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Bill The Butcher, Inc.
10-Q
--08-31
47090404
false
0001375554
Yes
No
Smaller Reporting Company
No
2013
Q1
2012-11-30
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Note
1. Description of Business and Summary of Significant
Accounting Policies</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Organization
and business</font> – Bill the Butcher, Inc. and its
wholly-owned subsidiary (“Bill the Butcher” or
the “Company”), is a Seattle, Washington based
retailer selling U.S. sourced and ethically and sustainably
raised meats through corporate-owned neighborhood butcher
shops.  At November 30, 2012, we operated four
stores in the greater Seattle area and entered into leases
for three additional stores, two of which are fully
constructed and awaiting opening, one of which we opened in
January 2013. We have one operating segment, butcher shops
selling organic and natural meat.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Fund
raising activities and restructuring of debt</font> –
Our Chief Executive Officer together with our financial
advisors at Finance 500, continue to raise capital and
have also negotiated restructured payment terms for
approximately $1.1 million of prior indebtedness and
settlement of prior litigation.  During the three
months ended November 30, 2012, we received $125,000 from
sales of our common stock before offering costs, and we (i)
issued $365,000 of our 12% Convertible Notes in exchange
for $300,000 of 24% notes and accrued interest, (ii) issued
$62,000 of our 12% Convertible Notes in exchange for
$50,000 of 15% notes and accrued interest, and (iii) issued
$225,000 of our 12% Convertible Notes in exchange for
accounts payable of such amount.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Going
concern</font> - The accompanying condensed consolidated
financial statements have been prepared in conformity with
accounting principles generally accepted in the United
States of America, which contemplate continuation of the
Company as a going concern. Our net loss was approximately
$1.3 million during the three months ended November 30,
2012 and $4.0 million during the year ended August 31,
2012, and our operating activities used cash of $200,000
during the three months ended November 30, 2012 and $1.0
million during the year ended August 31,
2012.  We expect losses to continue in the near
future as we grow and further develop our
operations.  At November 30, 2012, we had a
working capital deficit of approximately $4.3 million and a
stockholders’ deficit of $4.1 million.  We
have funded our operations, business development and growth
through sales of common stock and short-term borrowings. We
require additional funds to further develop our business,
execute our business strategy and satisfy our working
capital needs.  Our operating expenses will
consume a material amount of our cash
resources.  We intend to raise capital through
debt and/or equity financing to fund future operations and
to provide additional working capital. However, there is no
assurance that such financing will be available on a timely
basis, on terms favorable to us or obtained in sufficient
amounts necessary to meet our needs. In the event that we
cannot obtain additional funds on a timely basis or our
operations do not generate sufficient cash flow, we may be
forced to curtail or cease our activities, which would
likely result in the loss to investors of all or a
substantial portion of their investment.  The
accompanying condensed consolidated financial statements do
not include any adjustments to reflect the possible future
effects on the recoverability and classification of assets
or the amounts and classifications of liabilities that may
result from the outcome of this uncertainty.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Use of
estimates in the preparation of financial statements</font>
- Preparation of financial statements in conformity with
generally accepted accounting principles requires
management to make estimates and assumptions that affect
reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the
financial statements and reported amounts of revenue and
expenses during the reporting period. Actual results could
differ from those estimates. The more significant
accounting estimates inherent in the preparation of our
financial statements include estimates as to the valuation
and recoverability of inventories, recoverability of
long-lived assets, valuation of equity related instruments,
and valuation allowance for deferred income tax
assets.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Interim
financial statements</font> – The accompanying
unaudited condensed consolidated financial statements have
been prepared in accordance with accounting principles
generally accepted in the United States of America for
interim financial information and in accordance with the
instructions to Form 10-Q and Article 10 of Regulation
S-X.  Accordingly, they do not include all of the
information and note disclosures required by U.S. generally
accepted accounting principles for complete financial
statements.  The accompanying unaudited financial
information should be read in conjunction with the audited
consolidated financial statements, including the notes
thereto, as of and for the fiscal year ended August 31,
2012, included in our Annual Report on Form 10-K filed with
the Securities and Exchange Commission.  The
information furnished in this report includes all
adjustments (consisting of normal recurring adjustments),
which are, in the opinion of management, necessary for a
fair presentation of our consolidated financial position,
results of operations and cash flows for each period
presented.  The results of operations for the
interim period ended November 30, 2012 are not necessarily
indicative of the results for any future period.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Concentrations</font>
-<font style="DISPLAY: inline; FONT-WEIGHT: bold"> </font>All
of our operations are currently located in the greater
Seattle, Washington area. As a result, we could be
particularly susceptible to adverse trends and economic
conditions in the area, including labor markets and other
occurrences such as local strikes, earthquakes or other
natural disasters.  In addition, inasmuch as we
are a retailer of meat and related merchandise, adverse
publicity and/or trends with respect to the meat industry
in general could have a material effect on our operations
and financial condition.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Cash
and cash equivalents</font> - We consider all highly liquid
investments purchased with maturities of three months or
less to be cash equivalents. Our cash is maintained with
high credit quality financial institutions. At times, such
balances may be in excess of the FDIC insurance limit. At
November 30, 2012, no amounts exceeded the
limit.</font><br />
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Fair
value measurements</font> – In general, fair values
determined by Level 1 inputs utilize quoted prices
(unadjusted) in active markets for identical assets or
liabilities.  Fair values determined by Level 2
inputs utilize observable inputs other than Level 1 prices,
such as quoted prices for similar asset or liabilities,
quoted prices in markets that are not active or other
inputs that are observable or can be corroborated by
observable market data for substantially the full term of
the related assets or liabilities.  Fair values
determined by Level 3 inputs are unobservable data points
for the asset or liability, and include situations where
there is little, if any, market activity for the asset or
liability.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Fair
value of financial instruments</font> – The fair
value of our financial instruments, including cash and cash
