10-Q
2012-11-30
false
BSD MEDICAL CORP
0000320174
--08-31
29753191
Accelerated Filer
Yes
No
No
2013
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<!--egx--><p style='margin:0in;margin-bottom:.0001pt;margin-bottom:12.0pt'><b>Note 1.  Basis of Presentation</b></p> <p style='margin:0in;margin-bottom:.0001pt;text-indent:.5in'>The interim financial information of BSD Medical Corporation (the “Company”) as of November 30, 2012 and for the three months ended November 30, 2012 and 2011 is unaudited, and the condensed balance sheet as of August 31, 2012 is derived from our audited financial statements.  The accompanying unaudited condensed balance sheets as of November 30, 2012 and August 31, 2012 and the related unaudited condensed statements of comprehensive loss and cash flows for the three months ended November 30, 2012 and 2011 have been prepared in accordance with U.S. generally accepted accounting principles for interim financial reporting and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).  The condensed financial statements do not include all of the information and notes required by U.S. generally accepted accounting principles for complete financial statements.  These condensed financial statements should be read in conjunction with the notes thereto, and the financial statements and notes thereto included in our annual report on Form 10-K for the year ended August 31, 2012.</p> <p style='margin:0in;margin-bottom:.0001pt'> </p> <p style='margin:0in;margin-bottom:.0001pt;text-indent:.5in'>All adjustments (consisting only of normal recurring adjustments) necessary for the fair presentation of our financial position as of November 30, 2012 and August 31, 2012 and our results of operations and our cash flows for the three months ended November 30, 2012 and 2011 have been included.  The results of operations for the three months ended November 30, 2012 may not be indicative of the results for our fiscal year ending August 31, 2013.  </p> <p style='margin:0in;margin-bottom:.0001pt'> </p> <p style='margin:0in;margin-bottom:.0001pt'>            Certain amounts in the prior periods have been reclassified to conform to the current period presentation.</p>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt'><b>Note 2.  Inventories</b></p> <p style='margin:0in;margin-bottom:.0001pt'> </p> <p style='margin:0in;margin-bottom:.0001pt;margin-bottom:12.0pt;text-align:justify;text-indent:.5in'>Inventories consisted of the following:</p> <table border="0" cellspacing="0" cellpadding="0" style='margin-left:41.4pt;border-collapse:collapse'> <tr style='height:18.4pt'> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt;height:18.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;height:18.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>November 30, 2012</b></p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;height:18.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>August 31, 2012</b></p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Parts and supplies</p> </td> <td width="102" valign="bottom" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>$    1,187,094</p> </td> <td width="102" valign="bottom" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>$    1,180,428</p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Work-in-process</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>827,235</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>803,049</p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Finished goods</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>429,729</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>520,480</p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Reserve for obsolete inventory</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>(100,000)</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>(100,000)</p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Inventories, net</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>$    2,344,058</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>$    2,403,957</p> </td> </tr> </table>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt'><b>Note 3.  Property and Equipment</b></p> <p style='margin:0in;margin-bottom:.0001pt'> </p> <p style='margin:0in;margin-bottom:.0001pt;margin-bottom:12.0pt;text-align:justify;text-indent:.5in'>Property and equipment consisted of the following:</p> <table border="0" cellspacing="0" cellpadding="0" style='margin-left:41.4pt;border-collapse:collapse'> <tr style='height:18.4pt'> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt;height:18.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;height:18.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>November 30, 2012</b></p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;height:18.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>August 31, 2012</b></p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Equipment</p> </td> <td width="102" valign="bottom" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>$    1,372,093</p> </td> <td width="102" valign="bottom" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>$    1,368,183</p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Rental equipment</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>58,940</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>58,940</p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Furniture and fixtures</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>298,576</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>298,576</p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Building improvements</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>54,736</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>54,736</p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Building</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>956,000</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>956,000</p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Land</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>244,000</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>244,000</p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>2,984,345</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>2,980,435</p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Less accumulated depreciation</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>(1,600,786)</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>(1,567,796)</p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'> </p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Property and equipment, net</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>$    1,383,559</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>$    1,412,639</p> </td> </tr> </table> <p style='margin:0in;margin-bottom:.0001pt'> </p>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-align:justify'><b>Note 4.  Stockholders’ Equity</b></p> <p style='margin:0in;margin-bottom:.0001pt'> </p> <p style='margin:0in;margin-bottom:.0001pt'>The Company has 10,000,000 authorized shares of $0.001 par value preferred stock.  As of November 30, 2012 and August 31, 2012, there were no shares of preferred stock outstanding.  