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CCA INDUSTRIES INC
0000721447
--11-30
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<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 1 - us-gaap:OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-->
<!-- xbrl,ns -->
<!-- xbrl,nx -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="center" style="font-size: 10pt; margin-top: 0pt"><b></b>
</div>
<div align="left">
</div>
<div align="center" style="font-size: 10pt; margin-top: 0pt"><b></b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">NOTE 1 — <u>BASIS OF PRESENTATION</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The accompanying unaudited consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America (“GAAP”) for interim financial information and with the instructions to <font style="white-space: nowrap">Form
10-Q</font> and Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by GAAP for complete financial statements.
Operating results for the three and nine month periods ended August 31, 2011 are not
necessarily indicative of the results that may be expected for the entire year ended
November 30, 2011. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company’s annual report on Form 10-K
for the year ended November 30, 2010 and to Note 13 regarding prior period adjustments.
The accompanying unaudited consolidated financial statements, in the opinion of
management, include all adjustments necessary for a fair presentation. All such
adjustments are of a normal recurring nature.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 2 - caw:OrganizationAndDescriptionOfBusinessTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt">NOTE 2 — <u>ORGANIZATION AND DESCRIPTION OF BUSINESS</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">CCA Industries, Inc. (“CCA”) was incorporated in the State of Delaware on March 25,
1983.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">CCA manufactures and distributes health and beauty aid products.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">CCA has two wholly-owned active subsidiaries, CCA Online Industries, Inc., and CCA
IND., S.A. DE C.V., a Variable Capital Corporation organized pursuant to the laws of
Mexico. CCA Cosmetics, Inc., CCA Labs, Inc., and Berdell, Inc, are wholly-owned
subsidiaries that are currently inactive.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 3 - us-gaap:SignificantAccountingPoliciesTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt">NOTE 3 — <u>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><u>Principles of Consolidation:</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The consolidated financial statements include the accounts of CCA and its wholly-owned
subsidiaries (collectively the “Company”). All significant inter-company accounts and
transactions have been eliminated.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><u>Estimates and Assumptions:</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The consolidated financial statements include the use of estimates, which management
believes are reasonable. The process of preparing financial statements in conformity
with GAAP requires management to make estimates and assumptions regarding certain types
of assets, liabilities, revenues, and expenses. Such estimates primarily relate to
unsettled transactions and events as of the date of the financial statements.
Accounting estimates and assumptions are those that management considers to be most
critical to the financial statements because they inherently involve significant
judgment and uncertainties. All of these estimates and assumptions reflect
management’s best judgment about current economic and market conditions and their
effects on the information available as of the date of the consolidated financial
statements. Accordingly, upon settlement, actual results may differ from estimated
amounts.
</div>
<!-- Folio -->
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</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="center" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 0pt">
<u>
</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><u>Comprehensive
Income (Loss):</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Comprehensive (loss) income includes changes in equity that are excluded from the
consolidated statements of operations and are recorded directly into a separate section
of consolidated statements of comprehensive (loss) income. The Company’s accumulated
other comprehensive income (loss) shown on the consolidated balance sheets consist of
unrealized gains and losses on investment holdings, net of deferred tax expense or
benefit.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><u>Cash and Cash Equivalents:</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">For purposes of the statement of cash flows, the Company considers all highly liquid
instruments purchased with an original maturity of less than three months to be cash
equivalents.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><u>Short-Term Investments and Marketable Securities:</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Short-term investments and marketable securities consist of certificates of deposits,
corporate and government bonds and equity securities. The Company has classified its
investments as Available-for-Sale securities. Accordingly, such investments are
reported at fair market value, with the resultant unrealized gains and losses reported
as a separate component of shareholders’ equity. Fair value for Available-for-Sale
securities is determined by reference to quoted market prices or other relevant
information.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><u>Accounts Receivable:</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Accounts receivable consist of trade receivables recorded at original invoice amount,
less an estimated allowance for uncollectible amounts. The accounts receivable balance
is further reduced by allowances for cooperative advertising and reserves for returns
which are anticipated to be taken as credits against the balances as of the balance
sheet date. The allowances and reserves which are anticipated to be deducted from
future invoices are included in accrued liabilities. Trade credit is generally extended
on a short term basis; thus trade receivables do not bear interest, although a finance
charge may be applied to receivables that are past due. Trade receivables are
periodically evaluated for collectability based on past credit history with customers
and their current financial condition. Changes in the estimated collectability of
trade receivables are recorded in the results of operations for the period in which the
estimate is revised. Trade receivables that are deemed uncollectible are offset
against the allowance for uncollectible accounts. The Company generally does not
require collateral for trade receivables.
</div>
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</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="center" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 0pt">
<u>
</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><u>Inventories:</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Inventories are stated at the lower of cost (weighted average) or market. Product
returns are recorded in inventory when they are received at the lower of their original
cost or market, as appropriate. Obsolete inventory is written off and its value is
removed from inventory at the time its obsolescence is determined.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><u>Property and Equipment and Depreciation and Amortization:</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Property and equipment are stated at cost. The Company charges to expense repairs and
maintenance items, while major improvements and betterments are capitalized.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">When the Company sells or otherwise disposes of property and equipment items, the cost
and related accumulated depreciation are removed from the respective accounts and any
gain or loss is included in earnings.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Depreciation and amortization are provided utilizing the straight-line method over the
following estimated useful lives or lease terms of the assets, whichever is shorter:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="50%"> </td>
<td width="5%"> </td>
<td width="45%"> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Machinery and equipment
</div></td>
<td> </td>
<td align="left" valign="top">5-7 Years</td>
</tr>
<tr valign="bottom">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Furniture and fixtures
</div></td>
<td> </td>
<td align="left" valign="top">3-10 Years</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Tools, dies and masters
</div></td>
<td> </td>
<td align="left" valign="top">3 Years</td>
</tr>
<tr valign="bottom">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Transportation equipment
</div></td>
<td> </td>
<td align="left" valign="top">5 Years</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td valign="top">
<div style="margin-left:0px; text-indent:-0px">Leasehold improvements
</div></td>
<td> </td>
<td align="left" valign="top">Lesser of remaining life of the
lease or life of the asset
(ranging from 1-12 years)</td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><u>Intangible Assets:</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Intangible assets, which consist of trademarks and patents, are stated at cost.