equivalents, accounts payable, certain accrued liabilities
and notes payable approximates the carrying amounts value
due to their short maturities.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Merchandise
inventories</font> <font style="DISPLAY: inline; FONT-WEIGHT: bold">–</font>
Merchandise inventories, which consists of meat and
nonperishable products, are stated at the lower of cost or
market. Cost is determined by the first-in, first-out
method.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Impairment
of long-lived assets</font> - Long-lived assets are
reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset
may not be recoverable.  Recoverability of assets to
be held and used is measured by a comparison of the
carrying amount of an asset to future net cash flows
expected to be generated by the asset.  If such assets
are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets,
and is disclosed.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Deferred
financing costs</font> – We record legal and other
fees paid relating to offerings of equity or debt
securities as deferred financing costs included in other
assets.  Costs relating to debt are deferred and
amortized to interest expense over the term of the related
debt.  Costs relating to equity are recorded as
stock issue costs as a decrease to additional paid-in
capital upon sales of equity securities in the financing to
which the costs relate.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Debt
discount</font> – We record fees paid to lenders and
the fair value of common stock or warrants issued with
debt securities as a debt discount, which is presented net
of related borrowings on the consolidated balance sheets
and amortized as an adjustment to interest expense over the
borrowing term.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Revenue
recognition</font> - Revenues are recognized at the point
of sale at retail locations or upon delivery of the
product.  Retail store revenues are reported net
of sales, use or other transaction taxes that are collected
from customers and remitted to taxing authorities.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Cost
of goods sold</font> - Cost of goods sold includes the cost
of meat and nonperishable products sold.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Stock-based
compensation</font> -<font style="FONT-STYLE: italic; DISPLAY: inline"> </font>We
use the Black-Scholes-Merton option pricing model as our
method of valuation for stock-based awards. Stock-based
compensation expense is based on the value of the portion
of the award that will vest during the period. The
Black-Scholes-Merton option pricing model requires the
input of highly subjective assumptions, and other
reasonable assumptions could provide differing results. Our
determination of the fair value of stock-based awards on
the date of grant using an option pricing model is affected
by our stock price as well as assumptions regarding a
number of highly complex and subjective variables. These
variables include, but are not limited to, the expected
stock price volatility over the term of the award.
Stock-based compensation expense is recognized on a
straight-line basis over the applicable vesting period
based on the fair value of such stock-based awards on the
grant date.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Net
loss per share</font> - Basic and diluted net loss per
common share is computed by dividing the net loss by the
weighted average number of common shares outstanding during
the period.  Common stock equivalents are
excluded as the effect would be
anti-dilutive.  Shares excluded from net loss per
share computations for the three months ended November 30
were as follows:</font>
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<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
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<td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
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<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">2011</font>
</div>
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<td valign="bottom" width="1%" style="TEXT-ALIGN: left">
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<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">3,075,000</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr>
<td align="left" valign="bottom" width="47%" style="PADDING-BOTTOM: 2px">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Convertible
notes payable</font>
</div>
</td>
<td align="right" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">11,068,347</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">562,500</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr style="background-color: #CCEEFF;">
<td valign="bottom" width="47%" style="PADDING-BOTTOM: 4px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">17,920,021</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 4px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">3,637,500</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 4px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
</table><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Contingencies</font>
- Conditions may exist as of the date financial statements
are issued, which may result in a loss to the Company, but
which will only be resolved when one or more future events
do or do not occur. Company management assesses such
contingent liabilities, and such assessment inherently
involves an exercise of judgment.  If the
assessment of a contingency indicates that it is probable
that a liability has been incurred and the amount of the
liability can be estimated, then the estimated liability
would be accrued in our financial statements. If the
assessment indicates that a potentially material loss
contingency is not probable but is reasonably possible, or
is probable but cannot be estimated, then the nature of the
contingent liability, together with an estimate of the
range of possible loss, if determinable, would be
disclosed.</font>
</div><br/>
we operated four stores in the greater Seattle area and entered into leases for three additional stores, two of which are fully constructed and awaiting opening, one of which we opened in January 2013
1
1100000
125000
62000
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Going
concern</font> - The accompanying condensed consolidated
financial statements have been prepared in conformity with
accounting principles generally accepted in the United
States of America, which contemplate continuation of the
Company as a going concern. Our net loss was approximately
$1.3 million during the three months ended November 30,
2012 and $4.0 million during the year ended August 31,
2012, and our operating activities used cash of $200,000
during the three months ended November 30, 2012 and $1.0
million during the year ended August 31,
2012.  We expect losses to continue in the near
future as we grow and further develop our
operations.  At November 30, 2012, we had a
working capital deficit of approximately $4.3 million and a
stockholders’ deficit of $4.1 million.  We
have funded our operations, business development and growth
through sales of common stock and short-term borrowings. We
require additional funds to further develop our business,
execute our business strategy and satisfy our working
capital needs.  Our operating expenses will
consume a material amount of our cash
resources.  We intend to raise capital through
debt and/or equity financing to fund future operations and
to provide additional working capital. However, there is no
assurance that such financing will be available on a timely
basis, on terms favorable to us or obtained in sufficient
amounts necessary to meet our needs. In the event that we
cannot obtain additional funds on a timely basis or our
operations do not generate sufficient cash flow, we may be