The Company also has 80,000,000 authorized shares of $0.001 par value common stock. </p> <p style='margin:0in;margin-bottom:.0001pt'> </p> <p style='margin:0in;margin-bottom:.0001pt'><b><i>Shelf Registration Statement</i></b></p> <p style='margin:0in;margin-bottom:.0001pt'> </p> <p style='margin:0in;margin-bottom:.0001pt;text-indent:.5in'>On September 28, 2012, we filed a universal shelf registration statement with the SEC for the issuance of common stock, preferred stock, warrants, senior debt, subordinated debt and units up to an aggregate amount of $50.0 million.  We may periodically offer one or more of these securities in amounts, prices and terms to be announced when and if the securities are offered.  On October 11, 2012, the universal shelf registration statement was declared effective by the SEC.</p> <p style='margin:0in;margin-bottom:.0001pt;text-indent:.5in'> </p> <p style='margin:0in;margin-bottom:.0001pt'><b><i>Warrants</i></b></p> <p style='margin:0in;margin-bottom:.0001pt'> </p> <p style='margin:0in;margin-bottom:.0001pt'>               A summary of the outstanding warrants issued in prior stock offerings as of November 30, 2012, and changes during the three months then ended, is as follows:</p> <p style='margin:0in;margin-bottom:.0001pt'> </p> <table border="1" cellspacing="0" cellpadding="0" width="558" style='margin-left:22.5pt;border-collapse:collapse;border:none'> <tr style='height:63.9pt'> <td width="222" valign="bottom" style='width:166.5pt;border:none;padding:0;height:63.9pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="108" valign="bottom" style='width:81.0pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0;height:63.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Shares</b></p> </td> <td width="114" colspan="2" valign="bottom" style='width:85.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0;height:63.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Weighted-</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Average</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Exercise</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Price</b></p> </td> <td width="114" valign="bottom" style='width:85.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0;height:63.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Weighted-</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Average</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Remaining</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Contract Term (Years)</b></p> </td> </tr> <tr style='height:12.9pt'> <td width="222" valign="top" style='width:166.5pt;border:none;padding:0;height:12.9pt'> <p style='margin:0in;margin-bottom:.0001pt;margin-left:8.8pt;text-indent:-8.8pt'> </p> </td> <td width="108" valign="bottom" style='width:81.0pt;border:none;padding:0;height:12.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:12.9pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="bottom" style='width:76.5pt;border:none;padding:0;height:12.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> <td width="114" valign="bottom" style='width:85.5pt;border:none;padding:0;height:12.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> </tr> <tr style='height:12.9pt'> <td width="222" valign="top" style='width:166.5pt;border:none;padding:0;height:12.9pt'> <p style='margin:0in;margin-bottom:.0001pt;margin-left:8.8pt;text-indent:-8.8pt'>Outstanding at August 31, 2012</p> </td> <td width="108" valign="bottom" style='width:81.0pt;border:none;padding:0;height:12.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>2,408,523</p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:12.9pt'> <p style='margin:0in;margin-bottom:.0001pt'>$</p> </td> <td width="102" valign="bottom" style='width:76.5pt;border:none;padding:0;height:12.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>4.56</p> </td> <td width="114" valign="bottom" style='width:85.5pt;border:none;padding:0;height:12.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> </tr> <tr style='height:12.6pt'> <td width="222" valign="top" style='width:166.5pt;border:none;padding:0;height:12.6pt'> <p style='margin:0in;margin-bottom:.0001pt;margin-left:8.8pt;text-indent:-8.8pt'>Issued</p> </td> <td width="108" valign="bottom" style='width:81.0pt;border:none;padding:0;height:12.6pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>-</p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:12.6pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="bottom" style='width:76.5pt;border:none;padding:0;height:12.6pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>-</p> </td> <td width="114" valign="bottom" style='width:85.5pt;border:none;padding:0;height:12.6pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> </tr> <tr style='height:13.5pt'> <td width="222" valign="top" style='width:166.5pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt;margin-left:8.8pt;text-indent:-8.8pt'>Exercised</p> </td> <td width="108" valign="bottom" style='width:81.0pt;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>-</p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="bottom" style='width:76.5pt;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>-</p> </td> <td width="114" valign="bottom" style='width:85.5pt;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> </tr> <tr style='height:13.5pt'> <td width="222" valign="top" style='width:166.5pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt;margin-left:8.8pt;text-indent:-8.8pt'>Forfeited or expired</p> </td> <td width="108" valign="bottom" style='width:81.0pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>-</p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="bottom" style='width:76.5pt;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>-</p> </td> <td width="114" valign="bottom" style='width:85.5pt;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> </tr> <tr style='height:13.5pt'> <td width="222" valign="top" style='width:166.5pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt;margin-left:8.8pt;text-indent:-8.8pt'> </p> </td> <td width="108" valign="bottom" style='width:81.0pt;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="bottom" style='width:76.5pt;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> <td width="114" valign="bottom" style='width:85.5pt;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> </tr> <tr style='height:.35in'> <td width="222" valign="top" style='width:166.5pt;border:none;padding:0;height:.35in'> <p style='margin:0in;margin-bottom:.0001pt;margin-left:8.8pt;text-indent:-8.8pt'>Outstanding and exercisable at November 30, 2012</p> </td> <td width="108" valign="bottom" style='width:81.0pt;border:none;border-bottom:double windowtext 1.5pt;padding:0;height:.35in'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>2,408,523</p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;border-bottom:double windowtext 1.5pt;padding:0;height:.35in'> <p style='margin:0in;margin-bottom:.0001pt'>$</p> </td> <td width="102" valign="bottom" style='width:76.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0;height:.35in'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>4.56</p> </td> <td width="114" valign="bottom" style='width:85.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0;height:.35in'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>3.23</p> </td> </tr> </table> <p style='margin:0in;margin-bottom:.0001pt'> </p>
