PART
I. FINANCIAL INFORMATION
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ITEM
1. Financial Statements:
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Consolidated
Statements of Income (unaudited)
for the three months
ended February 28, 2007 and
2006................................
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1 |
Consolidated
Balance Sheets at February 28, 2007
(unaudited) and November 30,
2006...............................................................
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2 |
Consolidated Statements of Cash Flows (unaudited) for the three months ended February 28, 2007 and 2006........................ | 3 |
Notes to Consolidated Financial Statements (unaudited)................................................................................................................... | 4 |
ITEM
2. Management's Discussion and Analysis or Plan of
Operation.....................................................................................................
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6
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ITEM
3. Controls and
Procedures......................................................................................................................................................................
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8
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PART
II. OTHER INFORMATION
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ITEM
1. Legal
Proceedings.................................................................................................................................................................................
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8
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ITEM
2. Unregistered Sales of Equity Securities and
Use
of
Proceeds......................................................................................................
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8
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ITEM
3. Defaults Upon Senior
Securities........................................................................................................................................................
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8
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ITEM
4. Submission of Matters to a Vote of Security
Holders.....................................................................................................................
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8
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ITEM
5. Other
Information..................................................................................................................................................................................
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8
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ITEM
6. Exhibits....................................................................................................................................................................................................
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9
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Signatures..............................................................................................................................................................................................................
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10
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Three
Months Ended
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February
28, 2007
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February
28, 2006
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Net sales | $ | 2,563,854 | $ | 2,375,337 | |||
Cost of sales | 2,072,293 | 1,700,786 | |||||
Gross profit | 491,561 | 674,551 | |||||
Operating
expenses:
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Selling, general and administrative | 359,175 | 464,727 | |||||
Depreciation and amortization | 15,195 | 26,769 | |||||
Total
operating expenses
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374,370 | 491,496 | |||||
Income
from operations
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117,191 | 183,055 | |||||
Other
income (expense):
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Interest expense | (22,217 | ) | (41,884 | ) | |||
Other, net | 8,788 | 11,522 | |||||
Total other income (expense), net | (13,429 | ) | (30,362 | ) | |||
Income tax benefit | 169,223 | - | |||||
Net income | $ | 272,985 | $ | 152,693 | |||
Basic and diluted net income per share | $ | 0.02 | $ | 0.01 | |||
Weighted
average common shares outstanding:
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Basic | 12,133,693 | 12,116,026 | |||||
Diluted | 12,296,000 | 12,140,783 |
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February
28, 2007 (unaudited)
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November 30,
2006
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ASSETS
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Current
assets:
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Cash
and cash equivalents
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$
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290,736 |
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$
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441,860 |
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Accounts
receivable, net
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1,504,411 |
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1,519,282 |
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Inventories,
net
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1,143,196 |
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815,422 |
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Deferred tax asset | 812,944 | 634,000 | |||||
Prepaid
expenses and other
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301,275 |
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253,477 |
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Total
current assets
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4,052,562 |
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3,664,041 |
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Property
and equipment, net
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314,147 |
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342,237 |
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Other
assets
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75,702 |
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75,702 |
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Total
assets
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$
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4,442,411 |
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$
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4,081,980 |
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LIABILITIES
AND STOCKHOLDERS' EQUITY
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Current
liabilities:
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Accounts
payable
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$
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736,452 |
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$
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405,492 |
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Accrued
liabilities
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53,356 | 185,155 |
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Notes
payable - related parties
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30,168 |
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43,952 |
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Line
of credit
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756,721 |
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855,850 |
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Current
portion of capital lease obligations
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17,671 |
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19,728 |
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Total
current liabilities
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1,594,368 |
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1,510,177 |
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Capital
lease obligations, net of current portion
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16,141 |
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19,685 |
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Total
liabilities
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1,610,509 |
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1,529,862 |
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Commitments
and contingencies
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--
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--
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Stockholders'
equity:
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Preferred
stock-$.001 par value; 5,000,000 shares authorized; no shares issued
