5. SHAREHOLDERS' EQUITY

12 Months Ended

Aug. 31, 2013

Equity [Abstract]

Note 5. SHAREHOLDERS' EQUITY

Dividend

The Company’s Board of Directors declared cash dividends during fiscal year 2013 and 2012. The details of dividend paid are in the following table:

FY2013

Record Date	Distribution Date	Number of Shares Outstanding on Record Date		Dividend per Share			Total Amount
11/08/2012	11/13/2012		15,927,806	$	0.05		$	796,390
12/24/2012	12/28/2012		16,021,309	$	0.14	*	$	2,242,983
05/07/2013	05/10/2013		16,030,433	$	0.03	**	$	480,913
08/12/2013	08/15/2013		16,030,894	$	0.03	**	$	480,926
Total							$	4,001,212

*As a tax benefit to our shareholders considering the increase in federal income tax for capital gains in 2013, the Company’s Board of Directors declared an accelerated cash dividend, $0.14 per share, on December 14, 2012, consisting of all of the planned February 2013 distribution of $0.05 per share, plus $0.03 per share of the planned $0.05 per quarter per share for the remaining three fiscal quarters ending in calendar year 2013.

** The Company’s Board of Directors decided to increase the May and August dividend distribution by 50% from the planned $0.02/share to $0.03/share. Although dividend distributions are currently expected to continue on a quarterly basis, the Company’s Board of Directors reserves the right to discontinue the dividend distribution any time to meet the cash priorities of the business.

FY2012

Record Date	Distribution Date	Number of Shares Outstanding on Record Date		Dividend per Share		Total Amount
02/21/2012	03/01/2012		15,813,844	$	0.05	$	790,692
04/27/2012	05/08/2012		15,923.019	$	0.05	$	796,151
08/07/2012	08/10/2012		15,923.019	$	0.05	$	796,151
Total						$	2,382,994

Stock Option Plan

In September 1996, the Company’s Board of Directors adopted, and the Company’s shareholders approved, the 1996 Stock Option Plan (the "Option Plan") under which a total of 1,000,000 shares of common stock had been reserved for issuance. In March 1999, the shareholders approved an increase in the number of shares that may be granted under the Option Plan to 2,000,000. In February 2000, the shareholders approved an increase in the number of shares that may be granted under the Option Plan to 4,000,000. In December 2000, the shareholders approved an increase in the number of shares that may be granted under the Option Plan to 5,000,000. Furthermore, in February 2005, the shareholders approved an additional 1,000,000 shares, resulting in the total number of shares that may be granted under the Option Plan of 6,000,000. The 1996 Stock Option Plan terminated in September 2006 by its term. 

On February 23, 2007, the Company’s Board of Directors adopted and the Company’s shareholders approved the 2007 Stock Option Plan under which a total of 1,000,000 shares of common stock had been reserved for issuance.

Qualified Incentive Stock Options (“Qualified ISO”)

As of August 31, 2013, employees hold Qualified ISO to purchase 532,000 shares of the Company’s common stock at exercise prices ranging from $1.00 to $5.06 which were granted prior to August 31, 2013.

Transactions in FY12 (Incentive Stock Option Plan)	Number of Options			Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Life
Outstanding, August 31, 2011		957,636		$	1.40		5.220
Granted		100,000		$	3.25
Exercised		(360,736	)	$	1.22
Expired		(7,100	)	$	2.54
Outstanding, August 31, 2012		689,800		$	1.74		4.523
Vested and Exercisable, August 31, 2012		467,100		$	1.42		4.071
Vested and Expected to Vest, August 31, 2012		666,789		$	1.71		4.451

Transactions in FY13 (Incentive Stock Option Plan)	Number of Options			Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Life
Outstanding, August 31, 2012		689,800		$	1.74		4.523
Granted		20,000		$	5.06
Exercised		(175,800	)	$	1.90
Canceled/Forfeited		(2,000	)	$	1.00
Outstanding, August 31, 2013		532,000		$	1.82		3.953
Vested and Exercisable, August 31, 2013		392,600		$	1.45		3.798
Vested and Expected to Vest, August 31, 2013		519,600		$	1.79		3.912

Non-Qualified Stock Options (“NQSO”)

As of August 31, 2013, the outside members of the Company’s Board of Directors hold options to purchase 48,600 shares of the Company’s common stock at exercise prices ranging from $1.67 to $6.68, which were granted prior to August 31, 2013.

Transactions in FY12	Number of Options			Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Life
Outstanding, August 31, 2011		79,000		$	2.29		5.150
Granted		10,000		$	4.46
Exercised		(40,800	)	$	1.25
Canceled/Forfeited		(11,600	)	$	4.10
Outstanding, August 31, 2012		36,600		$	3.47		8.139
Exercisable, August 31, 2012		17,000		$	3.35		6.975

Transactions in FY13	Number of Options		Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Life
Outstanding, August 31, 2012		36,600	$	3.47		8.139
Granted		12,000	$	4.78
Outstanding, August 31, 2013		48,600	$	3.79		7.845
Exercisable, August 31, 2013		28,200	$	3.28		6.671

The fair value of the options, including both ISO and NQSO options, granted during FYE 2013 is estimated at $30,200. The fair value of these options was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions for FYE 2013: dividend yield of 4.35%, pre-vest forfeiture rate of 6.13%, expected volatility of 57.65%, risk-free interest rate of 0.66%, and expected life of 5.0 years. The total fair value of non-vested stock options as of August 31, 2013 was $194,956 and is amortizable over a weighted average period of 1.37 years.

During the previous fiscal year ended August 31, 2012, the fair value of the options, including both ISO and NQSO options, granted during FYE 2012 is estimated at $167,124. The fair value of these options was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions for FYE 2012: dividend yield of 0.41%, pre-vest forfeiture rate of 5.61% to 6.09%, expected volatility of 62.27% to 69.87%, risk-free interest rate of 0.82% to 1.01%, and expected life of 5.0 years to 7.0 years. The total fair value of non-vested stock options as of August 31, 2012 was $292,426 and is amortizable over a weighted average period of 2.03 years.

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which do not have vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Because our employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.

Intrinsic Value of options outstanding and options exercisable

	Intrinsic Value of Options Outstanding		Intrinsic Value of Options Exercisable		Intrinsic Value of Options Exercised
FY12	$	1,918,904	$	1,447,900	$	982,786
FY13	$	1,636,422	$	1,357,870	$	402,406

The weighted-average remaining contractual life of options outstanding issued under the Plan was 4.28 years at August 31, 2013. The exercise prices for the options outstanding at August 31, 2012 ranged from $1.00 to $6.68, and the information relating to these options is as follows:

Exercise Price		Awards Outstanding				Awards Exercisable
Low	High	Quantity		Weighted Average Remaining Contractual Life	Weighted Average Exercise Price	Quantity		Weighted Average Remaining Contractual Life	Weighted Average Exercise Price
$1.00	$1.50		353,100	3.9 years	$1.06		319,700	3.8 years	$1.07
$1.51	$3.00		34,600	6.5 years	$2.30		14,600	6.3 years	$2.04
$3.01	$4.50		156,900	4.1 years	$3.26		82,500	4.4 years	$3.18
$4.51	$6.68		36,000	6.0 years	$5.15		4,000	4.0 years	$6.68
			580,600				420,800