<!--egx--><p style='margin-top:0in;margin-right:0in;margin-bottom:12.0pt;margin-left:0in;text-align:justify;text-indent:.5in;text-indent:0in'><b>Note 5.  Net Loss Per Common Share</b></p> <p style='margin:0in;margin-bottom:.0001pt;text-indent:.5in'>The computation of basic earnings per common share is based on the weighted average number of shares outstanding during the period.  The computation of diluted earnings per common share is based on the weighted average number of shares outstanding during the period plus the weighted average common stock equivalents which would arise from the exercise of stock options and warrants outstanding using the treasury stock method and the average market price per share during the period.  </p> <p style='margin:0in;margin-bottom:.0001pt;text-indent:.5in'> </p> <p style='margin:0in;margin-bottom:.0001pt'>            The shares used in the computation of our basic and diluted earnings per share are reconciled as follows (rounded to thousands): </p> <p style='margin:0in;margin-bottom:.0001pt'> </p> <table border="1" cellspacing="0" cellpadding="0" width="558" style='margin-left:.45in;border-collapse:collapse;border:none'> <tr> <td width="366" valign="top" style='width:274.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="192" colspan="2" valign="top" style='width:2.0in;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Three Months Ended November 30,</b></p> </td> </tr> <tr> <td width="366" valign="top" style='width:274.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="96" valign="top" style='width:1.0in;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>2012</b></p> </td> <td width="96" valign="top" style='width:1.0in;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>2011</b></p> </td> </tr> <tr> <td width="366" valign="top" style='width:274.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="96" valign="top" style='width:1.0in;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="96" valign="top" style='width:1.0in;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> </tr> <tr> <td width="366" valign="top" style='width:274.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> Weighted average number of shares outstanding – basic</p> </td> <td width="96" valign="top" style='width:1.0in;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'> 29,778,000</p> </td> <td width="96" valign="top" style='width:1.0in;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'> 29,686,000</p> </td> </tr> <tr> <td width="366" valign="top" style='width:274.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> Dilutive effect of stock options and warrants</p> </td> <td width="96" valign="top" style='width:1.0in;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'> 0</p> </td> <td width="96" valign="top" style='width:1.0in;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'> 0</p> </td> </tr> <tr> <td width="366" valign="top" style='width:274.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="96" valign="top" style='width:1.0in;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="96" valign="top" style='width:1.0in;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> </tr> <tr> <td width="366" valign="top" style='width:274.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> Weighted average number of shares outstanding – diluted</p> </td> <td width="96" valign="top" style='width:1.0in;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'> 29,778,000</p> </td> <td width="96" valign="top" style='width:1.0in;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'> 29,686,000</p> </td> </tr> </table> <p style='margin:0in;margin-bottom:.0001pt'> </p> <p style='margin:0in;margin-bottom:.0001pt'> </p> <p style='margin:0in;margin-bottom:.0001pt;text-indent:.5in'>No stock options or warrants are included in the computation of diluted weighted average number of shares for the three months ended November 30, 2012 and 2011 because the effect would be anti-dilutive.  As of November 30, 2012, we had outstanding options and warrants to purchase a total of 5,583,762 shares of our common stock that could have a future dilutive effect on the calculation of earnings per share.  </p>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt;margin-bottom:12.0pt'><b>Note 6.   Related Party Transactions</b></p> <p style='margin:0in;margin-bottom:.0001pt;text-indent:.5in'>During the three months ended November 30, 2012 and 2011, we had sales of $70,271 and $300,860, respectively, to entities controlled by a significant stockholder and member of the Board of Directors.  These related party transactions represent approximately 11% and 46% of total sales for each respective three-month period.  </p> <p style='margin:0in;margin-bottom:.0001pt;text-indent:.5in'> </p> <p style='margin:0in;margin-bottom:.0001pt;text-indent:.5in'>As of November 30, 2012 and August 31, 2012, receivables included $56,526 and $33,257, respectively, from these related parties.  </p>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-align:justify'><b>Note 7.  Stock-Based Compensation</b></p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify'> </p> <p style='margin:0in;margin-bottom:.0001pt;margin-bottom:12.0pt;text-indent:.5in'>We have both an employee and director stock incentive plan, which are described more fully in Note 10 in our 2012 Annual Report on Form 10-K.  As of November 30, 2012, we had approximately 2,687,000 shares of common stock reserved for future issuance under the stock incentive plans.</p> <p style='margin:0in;margin-bottom:.0001pt'>Stock-based compensation cost is measured at the grant date based on the value of the award granted using the Black-Scholes option pricing model, and recognized over the period in which the award vests.  For stock awards no longer expected to vest, any previously recognized stock compensation expense is reversed in the period of termination.  The stock-based compensation expense has been allocated to the various categories of operating costs and expenses in a manner similar to the allocation of payroll expense as follows: </p> <p style='margin:0in;margin-bottom:.0001pt;margin-bottom:12.0pt;text-indent:.5in'> </p> <table border="1" cellspacing="0" cellpadding="0" width="528" style='margin-left:41.4pt;border-collapse:collapse;border:none'> <tr> <td width="324" valign="top" style='width:243.0pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="204" colspan="2" valign="top" style='width:153.0pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Three Months Ended November 30,</b></p> </td> </tr> <tr> <td width="324" valign="top" style='width:243.0pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>2012</b></p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>2011</b></p> </td> </tr> <tr> <td width="324" valign="top" style='width:243.0pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> </tr> <tr> <td width="324" valign="top" style='width:243.0pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Cost of sales</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.1in;text-align:right'>$        16,023</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.1in;text-align:right'>$        16,023</p> </td> </tr> <tr> <td width="324" valign="top" style='width:243.0pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Research and development</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.1in;text-align:right'>50,285</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.1in;text-align:right'>58,021</p> </td> </tr> <tr> <td width="324" valign="top" style='width:243.0pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Selling, general and administrative</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.1in;text-align:right'>223,604</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.1in;text-align:right'>215,011</p> </td> </tr> <tr> <td width="324" valign="top" style='width:243.0pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.3in;text-align:right'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.3in;text-align:right'> </p> </td> </tr> <tr> <td width="324" valign="top" style='width:243.0pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Total</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.1in;text-align:right'>$      289,912</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.1in;text-align:right'>$      289,055</p> </td> </tr> </table> <p style='margin:0in;margin-bottom:.0001pt'> </p> <p style='margin:0in;margin-bottom:.0001pt;text-indent:.5in'>During the three months ended November 30, 2012, we granted an employee 5,000 stock options at an exercise price of $2.05 per share and with one third vesting each year for the next three years.  