $184,878 and $171,341, respectively.

 
(b)
During the period July 2009 to February 2011, we secured from several existing shareholders a term loan in the aggregate amount of $1,214,000 at an annual interest rate of nine percent (9%) to mature on or about September 10, 2010 (the "Term Loan").  The Term Loan amount has since been reduced to $834,000 (excluding interest) and the due date of the loan was extended to December 31, 2011.  The Company has defaulted on repayment of the Term Loan by the maturity date, however, all but one lender has agreed to forbear collection until such time as the Company completes a secondary offering.  As of May 31, 2012 and May 31, 2011, the total amount due under the Term Loan including interest is $1,017,169 and $1,002,389 respectively.

 
(c)
Also reported under Notes Payable is a $250,000 short term loan from KeHE advanced in May 2011 (See Note 13-Long Term Debt).   The Company has defaulted on repayment of the short term loan by the maturity date, however, has the full support of KeHE which has agreed to forbear until such time as the Company completes a secondary offering.  As of May 31, 2012 and May 31, 2011, the current portion of the  $250,000 loan from KeHE, net of unamortized debt discount is $0 and $47,744, respectively.

In November 2011, we obtained a short term loan of $150,000 from a lender for purposes of obtaining advance product for seasonal sales.  The loan was repaid in three installments before December 31, 2011 as well as interest in the amount of $756.16 representing eight percent (8%) interest over the course of the loan.

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Note 9 - Accrued Expenses and Other Current Liabilities
12 Months Ended
May 31, 2012
Accounts Payable, Accrued Liabilities, and Other Liabilities Disclosure, Current [Text Block]
9.             ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

As of May 31, 2012, the Company had accrued expenses and other liabilities of $767,216 which consisted primarily of $529,125 for accrued interest on loans, vendor installment agreements of $60,895, accrued payroll of $52,054, accrued professional fees of $12,500, a vendor prepayment of $38,000 and other miscellaneous accruals for $74,643.  As of May 31, 2011, the Company had accrued expenses and other liabilities of $517,618 which consisted primarily of $418,834 for accrued interest on term loans, vendor installment agreements of $60,895, accrued payroll of $20,311 and other accrued expenses of $17,578.

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Note 10 - Accrued Payroll Taxes
12 Months Ended
May 31, 2012
Accounts Payable and Accrued Liabilities Disclosure [Text Block]
10.           ACCRUED PAYROLL TAXES

The Company is in arrears with paying payroll taxes of $1,093,483.  Of this amount approximately $480,000 relates to the parent Company's operations prior to the acquisition of Artisanal Cheese LLC. The balance relates to more recent payroll taxes which are attributable in part to the increased seasonal workforce.  The Company is currently negotiating with the relevant tax authorities to work out a payment program for the taxes owed.  Our plan is to make a down payment and then making double weekly tax payments until the arrears are paid.

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Note 11 - Income Taxes
12 Months Ended
May 31, 2012
Income Tax Disclosure [Text Block]
11.           INCOME TAXES

At May 31, 2012, the Company has available unused net operating loss carryforward (“NOL”) of approximately $15,380,000 that may be applied against future taxable income and expire at various dates through 2030.  The Company has a deferred tax assets arising from such net operating loss deductions and has recorded a valuation allowance for the full amount of such deferred tax asset since the likelihood of realization of the tax benefits cannot be determined.  Such valuation allowance has increased approximately $975,000 during 2012.

   
2012
   
2011
 
Deferred tax asset:
           
Net operating loss carryforward
  $ 6,725,000     $ 6,725,000  
Valuation allowance
    (6,725,000 )     (6,725,000 )
Net deferred tax asset
  $ -0-     $ -0-  

A reconciliation of the statutory federal income (tax) benefit to actual tax benefit is as follows:

   
2012
   
2011
 
Statutory federal income (tax) benefit
  $ (888,000 )   $ (888,000 )
State and local tax benefit – net of federal benefit
    (229,000 )     (229,000 )
Permanent differences – equity compensation and other
    142,000       142,000  
Income tax benefit utilized (not utilized)
    975,000       975,000  
Actual tax benefit
  $ -0-     $ -0-  

If the Company has a greater than 50% change in ownership of certain stock holdings by shareholders of the Company pursuant to Section 382 of the Internal Revenue Code, the net operating losses may be limited.  Currently no such evaluation has been performed.

