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<p style="text-align: justify; margin: 0pt 0px; font: bold 10pt times new roman, times, serif;">Note 1. Basis of Presentation</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt courier;"><b> </b></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The accompanying unaudited consolidated financial statements for Hauppauge Digital Inc. and subsidiaries (collectively, the “Company”) included herein have been prepared in accordance with generally accepted accounting principles for interim period reporting in conjunction with the instructions to Form 10-Q. Accordingly, these statements do not include all of the information required by generally accepted accounting principles for annual financial statements. In the opinion of management, all known adjustments (consisting of normal recurring accruals and reserves) necessary to present fairly the Company’s consolidated financial position, results of operations and cash flows as of and for the interim periods have been included. It is suggested that these interim statements be read in conjunction with the financial statements and related notes included in the Company's September 30, 2011 Form 10-K.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The operating results for the three months and nine months ended June 30, 2012 are not necessarily indicative of the results to be expected for the fiscal year ending September 30, 2012.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Management has evaluated subsequent events after the balance sheet date through the issuance of the financial statements for appropriate accounting and disclosure.</p>
<p style="text-align: justify; margin: 0pt 0px; font: bold 10pt times new roman, times, serif;">Note 2. Trade Accounts and Other Non-Trade Receivables</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Trade receivables consist of:</p>
<p style="text-indent: -0.25in; margin: 0pt 0px 0pt 0.5in; font: 10pt symbol;"> </p>
<table style="margin-top: 0pt; width: 100%; font: 10pt times new roman, times, serif; margin-bottom: 0pt;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: top;">
<td style="width: 0.25in;"></td>
<td style="width: 0.25in;"><font style="font-family: symbol;">·</font></td>
<td><font style="font-family: times new roman, times, serif;">Trade receivables from sales to customers</font></td>
</tr>
</table>
<p style="text-indent: -0.25in; margin: 0pt 0px 0pt 0.5in; font: 10pt symbol;"> </p>
<table style="margin-top: 0pt; width: 100%; font: 10pt times new roman, times, serif; margin-bottom: 0pt;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: top;">
<td style="width: 0.25in;"></td>
<td style="width: 0.25in;"><font style="font-family: symbol;">·</font></td>
<td><font style="font-family: times new roman, times, serif;">Allowances, consisting of sales and bad debt</font></td>
</tr>
</table>
<p style="text-indent: -0.15in; margin: 0pt 0px 0pt 0.15in; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: -0.15in; margin: 0pt 0px 0pt 0.15in; font: 10pt times new roman, times, serif;">Other non trade receivables consist of:</p>
<p style="text-indent: -0.25in; margin: 0pt 0px 0pt 0.5in; font: 10pt symbol;"> </p>
<table style="margin-top: 0pt; width: 100%; font: 10pt times new roman, times, serif; margin-bottom: 0pt;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: top;">
<td style="width: 0.25in;"></td>
<td style="width: 0.25in;"><font style="font-family: symbol;">·</font></td>
<td><font style="font-family: times new roman, times, serif;">Receivables pertaining to component parts purchased from the Company at cost by the Company’s contract manufacturers which are excluded from sales</font></td>
</tr>
</table>
<p style="text-indent: -0.25in; margin: 0pt 0px 0pt 0.5in; font: 10pt symbol;"> </p>
<table style="margin-top: 0pt; width: 100%; font: 10pt times new roman, times, serif; margin-bottom: 0pt;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: top;">
<td style="width: 0.25in;"></td>
<td style="width: 0.25in;"><font style="font-family: symbol;">·</font></td>
<td><font style="font-family: times new roman, times, serif;">General services tax (GST) and value added tax (VAT) reclaimable on goods purchased by the Company’s Asian and European locations</font></td>
</tr>
</table>
<p style="text-indent: -0.25in; margin: 0pt 0px 0pt 0.5in; font: 10pt symbol;"> </p>
<table style="margin-top: 0pt; width: 100%; font: 10pt times new roman, times, serif; margin-bottom: 0pt;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: top;">
<td style="width: 0.25in;"></td>
<td style="width: 0.25in;"><font style="font-family: symbol;">·</font></td>
<td><font style="font-family: times new roman, times, serif;">Other minor non-trade receivables</font></td>
</tr>
</table>
<p style="text-indent: -0.25in; margin: 0pt 0px 0pt 0.5in; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Trade receivables and other non-trade receivables as of June 30, 2012 and September 30, 2011 consisted of:</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 90%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="text-align: right; font-weight: bold;"> </td>
<td> </td>
<td style="text-align: right;" colspan="2">June 30,</td>
<td> </td>
<td> </td>
<td style="text-align: right;" colspan="2">September 30,</td>
<td> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="text-align: right; font-weight: bold;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;" colspan="2">2012</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;" colspan="2">2011</td>
<td style="padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 74%;">Trade receivables</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">7,396,438</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">7,893,923</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">Allowance for doubtful accounts</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">(352,123</td>
<td style="text-align: left;">)</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">(423,773</td>
<td style="text-align: left;">)</td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Sales reserve</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(4,011,551</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(3,761,454</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt;">Net trade receivables</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">3,032,764</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">3,708,696</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">Receivable from contract manufacturers</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">608,331</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;">$</td>
<td style="text-align: right;">2,030,251</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">GST and VAT tax receivables</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">214,138</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">298,303</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Other</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">68,482</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">79,772</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt;">Total other non trade receivables</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">890,951</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">2,408,326</td>