The estimated weighted average grant date fair value per share of these stock options was $1.10, and our weighted average assumptions used in the Black-Scholes valuation model to determine this estimated fair value are as follows:</p> <p style='margin:0in;margin-bottom:.0001pt;text-indent:.5in'> </p> <p style='margin:0in;margin-bottom:.0001pt;text-indent:.5in'>Expected volatility                               62.67%</p> <p style='margin:0in;margin-bottom:.0001pt;text-indent:.5in'>Expected dividends                             0%</p> <p style='margin:0in;margin-bottom:.0001pt;text-indent:.5in'>Expected term                                      7.4 years</p> <p style='margin:0in;margin-bottom:.0001pt;text-indent:.5in'>Risk-free interest rate                           1.02%</p> <p style='margin:0in;margin-bottom:.0001pt;text-indent:.5in'> </p> <p style='margin:0in;margin-bottom:.0001pt;text-indent:.5in'>Unrecognized stock-based compensation expense expected to be recognized over the estimated weighted-average amortization period of 1.06 years is approximately $1,560,000 as of November 30, 2012.</p> <p style='margin:0in;margin-bottom:.0001pt;text-indent:.5in'> </p> <p style='margin:0in;margin-bottom:.0001pt;text-indent:.5in'>A summary of the time-based stock option awards as of November 30, 2012, and changes during the three months then ended, is as follows:</p> <p style='margin:0in;margin-bottom:.0001pt;text-indent:.5in'> </p> <table border="1" cellspacing="0" cellpadding="0" width="594" style='margin-left:22.5pt;border-collapse:collapse;border:none'> <tr style='height:63.9pt'> <td width="222" valign="bottom" style='width:166.5pt;border:none;padding:0;height:63.9pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="108" valign="bottom" style='width:81.0pt;border:none;padding:0;height:63.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Shares</b></p> </td> <td width="84" colspan="2" valign="bottom" style='width:63.0pt;border:none;padding:0;height:63.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Weighted-</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Average</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Exercise</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Price</b></p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;padding:0;height:63.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Weighted-</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Average</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Remaining</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Contract Term (Years)</b></p> </td> <td width="96" colspan="2" valign="bottom" style='width:1.0in;border:none;padding:0;height:63.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Aggregate</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Intrinsic</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Value</b></p> </td> </tr> <tr style='height:12.9pt'> <td width="222" valign="top" style='width:166.5pt;border:none;padding:0;height:12.9pt'> <p style='margin:0in;margin-bottom:.0001pt;margin-left:8.8pt;text-indent:-8.8pt'> </p> </td> <td width="108" valign="bottom" style='width:81.0pt;border:none;padding:0;height:12.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:12.9pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="72" valign="bottom" style='width:.75in;border:none;padding:0;height:12.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;padding:0;height:12.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:12.9pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;padding:0;height:12.9pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> </tr> <tr style='height:12.9pt'> <td width="222" valign="top" style='width:166.5pt;border:none;padding:0;height:12.9pt'> <p style='margin:0in;margin-bottom:.0001pt;margin-left:8.8pt;text-indent:-8.8pt'>Outstanding at August 31, 2012</p> </td> <td width="108" valign="bottom" style='width:81.0pt;border:none;padding:0;height:12.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>3,182,239</p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:12.9pt'> <p style='margin:0in;margin-bottom:.0001pt'>$</p> </td> <td width="72" valign="bottom" style='width:.75in;border:none;padding:0;height:12.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>3.54</p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;padding:0;height:12.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:12.9pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;padding:0;height:12.9pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> </tr> <tr style='height:12.6pt'> <td width="222" valign="top" style='width:166.5pt;border:none;padding:0;height:12.6pt'> <p style='margin:0in;margin-bottom:.0001pt;margin-left:8.8pt;text-indent:-8.8pt'>Granted</p> </td> <td width="108" valign="bottom" style='width:81.0pt;border:none;padding:0;height:12.6pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>      5,000</p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:12.6pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="72" valign="bottom" style='width:.75in;border:none;padding:0;height:12.6pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>2.05</p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;padding:0;height:12.6pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:12.6pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;padding:0;height:12.6pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> </tr> <tr style='height:13.5pt'> <td width="222" valign="top" style='width:166.5pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt;margin-left:8.8pt;text-indent:-8.8pt'>Exercised</p> </td> <td width="108" valign="bottom" style='width:81.0pt;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>              0</p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="72" valign="bottom" style='width:.75in;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>0</p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt'>$</p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;border-bottom:double windowtext 1.5pt;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>0</p> </td> </tr> <tr style='height:13.5pt'> <td width="222" valign="top" style='width:166.5pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt;margin-left:8.8pt;text-indent:-8.8pt'>Forfeited or expired</p> </td> <td width="108" valign="bottom" style='width:81.0pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>    (12,000)</p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="72" valign="bottom" style='width:.75in;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>3.85</p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> </tr> <tr style='height:13.5pt'> <td width="222" valign="top" style='width:166.5pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt;margin-left:8.8pt;text-indent:-8.8pt'> </p> </td> <td width="108" valign="bottom" style='width:81.0pt;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="72" valign="bottom" style='width:.75in;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> </tr> <tr style='height:13.5pt'> <td width="222" valign="top" style='width:166.5pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt;margin-left:8.8pt;text-indent:-8.8pt'>Outstanding at November 30, 2012</p> </td> <td width="108" valign="bottom" style='width:81.0pt;border:none;border-bottom:double windowtext 1.5pt;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>  3,175,239</p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;border-bottom:double windowtext 1.5pt;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt'>$</p> </td> <td width="72" valign="bottom" style='width:.75in;border:none;border-bottom:double windowtext 1.5pt;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>3.53</p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;border-bottom:double windowtext 1.5pt;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>6.47</p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;border-bottom:double windowtext 1.5pt;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt'>$</p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;border-bottom:double windowtext 1.5pt;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>92,207</p> </td> </tr> <tr style='height:13.5pt'> <td width="222" valign="top" style='width:166.5pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt;margin-left:8.8pt;text-indent:-8.8pt'> </p> </td> <td width="108" valign="bottom" style='width:81.0pt;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="72" valign="bottom" style='width:.75in;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> </tr> <tr style='height:13.5pt'> <td width="222" valign="top" style='width:166.5pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt;margin-left:8.8pt;text-indent:-8.8pt'>Exercisable at November 30, 2012</p> </td> <td width="108" valign="bottom" style='width:81.0pt;border:none;border-bottom:double windowtext 1.5pt;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>  1,781,444</p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;border-bottom:double windowtext 1.5pt;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt'>$</p> </td> <td width="72" valign="bottom" style='width:.75in;border:none;border-bottom:double windowtext 1.5pt;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>3.83</p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;border-bottom:double windowtext 1.5pt;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>5.34</p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;border-bottom:double windowtext 1.5pt;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt'>$</p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;border-bottom:double windowtext 1.5pt;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>90,307</p> </td> </tr> </table> <p style='margin:0in;margin-bottom:.0001pt'> </p> <p style='margin:0in;margin-bottom:.0001pt'> </p> <p style='margin:0in;margin-bottom:.0001pt'>            The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value, based on our closing stock price of $1.66 as of November 30, 2012, which would have been received by the holders of in-the-money options had the option holders exercised their options as of that date.</p>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-align:justify'><b>Note 8.  Supplemental Cash Flow Information</b></p> <p style='margin:0in;margin-bottom:.0001pt'> </p> <p style='margin:0in;margin-bottom:.0001pt'>            We paid no amounts for interest expense and income taxes during the three months ended November 30, 2012 and 2011.  </p> <p style='margin:0in;margin-bottom:.0001pt'> </p> <p style='margin:0in;margin-bottom:.0001pt;text-indent:.5in'>During the three months ended November 30, 2012 and 2011, we had no non-cash financing and investing activities.</p>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt'><b>Note 9.  Recent Accounting Pronouncements</b></p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify'> </p> <p style='margin:0in;margin-bottom:.0001pt;text-indent:.5in'>No new accounting pronouncements were issued during the three months ended November 30, 2012 and through the date of filing this report that we believe are applicable or would have a material impact on our financial statements.</p>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-align:justify'><b>Note 10.  Subsequent Events</b></p> <p style='margin:0in;margin-bottom:.0001pt'> </p> <p style='margin:0in;margin-bottom:.0001pt;text-indent:.5in'>Subsequent to November 30, 2012, the Board of Directors of the Company approved the grant of a total of 200,000 stock options to an employee, with an exercise price of $1.59 per share and with one third vesting each year for the next three years.</p>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt;margin-bottom:12.0pt;text-align:justify;text-indent:.5in'>Inventories consisted of the following:</p> <table border="0" cellspacing="0" cellpadding="0" style='margin-left:41.4pt;border-collapse:collapse'> <tr style='height:18.4pt'> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt;height:18.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;height:18.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>November 30, 2012</b></p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;height:18.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>August 31, 2012</b></p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Parts and supplies</p> </td> <td width="102" valign="bottom" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>$    1,187,094</p> </td> <td width="102" valign="bottom" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>$    1,180,428</p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Work-in-process</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>827,235</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>803,049</p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Finished goods</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>429,729</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>520,480</p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Reserve for obsolete inventory</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>(100,000)</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>(100,000)</p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Inventories, net</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>$    2,344,058</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>$    2,403,957</p> </td> </tr> </table>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt;margin-bottom:12.0pt;text-align:justify;text-indent:.5in'>Property and equipment consisted of the following:</p> <table border="0" cellspacing="0" cellpadding="0" style='margin-left:41.4pt;border-collapse:collapse'> <tr style='height:18.4pt'> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt;height:18.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;height:18.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>November 30, 2012</b></p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;height:18.