forced to curtail or cease our activities, which would
likely result in the loss to investors of all or a
substantial portion of their investment.  The
accompanying condensed consolidated financial statements do
not include any adjustments to reflect the possible future
effects on the recoverability and classification of assets
or the amounts and classifications of liabilities that may
result from the outcome of this uncertainty.</font></div>
-4000000
-200000
-1000000
-4300000
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Use of
estimates in the preparation of financial statements</font>
- Preparation of financial statements in conformity with
generally accepted accounting principles requires
management to make estimates and assumptions that affect
reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the
financial statements and reported amounts of revenue and
expenses during the reporting period. Actual results could
differ from those estimates. The more significant
accounting estimates inherent in the preparation of our
financial statements include estimates as to the valuation
and recoverability of inventories, recoverability of
long-lived assets, valuation of equity related instruments,
and valuation allowance for deferred income tax
assets.</font></div>
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Interim
financial statements</font> – The accompanying
unaudited condensed consolidated financial statements have
been prepared in accordance with accounting principles
generally accepted in the United States of America for
interim financial information and in accordance with the
instructions to Form 10-Q and Article 10 of Regulation
S-X.  Accordingly, they do not include all of the
information and note disclosures required by U.S. generally
accepted accounting principles for complete financial
statements.  The accompanying unaudited financial
information should be read in conjunction with the audited
consolidated financial statements, including the notes
thereto, as of and for the fiscal year ended August 31,
2012, included in our Annual Report on Form 10-K filed with
the Securities and Exchange Commission.  The
information furnished in this report includes all
adjustments (consisting of normal recurring adjustments),
which are, in the opinion of management, necessary for a
fair presentation of our consolidated financial position,
results of operations and cash flows for each period
presented.  The results of operations for the
interim period ended November 30, 2012 are not necessarily
indicative of the results for any future period.</font></div>
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Concentrations</font>
-<font style="DISPLAY: inline; FONT-WEIGHT: bold"> </font>All
of our operations are currently located in the greater
Seattle, Washington area. As a result, we could be
particularly susceptible to adverse trends and economic
conditions in the area, including labor markets and other
occurrences such as local strikes, earthquakes or other
natural disasters.  In addition, inasmuch as we
are a retailer of meat and related merchandise, adverse
publicity and/or trends with respect to the meat industry
in general could have a material effect on our operations
and financial condition.</font></div>
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Cash
and cash equivalents</font> - We consider all highly liquid
investments purchased with maturities of three months or
less to be cash equivalents. Our cash is maintained with
high credit quality financial institutions. At times, such
balances may be in excess of the FDIC insurance limit. At
November 30, 2012, no amounts exceeded the
limit.</font></div>
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Fair
value measurements</font> – In general, fair values
determined by Level 1 inputs utilize quoted prices
(unadjusted) in active markets for identical assets or
liabilities.  Fair values determined by Level 2
inputs utilize observable inputs other than Level 1 prices,
such as quoted prices for similar asset or liabilities,
quoted prices in markets that are not active or other
inputs that are observable or can be corroborated by
observable market data for substantially the full term of
the related assets or liabilities.  Fair values
determined by Level 3 inputs are unobservable data points
for the asset or liability, and include situations where
there is little, if any, market activity for the asset or
liability.</font></div>
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Fair
value of financial instruments</font> – The fair
value of our financial instruments, including cash and cash
equivalents, accounts payable, certain accrued liabilities
and notes payable approximates the carrying amounts value
due to their short maturities.</font></div>
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Merchandise
inventories</font> <font style="DISPLAY: inline; FONT-WEIGHT: bold">–</font>
Merchandise inventories, which consists of meat and
nonperishable products, are stated at the lower of cost or
market. Cost is determined by the first-in, first-out
method.</font></div>
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Impairment
of long-lived assets</font> - Long-lived assets are
reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset
may not be recoverable.  Recoverability of assets to
be held and used is measured by a comparison of the
carrying amount of an asset to future net cash flows
expected to be generated by the asset.  If such assets
are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets,
and is disclosed.</font></div>
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Deferred
financing costs</font> – We record legal and other
fees paid relating to offerings of equity or debt
securities as deferred financing costs included in other
assets.  Costs relating to debt are deferred and
amortized to interest expense over the term of the related
debt.  Costs relating to equity are recorded as
stock issue costs as a decrease to additional paid-in
capital upon sales of equity securities in the financing to
which the costs relate.</font></div>
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Debt
discount</font> – We record fees paid to lenders and
the fair value of common stock or warrants issued with
debt securities as a debt discount, which is presented net
of related borrowings on the consolidated balance sheets
and amortized as an adjustment to interest expense over the
borrowing term.</font></div>
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Revenue
recognition</font> - Revenues are recognized at the point
of sale at retail locations or upon delivery of the
product.  Retail store revenues are reported net
of sales, use or other transaction taxes that are collected
from customers and remitted to taxing authorities.</font></div>
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Cost
of goods sold</font> - Cost of goods sold includes the cost
of meat and nonperishable products sold.</font></div>
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Stock-based
compensation</font> -<font style="FONT-STYLE: italic; DISPLAY: inline"> </font>We
use the Black-Scholes-Merton option pricing model as our
method of valuation for stock-based awards. Stock-based
compensation expense is based on the value of the portion
of the award that will vest during the period. The
Black-Scholes-Merton option pricing model requires the
input of highly subjective assumptions, and other
reasonable assumptions could provide differing results. Our
determination of the fair value of stock-based awards on
the date of grant using an option pricing model is affected
by our stock price as well as assumptions regarding a
number of highly complex and subjective variables. These
variables include, but are not limited to, the expected
stock price volatility over the term of the award.