Patents are amortized utilizing the straight-line method over a period of 17 years.
Such intangible assets are reviewed for potential impairment on a quarterly basis.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><u>Web Site Costs:</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Certain costs incurred in creating the graphics and content of the Company’s web site
have been capitalized in accordance with the Accounting Standards Codification (“ASC”)
Topic 350, “Intangibles — Goodwill and Other”, issued by the Financial Accounting
Standards Board (“FASB”). The Company had determined that these costs would be
amortized over a two-year period. Web site design and conceptual costs are expensed as
incurred.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><u>Financial Instruments:</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The carrying value of assets and liabilities considered financial instruments
approximate their respective fair value.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="center" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 0pt">
<u>
</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><u>Income Taxes:</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Income taxes are accounted for under the asset and liability method. Deferred tax
assets and liabilities are recognized for future tax consequences attributable to the
temporary differences between the carrying amounts of assets and liabilities as
recorded on the Company’s financial statements and the carrying amounts as reflected on
the Company’s income tax return. In addition, the tax effect of charitable
contributions that cannot be deducted in the current period and are carried forward for
future periods are also reflected as deferred tax assets. Deferred tax assets and
liabilities are valued using the tax rates expected to apply in the years in which
those temporary differences are expected to be recovered or settled. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management, it is
more likely than not that some portion, or all of the deferred tax asset will not be
realized.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><u>Tax Credits:</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Tax credits, when present, are accounted for using the flow-through method as a
reduction of income taxes in the years utilized.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><u>Earnings Per Common Share:</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Basic earnings per share are calculated in accordance with ASC Topic 260, “Earnings Per
Share”, which requires using the average number of shares of common stock outstanding
during the period. Diluted earnings per share is computed on the basis of the average
number of common shares outstanding plus the dilutive effect of any common stock
equivalents using the “treasury stock method”. Common stock equivalents consist of
stock options. Based on the stockholder protection rights agreement discussed in Note
No. 10, there is a potential dilution of earnings per common share if an acquirer
accumulated twenty percent (20%) or more of the outstanding common shares of the
Company.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><u>Revenue Recognition:</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The Company recognizes sales upon shipment of merchandise. Net sales comprise gross
revenues less expected returns, trade discounts, customer allowances and various sales
incentives. Although no legal right of return exists between the customer and the
Company, returns are accepted if it is in the best interests of the Company’s
relationship with the customer. The Company, therefore, records a reserve for returns
based on the historical returns as a percentage of sales in the five preceding months,
adjusting for returns that can be put back into inventory, and a specific reserve based
on customer circumstances. Those returns which are anticipated to be taken as credits
against the balances as of the balance sheet date are offset against the accounts
receivable. The reserves which are anticipated to be deducted from future invoices are
included in accrued liabilities.
</div>
<!-- Folio -->
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</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="center" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 0pt">
<u>
</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><u>Sales Incentives:</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">In accordance with ASC Topic 605-10-S99, “Revenue Recognition”, the Company has
accounted for certain sales incentives offered to customers by charging them directly
to sales as opposed to advertising and promotional expense. These accounting
adjustments under ASC Topic 605-10-S99 do not affect net income.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><u>Advertising Costs:</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The Company’s policy for financial reporting is to charge advertising cost to expense
as incurred. Advertising, cooperative and promotional expenses for the three months
ended August 31, 2011 and August 31, 2010 were $1,322,522 and $1,690,455, respectively.
Advertising, cooperative and promotional expenses for the nine months ended August 31,
2011 and August 31, 2010 were $4,771,316 and $5,599,736, respectively.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><u>Shipping Costs:</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The Company’s policy for financial reporting purposes is to include shipping costs as
part of selling, general and administrative expenses as incurred. Shipping costs
included for the three months ended August 31, 2011 and
August 31, 2010 were $670,043
and $729,725, respectively. Shipping costs included for the nine months ended August
31, 2011 and 2010 were $2,126,917 and $2,047,045, respectively.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><u>Stock Options:</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">In December 2004, the FASB issued ASC Topic 718, “Stock Compensation”. ASC Topic 718
requires stock grants to employees to be recognized in the consolidated statements of
operations based on their fair values.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><u>Recent Accounting Pronouncements:</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">In January 2010, the FASB issued ASU 2010-06, which is an update to Topic 820, “Fair
Value Measurement and Disclosures”. This update establishes further disclosure
requirements regarding transfers in and out of levels 1 and 2, and activity in level 3
fair value measurements. The update also provides clarification as to the level of
disaggregation for each class of assets and liabilities, requires disclosures about
inputs and valuation techniques, and also includes conforming amendments to the
guidance on employers’ disclosures about postretirement benefit plan assets. ASU
2010-06 was effective for all interim and annual reporting periods beginning after
December 15, 2010. ASU 2010-06 did not have a material impact on the Company’s
financial position or results of operation.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">In February 2010, the FASB issued ASU 2010-09, which is an update to Topic 855,
“Subsequent Events”. This update clarifies the date through which the Company is
required to evaluate subsequent events. SEC filers will be required to evaluate
subsequent events through the date that the financial statements are issued. ASU
2010-09 was effective
upon issuance, and did not have a material impact on the Company’s financial position
or results of operation.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="center" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 0pt">
<u>
</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 0pt; margin-left: 4%">
<u>
</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">In December 2010, the FASB issued ASU 2010-28, which is an update to Topic 350,
“Intangibles — Goodwill and Other”. This update provides additional guidance with
regard to performing goodwill impairment testing for reporting units with zero or
negative carrying amounts. ASU 2010-28 was effective for all interim and annual
reporting periods beginning after December 15, 2010. ASU 2010-28 did not have a
material impact on the Company’s financial position or results of operation.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">In May 2011, the FASB issued ASU 2011-04, which is an update to Topic 820, “Fair Value
Measurement”. This update establishes common requirements for measuring fair value and
related disclosures in accordance with accounting principles generally accepted in the
United States of America and international financial reporting standards. This
amendment did not require additional fair value measurements. ASU 2011-04 is effective
for all interim and annual reporting periods beginning after December 15, 2011. ASU
2011-04 is not expected to have a material impact on the Company’s financial position
or results of operation.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">In June 2011, the FASB issued ASU 2011-05, which is an update to Topic 220,
“Comprehensive Income”. This update eliminates the option of presenting the
components of other comprehensive income as part of the statement of changes in
stockholders’ equity, requires consecutive presentation of the statement of net income
and other comprehensive income and requires reclassification adjustments from other
comprehensive income to net income to be shown on the financial statements. ASU
2011-05 is effective for all interim and annual reporting periods beginning after
December 15, 2011. ASU 2011-05 is not expected to have a material impact on the
Company’s financial position or results of operation.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Management does not believe that any other recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
accompanying financial statements.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="center" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 4 - us-gaap:InventoryDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt">NOTE 4 — <u>INVENTORIES</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The components of inventory consist of the following:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">August 31,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">November 30,</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2011</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Raw materials
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">6,036,650</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">5,773,121</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Finished goods
</div></td>
<td> </td>
<td> </td>
<td align="right">3,109,789</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,304,113</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">9,146,439</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">9,077,234</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">At August 31, 2011 and November 30, 2010, the Company had a reserve for obsolescence