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>August 31, 2012</b></p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Equipment</p> </td> <td width="102" valign="bottom" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>$    1,372,093</p> </td> <td width="102" valign="bottom" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>$    1,368,183</p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Rental equipment</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>58,940</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>58,940</p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Furniture and fixtures</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>298,576</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>298,576</p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Building improvements</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>54,736</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>54,736</p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Building</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>956,000</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>956,000</p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Land</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>244,000</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>244,000</p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>2,984,345</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>2,980,435</p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Less accumulated depreciation</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>(1,600,786)</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>(1,567,796)</p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'> </p> </td> </tr> <tr> <td width="342" valign="top" style='width:256.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Property and equipment, net</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>$    1,383,559</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.05in;text-align:right'>$    1,412,639</p> </td> </tr> </table>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt'> </p> <table border="1" cellspacing="0" cellpadding="0" width="558" style='margin-left:22.5pt;border-collapse:collapse;border:none'> <tr style='height:63.9pt'> <td width="222" valign="bottom" style='width:166.5pt;border:none;padding:0;height:63.9pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="108" valign="bottom" style='width:81.0pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0;height:63.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Shares</b></p> </td> <td width="114" colspan="2" valign="bottom" style='width:85.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0;height:63.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Weighted-</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Average</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Exercise</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Price</b></p> </td> <td width="114" valign="bottom" style='width:85.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0;height:63.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Weighted-</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Average</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Remaining</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Contract Term (Years)</b></p> </td> </tr> <tr style='height:12.9pt'> <td width="222" valign="top" style='width:166.5pt;border:none;padding:0;height:12.9pt'> <p style='margin:0in;margin-bottom:.0001pt;margin-left:8.8pt;text-indent:-8.8pt'> </p> </td> <td width="108" valign="bottom" style='width:81.0pt;border:none;padding:0;height:12.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:12.9pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="bottom" style='width:76.5pt;border:none;padding:0;height:12.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> <td width="114" valign="bottom" style='width:85.5pt;border:none;padding:0;height:12.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> </tr> <tr style='height:12.9pt'> <td width="222" valign="top" style='width:166.5pt;border:none;padding:0;height:12.9pt'> <p style='margin:0in;margin-bottom:.0001pt;margin-left:8.8pt;text-indent:-8.8pt'>Outstanding at August 31, 2012</p> </td> <td width="108" valign="bottom" style='width:81.0pt;border:none;padding:0;height:12.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>2,408,523</p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:12.9pt'> <p style='margin:0in;margin-bottom:.0001pt'>$</p> </td> <td width="102" valign="bottom" style='width:76.5pt;border:none;padding:0;height:12.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>4.56</p> </td> <td width="114" valign="bottom" style='width:85.5pt;border:none;padding:0;height:12.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> </tr> <tr style='height:12.6pt'> <td width="222" valign="top" style='width:166.5pt;border:none;padding:0;height:12.6pt'> <p style='margin:0in;margin-bottom:.0001pt;margin-left:8.8pt;text-indent:-8.8pt'>Issued</p> </td> <td width="108" valign="bottom" style='width:81.0pt;border:none;padding:0;height:12.6pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>-</p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:12.6pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="bottom" style='width:76.5pt;border:none;padding:0;height:12.6pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>-</p> </td> <td width="114" valign="bottom" style='width:85.5pt;border:none;padding:0;height:12.6pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> </tr> <tr style='height:13.5pt'> <td width="222" valign="top" style='width:166.5pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt;margin-left:8.8pt;text-indent:-8.8pt'>Exercised</p> </td> <td width="108" valign="bottom" style='width:81.0pt;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>-</p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="bottom" style='width:76.5pt;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>-</p> </td> <td width="114" valign="bottom" style='width:85.5pt;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> </tr> <tr style='height:13.5pt'> <td width="222" valign="top" style='width:166.5pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt;margin-left:8.8pt;text-indent:-8.8pt'>Forfeited or expired</p> </td> <td width="108" valign="bottom" style='width:81.0pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>-</p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="bottom" style='width:76.5pt;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>-</p> </td> <td width="114" valign="bottom" style='width:85.5pt;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> </tr> <tr style='height:13.5pt'> <td width="222" valign="top" style='width:166.5pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt;margin-left:8.8pt;text-indent:-8.8pt'> </p> </td> <td width="108" valign="bottom" style='width:81.0pt;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="bottom" style='width:76.5pt;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> <td width="114" valign="bottom" style='width:85.5pt;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> </tr> <tr style='height:.35in'> <td width="222" valign="top" style='width:166.5pt;border:none;padding:0;height:.35in'> <p style='margin:0in;margin-bottom:.0001pt;margin-left:8.8pt;text-indent:-8.8pt'>Outstanding and exercisable at November 30, 2012</p> </td> <td width="108" valign="bottom" style='width:81.0pt;border:none;border-bottom:double windowtext 1.5pt;padding:0;height:.35in'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>2,408,523</p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;border-bottom:double windowtext 1.5pt;padding:0;height:.35in'> <p style='margin:0in;margin-bottom:.0001pt'>$</p> </td> <td width="102" valign="bottom" style='width:76.