Stock-based compensation expense is recognized on a
straight-line basis over the applicable vesting period
based on the fair value of such stock-based awards on the
grant date.</font></div>
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Net
loss per share</font> - Basic and diluted net loss per
common share is computed by dividing the net loss by the
weighted average number of common shares outstanding during
the period.  Common stock equivalents are
excluded as the effect would be
anti-dilutive.  Shares excluded from net loss per
share computations for the three months ended November 30
were as follows:</font>
</div><br/><table cellpadding="0" cellspacing="0" width="75%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr>
<td valign="bottom" width="47%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">2012</font>
</div>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"> </font>
</td>
<td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"> </font>
</td>
<td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">2011</font>
</div>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr style="background-color: #CCEEFF;">
<td align="left" valign="bottom" width="47%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Warrants
and options</font>
</div>
</td>
<td align="right" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">6,851,674</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">3,075,000</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr>
<td align="left" valign="bottom" width="47%" style="PADDING-BOTTOM: 2px">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Convertible
notes payable</font>
</div>
</td>
<td align="right" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">11,068,347</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">562,500</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr style="background-color: #CCEEFF;">
<td valign="bottom" width="47%" style="PADDING-BOTTOM: 4px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">17,920,021</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 4px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">3,637,500</font></td></tr></table>
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Contingencies</font>
- Conditions may exist as of the date financial statements
are issued, which may result in a loss to the Company, but
which will only be resolved when one or more future events
do or do not occur. Company management assesses such
contingent liabilities, and such assessment inherently
involves an exercise of judgment.  If the
assessment of a contingency indicates that it is probable
that a liability has been incurred and the amount of the
liability can be estimated, then the estimated liability
would be accrued in our financial statements. If the
assessment indicates that a potentially material loss
contingency is not probable but is reasonably possible, or
is probable but cannot be estimated, then the nature of the
contingent liability, together with an estimate of the
range of possible loss, if determinable, would be
disclosed.</font></div>
<br />
Shares excluded from net loss per share computations for the
three months ended November 30 were as follows:: <br />
<br /><table cellpadding="0" cellspacing="0" width="75%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr>
<td valign="bottom" width="47%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">2012</font>
</div>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"> </font>
</td>
<td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"> </font>
</td>
<td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">2011</font>
</div>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr style="background-color: #CCEEFF;">
<td align="left" valign="bottom" width="47%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Warrants
and options</font>
</div>
</td>
<td align="right" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">6,851,674</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">3,075,000</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr>
<td align="left" valign="bottom" width="47%" style="PADDING-BOTTOM: 2px">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Convertible
notes payable</font>
</div>
</td>
<td align="right" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">11,068,347</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">562,500</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr style="background-color: #CCEEFF;">
<td valign="bottom" width="47%" style="PADDING-BOTTOM: 4px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">17,920,021</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 4px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">3,637,500</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 4px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
</table>
6851674
3075000
11068347
562500
17920021
3637500
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Note
2.  Related Party and Settlement of
Litigation</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">J’Amy
Owens, our sole officer and director and principal
shareholder, acquired a majority of the Company’s
ownership in 2009, and during the fiscal year ended August
31, 2010, the Company acquired ownership of a business she
co-founded to develop the “Bill the Butcher”
retail concept.  Ms. Owens is involved in other
business activities, and as a result may face a conflict in
selecting between the Company and other business
interests.  We have not established a policy for
resolution of such conflicts.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Settlement
of Litigation</font> - In 2010, a former employee commenced
a lawsuit in the Superior Court of the State of Washington
against the Company, J’Amy Owens, its sole officer
and director (together the with the Company the “BtB
Parties), and certain advisors to the Company (“Other
Parties”).  In July 2012, the Company, Ms.
Owens and the former employee entered into a settlement
agreement and general release and all claims, demands,
expenses, attorney fees, causes of action or suits between
and among the Company, Ms. Owens and the former employee
were released and fully settled.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In
2011, an action was commenced by the former owner and
co-founder of the company we acquired in 2010, in the
Superior Court of the State of Washington, against the BtB
Parties and the Other Parties. In August 2012, the Company,
Ms. Owens and the plaintiff entered into a settlement
agreement and general release pursuant to which, among
other things, all claims, demands, expenses, attorney fees,
causes of action or suits between and among the Company,
Ms. Owens and the plaintiff were released.  The
plaintiff retained 6,270,000 shares of our common stock
previously issued, and we issued to the plaintiff a
$130,000 non-interest bearing note payable due July 1,
2013.  In connection with the issuance of shares
and notes payable and with related legal fees and expenses,
we recognized settlement expense of approximately $766,000
during the year ended August 31, 2012.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In
July 2012, a lawsuit was filed against the Company and Ms.
Owens by the “Other Parties” described above
claiming indemnification with respect to litigation brought
by the former employee against the Other Parties, and among
other things, recovery of damages in an unspecified amount
and recovery of attorney’s fees.  The Other
Parties are holders of shares of Company common stock in
excess of 5%, but less than 10% of total Company common
stock outstanding.  The Company and the Other
Parties reached a settlement regarding this litigation
subsequent to in September 2012, pursuant to which, among
other things, the Company agreed to issue 2,500,000 shares
of our common stock to the Other Parties and the Other
Parties dropped their litigation and released all claims.
In connection with the issuance of shares and related legal
fees and expenses, we recognized settlement expense of
approximately $263,000 during the three months ended
November 30, 2012.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Common
Stock Receivable from Founder</font> - During the year
ended August 31, 2011, we issued 293,750 shares of our
common stock to investors in exchange for $75,000, and Ms.
