Shareholders' Equity

12 Months Ended

Aug. 31, 2014

Shareholders' Equity [Abstract]

Shareholders' Equity

9.SHAREHOLDERS’ EQUITY

Preferred Stock

We have 14.0 million shares of preferred stock authorized for issuance.  At August 31, 2014 and 2013, no shares of preferred stock were issued or outstanding.

Common Stock Warrants

Pursuant to the terms of a preferred stock recapitalization plan completed in fiscal 2005, we issued warrants to purchase 6.2 million shares of common stock with an exercise price of $8.00 per share that expired on March 8, 2013.  Prior to the expiration of the warrants, we issued 2.3 million shares of our common stock, including 1.7 million shares during fiscal 2013, and paid approximately $55,000 (at our discretion) for net cash exercises in fiscal 2013.

Knowledge Capital Investment Group (Knowledge Capital), a related entity that originally held a warrant to purchase 5.9 million shares of our common stock (such warrant is included in the 6.2 million warrants discussed above), exercised its warrant at various dates according to the terms of a fiscal 2011 exercise agreement, and received a total of 2.2 million shares of our common stock from shares held in treasury.  In the fiscal 2011 exercise agreement, Knowledge Capital agreed to the following:

1. To exercise its remaining warrant shares on a net settlement basis.

2. Not to exercise its right to cause the Company to file a registration statement with respect to the resale of any of the shares owned by Knowledge Capital (including shares already owned by Knowledge Capital) prior to the earlier of (i) March 8, 2013 (the expiration of the warrant) and (ii) one year after the date on which the warrant has been exercised in full (the Stand-Off Period).

3. If Knowledge Capital intends to sell any of our common shares (including shares previously owned by Knowledge Capital) in the market during the Stand-Off Period on an unregistered basis, Knowledge Capital will notify us in writing of such intent, including the details surrounding such sale, at least five trading days before commencing such sales, and, if requested by us, will refrain from selling shares of our common stock for up to 120 days after the date Knowledge Capital intended to begin such sales in order to permit us to arrange for an underwritten or other organized sale of these shares.  This action includes filing with the Securities and Exchange Commission, if applicable and required, an effective registration statement covering the sale of the shares in the manner proposed by Knowledge Capital or as otherwise agreed to by Knowledge Capital and us.

4. To discuss with us any proposal by us to purchase such shares during the 120-day period.

In exchange for these considerations, we agreed to waive our right to pay cash in lieu of shares upon exercises of the warrant.  Two members of our Board of Directors, including our Chief Executive Officer, have an equity interest in Knowledge Capital.  This transaction and agreement was approved by members of our Board of Directors who are not affiliated with Knowledge Capital and had no economic interest in the warrant.  As of August 31, 2014, Knowledge Capital has not sold any of its shares received from the exercise of the stock warrants.

Treasury Stock

On March 26, 2012 our Board of Directors approved a plan to purchase up to $10.0 million of the Company’s outstanding common stock.  We intend to use available cash in excess of $10.0 million, provided we have no balance outstanding on our line of credit, to make the purchases.  All previously existing common stock repurchase plans were canceled.  Common stock purchases under this approved plan are made at our discretion based on prevailing market prices and are subject to customary regulatory requirements and considerations.  We do not have a timetable for the purchase of these common shares, and the authorization by the Board of Directors does not have an expiration date.  Through August 31, 2014, we have purchased a total of 73,320 shares of our common stock for $0.8 million under the terms of this repurchase plan.