Note 5: Stockholders' Equity

12 Months Ended

Aug. 31, 2012

Notes

Note 5: Stockholders' Equity

Note 5:  Stockholders’ Equity

The Company has 10,000,000 authorized shares of $0.001 par value preferred stock.  As of August 31, 2012 and 2011, there were no shares of preferred stock outstanding.  The Company also has 80,000,000 authorized shares of $0.001 par value common stock.

Stock Offerings

On October 1, 2009, a universal shelf registration statement was declared effective by 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.  Subsequent to August 31, 2012, we filed a new 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.  See Note 16. We may periodically offer one or more of these securities in amounts, prices and on terms to be announced when and if the securities are offered.  At the time any of the securities covered by the registration statement are offered for sale, a prospectus supplement will be prepared and filed with the SEC containing specific information about the terms of any such offering.  We have previously completed four offerings utilizing our universal shelf registration statement.  Each of these offerings was completed during calendar year 2010. 

On each of February 11, 2010, May 3, 2010, August 19, 2010, and November 15, 2010, we entered into a placement agency agreement (collectively, the “Agency Agreements”) with Roth Capital Partners, LLC (the “Placement Agent”), pursuant to which the Placement Agent agreed to use its reasonable efforts to arrange for the sale of shares of our common stock and warrants in registered direct public offerings.   These offerings are referred to herein as the “February Offering,” “May Offering,” August Offering” and “November Offering” (each, an “Offering” and collectively the “2010 Offerings”).  In connection with each of the Offerings, we and certain institutional investors also entered into securities purchase agreements (collectively, the “Purchase Agreements”) pursuant to which we agreed to sell shares of our common stock and warrants to purchase additional shares of our common stock to the investors.  The common stock and warrants were sold in fixed combinations, with each combination consisting of one share of common stock and a warrant to purchase 0.75 shares of common stock (0.50 shares in the case of the November Offering).  The warrants became exercisable six months and one day following the closing date of the Offering and will remain exercisable for five years thereafter.  The exercise price of the warrants is subject to adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalization transactions. 

The number of shares of our common stock and number of shares of our common stock issuable upon exercise of the warrants as well as the purchase price per fixed combination and the exercise price associated with each warrant which were sold in the 2010 Offerings are shown below:

2010 Offerings	Shares of Common Stock	Warrants – Shares of Common Stock Issuable upon Exercise of the Warrants	Purchase Price per Fixed Combination	Warrant Exercise Price (Per Share)
February Offering	1,176,471	882,354	$1.70	$2.04
May Offering	1,644,737	1,233,553	$1.52	$1.94
August Offering	1,225,000	918,750	$2.25	$3.27
November Offering	1,750,000	875,000	$5.97	$7.73

The Placement Agent was entitled to a cash fee of 6.5% of the gross proceeds paid to us for the securities we would sell in each of the Offerings.  We would also reimburse the Placement Agent for all reasonable and documented out-of-pocket expenses that would be incurred by the Placement Agent in connection with each of the Offerings, which could not exceed in the case of each of the Offerings the lesser of (i) $75,000 ($30,000 in the case of November Offering and in the case of the February Offering, $75,000 less a $25,000 cash advance for expenses), or (ii) 8% of the gross proceeds of the Offering, less the Placement Agent’s placement fee (and in the case of the February Offering, also less the $25,000 cash advance for expenses).  Each of the Agency Agreements contains customary representations, warranties and covenants by us.  They also provide for customary indemnification by us and the Placement Agent for losses or damages arising out of or in connection with the sale of the securities being offered.  We also agreed to indemnify the Placement Agent against liabilities under the Securities Act of 1933, as amended.  We also agreed to contribute to payments the Placement Agent may be required to make in respect of such liabilities.

The exercisability of the warrants sold in the 2010 Offerings may be limited if, upon exercise, the holder or any of its affiliates would beneficially own more than 4.9% of our common stock.

We agreed with each of the purchasers that while the warrants are outstanding, we will not affect or enter into an agreement to affect a “Variable Rate Transaction,” which means a transaction in which we:

·         issue or sell any convertible securities either (A) at a conversion, exercise or exchange rate or other price that is based upon and/or varies with the trading prices of, or quotations for, the shares of our common stock at any time after the initial issuance of such convertible securities, or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such convertible securities or upon the occurrence of specified or contingent events directly or indirectly related to our business or the market for our common stock, other than pursuant to a customary “weighted average” anti-dilution provision; or

·         enter into any agreement (including, without limitation, an equity line of credit) whereby we may sell securities at a future determined price (other than standard and customary “preemptive” or “participation” rights).

We agreed with each of the purchasers if we issue securities within the 12 months following the closing of an Offering, the purchasers shall have the right to purchase all of the securities on the same terms, conditions and price provided for in the proposed issuance of securities.

We also agreed to indemnify each of the purchasers against certain losses resulting from our breach of any of our representations, warranties, or covenants under agreements with each of the purchasers, as well as under certain other circumstances described in the Purchase Agreements.

 We closed the February Offering on February 17, 2010.  The aggregate gross proceeds to us from the February Offering, before deducting fees to the Placement Agent and other offering expenses payable by us, were approximately $2,000,000 .  The net proceeds to us from the February Offering, after deducting placement agent fees and the offering expenses borne by us, were approximately $1,700,000.

We closed the May Offering on May 6, 2010.  The aggregate gross proceeds to us from the May Offering, before deducting fees to the Placement Agent and other offering expenses payable by us, were approximately $2,500,000 .  The net proceeds to us from the May Offering, after deducting placement agent fees and the offering expenses borne by us, were approximately $2,300,000.

We closed the August Offering on August 24, 2010.  The aggregate gross proceeds to us from the August Offering, before deducting fees to the Placement Agent and other offering expenses payable by us, were approximately $2,750,000 .  The net proceeds to us from the August Offering, after deducting placement agent fees and the offering expenses borne by us, were approximately $2,500,000.

We closed the November Offering on November 18, 2010.  The aggregate gross proceeds to us from the November Offering, before deducting fees to the Placement Agent and other offering expenses payable by us, were approximately $10,450,000 .  The net proceeds to us from the November Offering, after deducting placement agent fees and the offering expenses borne by us, were approximately $9,700,000.

Warrant Exercises

During our fiscal year ended August 31, 2011, investors exercised warrants to purchase a total of 1,501,134 common shares, with net proceeds to the Company of approximately $3,000,000.  We have issued 772,060 shares of our common stock as a result of the exercise of warrants issued in the February Offering, and 729,074 shares of our common stock as a result of the exercise of warrants issued in the May Offering.

A summary of the outstanding warrants issued in the stock offerings as of August 31, 2012 and changes during the year then ended is as follows:

	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contract Term (Years)
Outstanding as of August 31, 2011	2,408,523	$	4.56
Granted	-		-
Exercised	-		-
Forfeited or expired	-		-
Outstanding and exercisable as of August 31, 2012 (all exercisable)	2,408,523	$	4.56	3.48