Owens agreed to transfer 200,000 of these shares from
personally owned shares.  The agreement to
transfer shares is accounted for as a contribution of
capital of $100,000 based on the closing price of our
common stock on the transaction date.  The
transfer of shares to the Company has not occurred and the
receivable for such shares is presented as a separate
component of stockholders’ deficit.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Lease
arrangement with Founder</font> – Commencing in
September 2012, we lease our corporate facilities from
J’Amy Owens pursuant to a lease
arrangement.  During the three months ended
November 30, 2012, we paid rent of $10,000 per month and
paid a non-refundable security deposit of
$20,000.  We continue to pay rent of $10,000 per
month and are in the process of negotiating a lease
agreement.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Common
Stock Issued to Employees</font> – During the three
months ended November 30, 2012 we issued 1,000,000 shares
to each of two employees, who are currently holders of our
common stock.  These shares are subject to a
proxy to vote by Ms. Owens, as are other shares owned by
these employees.</font>
</div><br/>
6270000
130000
non-interest bearing
766000
excess of 5%, but less than 10%
2500000
263000
293750
75000
200000
100000
10000
20000
1000000
2
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Note
3.   Merchandise Inventories</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Merchandise
inventories consisted of the following (in
thousands):</font>
</div><br/><table cellpadding="0" cellspacing="0" width="75%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr>
<td valign="bottom" width="47%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td colspan="2" valign="bottom" width="12%" style="TEXT-ALIGN: center">
<div style="TEXT-ALIGN: center; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">November
30,</font>
</div>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"> </font>
</td>
<td valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"> </font>
</td>
<td colspan="2" valign="bottom" width="12%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">August
31,</font>
</div>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"> </font>
</td>
</tr>
<tr>
<td valign="bottom" width="47%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"> </font>
</td>
<td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"> </font>
</td>
<td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">2012</font>
</div>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"> </font>
</td>
<td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"> </font>
</td>
<td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">2012</font>
</div>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr style="background-color: #CCEEFF;">
<td align="left" valign="bottom" width="47%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Perishable
food</font>
</div>
</td>
<td align="right" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$</font>
</td>
<td valign="bottom" width="11%" style="TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">7</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$</font>
</td>
<td valign="bottom" width="11%" style="TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">20</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr>
<td align="left" valign="bottom" width="47%" style="PADDING-BOTTOM: 2px">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Non-perishables</font>
</div>
</td>
<td align="right" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">6</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">7</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr style="background-color: #CCEEFF;">
<td align="left" valign="bottom" width="47%" style="PADDING-BOTTOM: 4px">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">     Total</font>
</div>
</td>
<td align="right" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$</font>
</td>
<td valign="bottom" width="11%" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">13</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 4px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$</font>
</td>
<td valign="bottom" width="11%" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">27</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 4px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
</table><br/>
<br />
Merchandise inventories consisted of the following (in
thousands): <br />
<br /><table cellpadding="0" cellspacing="0" width="75%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr>
<td valign="bottom" width="47%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="left" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td colspan="2" valign="bottom" width="12%" style="TEXT-ALIGN: center">
<div style="TEXT-ALIGN: center; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">November
30,</font>
</div>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"> </font>
</td>
<td valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"> </font>
</td>
<td colspan="2" valign="bottom" width="12%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">August
31,</font>
</div>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"> </font>
</td>
</tr>
<tr>
<td valign="bottom" width="47%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"> </font>
</td>
<td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"> </font>
</td>
<td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">2012</font>
</div>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"> </font>
</td>
<td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"> </font>
</td>
<td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">2012</font>
</div>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr style="background-color: #CCEEFF;">
<td align="left" valign="bottom" width="47%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Perishable
food</font>
</div>
</td>
<td align="right" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$</font>
</td>
<td valign="bottom" width="11%" style="TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">7</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$</font>
</td>
<td valign="bottom" width="11%" style="TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">20</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr>
<td align="left" valign="bottom" width="47%" style="PADDING-BOTTOM: 2px">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Non-perishables</font>
</div>
</td>
<td align="right" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">6</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">7</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr style="background-color: #CCEEFF;">
<td align="left" valign="bottom" width="47%" style="PADDING-BOTTOM: 4px">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">     Total</font>
</div>
</td>
<td align="right" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$</font>
</td>
<td valign="bottom" width="11%" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">13</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 4px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$</font>
</td>
<td valign="bottom" width="11%" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">27</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 4px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
</table>
7000
20000
6000
7000
13000
27000
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Note
4.  Notes Payable</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Notes
payable and advances are due within one year and consist of
the following (in thousands):</font><br />
</div><br/><table cellpadding="0" cellspacing="0" width="75%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr>
<td valign="bottom" width="47%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"> </font>
</td>
<td align="left" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"> </font>
</td>
<td colspan="2" valign="bottom" width="12%" style="TEXT-ALIGN: center">
<div style="TEXT-ALIGN: center; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">November
30,</font>
</div>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"> </font>