<td style="text-align: left; padding-bottom: 2.5pt;"></td>
</tr>
</table>
<p style="text-align: justify; margin: 0pt 0px; font: bold 10pt times new roman, times, serif;">Note 3. Inventories</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Inventories have been valued at the lower of average cost or market on a first in first out basis. The components of inventory consist of:</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 80%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: center;" colspan="2">June 30,</td>
<td> </td>
<td> </td>
<td style="text-align: center;" colspan="2">September 30,</td>
<td> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="text-align: left;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2012</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2011</td>
<td style="padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 74%;">Component parts</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">4,317,478</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">3,504,129</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Finished goods</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">3,755,802</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">3,774,917</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">Subtotal</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">8,073,280</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">7,279,046</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Reserve for anticipated sales returns at cost</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">2,988,246</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">2,813,178</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt;">Total</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">11,061,526</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">10,092,224</td>
<td style="text-align: left; padding-bottom: 2.5pt;"></td>
</tr>
</table>
<p style="text-align: justify; margin: 0pt 0px; font: bold 10pt times new roman, times, serif;">Note 4. Net Income (Loss) Per Share</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Basic net income (loss) per share includes no dilution and is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the period. Diluted net income (loss) per share reflects, in the periods in which they have a dilutive effect, the dilution which would occur upon the exercise of stock options. A reconciliation of the shares used in calculating basic and diluted net income per share is as follows:</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 95%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="text-align: left;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="6">Three months ended</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="6">Nine months ended</td>
<td style="padding-bottom: 1pt;"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="text-align: left;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="6">June 30</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="6">June 30,</td>
<td style="padding-bottom: 1pt;"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="text-align: left;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2012</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2011</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2012</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2011</td>
<td style="padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 48%;">Weighted average shares outstanding-basic</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 10%;">10,122,344</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 10%;">10,122,344</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 10%;">10,122,344</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 10%;">10,104,061</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Number of shares issued on the assumed exercise of stock options</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt;">Weighted average shares outstanding-diluted</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">10,122,344</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">10,122,344</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">10,122,344</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">10,104,061</td>
<td style="text-align: left; padding-bottom: 2.5pt;"></td>
</tr>
</table>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Options to purchase 1,531,567 and 1,501,317 shares of common stock, at prices from $0.77 to $7.45 and from $0.89 to $7.45, were outstanding for the three months and nine months ended June 30, 2012 and 2011, respectively, but were not included in the computation of diluted earnings per share because they were anti-dilutive.</p>
<p style="text-align: justify; margin: 0pt 0px; font: bold 10pt times new roman, times, serif;">Note 5. Product segment and geographic information</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company operates in one business segment, which is the development, marketing and manufacturing of analog and digital video products for the personal computer market and Apple iPad® and iPhone® market. The products are similar in function and share commonality of component parts and manufacturing processes. The Company’s products are either sold, or can be sold, by the same retailers and distributors in the Company’s marketing channel. The Company also sells product directly to PC manufacturers.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company’s products fall under three product categories:</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="margin-top: 0pt; width: 100%; font: 10pt times new roman, times, serif; margin-bottom: 0pt;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: top;">
<td style="width: 0.25in;"></td>
<td style="width: 0.25in;"><font style="font-family: symbol;">·</font></td>
<td>Video recorder products, such as USB-Live2, which allows consumers to record video tapes to DVD disc or to some of the Company’s products, such as the HD PVR and Colossus</td>
</tr>
</table>
<table style="margin-top: 0pt; width: 100%; font: 10pt times new roman, times, serif; margin-bottom: 0pt;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: top;">
<td style="width: 0.25in;"></td>
<td style="width: 0.25in;"><font style="font-family: symbol;">·</font></td>
<td>TV receivers, which include Broadway and the Company’s WinTV and PCTV TV tuner products</td>
</tr>
</table>
<table style="margin-top: 0pt; width: 100%; font: 10pt times new roman, times, serif; margin-bottom: 0pt;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: top;">
<td style="width: 0.25in;"></td>
<td style="width: 0.25in;"><font style="font-family: symbol;">·</font></td>