and
outstanding
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--
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--
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Common
stock-$.001 par value; 25,000,000 shares authorized; 12,146,026 and
12,116,026 shares issued and outstanding at February 28,
2007 and November 30, 2006, respectively
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12,146 |
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12,116 |
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Additional
paid-in capital
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8,362,266 |
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8,355,497 |
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Accumulated
deficit
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(5,542,510) |
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(5,815,495) |
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Total
stockholders' equity
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2,831,902 |
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2,552,118 |
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Total
liabilities and stockholders' equity
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$
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4,442,411 |
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$
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4,081,980 |
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Three
Months Ended
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February
28, 2007
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February
28, 2006
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Cash
flows from operating activities:
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Net
income
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$
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272,985 |
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$
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152,693 |
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Adjustments
to reconcile net income to net cash provided by operating
activities
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Depreciation and amortization
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51,005 |
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62,814 |
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Deferred
taxes
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(178,944)
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-
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Stock based compensation
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1,700 |
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- |
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Changes
in operating assets and liabilities:
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Accounts
receivable
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14,871 |
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236,901 | |||
Inventories
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(327,774) |
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89,661 |
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Prepaid
expenses and other
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(47,798)
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66,999 |
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Accounts
payable and accrued liabilities
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199,161 | (575,971) |
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Net cash provided by (used in) operating activities
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(14,794) |
33,097
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Cash
flows from investing activities:
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Purchases
of property
and equipment
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(22,915) |
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(20,694) |
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Net cash used in investing
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(22,915)
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(20,694) |
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Cash
flows from financing activities
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Net borrowings (repayments) under line of credit
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(99,129) |
84,990
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Repayments of long-term obligations
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(19,385)
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(55,307) | |||||
Exercise of stock options
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5,099 | -- |
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Net cash provided by (used in) financing activities
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(113,415) | 29,683 |
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Net change in cash and cash equivalents
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(151,124) |
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42,086 |
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Cash
and cash equivalents, beginning of period
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441,860 |
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407,039 |
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Cash
and cash equivalents, end of period
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$ 290,736
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$ 449,125 |
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Supplemental
disclosures of cash flow information
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Cash paid during the period for:
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Interest
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$ | 22,217 |
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$
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41,884 |
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Income taxes |
$
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9,722 | $ | 16,096 |
Three
Months Ended
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February
28, 2006
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Net income available to common shareholders | $ | 152,693 | ||
Plus:
Stock-based employee compensation expense included in reported net
income
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-- | |||
Less:
Total stock-based employee compensation determined using fair
value based method
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(4,750 | ) | ||
Pro
forma net income available to common stockholders
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$ | 147,943 | ||
Net
income per common share - basic and diluted - as reported
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$ | 0.01 | ||
Net
income per common share - basic and diluted - pro forma
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$ | 0.01 |
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Shares
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Weighted
Average Price
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Weighted
Average Remaining Contractual Term
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Aggregate
Intrinsic Value
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Outstanding at November, 2006 |
475,000
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$
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0.94
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Cancelled
or expired
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(10,000
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)
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$
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1.78
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Exercised |
(30,000
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)
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$
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0.17
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Outstanding at February 28, 2007 |
435,000
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$
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0.97
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3.23 | $ | 62,900 | ||||
Options
exercisable at February 28, 2007
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350,000
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$
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1.14
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2.40 | $ | 36,450 |
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February
28,
2007
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November
30, 2006
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(unaudited)
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Raw Materials | $ | 518,496 | $ | 355,773 | |||
Work-in-process | 143,019 | 94,949 | |||||
Finished Goods | 485,281 | 364,700 | |||||
Less allowance for obsolete inventories | 3,600 | -- | |||||
$
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1,143,196
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$ | 815,422 |