</td>
<td valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"> </font>
</td>
<td colspan="2" valign="bottom" width="12%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">August
31,</font>
</div>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"> </font>
</td>
</tr>
<tr>
<td valign="bottom" width="47%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"> </font>
</td>
<td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"> </font>
</td>
<td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">2012</font>
</div>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"> </font>
</td>
<td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"> </font>
</td>
<td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">2012</font>
</div>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr style="background-color: #CCEEFF;">
<td align="left" valign="bottom" width="47%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Convertible
notes, interest at 12%</font>
</div>
</td>
<td align="right" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$</font>
</td>
<td valign="bottom" width="11%" style="TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">1,660</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$</font>
</td>
<td valign="bottom" width="11%" style="TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">1,008</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr>
<td align="left" valign="bottom" width="47%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Convertible
notes, interest at 15%</font>
</div>
</td>
<td align="right" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">-</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">50</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr style="background-color: #CCEEFF;">
<td align="left" valign="bottom" width="47%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">24%
notes</font>
</div>
</td>
<td align="right" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">-</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">300</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr>
<td align="left" valign="bottom" width="47%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Non-interest
bearing note</font>
</div>
</td>
<td align="right" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">130</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">130</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr style="background-color: #CCEEFF;">
<td align="left" valign="bottom" width="47%" style="PADDING-BOTTOM: 2px">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Advances
on notes</font>
</div>
</td>
<td align="right" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">465</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">465</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr>
<td align="left" valign="bottom" width="47%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">     Total
notes payable and advances</font>
</div>
</td>
<td align="right" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">2,255</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">1,953</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr style="background-color: #CCEEFF;">
<td align="left" valign="bottom" width="47%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Discount,
net of amortization</font>
</div>
</td>
<td align="right" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">(51</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">)</font>
</td>
<td align="right" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">(73</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">)</font>
</td>
</tr>
<tr>
<td align="left" valign="bottom" width="47%" style="PADDING-BOTTOM: 4px">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">     Total</font>
</div>
</td>
<td align="right" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$</font>
</td>
<td valign="bottom" width="11%" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">2,204</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 4px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$</font>
</td>
<td valign="bottom" width="11%" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">1,880</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 4px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
</table><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">12%
Convertible Notes Payable</font> – During the year
ended August 31, 2012, we issued $500,000 of notes payable
due July 1, 2013, and warrants to purchase 3,000,006 shares
of our common stock at a purchase price of $0.15 per share
in exchange for $500,000 cash, less financing fees and
expenses of approximately $71,000, and also issued $483,000
of notes payable due July 1, 2013 in exchange for 15%
Convertible Notes having face amounts of $400,000 and
related accrued interest of $83,000<a id="eolPage30" name="eolPage30"><!--EFPlaceholder--></a>. The notes bear
interest at 12% per annum and are convertible into shares
of our common stock at the holders election at a per share
price of $0.15 per share (the 12% Convertible
Notes).  The 12% Convertible Notes are
collateralized by a pledge of interests in all of the
Company’s assets on a pari passu basis with holders
of other collateralized notes payable.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">During
the three months ended November 30, 2012, we issued
$427,000 of 12% Convertible Notes in exchange for 15%
Convertible Notes and 24% Notes Payable as described
below.  Additionally, during the three months
ended November 30, 2012, we also issued $225,000 of 12%
Convertible Notes due July 1, 2013 in exchange for accounts
payable of such amounts.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">15%
Convertible Notes</font> - During the year ended August 31,
2011, we received $450,000 cash from investors and issued
convertible notes payable (together, the “15%
Convertible Notes” in such amounts together with
warrants to purchase 550,000 shares of our common stock at
a per share price of $0.80 that expire in February
2016.  Convertible Notes were due in one year and
bear interest at 15% payable at
maturity.  Convertible Notes are convertible into
shares of our common stock at a conversion price of $0.80
per share under certain conditions.  A relative
portion of the fair value of warrants issued was recorded
as debt discount and amortized to interest expense, of
which $53,000 was recognized during the fiscal year ending
August 31, 2012.  As described above, during the
year ended August 31, 2012, holders of $400,000 of 15%
Convertible Notes exchanged 15% Convertible Notes for 12%
Convertible Notes, and during the three months ended
November 30, 2012, the remaining $50,000 of 15% Convertible
Notes were exchanged for 12% Convertible
Notes.  No gain or loss was recognized on these
exchanges.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">24%
Note Payable</font> - In May 2011, we received $300,000
cash and issued a note payable due in September 2011,
bearing interest at 6.25% payable at maturity.  The
maturity date could be extended for one month, and if
extended, the note bears interest at 8.25% and we agreed to
issue the note holder 100,000 shares of our common
stock.  The note bears interest at 24% beyond the
extended maturity date, is due on demand.  In
January 2012, we agreed to issue the lender shares of our
common stock and the lender agreed to forbear from issuing
a written default notice extend the loan until February 15,
2012.  In October 2012, we entered into a
settlement agreement with the note holder pursuant to
which, among other things, we issued $365,000 of 12%
Convertible Notes due October 1, 2013 in exchange for
$300,000 of 24% Notes Payable and related accrued interest
of $65,000, all matters pertaining to litigation and
disputes with respect to our contractual obligations of the
24% Note Payable were settled, and shares of common stock
we previously issued were retained by the note
holder.  No gain or loss was recognized on this
exchange.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Non-interest
bearing Note Payable</font> – In August 2012, in
connection with a settlement agreement as disclosed in Note