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0;height:.35in'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>4.56</p> </td> <td width="114" valign="bottom" style='width:85.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0;height:.35in'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>3.23</p> </td> </tr> </table>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt'> </p> <table border="1" cellspacing="0" cellpadding="0" width="558" style='margin-left:.45in;border-collapse:collapse;border:none'> <tr> <td width="366" valign="top" style='width:274.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="192" colspan="2" valign="top" style='width:2.0in;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Three Months Ended November 30,</b></p> </td> </tr> <tr> <td width="366" valign="top" style='width:274.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="96" valign="top" style='width:1.0in;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>2012</b></p> </td> <td width="96" valign="top" style='width:1.0in;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>2011</b></p> </td> </tr> <tr> <td width="366" valign="top" style='width:274.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="96" valign="top" style='width:1.0in;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="96" valign="top" style='width:1.0in;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> </tr> <tr> <td width="366" valign="top" style='width:274.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> Weighted average number of shares outstanding – basic</p> </td> <td width="96" valign="top" style='width:1.0in;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'> 29,778,000</p> </td> <td width="96" valign="top" style='width:1.0in;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'> 29,686,000</p> </td> </tr> <tr> <td width="366" valign="top" style='width:274.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> Dilutive effect of stock options and warrants</p> </td> <td width="96" valign="top" style='width:1.0in;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'> 0</p> </td> <td width="96" valign="top" style='width:1.0in;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'> 0</p> </td> </tr> <tr> <td width="366" valign="top" style='width:274.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="96" valign="top" style='width:1.0in;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="96" valign="top" style='width:1.0in;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> </tr> <tr> <td width="366" valign="top" style='width:274.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> Weighted average number of shares outstanding – diluted</p> </td> <td width="96" valign="top" style='width:1.0in;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'> 29,778,000</p> </td> <td width="96" valign="top" style='width:1.0in;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'> 29,686,000</p> </td> </tr> </table>
<!--egx--> <p style='margin:0in;margin-bottom:.0001pt;margin-bottom:12.0pt;text-indent:.5in'> </p> <table border="1" cellspacing="0" cellpadding="0" width="528" style='margin-left:41.4pt;border-collapse:collapse;border:none'> <tr> <td width="324" valign="top" style='width:243.0pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="204" colspan="2" valign="top" style='width:153.0pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Three Months Ended November 30,</b></p> </td> </tr> <tr> <td width="324" valign="top" style='width:243.0pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>2012</b></p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>2011</b></p> </td> </tr> <tr> <td width="324" valign="top" style='width:243.0pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> </tr> <tr> <td width="324" valign="top" style='width:243.0pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Cost of sales</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.1in;text-align:right'>$        16,023</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.1in;text-align:right'>$        16,023</p> </td> </tr> <tr> <td width="324" valign="top" style='width:243.0pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Research and development</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.1in;text-align:right'>50,285</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.1in;text-align:right'>58,021</p> </td> </tr> <tr> <td width="324" valign="top" style='width:243.0pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Selling, general and administrative</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.1in;text-align:right'>223,604</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.1in;text-align:right'>215,011</p> </td> </tr> <tr> <td width="324" valign="top" style='width:243.0pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.3in;text-align:right'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.3in;text-align:right'> </p> </td> </tr> <tr> <td width="324" valign="top" style='width:243.0pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Total</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.1in;text-align:right'>$      289,912</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;margin-right:.1in;text-align:right'>$      289,055</p> </td> </tr> </table>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-indent:.5in'> </p> <table border="1" cellspacing="0" cellpadding="0" width="594" style='margin-left:22.5pt;border-collapse:collapse;border:none'> <tr style='height:63.9pt'> <td width="222" valign="bottom" style='width:166.5pt;border:none;padding:0;height:63.9pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="108" valign="bottom" style='width:81.0pt;border:none;padding:0;height:63.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Shares</b></p> </td> <td width="84" colspan="2" valign="bottom" style='width:63.0pt;border:none;padding:0;height:63.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Weighted-</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Average</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Exercise</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Price</b></p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;padding:0;height:63.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Weighted-</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Average</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Remaining</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Contract Term (Years)</b></p> </td> <td width="96" colspan="2" valign="bottom" style='width:1.0in;border:none;padding:0;height:63.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Aggregate</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Intrinsic</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Value</b></p> </td> </tr> <tr style='height:12.9pt'> <td width="222" valign="top" style='width:166.5pt;border:none;padding:0;height:12.9pt'> <p style='margin:0in;margin-bottom:.0001pt;margin-left:8.8pt;text-indent:-8.8pt'> </p> </td> <td width="108" valign="bottom" style='width:81.0pt;border:none;padding:0;height:12.