of $813,217 and $1,372,798, respectively.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 5 - us-gaap:PropertyPlantAndEquipmentDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt">NOTE 5 — <u>PROPERTY AND EQUIPMENT</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The components of property and equipment consisted of the following:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">August 31,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">November 30,</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2011</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Machinery and equipment
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">273,003</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">261,676</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Furniture and equipment
</div></td>
<td> </td>
<td> </td>
<td align="right">988,473</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">961,378</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Transportation Equipment
</div></td>
<td> </td>
<td> </td>
<td align="right">27,538</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Tools, dies, and masters
</div></td>
<td> </td>
<td> </td>
<td align="right">387,311</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">352,276</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Capitalized lease obligations
</div></td>
<td> </td>
<td> </td>
<td align="right">263,067</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">263,067</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Web Site
</div></td>
<td> </td>
<td> </td>
<td align="right">20,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">20,000</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Leasehold improvements
</div></td>
<td> </td>
<td> </td>
<td align="right">466,934</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">428,761</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right">2,426,326</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,287,158</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Less: Accumulated depreciation
and amortization
</div></td>
<td> </td>
<td> </td>
<td align="right">1,883,801</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,736,469</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Property and Equipment — Net
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">542,525</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">550,689</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Depreciation expense for the three months ended August 31, 2011 and 2010 amounted to
$49,918 and $57,366, respectively. Depreciation expense for the nine months ended
August 31, 2011 and 2010 amounted to $147,332 and $181,791, respectively.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="center" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 6 - us-gaap:IntangibleAssetsDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt">NOTE 6 — <u>INTANGIBLE ASSETS</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Intangible assets consist of owned trademarks and patents for ten product lines
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">August 31,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">November 30,</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Patents and trademarks
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">822,896</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">822,896</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Less: Accumulated amortization
</div></td>
<td> </td>
<td> </td>
<td align="right">149,663</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">149,316</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Intangible Assets — Net
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">673,233</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">673,580</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Patents are amortized on a straight-line basis over their legal life of 17 years and
trademarks are adjusted to realizable value for each quarterly reporting period.
Amortization expense for the three months ended August 31, 2011 and 2010 were $116 and
$546, respectively. Amortization expense for the nine months ended August 31, 2011 and
2010 amounted to $347 and $1,638, respectively. Estimated amortization expense for the
years ending November 30, 2011, 2012, 2013, 2014 and 2015 will be $462, $462, $462, $439
and $421 respectively.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 7 - us-gaap:MarketableSecuritiesTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt">NOTE 7 — <u>SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Short-term investments and marketable securities, which consist of fully guaranteed
bank certificates of deposit, stock and various corporate and government obligations,
are stated at market value. The Company has classified its investments as
Available-for-Sale securities and considers as current assets those investments which
will mature or are likely to be sold within the ensuing twelve months. The remaining
investments are considered non-current assets. The cost and market values of the
investments at August 31, 2011 and November 30, 2010 were as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">August 31, 2011</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">November 30, 2010</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">COST</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">MARKET</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">COST</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">MARKET</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Current:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Guaranteed bank
certificates of
deposit
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">816,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">821,836</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Corporate
obligations
</div></td>
<td> </td>
<td> </td>
<td align="right">970,461</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">967,811</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">200,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">202,364</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">U.S. Government
obligations
(including mortgage
backed securities)
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,499,185</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,499,100</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Preferred stock
</div></td>
<td> </td>
<td> </td>
<td align="right">454,855</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">391,080</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">250,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">216,140</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Common stock
</div></td>
<td> </td>
<td> </td>
<td align="right">443,815</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">538,742</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">667,188</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">710,023</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Limited Partnership
</div></td>
<td> </td>
<td> </td>
<td align="right">223,373</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">221,815</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Mutual funds
</div></td>
<td> </td>
<td> </td>
<td align="right">215,274</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">191,377</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">215,273</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">187,639</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Other equity
</div></td>
<td> </td>
<td> </td>
<td align="right">70,206</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">35,297</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">70,202</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">36,746</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Total Current
</div></td>
<td> </td>
<td> </td>
<td align="right">2,377,984</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,346,122</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,717,848</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,673,848</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="center" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 0pt">
<u>
</u>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">August 31, 2011</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">November 30, 2010</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">COST</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">MARKET</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">COST</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">MARKET</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Long-term:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Corporate obligations
</div></td>
<td> </td>
<td> </td>
<td align="right">754,518</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">743,628</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">750,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">748,629</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Preferred stock
</div></td>
<td> </td>
<td> </td>
<td align="right">2,404,587</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,371,035</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,391,002</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,375,422</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:45px; text-indent:-15px">Total Long-term
</div></td>
<td> </td>
<td> </td>
<td align="right">3,159,105</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,114,663</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,141,002</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,124,051</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">5,537,089</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">5,460,785</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">7,858,850</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">7,797,899</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">As of August 31, 2011, the Company had unrealized losses on its investments of
$(76,301). This amount was reduced by a deferred tax benefit of $30,826, of which a
$24,928 benefit was recorded in prior fiscal years and a benefit of $5,898 was recorded
in fiscal 2011. None of the unrealized losses have been deemed to be
other-than-temporary or temporary impairments, and are accounted for under
mark-to-market rules for Available-for-Sale securities. Please see Note 3 for further
information.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Bank certificates of deposit and interest bearing accounts are insured by the Federal
Deposit Insurance Corporation up to $250,000. Non-interest bearing accounts are
insured for the full balance under the Temporary Liquidity Guarantee Program. The
Company maintains accounts with several brokerage firms. The accounts contain cash and
securities. Balances are insured up to $500,000 (with a limit of $100,000 for cash) by
the Securities Investor Protection Corporation (SIPC).
