SHAREHOLDERS' EQUITY

6 Months Ended

Feb. 28, 2014

Shareholders Equity

SHAREHOLDERS' EQUITY

NOTE 5 – SHAREHOLDERS’ EQUITY

The Company maintains the 2004 Incentive Plan (the “Equity Plan”), which was approved by shareholders in April 2004. Executives, eligible employees, consultants and non-employee directors are eligible to receive options and stock grants pursuant to the Equity Plan. Pursuant to the Equity Plan, options to purchase shares of stock and restricted stock awards can be granted with exercise prices, vesting conditions and other performance criteria determined by the Compensation Committee of the Board. The Company initially reserved 1.6 million shares of common stock for issuance under the Equity Plan. At February 28, 2014, the Company had 1,218,311 common shares remaining that can be granted to eligible participants pursuant to the Equity Plan. The Equity Plan expires April 11, 2014, at which time no additional shares may be granted pursuant to the Equity Plan. In January 2014 the shareholders approved the 2014 Incentive Plan, which becomes effective April 12, 2014, to replace the 2004 Equity Plan. The Company has reserved 1.6 million shares of common stock for issuance under the 2014 Incentive Plan.

The following table summarizes the stock option activity for the Equity Plan for the six months ended February 28, 2014:

	Number of Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Approximate Aggregate Instrinsic Value
Oustanding at August 31, 2013		347,500	$	5.62
Granted		32,500		6.08
Exercised		—		—
Forfeited or expired		—		—
Outstanding at February 28, 2014		380,000	$	5.66		6.89	$	506,415
Options exercisable at February 28, 2014		247,500	$	5.67		5.19	$	587,825

The following table summarizes the activity and value of non-vested options as of and for the six months ended February 28, 2014:

	Number of Options			Weighted-Average Grant Date Fair Value
Non vested options outstanding at beginning of period		132,500		$	3.80
Granted		32,500			4.09
Vested		(32,500	)		2.36
Forfeited		—			—
Options not vested at February 28, 2014		132,500		$	4.22

All non-vested options are expected to vest. The total fair value of options vested during the three and six months ended February 28, 2014 and February 28, 2013 was $76,800 and $18,800, respectively.

Stock-based compensation expense was $59,500 and $12,500 for the three months ended February 28, 2014 and 2013, respectively. Stock-based compensation expense was $114,300 and $23,100 for the six months ended February 28, 2014 and 2013, respectively.

At February 28, 2014, the Company had unrecognized expenses relating to non-vested options that are expected to vest totaling $398,900 which have a weighted average life of less than three years. The Company has not recorded any excess tax benefits to additional paid-in capital.