2, we issued a promissory note payable due July 1, 2013 in
the amount of $130,000.  A discount for imputed
interest of approximately $10,000 was recorded using an
estimated interest rate of 12%, which is amortized to
interest expense over the term until
maturity.  The note payable is collateralized by
a pledge of interests in all of the Company’s assets
on a pari passu basis with holders of other collateralized
notes payable, and payments on the note are required in the
amount of 6.5% of proceeds received by the Company from
securities offerings subsequent to the date of the
settlement agreement, which proceeds are to be paid at
finance closings.  </font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Automatic
Conversion of Notes to Common Stock</font> – Pursuant
to terms of 12% Convertible Notes and the Non-interest
bearing Note Payable, the outstanding balance, including
accrued interest, shall automatically convert into shares
of common Stock at a per share conversion price of $0.15
once the per share price of the Common Stock reaches or
exceeds $0.45 for ten consecutive trading days, or
alternatively shall automatically convert into shares of
Common Stock at a per share conversion price of $0.15 upon
completion by the Company of a sale of $1 million or more
of a subsequent equity or new debt financing following the
date of the Note.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Advances
on Notes Payable</font> – During the years ended
August 31, 2012 and 2011, we received cash and agreed to
issue promissory notes payable to prospective investors,
the terms of which were not yet finalized. Interest has
been accrued on advances at a rate of 15% per annum.</font>
</div><br/>
500000
2013-07-01
3000006
0.15
71000
483000
400000
83000
0.12
0.15
427000
225000
450000
550000
0.80
0.15
0.80
53000
50000
300000
0.0625
extended for one month, and if extended, the note bears interest at 8.25%
100000
24% beyond the extended maturity date
365000
300000
65000
2013-07-01
130000
10000
0.12
pledge of interests in all of the Company's assets on a pari passu basis with holders of other collateralized notes payable
amount of 6.5% of proceeds received by the Company from securities offerings subsequent to the date of the settlement agreement, which proceeds are to be paid at finance closings
$0.15 once the per share price of the Common Stock reaches or exceeds $0.45 for ten consecutive trading days, or alternatively shall automatically convert into shares of Common Stock at a per share conversion price of $0.15 upon completion by the Company of a sale of $1 million or more of a subsequent equity or new debt financing following the date of the Note
0.15
<br />
Notes payable and advances are due within one year and consist
of the following (in thousands): <br />
<br /><table cellpadding="0" cellspacing="0" width="75%" style="FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">
<tr>
<td valign="bottom" width="47%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"> </font>
</td>
<td align="left" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"> </font>
</td>
<td colspan="2" valign="bottom" width="12%" style="TEXT-ALIGN: center">
<div style="TEXT-ALIGN: center; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">November
30,</font>
</div>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"> </font>
</td>
<td valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"> </font>
</td>
<td colspan="2" valign="bottom" width="12%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">August
31,</font>
</div>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"> </font>
</td>
</tr>
<tr>
<td valign="bottom" width="47%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"> </font>
</td>
<td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"> </font>
</td>
<td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">2012</font>
</div>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"> </font>
</td>
<td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"> </font>
</td>
<td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="center">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">2012</font>
</div>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr style="background-color: #CCEEFF;">
<td align="left" valign="bottom" width="47%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Convertible
notes, interest at 12%</font>
</div>
</td>
<td align="right" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$</font>
</td>
<td valign="bottom" width="11%" style="TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">1,660</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$</font>
</td>
<td valign="bottom" width="11%" style="TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">1,008</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr>
<td align="left" valign="bottom" width="47%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Convertible
notes, interest at 15%</font>
</div>
</td>
<td align="right" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">-</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">50</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr style="background-color: #CCEEFF;">
<td align="left" valign="bottom" width="47%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">24%
notes</font>
</div>
</td>
<td align="right" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">-</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">300</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr>
<td align="left" valign="bottom" width="47%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Non-interest
bearing note</font>
</div>
</td>
<td align="right" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">130</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">130</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr style="background-color: #CCEEFF;">
<td align="left" valign="bottom" width="47%" style="PADDING-BOTTOM: 2px">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Advances
on notes</font>
</div>
</td>
<td align="right" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">465</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">465</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 2px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr>
<td align="left" valign="bottom" width="47%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">     Total
notes payable and advances</font>
</div>
</td>
<td align="right" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">2,255</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">1,953</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
<tr style="background-color: #CCEEFF;">
<td align="left" valign="bottom" width="47%">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Discount,
net of amortization</font>
</div>
</td>
<td align="right" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">(51</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">)</font>
</td>
<td align="right" valign="bottom" width="1%">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="11%" style="TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">(73</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">)</font>
</td>
</tr>
<tr>
<td align="left" valign="bottom" width="47%" style="PADDING-BOTTOM: 4px">
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">     Total</font>
</div>
</td>
<td align="right" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$</font>
</td>
<td valign="bottom" width="11%" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">2,204</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 4px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td align="right" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
<td valign="bottom" width="1%" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: left">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$</font>
</td>
<td valign="bottom" width="11%" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: right">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">1,880</font>
</td>
<td nowrap="nowrap" valign="bottom" width="1%" style="TEXT-ALIGN: left; PADDING-BOTTOM: 4px">
<font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt"> </font>
</td>
</tr>
</table>
1660000
1008000
0
50000
0
300000
130000