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The Company adopted ASC Topic 820, “Fair Value Measurements and Disclosures” as of
December 1, 2007, which expands disclosures about investments that are measured and
reported at fair market value. ASC Topic 820 established a fair value hierarchy that
prioritizes the inputs to valuation techniques utilized to measure fair value into
three broad levels as follows:
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Level 1 — Quoted market prices in active markets for the identical asset or liability
that the reporting entity has ability to access at the measurement date.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Level 2 — Quoted market prices for identical or similar assets or liabilities in
markets that are not active, and where fair value is determined through the use of
models or other valuation methodologies.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Level 3 — Unobserved inputs for the asset or liability. Fair value is determined by
the reporting entity’s own assumptions utilizing the best information available, and
includes situations where there is little market activity for the investment.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="center" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 0pt">
<u>
</u>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="58%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Quoted</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Significant</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Market Price</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Other</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">in Active</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Observable</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">August 31,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Markets</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Inputs</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000">Description</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2011</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">(Level 1)</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">(Level 2)</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Bank Certificates of Deposit
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Corporate obligations
</div></td>
<td> </td>
<td> </td>
<td align="right">1,711,439</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,711,439</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Preferred Stock
</div></td>
<td> </td>
<td> </td>
<td align="right">2,762,115</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,762,115</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Common Stock
</div></td>
<td> </td>
<td> </td>
<td align="right">538,742</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">538,742</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Limited Partnership
</div></td>
<td> </td>
<td> </td>
<td align="right">221,815</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">221,815</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Mutual Funds
</div></td>
<td> </td>
<td> </td>
<td align="right">191,377</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">191,377</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other Equity
</div></td>
<td> </td>
<td> </td>
<td align="right">35,297</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">35,297</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">5,460,785</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">3,714,049</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,746,736</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="58%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Quoted</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Significant</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Market Price</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Other</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">in Active</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Observable</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">November 30,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Markets</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Inputs</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000">Description</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">(Level 1)</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">(Level 2)</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Bank Certificates of Deposit
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">821,836</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">821,836</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Corporate obligations
</div></td>
<td> </td>
<td> </td>
<td align="right">950,993</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">950,993</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Government Obligations
</div></td>
<td> </td>
<td> </td>
<td align="right">2,499,100</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,499,100</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Preferred Stock
</div></td>
<td> </td>
<td> </td>
<td align="right">2,591,562</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,591,562</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Common Stock
</div></td>
<td> </td>
<td> </td>
<td align="right">710,023</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">710,023</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Mutual Funds
</div></td>
<td> </td>
<td> </td>
<td align="right">187,639</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">187,639</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other Equity
</div></td>
<td> </td>
<td> </td>
<td align="right">36,746</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">36,746</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">7,797,899</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">5,988,324</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,809,575</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="center" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 8 - us-gaap:AccountsPayableAndAccruedLiabilitiesDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt">NOTE 8 — <u>ACCOUNTS PAYABLE AND ACCRUED LIABILITIES</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The following items, which exceeded 5% of total current liabilities, are included in
accounts payable and accrued liabilities as of:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">August 31,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">November 30,</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2011</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">(In Thousands)</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">(In Thousands)</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">a) Media advertising
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">871</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">*</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">b) Accrued returns
</div></td>
<td> </td>
<td> </td>
<td align="right">1,262</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,317</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">c) Coop advertising
</div></td>
<td> </td>
<td> </td>
<td align="right">1,701</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,610</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">3,834</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,927</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr style="font-size: 6pt">
<td width="3%"> </td>
<td width="1%"> </td>
<td width="96%"> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">*</td>
<td> </td>
<td>
<div style="text-align: justify">Did not exceed 5% of total current liabilities at November 30, 2010.
</div></td>
</tr>
</table>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">All other liabilities individually did not exceed 5% of total current liabilities.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 9 - us-gaap:OtherIncomeAndOtherExpenseDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt">NOTE 9 — <u>OTHER INCOME</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Other income consists of the following:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Three Months Ending</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Nine Months Ending</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">August 31,</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">August 31,</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2011</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2011</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Interest and dividend income
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">62,608</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">54,876</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">189,599</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">196,349</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Royalty income
</div></td>
<td> </td>
<td> </td>
<td align="right">50,863</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">45,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">159,694</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">135,000</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Realized (loss) gain on
sale
of Bonds
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,394</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">815</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(14,975</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Miscellaneous
</div></td>
<td> </td>
<td> </td>
<td align="right">1,575</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,739</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,670</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">43,853</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">115,046</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">106,009</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">362,778</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">360,227</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
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<!-- Begin Block Tagged Note 10 - us-gaap:CommitmentsAndContingenciesDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt">NOTE 10 — <u>COMMITMENTS AND CONTINGENCIES</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><u>Litigation</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The Company has a license agreement with Alleghany Pharmacal Corporation (“Alleghany”),
which it entered into in 1986 for the use of certain trademarks, including Nutra Nail
and Hair Off. The license agreement provides that if, and when, in the aggregate,
$9,000,000 in royalties had been paid thereunder, the royalty rate for those products
charged at 6% would be reduced to 1%. The Company paid an aggregate of $9,000,000 in
royalties to Alleghany as of April 2003, and commencing on May 1, 2003, the license
royalty was reduced to 1%. On March 25, 2011, the Company received a letter
on behalf of Alleghany claiming that the Company was in default of the license
agreement, and that minimum annual royalties of $360,000 per year were due to
Alleghany
for fiscal 2003 and subsequent years. The Company had understood since the inception of the
license agreement, that once the royalty rate was reduced to 1%, the minimum royalties
would end. On July 8, 2011, the Company reached a settlement in which it agreed to a
one-time payment to Alleghany of $600,000, an increase in the royalty rate from 1% to
2.5%, and a minimum annual royalty of $250,000 in order to settle this matter in full.