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Note 12 - Long Term Debt
12 Months Ended
May 31, 2012
Long-term Debt [Text Block]
12.           LONG TERM DEBT

   
2012
   
2011
 
At May, long-term debt consists of:
           
KeHE Loan,(a)
  $ 770,000     $ 770,000  
Long-Term Loan,(b)
    3,882,000       3,000,000  
Debt Discount, (c)
    (99,512 )     (279,620 )
Total debt
  $ 4,552,488     $ 3,490,380  
Less current portion
    (250,000 )     (202,256 )
Long term debt
  $ 4,302,488     $ 3,288,124  

 
(a)
On or about February 11, 2011, the Company entered into a three-year marketing and distribution agreement granting KeHE Distributors LLC the exclusive rights to distribute into retail outlets all Artisanal products with primary focus on the Company's 16-cheese CheeseClock program. KeHE's exclusivity is dependent upon KeHE meeting specific minimum annual sales. Under the agreement, KeHE earns a commission of five percent (5%) on all net sales to accounts serviced by KeHE and may also earn stock options upon meeting specified sales thresholds over the term of the agreement (See Notes to Financials, Note 10, Shareholders Equity for details). The agreement further provides that KeHE will loan up to $520,000 to the Company to facilitate the purchase of inventory required for the KeHE accounts and that KeHE will advance up to an additional $100,000 of marketing funds to be used for in-store demonstrations and related marketing costs. The loan bears interest at a rate of 3-Month LIBOR plus 5% to be paid quarterly and is secured by the Company's accounts receivable and inventory. For so long as any amounts remain outstanding under the loan or KeHE maintains its exclusive distributor status and meets its annual minimum purchases, the Company may not incur any debt or issue any additional common stock without KeHE’s consent, which consent shall not be unreasonably withheld. As of May 2011, the Company had drawn down $520,000 of the total amount permitted under the agreement. In May 2011, it borrowed an additional $250,000 from KeHE to be repaid within 60 days. For this reason, $250,000 of the KeHE loan is reported under Notes Payable. As an inducement for making this additional loan, the Company modified the vesting terms of KeHe’s 4,880,000 options, which were to be earned based on certain product purchase thresholds. Upon the execution on May 9, 2011, of the amended Marketing and Distribution Agreement, KeHE became fully vested on 440,000 three year options exercisable at $.30 a share. The fair market value of these options, utilizing the Black Scholes model, was $75,386. These costs were amortized over 60 days. The remaining 4,440,000 of options to be earned for future purchases of inventory were to become fully vested on August 22, 2011, if the $250,000 was not repaid. The additional funds were not repaid and the remaining options vested. The fair market value of these options, utilizing the Black Scholes model, was $976,628 all of which was expensed immediately. The principal of $770,000 is now due in May 2014. As of May 31, 2012, the total amount due under the KeHE Agreement including interest is $818,194.

     
(b)
On or about February 22, 2010, the Company entered a loan agreement with one of its preferred shareholders and term loan participants (the "Lender") for a loan of $2.5 million (the "Long Term Loan").  On specified dates since then, the Long Term Loan has been increased by a total of $1,000,000.  The original loan was conditional upon the Lender obtaining a first security position on all of the Company's assets.  The loan was also conditional upon the Company's repurchase from Lender and its affiliate of 500,000 shares of the redeemable convertible preferred stock held by them collectively, repayment to the Lender of amounts Lender had previously advanced to Borrower under the Term Loan agreement (discussed above), and issuance to Lender of 9,275,000 shares of the Company's $.001 par value common stock representing twenty percent of the Company's outstanding common stock on a fully-diluted basis.  The maturity date of this Long Term Loan is February 2013.  As of May 31, 2012, the total amount due under the Long Term Loan including interest is $4,144,873.

 
(c)
A unamortized debt discount attributed to the Long-Term Loan as of May 31, 2012 and May 31, 2011 was $99,512 and $279,620, respectively.

Five-Year Maturity of Debt Schedule

   
Principal
 
       
Fiscal 2011
    1,294,000  
Fiscal 2012
       
Fiscal 2013
    3,882,000  
Fiscal 2014
    -  
Fiscal 2015
    -  
Total
    5,176,000  

Such five year maturity schedule of debt is exclusive of the $99,512 of unamortized debt discount.

