STOCKHOLDERS’ EQUITY

12 Months Ended

Oct. 31, 2011

Notes to Financial Statements

STOCKHOLDERS' EQUITY

a.                 The Company concluded an offering to selected investors of 890,000 units, each of which consists of one share of our common stock, par value $0.001 per share, and three-tenths (3/10^ths) of a warrant, each to purchase one share of our common stock at an exercise price of $13.59 per share. The units were sold at a per unit price of $10.40. No units were issued, however, and investors received only shares of common stock and warrants. The common stock and the warrants may be transferred separately immediately upon issuance. The warrants will be exercisable on or after the date that is six months and one day after the date the warrants are issued and will expire on the fifth anniversary of the date the warrants become exercisable. The gross proceeds of the offering amounted to $9,256,000. The offering costs consisted of placement agent fee of $647,920, underwriter fee of $77,456, regulatory fee of $12,223 and legal and professional fees of $186,610, resulting in net proceeds received of $8,331,791.

The Warrants issued in the subscription agreement are linked to 267,000 shares of common stock with an exercise price of $13.59 per share.  The Warrants become exercisable on April 1, 2012 and remain exercisable through April 1, 2017. The exercise price is subject to adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalization transactions.  The Warrants may also be exercised on a cashless basis under a formula that explicitly limits the number of issuable common shares. Further, the exercisability of the Warrants may be limited if, upon exercise, the holder or any of its affiliates would beneficially own more than 4.9% and 9.9% of the Company’s Common Stock.

The principal concepts underlying accounting for warrants provide a series of conditions, related to the potential for net cash settlement, which must be met in order to achieve equity classification. Management evaluated the terms and conditions of the Warrants and determined that i) the Warrants did not embody any of the conditions for liability classification under ASC 480 and ii) they were considered to be solely indexed to the Company’s own stock and met all the established criteria for equity classification set forth in ASC 815. Accordingly, the Warrants achieve equity classification at inception. The classification of the Warrants will be re-evaluated each reporting period.

Treasury Stock. The Company utilizes the cost method of accounting for treasury stock. The cost of reissued shares is determined under the last-in, first-out method. The Company did not purchase any shares during the years ended October 31, 2011 and 2010.

c. Dividends. On October 31, 2011, the Company paid a cash dividend of $193,689 ($0.03 per share) to all stockholders of record as of October 31, 2011. On July 28, May 2 and January 31, 2011, the Company paid a cash dividend of $166,989 ($0.03 per share) to all stockholders of record as of July 18, April 29 and January 17, 2011.