Although management believed that the Company had a meritorious defense and could
prevail in a court of law, it was decided to settle the dispute due to the risk of loss
of two profitable core brands, “Nutra Nail” and “Hair Off”, and possible substantial
liabilities that the Company estimated could be as high as $1,900,000. An expense of
$695,000 was recorded in the second quarter of fiscal 2011 to reflect the anticipated
costs of settling this matter and the increased royalty rate, with the expense included
in selling, general and administrative expenses in the statement of operations. The
one-time payment of $600,000 was paid by the Company to Alleghany on July 18, 2011.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">We may be subject to additional various claims, complaints and legal actions that arise
from time to time in the normal course of business. Other than as described above, we
do not believe we are party to any currently pending legal proceedings that will result
in a material adverse effect on our business. There can be no assurance that existing
or future legal proceedings arising in the ordinary course of business or otherwise
will not have a material adverse effect on our business, consolidated financial
position, results of operations or cash flows.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><u>Dividends and Capital Transactions</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">On January 28, 2011, the board of directors declared a $0.07 per share dividend for the
first quarter ended February 28, 2011. The dividend was payable to all shareholders of
record as of February 10, 2011 and was paid on March 10, 2011.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">On February 9, 2011, the Board of Directors of the Company declared a dividend, payable
to holders of record as of the close of business on February 22, 2011 of one preferred
stock purchase right (a Right) for each outstanding share of common stock, par value
$0.01 per share, and of Class A common stock, par value $0.01 per share, of the Company
(together, the Common Stock). In addition, the Company will issue one Right with each
new share of Common Stock issued. In connection therewith, on February 9, 2011, the
Company entered into a Stockholder Protection Rights Agreement (as amended from time to
time, the Rights Agreement) with American Stock Transfer & Trust Company LLC, as Rights
Agent, which has a term of one year, unless amended by the Board of Directors (and in
certain circumstances with certain stockholder approval) in accordance with the terms
of the Rights Agreement. The Rights will initially trade with and be inseparable from
our Common Stock and will not be evidenced by separate certificates unless they become
exercisable. Each Right entitles its holder to purchase from the Company
one-hundredth
of a share of participating preferred stock having economic and voting terms similar to the Common
Stock at an exercise price of $18 per Right, subject to adjustment in accordance
with the terms of the Rights Agreement, once the Rights become exercisable. Under the
Rights Agreement, the Rights become exercisable if any person or group acquires 20% or
more of
the Common Stock or, in the case of any person or group that owned 20% or more of the
Common Stock as of February 9, 2011, upon the acquisition of any additional shares by
such person or group. The Company, its subsidiaries, employee benefit plans of the
Company or any of its subsidiaries and any entity holding Common Stock for or pursuant
to the terms of any such plan are excepted. Upon exercise of the Right in accordance
with the
Rights Agreement, the holder would be able to purchase a number of shares of Common
Stock from the Company having an aggregate market price (as defined in the Rights
Agreement) equal to twice the then-current exercise price for an amount in cash equal
to the then-current exercise price. In addition, the Company may, in certain
circumstances and pursuant to the terms of the Rights Agreement, exchange the Rights
for one share of Common Stock or an equivalent security for each Right or,
alternatively, redeem the Rights for $0.001 per Right. The Rights will not prevent a
takeover of our Company, but may cause substantial dilution to a person that acquires
20% or more of the Company’s Common Stock.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">On February 28, 2011, the Board of Directors of the Company declared a $0.07 per share
dividend for the second quarter ended May 31, 2011. The dividend was payable to all
shareholders of record as of May 2, 2011, and was paid on June 2, 2011.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">On July 15, 2011, the Board of Directors of the Company declared a $0.07 per share
dividend for the third quarter ended August 31, 2011. The dividend was payable to all
shareholders of record as of August 2, 2011, and was paid on September 2, 2011.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><u>Change of Control Agreements</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">On March 15, 2011, the compensation committee of the board of directors, acting on
behalf of the Company, entered into a Change of Control Agreement (together, the “COC
Agreements”) with each of Ira W. Berman and David Edell (the “Consultants”). Each of
Mr. Berman and Mr. Edell was employed as a senior executive of the Company until
December 31, 2010, at which point they each became consultants to the Company pursuant
to the terms of their respective Amended and Restated Employment Agreements, as amended
(each, an “Employment/Consulting Agreement”), which are listed as Exhibits 10.1 and
10.2 to the Company’s Annual Report on Form 10-K for the year ended November 30, 2010.