<td>Non-TV tuner products such as the ImpactVCB, MediaMVP-HD and the Company’s TV applications for the PC and the Apple iPad® and iPhone®</td>
</tr>
</table>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company’s TV tuner products enable, among other things, a PC user to watch TV in a resizable window on a PC. The Company’s video recorder products allow consumers to record high definition video from a cable TV or satellite set top box or a game console such as a Xbox 360 or Sony Playstation 3. The Company’s other non-TV tuner products enable, among other things, the ability to watch and listen to PC based videos, music and pictures on a TV set through a home network.</p>
<p style="text-align: center; text-transform: uppercase; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Sales by functional category are as follows:</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 95%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: center;" colspan="6">Three months ended June 30,</td>
<td> </td>
<td> </td>
<td style="text-align: center;" colspan="6">Nine months ended June 30</td>
<td> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="border-bottom: black 1pt solid; text-align: left;">Product line sales</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2012</td>
<td style="text-align: center; padding-bottom: 1pt;"> </td>
<td style="text-align: center; padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2011</td>
<td style="text-align: center; padding-bottom: 1pt;"> </td>
<td style="text-align: center; padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2012</td>
<td style="text-align: center; padding-bottom: 1pt;"> </td>
<td style="text-align: center; padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2011</td>
<td style="padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 48%;">Video recorder products</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">4,137,859</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">3,585,118</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">19,115,575</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">11,829,507</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">TV tuner products</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">4,629,434</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">4,610,004</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">14,747,645</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">18,697,862</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Other video products and software</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid;
text-align: right;">448,410</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">684,295</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">2,100,698</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">1,539,156</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt;">Total sales</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">9,215,703</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">8,879,417</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">35,963,918</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">32,066,525</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company sells its products through a North American and international network of distributors and retailers. It maintains sales offices in the United Stated, Europe and Asia. Sales percentages by geographic region are as follows:</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 90%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="text-align: left; font-weight: bold;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="6">Three months ended June 30,</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="6">Nine months ended June 30,</td>
<td style="padding-bottom: 1pt;"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="border-bottom: black 1pt solid; text-align: left;">Geographic region</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2012</td>
<td style="text-align: center; padding-bottom: 1pt;"> </td>
<td style="text-align: center; padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2011</td>
<td style="text-align: center; padding-bottom: 1pt;"> </td>
<td style="text-align: center; padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2012</td>
<td style="text-align: center; padding-bottom: 1pt;"> </td>
<td style="text-align: center; padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2011</td>
<td style="padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 48%;">The Americas</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 10%;">46</td>
<td style="text-align: left; width: 1%;">%</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 10%;">58</td>
<td style="text-align: left; width: 1%;">%</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 10%;">54</td>
<td style="text-align: left; width: 1%;">%</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 10%;">59</td>
<td style="text-align: left; width: 1%;">%</td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">Europe</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">50</td>
<td style="text-align: left;">%</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">38</td>
<td style="text-align: left;">%</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">42</td>
<td style="text-align: left;">%</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">38</td>
<td style="text-align: left;">%</td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Asia</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">4</td>
<td style="text-align: left; padding-bottom: 1pt;">%</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">4</td>
<td style="text-align: left; padding-bottom: 1pt;">%</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">4</td>
<td style="text-align: left; padding-bottom: 1pt;">%</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">3</td>
<td style="text-align: left; padding-bottom: 1pt;">%</td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom:
2.5pt;">Total</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">100</td>
<td style="text-align: left; padding-bottom: 2.5pt;">%</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">100</td>
<td style="text-align: left; padding-bottom: 2.5pt;">%</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">100</td>
<td style="text-align: left; padding-bottom: 2.5pt;">%</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">100</td>
<td style="text-align: left; padding-bottom: 2.5pt;">%</td>
</tr>
</table>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Note 6. Tax provision</b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b> </b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company’s tax provision for the three and nine months ended June 30, 2012 and 2011 is as follows:</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 95%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: center;" colspan="6">Three months ended June 30,</td>
<td> </td>
<td> </td>
<td style="text-align: center;" colspan="6">Nine months ended June 30,</td>