130000
2255000
1953000
-51000
-73000
2204000
1880000
0.12
0.12
0.15
0.15
0.24
0.24
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Note
5.  Stockholders’ Equity</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Preferred
Stock</font> - We are authorized to issue up to 5,000,000
shares of $0.001 par value preferred stock, including two
million shares of Series A preferred stock that would be
entitled to ten votes per share, two million shares of
Series B preferred stock that would be entitled to two
votes per share, and one million shares of Series C
preferred stock with no voting rights.  Our Board
of Directors has the authority to fix and determine the
relative economic rights and preferences of preferred
shares, as well as the authority to issue such shares
without further stockholder approval.  As a
result, our Board of Directors could authorize the issuance
of a series of preferred stock that would grant to holders
preferred rights to our assets upon liquidation, the right
to receive dividends before dividends are declared to
holders of our common stock, and the right to the
redemption of such preferred shares, together with a
premium, prior to the redemption of the common
stock.  In addition, shares of preferred stock
could be issued with terms designed to delay or prevent a
change in control or make removal of management more
difficult. </font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Common
Stock</font> - We are authorized to issue up to 70,000,000
shares of $0.001 par value Class A common
stock.   As of November 30, 2012, we have
approximately 50,083,000 shares issued and issuable, and
have warrants outstanding to purchase 6,852,000 shares and
convertible notes convertible into approximately 11,068,000
shares, which together total 68,003,000 shares.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><a id="eolPage31" name="eolPage31">
<!--EFPlaceholder--></a><font style="FONT-STYLE: italic; DISPLAY: inline">Common Stock
Issued for Borrowing Extensions –</font> During the
three months ended November 30, 2012, we issued 300,000
shares of our common stock to lenders.  The value
of shares issued based on the closing market price on the
date shares are issuable approximated $21,000 and is
reported as interest expense.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="FONT-STYLE: italic; DISPLAY: inline">Common Stock
Issuable for Cash</font> – During the three months
ended November 30, 2012, we received cash of
$125,000  in exchange for the purchase
of  2,500,000 shares of our common stock, which
were not issued as of November 30, 2012.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="FONT-STYLE: italic; DISPLAY: inline">Common Stock
Issuable in Connection with Settlement Agreement
–</font> During the three months ended November 30,
2012, we agree to issue 2,500,000 shares of our common
stock in settlement of litigation as disclosed in Note
2.  The value of shares issued based on the
closing market price on the dates shares are issuable of
$175,000 was reported as settlement expense.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="FONT-STYLE: italic; DISPLAY: inline">Common Stock
Issuable in Conversion of Notes Payable –</font>
During the three months ended November 30, 2012, we agreed
to issue 303,000 shares of our common stock in connection
with a the conversion of $15,000 of Convertible Notes
Payable.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="FONT-STYLE: italic; DISPLAY: inline">Common Stock
Issuable in Exchange for Accounts Payable –</font>
During the three months ended November 30, 2012, we agreed
to issue 460,000 shares of our common stock in connection
with exchanges of accounts payable.  The value of
shares based on the closing market price on the dates
shares are issuable approximated $37,000.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="FONT-STYLE: italic; DISPLAY: inline">Common Stock
Issuable for Services</font> – In February 2012, we
extended for a one-year an agreement, with an investor and
public relations firm pursuant to which, among other
things, we issued the firm 1,250,000 shares of our common
stock and agreed to issue the firm 250,000 shares of our
common stock each three-month period.  Shares
were recorded at the closing market price on the dates
shares are issuable.  During the three months
ended November 30, 2012, we recorded expense of $18,000 and
250,000 shares issuable.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">During
the three months ended November 30, 2012, we agreed to
issue 2,000,000 shares of our common stock to employees for
services and recorded expense of $220,000 based on closing
market prices of our common stock on the dates shares were
issuable.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="FONT-STYLE: italic; DISPLAY: inline">Warrants to
Purchase Common Stock –</font> In connection with
offerings of our common stock and notes payable, we have
issued warrants to purchase shares of our common
stock.  We have also issued warrants to purchase
shares of our common stock to service providers for
services provided.  At November 30, 2012, here
were warrants outstanding for the purchase of 6,851,674
shares having a weighted average exercise price of $0.19
per share.</font>
</div><br/>
2000000
ten votes per share
2000000
two votes per share
1000000
no voting rights
50083000
11068000
68003000
300000
21000
2500000
2500000
175000
303000
15000
460000
37000
P1Y
issued the firm 1,250,000 shares of our common stock and agreed to issue the firm 250,000 shares of our common stock each three-month period
18000
250000
2000000
220000
6851674
0.19
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Note
6.  Commitments and Contingencies</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Legal
Matters</font> - From time to time, we may be subject to
various legal proceedings and claims that may arise in the
ordinary course of business. Our management currently
believes that resolution of such legal matters will not
have a material adverse impact on our consolidated
financial position, results of operations or cash
flows.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Agreement
with Placement Agent</font> – In 2012, we entered
into an agreement with a firm to provide placement agent
services in connection with our fund-raising
activities.  Pursuant to terms of the agreement,
among other things, we agreed to pay the firm a fee upon
financing transaction closings equal to a percentage
ranging from 10% to 13% of  transaction values
(as defined) and shares of our common stock and warrants to
purchase shares of our common stock.  During the
three months ended November 30, 2012, we recognized
deferred debt issue costs of approximately
$233,000,   stock issue costs of
approximately $43,000 and settlement expense of $157,000,
and at November 30, 2012, accrued fees, including
securities issuable, approximate $434,000.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Lease
of corporate facilities</font> – As disclosed in Note
2, in September 2012 the Company entered into an
arrangement for the lease of facilities for $10,000 per
month, and is in process of negotiating a lease
agreement.</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Arrearages
in payment of employment and other taxes</font> – The
Company is in arrears in payment of employment and other
taxes, and is taking measures to obtain additional funds to
remedy the arrearages.</font>
</div><br/>
equal to a percentage ranging from 10% to 13% oftransaction values (as defined) and shares of our common stock and warrants to purchase shares of our common stock
233000
43000
157000
434000
<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"><a id="FIS_SUBSEQUENT_EVENTS" name="FIS_SUBSEQUENT_EVENTS">
<!--EFPlaceholder--></a>Note 7.  Subsequent
Events</font>
</div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left">
<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Subsequent
to November 30, 2012, we agreed to issue 1,700,000 shares
of our common stock in exchange for $85,000 cash and issued
a 12% Convertible Note in the amount of $75,000 and agreed
to issue 300,000 shares of our common stock in exchange for
$75,000.</font>
</div><br/>
1700000
85000
75000
300000
75000