Mr. Edell is a director of the Company, and Mr. Berman was a director until August 4,
2011.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="center" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 0pt">
<u>
</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 0pt; margin-left: 4%">
<u>
</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The COC Agreements contained identical terms and conditions to each other and provide
that, in the event of a Change of Control of the Company, each of the Consultants is
entitled to cease performing consulting services under his respective Employment/Consulting
Agreement, and is entitled to certain payments from the Company, including a lump sum
payment of all fees under the Employment/Consulting Agreement from the date of
occurrence of the Change of Control through the end of the original term of that
Employment/Consulting Agreement. In addition, upon on Change of Control, all of the
Consultants’ unvested awards under the Company’s equity-based compensation plans, if
any, automatically vest in full.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Under the COC Agreements, each Consultant has agreed to a non-competition and
non-solicitation restriction for two years, during which two-year period the Consultant
is entitled to continued coverage under the Company’s group health, dental, long-term
disability and life insurance plans. The foregoing summary of the COC Agreements are
qualified in their entirety by the full text of the COC Agreements, copies of which may
be found in Form 8-K, filed by the Company with the United States Securities and
Exchange Commission on March 17, 2011.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><u>Employment Agreements</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">On March 21, 2011, the compensation committee of the board of directors, acting on
behalf of the Company, entered into an Employment Agreement (each, an “Employment
Agreement”) with each of Dunnan Edell, Stephen A. Heit, and Drew Edell (each, an
“Executive”). Pursuant their respective Employment Agreements, Mr. Dunnan Edell has
been engaged to continue to serve as the Company’s President and Chief Executive
Officer, Mr. Heit has been engaged to continue to serve as the Company’s Executive Vice
President
and Chief Financial Officer, and Mr. Drew Edell has been engaged to continue to serve
as the Company’s Executive Vice President, Product Development and Production.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Mr. Dunnan Edell and Mr. Drew Edell are brothers and are the sons of David Edell, who
is a member of the Board of Directors of the Company and serves as a consultant to the
Company.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Except as set forth below, the Employment Agreements contain substantially similar
terms to each other. The term of employment under each of the Employment Agreements
runs from March 21, 2011 through December 31, 2013, and will continue thereafter for
successive one-year periods unless the Company or the Executive chooses not to renew
the respective Employment Agreement.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Under the respective Employment Agreements, the base salaries of Mr. Dunnan Edell, Mr.
Heit, and Mr. Drew Edell are $350,000, $250,000, and $275,000 per annum, respectively,
and may be increased each year at the discretion of the Company’s Board of Directors.
The Executives are eligible to receive an annual performance-based bonus under their
respective Employment Agreement, and are entitled to participate in Company
equity compensation plans. In addition, each of the Executives will receive an
automobile allowance, health insurance and certain other benefits.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="center" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 0pt">
<u>
</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 0pt; margin-left: 4%">
<u>
</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">In the event of termination of the respective Employment Agreement as a result of the
disability or death of the Executive, the Executive (or his estate or beneficiaries)
shall be entitled to receive all base salary and other benefits earned and accrued
until such termination as well as a single-sum payment equal to the Executive’s base
salary and a single-sum payment equal to the value of the highest bonus earned by the
Executive in the
one-year period preceding the date of termination pro-rated for the number of days
served in that fiscal year.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">If the Company terminates the Executive for Cause (as defined in the respective
Employment Agreement), or the Executive terminates his employment in a manner not
considered to be for Good Reason, the Executive shall be entitled to receive all base
salary and other benefits earned and accrued prior to the date of termination. If the
Company terminates the Executive in a manner that is not for Cause or due to the
Executive’s death or disability, the Executive terminates his employment for Good
Reason, or the Company does not renew the Employment Agreement after December 31, 2013,
the Executive shall be entitled to receive a single-sum payment equal to his unpaid
base salary and other benefits earned and accrued prior to the date of termination and
a single-sum payment of an amount equal to three times (a) the average of the base
salary amounts paid to Executive over the three calendar years prior to the date of
termination, (b) if less than three years have elapsed between March 21, 2011 and the
date of termination, the highest base salary paid to the Executive in any calendar year
prior to the date of termination, or (c) if less than twelve months have elapsed
between March 21, 2011 and the date of termination, the highest base salary received in
any month times twelve. In addition, each Executive is entitled to certain benefits in
connection with a Change of Control (as defined in their respective Employment
Agreements).
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Under the Employment Agreements, each Executive has agreed to non-competition
restrictions for a period of six months following the end of the term of his Employment
Agreement, during which period the Executive will be paid an amount equal to his base
salary for a period of six months, and an amount equal to the pro rata share of any
bonus attributable to the portion of the year completed prior to the date of
termination. The Executives have also agreed to confidentiality and non-solicitation
restrictions under the Employment Agreements.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The foregoing summary of the Employment Agreements are qualified in their entirety by
the full text of the Employment Agreements, copies of which may be found in Form 8-K
that was filed by Company on March 21, 2011 with the United States Securities and
Exchange Commission.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="center" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 0pt">
<u>
</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 0pt; margin-left: 4%">
<u>
</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The Company also entered into an Employment Agreement with another Company executive,
who is not a “named executive officer” within the meaning of the Securities Exchange
Act of 1934, as amended and related regulations. The additional Employment Agreement
referred to in the preceding sentence contains substantially similar terms as the
Employment Agreements discussed above, except that the employee’s base salary is
$135,000 per annum.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">As a result of the execution of the Employment Agreements referred to above, the
Amended and Restated Employment Agreement, by and between Mr. Dunnan Edell and the
Company, effective as of December 1, 2002 and amended on February 10, 2007 and May 17,
2007, has been terminated. Similarly, as a result of the execution of the Employment
Agreement referred to above, the Amended and Restated Employment Agreement, by and
between Mr. Drew Edell and the Company, effective as of December 1, 2002 and amended on
February 10, 2007 and May 17, 2007, has also been terminated.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><u>Collective Bargaining Agreement</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The Company signed a collective bargaining agreement with Local 108, L.I.U. of N.A.,
AFL-CIO that became effective January 1, 2011. The agreement is effective for a one
year term expiring December 31, 2011. Other than standard wage, holiday, vacation and
sick day provisions, the agreement calls for CCA to contribute to the Recycling and
General Industrial Union Local 108 Welfare Fund (“Welfare Fund”) certain benefit costs.