<td> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="text-align: left;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2012</td>
<td style="text-align: center; padding-bottom: 1pt;"> </td>
<td style="text-align: center; padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2011</td>
<td style="text-align: center; padding-bottom: 1pt;"> </td>
<td style="text-align: center; padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2012</td>
<td style="text-align: center; padding-bottom: 1pt;"> </td>
<td style="text-align: center; padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2011</td>
<td style="padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 48%;">Current tax expense on international operations</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">25,469</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">29,289</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">77,864</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">108,345</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">Current state taxes</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">10,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">10,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">30,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">30,000</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Deferred tax (benefit) expense</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(116,627</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(30,830</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">434,211</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">99,708</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt;">Tax (benefit) provision</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">(81,158</td>
<td style="text-align: left; padding-bottom: 2.5pt;">)</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">8,459</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">542,075</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">238,053</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Deferred tax benefit for the three months ended June 30, 2012 was primarily due to increases in reserves and net operating losses offset somewhat by write-offs for bad debt.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Deferred tax expense for the nine months ended June 30, 2012 was primarily due to the utilization of net operating losses and write-offs of inventory and bad debt.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Note 7. Accrued expense-fees</b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b> </b></p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company uses software and technology purchased or licensed from third parties in certain of the Company’s products.  The Company enters into agreements for these technologies, and incurs a fee for each product sold that includes the technology. The Company recognizes and estimates the amount of fees owed to third parties based on products sold that include software and technology purchased or licensed from these third parties.  The Company uses all available applicable information in determining these estimates and thus the accrued amounts are subject to change as new information is made available to the Company. Accrued expense-fees are accounted for as a component of product cost and are charged to cost of sales.  As of June 30, 2012 and September 30, 2011 the amount of accrued expense-fees amounted to $4,900,534 and $4,082,719, respectively.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Note 8. Accrued Expenses</b></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><font style="font-size: 10pt;">Accrued expenses are for costs incurred for goods and services which are based on estimates, charged as incurred to operations as period costs and for which no invoice has been rendered. Accrued expenses as of June 30, 2012 and September 30, 2011 were </font>$12,348,028<font style="font-size: 10pt;"> and $11,417,895, respectively. Included in accrued expenses are accruals for product costs, accruals for sales costs relating to sales rebate programs, accruals for freight and duty expenses, accruals for compensation, accruals for warranty repair costs and accruals for advertising and marketing costs.</font></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Note 9. Fair Value Measurements</b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b> </b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">ASC Topic 820, “Fair Value Measurements and Disclosures”, establishes a framework for measuring fair value, and expands the related disclosure requirements. The ASC indicates, among other things, that a fair value measurement assumes a transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The Company also follows the provisions of ASC 820-10 with respect to its non-financial assets and liabilities adopted during the first quarter of fiscal 2010. In order to increase consistency and comparability in fair value measurements, ASC 820-10 establishes a hierarchy for observable and unobservable inputs used to measure fair value into three broad Levels, which are described below:</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">  </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">• Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">• Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">• Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Additionally, on a nonrecurring basis, the Company uses fair value measures when analyzing asset impairment. Long-lived assets and certain identifiable intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If it is determined such indicators are present and the review indicates that the assets will not be fully recoverable, based on undiscounted estimated cash flows over the remaining amortization periods, their carrying values are reduced to estimated fair value. Measurements based on undiscounted cash flows are considered to be Level 3 inputs.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The carrying amount of cash, accounts receivable and accounts payable and other short-term financial instruments approximate their fair value due to their short-term nature.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Trade receivables and other non-trade receivables as of June 30, 2012 and September 30, 2011 consisted of:</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 90%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="text-align: right; font-weight: bold;"> </td>
<td> </td>
<td style="text-align: right;" colspan="2">June 30,</td>
<td> </td>
<td> </td>
<td style="text-align: right;" colspan="2">September 30,</td>
<td> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="text-align: right; font-weight: bold;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;" colspan="2">2012</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;" colspan="2">2011</td>