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:12.9pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="72" valign="bottom" style='width:.75in;border:none;padding:0;height:12.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;padding:0;height:12.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:12.9pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;padding:0;height:12.9pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> </tr> <tr style='height:12.9pt'> <td width="222" valign="top" style='width:166.5pt;border:none;padding:0;height:12.9pt'> <p style='margin:0in;margin-bottom:.0001pt;margin-left:8.8pt;text-indent:-8.8pt'>Outstanding at August 31, 2012</p> </td> <td width="108" valign="bottom" style='width:81.0pt;border:none;padding:0;height:12.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>3,182,239</p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:12.9pt'> <p style='margin:0in;margin-bottom:.0001pt'>$</p> </td> <td width="72" valign="bottom" style='width:.75in;border:none;padding:0;height:12.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>3.54</p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;padding:0;height:12.9pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:12.9pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;padding:0;height:12.9pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> </tr> <tr style='height:12.6pt'> <td width="222" valign="top" style='width:166.5pt;border:none;padding:0;height:12.6pt'> <p style='margin:0in;margin-bottom:.0001pt;margin-left:8.8pt;text-indent:-8.8pt'>Granted</p> </td> <td width="108" valign="bottom" style='width:81.0pt;border:none;padding:0;height:12.6pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>      5,000</p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:12.6pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="72" valign="bottom" style='width:.75in;border:none;padding:0;height:12.6pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>2.05</p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;padding:0;height:12.6pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:12.6pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;padding:0;height:12.6pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> </tr> <tr style='height:13.5pt'> <td width="222" valign="top" style='width:166.5pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt;margin-left:8.8pt;text-indent:-8.8pt'>Exercised</p> </td> <td width="108" valign="bottom" style='width:81.0pt;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>              0</p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="72" valign="bottom" style='width:.75in;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>0</p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt'>$</p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;border-bottom:double windowtext 1.5pt;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>0</p> </td> </tr> <tr style='height:13.5pt'> <td width="222" valign="top" style='width:166.5pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt;margin-left:8.8pt;text-indent:-8.8pt'>Forfeited or expired</p> </td> <td width="108" valign="bottom" style='width:81.0pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>    (12,000)</p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="72" valign="bottom" style='width:.75in;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>3.85</p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> </tr> <tr style='height:13.5pt'> <td width="222" valign="top" style='width:166.5pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt;margin-left:8.8pt;text-indent:-8.8pt'> </p> </td> <td width="108" valign="bottom" style='width:81.0pt;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="72" valign="bottom" style='width:.75in;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> </tr> <tr style='height:13.5pt'> <td width="222" valign="top" style='width:166.5pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt;margin-left:8.8pt;text-indent:-8.8pt'>Outstanding at November 30, 2012</p> </td> <td width="108" valign="bottom" style='width:81.0pt;border:none;border-bottom:double windowtext 1.5pt;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>  3,175,239</p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;border-bottom:double windowtext 1.5pt;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt'>$</p> </td> <td width="72" valign="bottom" style='width:.75in;border:none;border-bottom:double windowtext 1.5pt;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>3.53</p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;border-bottom:double windowtext 1.5pt;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>6.47</p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;border-bottom:double windowtext 1.5pt;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt'>$</p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;border-bottom:double windowtext 1.5pt;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>92,207</p> </td> </tr> <tr style='height:13.5pt'> <td width="222" valign="top" style='width:166.5pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt;margin-left:8.8pt;text-indent:-8.8pt'> </p> </td> <td width="108" valign="bottom" style='width:81.0pt;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="72" valign="bottom" style='width:.75in;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'> </p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt'> </p> </td> </tr> <tr style='height:13.5pt'> <td width="222" valign="top" style='width:166.5pt;border:none;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt;margin-left:8.8pt;text-indent:-8.8pt'>Exercisable at November 30, 2012</p> </td> <td width="108" valign="bottom" style='width:81.0pt;border:none;border-bottom:double windowtext 1.5pt;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>  1,781,444</p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;border-bottom:double windowtext 1.5pt;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt'>$</p> </td> <td width="72" valign="bottom" style='width:.75in;border:none;border-bottom:double windowtext 1.5pt;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>3.83</p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;border-bottom:double windowtext 1.5pt;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>5.34</p> </td> <td width="12" valign="bottom" style='width:9.0pt;border:none;border-bottom:double windowtext 1.5pt;padding:0;height:13.5pt'> <p style='margin:0in;margin-bottom:.0001pt'>$</p> </td> <td width="84" valign="bottom" style='width:63.0pt;border:none;border-bottom:double windowtext 1.5pt;padding:0;height:13.5pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>90,307</p> </td> </tr> </table>
1187094
1180428
827235
803049
429729
520480
100000
100000
2344058
2403957
1372093
1368183
58940
58940
298576
298576
54736
54736
956000
956000
244000
244000
2984345
2980435
-1600786
-1567796
1383559
1412639
10000000
0.001
80000000
0.001
2408523
4.56
2408523
4.56
3.23
29778000
29686000
0
0
29778000
29686000
70271
300860
56526
33257
16023
16023
50285
58021
223604
215011
289912
289055
5000
2.05
1.10
0.6267
0.0000
7.4
0.0102
1.06
1560000
3182239
3.54
5000
2.05
0
0
0
-12000
3.85
3175239
3.53
6.47
92207
1781444
3.83
5.34
90307
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