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Note 13 - Shareholders' Equity
12 Months Ended
May 31, 2012
Stockholders' Equity Note Disclosure [Text Block]
13.           SHAREHOLDERS’ EQUITY

Terms of Series A Preferred Stock (“Preferred Stock”)

The Preferred Stock is convertible at $.30 per share into $.001 par value Common Stock of Company, (equaling 60% of the issued and outstanding Common Stock of the Company on a fully diluted basis, excluding the Management Stock Option (see below)).  Initially, dividends were to be paid (a) at an annual rate of 12% in each of the first three years ending August 14, 2008, 2009, and 2010 and were to be paid in preferred shares and (b) after the first three years, at a rate of 12% if paid in cash or at a rate of 15% if paid in preferred shares, at the election of the Company.  In February 2010, the preferred shareholders voted to terminate the issuance of dividends effective November 30, 2009.  The preferred share dividends shall convert into Common Stock at $.30 per share.

So long as over $1,500,000 of the Preferred Stock is issued and outstanding the Company shall require the prior written consent of Holders representing 2/3 of the Preferred Stock issued and outstanding to (a) sell, merge with, acquire or consolidate with another business entity, (b) incur additional leverage beyond the leverage contemplated by the Company and Holders as part of the Company’s acquisition of Artisanal Cheese, LLC, or (c) issue any new shares of common stock or securities convertible or exercisable into Common Stock in excess of 2% of the shares of Common Stock issued and outstanding on a fully diluted basis at the Closing, excluding the Management Stock Option below.

In the event of a liquidation, the Preferred Stockholders shall receive a cash payment of $1.20 per preferred share.

Preferred Stock Issuances

During the quarter ended August 31, 2011, several private investors made equity investments totaling $430,250 for which these investors received 430,250 shares of our  preferred stock.

During the quarter ended August 31, 2011, we  issued a secured lender 277,544 shares of our  preferred stock in lieu of a cash payment of interest owed on his loan totaling $277,544.

In August 2011, Artisanal issued 50,000 shares of preferred stock to a lender in connection with a loan to us of $200,000.

During the quarter ended November 30, 2011, one private investor made an investment of $370,000 for which he received 370,000 shares of our  preferred stock.

As of May 31, 2012, the total number of preferred shares outstanding is 6,514,154.

Common Stock Issuances

In March 2011, a preferred shareholder converted 13,500 shares of preferred stock at the conversion price of $.30 per share into 45,000 shares of common stock.

In July 2010, the Company issued 50,000 shares of common stock to each of seven directors for a total of 350,000 shares for their agreement to serve as board members.  The company recorded an expense of $24,200 in connection with these shares over a one year amortization period.

In October, 2010, the Company issued a total of 65,000 shares of common stock to two employees. The company has record an expense of $38,786 in connection with these shares over a one year amortization period.

In December 2010, 25,000 shares of common stock previously issued to an employee were cancelled.

In March 2011, a preferred shareholder converted 13,500 shares of preferred stock at the conversion rate of $.30 per share for which the shareholder received 45,000 shares of common stock.

In September 2011, two preferred shareholders converted a total of 263,300 shares of preferred stock at the conversion rate of $.30 per share for which they received a total of 877,666 shares of common stock.

In October 2011, we issued a total of 155,000 shares of common stock to three employees. We  recorded an expense of $75,950 in connection with these shares over a one year amortization period.

In February 2012, a preferred shareholder converted a total of 756,000 shares of preferred stock at the conversion rate of $.30 per share for which he received a total of 2,520,000 shares of common stock.

In the quarter ended May 31, 2012, Artisanal issued 341,000 shares of common stock to lenders in connection with loans totaling $682,000.

As of May 31, 2012, the total number of common shares outstanding is 28,093,982.

Stock Option

On or about February 11, 2011, Artisanal entered a marketing and distribution agreement with KeHE Distributors pursuant to which we were obligated to issue up to 4,880,000 stock options in specified tranches subject to KeHE achieving certain purchase thresholds.  During May 2011, we amended the vesting terms of these options, whereby 440,000 of the options were immediately vested and the remainder vested after our fiscal year end. The respective stock options have an exercise period of three years from the date of issuance and an exercise price of $.30 per share.

In September 2011, we issued a total of 550,000 stock options to five board members to replace those options which expired earlier in the year.  The stock options have an exercise period of three years from the date of issuance and an exercise price of $.30 per share.  We have recorded an expense of $20,420 in connection with these options.