<td style="padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 74%;">Trade receivables</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">7,396,438</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">7,893,923</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">Allowance for doubtful accounts</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">(352,123</td>
<td style="text-align: left;">)</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">(423,773</td>
<td style="text-align: left;">)</td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Sales reserve</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(4,011,551</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(3,761,454</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt;">Net trade receivables</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">3,032,764</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">3,708,696</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">Receivable from contract manufacturers</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">608,331</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;">$</td>
<td style="text-align: right;">2,030,251</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">GST and VAT tax receivables</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">214,138</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">298,303</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Other</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">68,482</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">79,772</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt;">Total other non trade receivables</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">890,951</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">2,408,326</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Inventories have been valued at the lower of average cost or market on a first in first out basis. The components of inventory consist of:</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 80%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: center;" colspan="2">June 30,</td>
<td> </td>
<td> </td>
<td style="text-align: center;" colspan="2">September 30,</td>
<td> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="text-align: left;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2012</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2011</td>
<td style="padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 74%;">Component parts</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">4,317,478</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">3,504,129</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Finished goods</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">3,755,802</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">3,774,917</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">Subtotal</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">8,073,280</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">7,279,046</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Reserve for anticipated sales returns at cost</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">2,988,246</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">2,813,178</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt;">Total</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">11,061,526</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">10,092,224</td>
<td style="text-align: left; padding-bottom: 2.5pt;"></td>
</tr>
</table>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">A reconciliation of the shares used in calculating basic and diluted net income per share is as follows:</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 95%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="text-align: left;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="6">Three months ended</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="6">Nine months ended</td>
<td style="padding-bottom: 1pt;"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="text-align: left;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="6">June 30</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="6">June 30,</td>
<td style="padding-bottom: 1pt;"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="text-align: left;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2012</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2011</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2012</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2011</td>
<td style="padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 48%;">Weighted average shares outstanding-basic</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 10%;">10,122,344</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 10%;">10,122,344</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 10%;">10,122,344</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 10%;">10,104,061</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Number of shares issued on the assumed exercise of stock options</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt;">Weighted average shares outstanding-diluted</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">10,122,344</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">10,122,344</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">10,122,344</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">10,104,061</td>
<td style="text-align: left; padding-bottom: 2.5pt;"></td>
</tr>
</table>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Sales by functional category are as follows:</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 95%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: center;" colspan="6">Three months ended June 30,</td>
<td> </td>
<td> </td>
<td style="text-align: center;" colspan="6">Nine months ended June 30</td>
<td> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="border-bottom: black 1pt solid; text-align: left;">Product line sales</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2012</td>
<td style="text-align: center; padding-bottom: 1pt;"> </td>
<td style="text-align: center; padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2011</td>
<td style="text-align: center; padding-bottom: 1pt;"> </td>
<td style="text-align: center; padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2012</td>
<td style="text-align: center; padding-bottom: 1pt;"> </td>
<td style="text-align: center; padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2011</td>