The Welfare Fund provides medical, dental and life insurance for the Company’s
employees covered under the collective bargaining agreement. This agreement pertains
to 28% of the CCA labor force.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 11 - caw:FourZeroOneKPlanTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt">NOTE 11 — <u>Four Zero One K PLAN</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The Company has adopted a 401(K) Profit Sharing Plan that all employees with over one
year of service and have attained age 21 are eligible to join. Employees may make
salary reduction contributions up to twenty-five percent of compensation not to exceed
the federal government limits. The Plan allows for the Company to make discretionary
contributions. For all fiscal periods to date, the Company did not make any
contributions.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="center" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 12 - us-gaap:IncomeTaxDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt">NOTE 12 — <u>INCOME TAXES</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">CCA and its subsidiaries file a consolidated federal income tax return.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The Company previously adopted the provisions of ASC Subtopic 740-10-25, “Uncertain Tax
Positions”. Management believes that there were no unrecognized tax benefits, or tax
positions that would result in uncertainty regarding the deductions taken, as of August
31, 2011 and August 31, 2010. ASC Subtopic 740-10-25 prescribes a recognition threshold
and a measurement attribute for the financial statement recognition and measurement of tax
positions taken or expected to be taken in a tax return. For those benefits to be
recognized, a tax position must be more-likely-than-not to be sustained upon
examination by taxing authorities. There were no penalties or related interest for the
fiscal year to date ended August 31, 2011 or for the fiscal year to date ended August
31, 2010. The Company had no officer salaries that were not deductible for tax
purposes during the three months and nine months ended August 31, 2011. During the
three and nine months ended August 31, 2010, the Company had $79,650 and $461,523,
respectively of officer salaries that were not deductible for tax purposes in
calculating the income tax provision.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">As of August 31, 2011, the Company had unrealized losses on its investments of
$(76,301). This amount was reduced by a deferred tax benefit of $30,826, of which a
$24,928 benefit was recorded in prior fiscal years and a benefit of $5,898 was recorded
during fiscal 2011. The deferred tax benefit has been recorded as part of the deferred
tax asset, and offset against the unrealized losses on marketable securities reported
on the consolidated balance sheets.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">At August 31, 2011 and November 30, 2010, respectively, the Company had temporary
differences arising from the following:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="14" style="border-bottom: 1px solid #000000">August 31, 2011</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">Classified As</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Deferred</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Short-Term</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Long-Term</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000">Type</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Tax</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Asset</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">(Liability)</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Depreciation
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(363,062</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(146,677</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(146,677</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Unrealized loss on
investments
</div></td>
<td> </td>
<td> </td>
<td align="right">76,301</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">30,826</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">30,826</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Reserve for bad debts
</div></td>
<td> </td>
<td> </td>
<td align="right">43,941</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">17,752</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">17,752</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Reserve for returns
</div></td>
<td> </td>
<td> </td>
<td align="right">1,777,106</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">717,951</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">717,951</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Reserve for obsolete
inventory
</div></td>
<td> </td>
<td> </td>
<td align="right">813,217</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">328,540</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">328,540</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Vacation accrual
</div></td>
<td> </td>
<td> </td>
<td align="right">337,688</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">136,426</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">136,426</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Charitable Contributions
</div></td>
<td> </td>
<td> </td>
<td align="right">413,228</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">166,944</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">166,944</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Section 263A costs
</div></td>
<td> </td>
<td> </td>
<td align="right">231,459</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">93,509</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">93,509</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net deferred tax asset (liability)
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,345,271</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,491,948</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(146,677</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="center" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 0pt">
<u>
</u>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="14" style="border-bottom: 1px solid #000000">November 30, 2010</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">Classified As</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Deferred</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Short-Term</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Long-Term</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000">Type</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Tax</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Asset</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">(Liability)</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Depreciation
</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(290,262</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(118,717</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(118,717</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Unrealized loss on investments
</div></td>
<td> </td>
<td> </td>
<td align="right">60,950</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">24,929</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">24,929</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Reserve for bad debts
</div></td>
<td> </td>
<td> </td>
<td align="right">24,739</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">10,119</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">10,119</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Reserve for returns
</div></td>
<td> </td>
<td> </td>
<td align="right">1,238,510</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">506,551</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">506,551</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Reserve for obsolete inventory
</div></td>
<td> </td>
<td> </td>
<td align="right">1,372,798</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">561,474</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">561,474</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Vacation accrual
</div></td>
<td> </td>
<td> </td>
<td align="right">251,083</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">102,693</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">102,693</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net Operating Loss (Restated)
</div></td>
<td> </td>
<td> </td>
<td align="right">774,736</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">316,866</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">316,866</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Charitable Contributions
</div></td>
<td> </td>
<td> </td>
<td align="right">285,221</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">116,655</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">116,655</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Section 263A costs
</div></td>
<td> </td>
<td> </td>
<td align="right">284,831</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">116,496</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">116,496</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Net deferred tax asset
(liability)
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,637,066</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,755,783</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(118,717</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Income tax expense (benefit) consists of the following components:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">Three Months Ended August 31,</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2011</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Current (benefit) — Federal
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(29,757</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Current tax — State & Local
</div></td>
<td> </td>
<td> </td>
<td align="right">34,989</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">57,784</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Deferred tax expense (benefit)
</div></td>
<td> </td>
<td> </td>
<td align="right">263,573</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(137,323</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total tax expense (benefit)
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">298,562</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(109,296</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">Nine Months Ended August 31,</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2011</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</td>
<td> </td>
</tr>
<tr>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Current tax expense — Federal
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">122,551</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Current tax expense — State & Local
</div></td>
<td> </td>
<td> </td>
<td align="right">48,611</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">103,073</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 0px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 0px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Deferred tax expense (benefit)
</div></td>
<td> </td>
<td> </td>
<td align="right">297,693</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(363,099</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total tax expense (benefit)
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">346,304</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(137,475</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="center" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 0pt">
<u>
</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Prepaid income taxes consist of the following components:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="58%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">State &</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Federal</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Local</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Total</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">August 31, 2011
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">520,230</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">453,611</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">973,841</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">November 30, 2010