A summary of the activity of stock options for the years ended May 31, 2012 and 2011 is as follows:

   
Stock Options
   
Weighted Average
Exercise Price
 
   
Outstanding
   
Exercisable
   
Outstanding
   
Exercisable
 
Balance – May 31, 2010
    770,000       770,000     $ .30     $ .30  
Granted Fiscal Year 2011
    4,880,000       4,880,000       .30       .30  
Exercised Fiscal Year 2011
    -       -       -       -  
Canceled Fiscal Year 2011
    (770,000 )     (770,000 )     (.30 )     (.30 )
Balance – May 31, 2011
    4,880,000       4,880,000       .30       .30  
Granted Fiscal Year 2012
    550,000       550,000       .30       .30  
Exercised Fiscal Year 2012
    -       -       -       -  
Canceled Fiscal Year 2012
    -       -       -       -  
Balance – May 31, 2012
    5,430,000       5,430,000     $ .30     $ .30  

The intrinsic value of the Company’s options outstanding during the years ended May 31, 2012 and 2011 was $0 and $0, respectively.

Information, at date of issuance, regarding stock option grants for the year ended May 31, 2012:

 
 
Shares
   
Weighted
Average
Exercise
 Price
   
Weighted
Average
Fair
Value
 
Year ended May 31, 2012:
                 
Exercise price exceeds market price
    5,430,000     $ .30     $ .065  
Exercise price equals market price
    -       -       -  
Exercise price is less than market price
    -       -       -  
                         

The following table summarizes information about stock options outstanding and exercisable at May 31, 2012:

 
Number
Outstanding
   
Weighted-
Average
Remaining
Life in
Years
   
Weighted
Average
Exercise
Price
   
Number
Exercisable
 
Range of exercise prices:
                     
$ .01 to $.50       5,430,000       3     $ .30       5,430,000  

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Note 14 - Commitments and Contingency
12 Months Ended
May 31, 2012
Commitments and Contingencies Disclosure [Text Block]
14.           COMMITMENTS AND CONTINGENCY

As of May 31, 2012 and May 31, 2011, the company has the following commitments and contingencies:

Term
Agreement
Monthly Expense
     
8/15/07 – 8/14/12
Preferred Vendor Agreement (a)
n/a
     
8/15/07 – 8/14/12
Product Development Agreement (b)
n/a
     
8/15/07 – 8/14/12
Trademark Assignment (c)
n/a
     
9/28/07 – 8/31/12
Lease Agreement (d)
$26,000

 
a.
The Company had entered into a five-year Preferred Vendor Agreement with two restaurant establishments owned by the former member of Artisanal Cheese, LLC, pursuant to which the Company will supply the restaurants or their affiliates with any and all premium cheese products at a high volume discount and at prices not to exceed prices offered to other customers, and the restaurants are to purchase exclusively from the Company provided the Company can meet terms and conditions acceptable to the restaurants.  The Preferred Vendor Agreement also provides for a credit to the restaurant establishments which credit shall be applied to the first $228,000 worth of product, not to exceed $57,000 in any calendar quarter.  This credit is the result of the payoff in full at the closing of Artisanal by one of its former members of a certain loan to the Company.  (See Note 8, Notes Payable).

 
b.
The Company had entered into a five-year Product Development Agreement pursuant to which the Company shall have a “first-look” right and 30-day exclusivity period to evaluate and negotiate in good faith a distribution arrangement (including minimum orders, exclusivity, prices/royalty rates and terms) for all new cheeses, cheese related products and other products developed by the two restaurant establishments owned by the former member of Artisanal Cheese, LLC.  After the 30-day exclusivity period, the Company will have an opportunity to match any terms and conditions of a distribution agreement that the restaurants may subsequently reach with a third party.  The Agreement provides for a written trademark license from the Company to the restaurants upon terms to be mutually agreed upon with respect to any distribution by the restaurants under the Artisanal brand of such new products other than distribution by the Company.

 
c.
The Company had entered into a Trademark License Agreement pursuant to which the Company granted a royalty-free license to the two restaurant establishments to use the trade name “Artisanal Fromagerie & Bistro” and the derivative logo (consisting of an oval design with four stylized sheep seated in front of a barn and the words “Artisanal Fromagerie – Bistro – Wine Bar”) in connection with the operation, distribution and sale of cheese, cheese products and other food products from the restaurant establishments or their affiliated restaurants or retail stores.  In October 2009 this mark was assigned to the Licensees in accordance with the agreement.