<td style="padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 48%;">Video recorder products</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">4,137,859</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">3,585,118</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">19,115,575</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">11,829,507</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">TV tuner products</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">4,629,434</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">4,610,004</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">14,747,645</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">18,697,862</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Other video products and software</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">448,410</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">684,295</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">2,100,698</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">1,539,156</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt;">Total sales</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">9,215,703</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">8,879,417</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">35,963,918</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">32,066,525</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;">It maintains sales offices in the United Stated, Europe and Asia. Sales percentages by geographic region are as follows:</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 90%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="text-align: left; font-weight: bold;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="6">Three months ended June 30,</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="6">Nine months ended June 30,</td>
<td style="padding-bottom: 1pt;"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="border-bottom: black 1pt solid; text-align: left;">Geographic region</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2012</td>
<td style="text-align: center; padding-bottom: 1pt;"> </td>
<td style="text-align: center; padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2011</td>
<td style="text-align: center; padding-bottom: 1pt;"> </td>
<td style="text-align: center; padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2012</td>
<td style="text-align: center; padding-bottom: 1pt;"> </td>
<td style="text-align: center; padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2011</td>
<td style="padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 48%;">The Americas</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 10%;">46</td>
<td style="text-align: left; width: 1%;">%</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 10%;">58</td>
<td style="text-align: left; width: 1%;">%</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 10%;">54</td>
<td style="text-align: left; width: 1%;">%</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 10%;">59</td>
<td style="text-align: left; width: 1%;">%</td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">Europe</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">50</td>
<td style="text-align: left;">%</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">38</td>
<td style="text-align: left;">%</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">42</td>
<td style="text-align: left;">%</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">38</td>
<td style="text-align: left;">%</td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Asia</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">4</td>
<td style="text-align: left; padding-bottom: 1pt;">%</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">4</td>
<td style="text-align: left; padding-bottom: 1pt;">%</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">4</td>
<td style="text-align: left; padding-bottom: 1pt;">%</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">3</td>
<td style="text-align: left; padding-bottom: 1pt;">%</td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt;">Total</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">100</td>
<td style="text-align: left; padding-bottom: 2.5pt;">%</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">100</td>
<td style="text-align: left; padding-bottom: 2.5pt;">%</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">100</td>
<td style="text-align: left; padding-bottom: 2.5pt;">%</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">100</td>
<td style="text-align: left; padding-bottom: 2.5pt;">%</td>
</tr>
</table>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company’s tax provision for the three and nine months ended June 30, 2012 and 2011 is as follows:</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 95%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: center;" colspan="6">Three months ended June 30,</td>
<td> </td>
<td> </td>
<td style="text-align: center;" colspan="6">Nine months ended June 30,</td>
<td> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="text-align: left;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2012</td>
<td style="text-align: center; padding-bottom: 1pt;"> </td>
<td style="text-align: center; padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2011</td>
<td style="text-align: center; padding-bottom: 1pt;"> </td>
<td style="text-align: center; padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2012</td>
<td style="text-align: center; padding-bottom: 1pt;"> </td>
<td style="text-align: center; padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2011</td>
<td style="padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 48%;">Current tax expense on international operations</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">25,469</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">29,289</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">77,864</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">108,345</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">Current state taxes</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">10,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">10,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">30,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">30,000</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Deferred tax (benefit) expense</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(116,627</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(30,830</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">434,211</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">99,708</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt;">Tax (benefit) provision</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">(81,158</td>
<td style="text-align: left; padding-bottom: 2.5pt;">)</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">8,459</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">542,075</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">238,053</td>
<td style="text-align: left; padding-bottom: 2.5pt;"></td>
</tr>
</table>
7893923
7396438
-423773
-352123
-3761454
-4011551
2030251
608331
298303
214138
79772
68482
3504129
4317478
3774917
3755803
10122344
10104061
10122344
10122344
0
0
0
0
10122344
10104061
10122344
10122344
1501317
1501317
1531567
1531567
0.89
0.89
0.77
0.77
7.45
7.45
7.45
7.45
1.00
0.58
0.38
0.04
1.00
0.59
0.38
0.03
1.00
0.46
0.50
0.04
1.00
0.54
0.42
0.04
29289
108345
25469
77864
10000
30000
10000
30000
8459
238053
-81158
542075
7279046
8073281
2813178
2988246