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">519,825</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">479,877</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">999,702</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Income tax payable consists of the following components:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="58%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">State &</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Federal</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Local</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Total</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">August 31, 2011
</div></td>
<td> </td>
<td align="left">$</td>
<td nowrap="nowrap" align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">22,500</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">22,500</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">November 30, 2010
</div></td>
<td> </td>
<td align="left">$</td>
<td nowrap="nowrap" align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">A reconciliation of (benefit from) provision for income taxes computed at the statutory
rate to the effective rate for the three months ended August 31, 2011 and 2010 is as
follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Three Months Ended</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Three Months Ended</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">August 31, 2010</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">August 31, 2011</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Percent</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Percent</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">of Pretax</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Income</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Provision for (benefit from) income
taxes at federal statutory rate
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">237,271</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">34.00</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(240,557</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(34.00</td>
<td nowrap="nowrap">)%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Increases in taxes
resulting from:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">State income taxes, net of federal
income tax benefit
</div></td>
<td> </td>
<td> </td>
<td align="right">41,453</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5.94</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(42,027</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(5.94</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Non-deductible expenses and
other adjustments
</div></td>
<td> </td>
<td> </td>
<td align="right">19,838</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2.84</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">173,288</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">24.49</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Provision for (benefit from)
income taxes
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">298,562</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">42.78</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(109,296</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(15.45</td>
<td nowrap="nowrap">)%</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="center" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 0pt">
<u>
</u>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Nine Months Ended</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">Nine Months Ended</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">August 31, 2010</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">August 31, 2011</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Percent</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Percent</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">of Pretax</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Income</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Provision for (benefit from)
Income taxes
at federal statutory rate
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">286,088</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">34.00</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(375,610</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(34.00</td>
<td nowrap="nowrap">)%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Increases in taxes
resulting from:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">State income taxes, net of federal
income tax benefit
</div></td>
<td> </td>
<td> </td>
<td align="right">49,981</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5.94</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(65,621</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(5.94</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Non-deductible expenses and
other adjustments
</div></td>
<td> </td>
<td> </td>
<td align="right">10,235</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1.22</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">303,756</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">27.50</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Provision for (benefit from)
income taxes
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">346,304</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">41.16</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(137,475</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(12.44</td>
<td nowrap="nowrap">)%</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="center" style="font-size: 10pt; margin-top: 0pt">
<b>
</b>
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 13 - caw:PriorPeriodAdjustmentTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt">NOTE
13 — <u>PRIOR PERIOD ADJUSTMENT</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">An error was discovered in the November 2010 financial statements, whereby accounts
payable was overstated by $595,086. This error occurred over several years originating
prior to fiscal 2006, and was not material in any one year. This error has also
resulted in a reduction of the current deferred tax asset by $243,391 due to the
decrease in the net operating loss carried forward. The cumulative effect of the
change resulted in an increase of $351,695 to retained earnings as of November 30,
2010. Management reviewed this adjustment from both a quantitative and qualitative
basis, and does not believe this adjustment is material to the financial statements.
Accordingly the previously filed 10-K for the year ended November 30, 2010 will not be
amended. If the 10-K was amended, it would have reflected an additional expense in
fiscal 2010 of $13,796, additional income of $53,266 in fiscal 2009, and an additional
expense of $6,441 for fiscal 2008. No adjustment to earnings (loss) per share would
have been required for the fiscal years 2010, 2009, and 2008. The following are the
original and revised amounts:
</div>
<div align="center" style="font-size: 10pt; margin-top: 10pt">CONSOLIDATED BALANCE SHEETS<br />
As of November 30, 2010
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="58%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Original</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Revised</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Change</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Deferred Income Tax
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">1,999,174</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,755,783</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(243,391</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total Assets
</div></td>
<td> </td>
<td> </td>
<td align="right">36,555,590</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">36,312,199</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(243,391</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Accounts Payable
</div></td>
<td> </td>
<td> </td>
<td align="right">9,101,365</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,506,279</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(595,086</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Retained Earnings
</div></td>
<td> </td>
<td> </td>
<td align="right">24,454,779</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">24,806,474</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">351,695</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total Liabilities and Shareholders’ Equity
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">36,555,590</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">36,312,199</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(243,391</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 14 - us-gaap:SubsequentEventsTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt">NOTE 14 — <u>SUBSEQUENT EVENTS</u>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">On
October 10, 2011, the Board of Directors of the Company approved
a $0.07 per share
dividend for the fourth quarter ending November 30, 2011, payable to all shareholders
as of November 1, 2011 and to be paid on December 2, 2011.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">On September 27, 2011, a lawsuit, entitled Shirilla v. CCA Industries, Inc., was
instituted against the Company in the Superior Court of California, County of Los
Angeles. The plaintiff named in the complaint relating to the lawsuit seeks to have
the case certified as a class action. The complaint alleges unfair or deceptive
business practices by the Company and asserts that the Company made false and
misleading claims about its “Mega-T” product line in violation of the California
Consumer Legal Remedies Act and the California Business and Professions Code. The
complaint states that the plaintiff is seeking injunction and other equitable remedies,
and restitution, disgorgement and unspecified monetary damages and
expenses. The Company
denies the allegations of wrongdoing and liability with regard to its
advertising and other business practices. Moreover, the Company believes that the
claims asserted in the Shirilla matter are the same as or similar to those
asserted in the class action Wally v. CCA Industries, Inc., which was filed in the same
court in 2009 and was settled, without admission of any liability or allegations made
in the case, in 2010. The court-approved settlement in Wally dismissed all claims that
were made, or could have been made, in the case by members of the plaintiff class.
Accordingly, the Company believes the claims asserted in <i>Shirilla </i>are without merit and
should be dismissed. There can be no assurance, however, that the court will concur
with the Company’s position.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">On September 20, 2011, the Company filed Form 8-K announcing that it had voluntarily
requested that retailers and other outlets carrying the Company’s Plus+White<sup style="font-size: 85%; vertical-align: text-top">®</sup> whitening
gel return three (3) lots of the oral care product, consisting of approximately 90,000
units of its Plus White whitening gel, shipped in June, July and August 2011. Some of
the gel included in these lots liquefied (primarily a cosmetic change to the product)
which caused the product to lose its efficacy. The Company has agreed to replace the
units or issue credits and refund any consumer for their purchase of the defective
product. The Company believes that the gross sales of the defective merchandise
delivered to customers, together with additional retailer charges related to the
return, were approximately $646,106, which was recorded as an additional reserve for
returns in the third quarter ended August 31, 2011. At present, the Company is unable
to predict the impact on future sales or the cost it will incur as a result of this
action, though the impact could be material.
</div>
</div>
967702
Unrealized holding loss for the three and nine months ended August 31, 2011 is net of a deferred
tax benefit from unrealized losses of $56,323 and $5,898 respectively. Unrealized holding gain for
the three and nine months ended August 31, 2010 is net of a deferred tax (expense) from unrealized
gains of $(65,948) and $(16,534) respectively.