Reverse Stock Split
On March 16, 2011,
pursuant to a February 7, 2011, written consent signed by the shareholders owning a majority of the Companys issued and
outstanding shares and a February 24, 2011, unanimous written consent of the Companys Board, the Company underwent a one-for-three
reverse stock split whereby holders of three shares of the Companys common stock as of March 15, 2011, received one share
of its common stock after the reverse stock split, with all fractional shares being rounded up to the nearest whole share.
All share and
per share amounts have been retrospectively restated to reflect the one-for-three reverse stock split effected March 16, 2011.
FINRA declared the reverse stock split effective as of March 21, 2011.
On February 12,
2008, the Company consummated the sale of an aggregate of 1,225,000 shares of its common stock and Class F Callable Warrants to
purchase up to an additional 1,225,000 shares of the Companys common stock for aggregate gross proceeds of $3,675,000 pursuant
to the terms of a Securities Purchase Agreement dated February 8, 2008 with certain institutional and other accredited investors.
The Class F Callable Warrants were exercisable for a period of three years from the date of issuance at an initial exercise price
of $3.75 per share.
The Company determined
that its Class F Callable Warrants contained a dilutive issuance provision. As a result, the Company reclassified 1,062,833 of
its Class F Callable Warrants to a long-term warrant liability. The Companys Class F Callable Warrants were considered derivative
financial liabilities and were therefore required to be adjusted to fair value each quarter. During the year ended August
31, 2011, investors exercised 1,054,512 Class F Callable Warrants for aggregate gross proceeds
of $3,954,375. all unexercised Class F Callable Warrants expired resulting in the adjustment to their fair value to $0 during
the year ended August 31, 2011.