 
d.
Upon closing the acquisition of Artisanal Cheese LLC in August 2007, the Company negotiated a new five-year lease for approximately 10,000 square feet commencing September 28, 2007, subject to rent increase of approximately ten percent per annum. The current lease payment is approximately $26,000 per month.  The leased space consists of all executive and sales offices, five cheese aging caves, a packaging and shipping facility, a customer call center and a 1,000 square foot cheese center consisting of a fully-equipped kitchen, classroom and presentation area with two large flat screen television panels used for conducting cheese education courses and third-party special events.  From this facility the business distributes its line of Artisanal Premium Cheese products to fine food wholesalers, specialty food outlets, restaurants and through its catalogue and Website. The lease has been extended to February 2013 with a option to extend through May 2013.

The Company's subsidiary is currently involved in a couple of legal proceedings that are incidental to its operations.  None of these proceedings may have, or have had in the 12 months preceding the date of this report, a significant effect on the financial position or profitability of the Company or its subsidiary:

CIT Technology Financing Services, Inc. v. Artisanal Cheese, LLC, New York Supreme Court (New York), Index No. 06159/10 – Plaintiff sought approximately $107,000 pursuant to two copier leases.  The Company negotiated a settlement with plaintiff to resume monthly payments for the copiers.  The Company is in default of the settlement agreement as it is five months in arrears as of the date of this filing.  A judgment has not been entered to date.

Christopher Calise and Perry Lerner v. Artisanal Cheese, LLC, New York Supreme Court (New York County), Index No. 5073/2010.  Plaintiffs each loaned $50,000 to the Company on or about July 10, 2009.  In June 2010, they commenced an action for unpaid interest and requesting acceleration of the loan.  The Company negotiated a settlement with plaintiffs to pay off the note by December 31, 2011.  As of the date of this filing, plaintiffs have been paid in full.

Central Business Solutions v. Artisanal Cheese, LLC New York City Civil Court (New York County), Index No. 043515/2010.  Plaintiff is seeking approximately $13,000 for equipment maintenance services.  The Company rejects Plaintiff's claim in full and has counterclaimed for damages resulting from Plaintiff's breach of contract, misrepresentation and fraud.

Charles Knott v. Artisanal Cheese, LLC, New York Supreme Court (New York County), Index No. 5073/2010.   In July 2012, plaintiff commenced an action to recover unpaid principal and interest of a $150,000 loan made to the company which matured on December 31, 2011.  An answer has been filed and the Company is attempting to negotiate a settlement with the lender to pay down the note.

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Note 15 - Related Party Transactions
12 Months Ended
May 31, 2012
Related Party Transactions Disclosure [Text Block]
15.           RELATED PARTY TRANSACTIONS

Since acquiring Artisanal, Mr. Dowe’s wife, Janet L. Dowe, has periodically provided legal and administrative services to the company for a consulting fee of $5,000 per month.  The fees paid to Mrs. Dowe for services rendered to Artisanal are approved by our Board of Directors, except for Mr. Dowe who is not entitled to vote on these matters.  Effective January 1, 2010, Mrs. Dowe became a part-time employee of Artisanal at an annual salary of $60,000.  Effective April 22, 2011, she became a full-time employee at an annual salary of $120,000.

With respect to the foregoing transactions, we believe that the terms of these transactions were as fair to us as could be obtained from an unrelated third party.  Future transactions with affiliates including loans will be on terms no less favorable than can be obtained from unaffiliated parties and will be approved by a majority of the independent disinterested members of our board of directors.

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Note 16 - Subsequent Events
12 Months Ended
May 31, 2012
Subsequent Events [Text Block]
16.           SUBSEQUENT EVENTS

On April 13, 2012, the Company filed with the SEC a registration statement on Form S-1 for the purpose of raising up to $8 million through the sale of up to 16 million shares of its common stock.  The registration statement became effective on June 6, 2012.  As of the date of this filing, approximately $282,500 has been raised and 141,250 shares issued.

In October 2012, two private lenders agreed to loan to the Company a total of $1,700,000 secured and to be paid down by using the Company's credit card receipts for online purchases.  The loan bears interest of 6% p.a. and matures on October 14, 2014.  The lenders each received one share of the Company's common stock for each dollar they loaned, respectively.  The proceeds are being used to pay down tax liabilities and for operating capital.

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