Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Aug. 31, 2013 | Oct. 15, 2013 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | SURGE COMPONENTS INC | |
Entity Central Index Key | 747540 | |
Amendment Flag | FALSE | |
Current Fiscal Year End Date | -19 | |
Document Type | 10-Q | |
Document Period End Date | 31-Aug-13 | |
Document Fiscal Year Focus | 2013 | |
Document Fiscal Period Focus | Q3 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 9,060,012 |
Consolidated_Balance_Sheets_un
Consolidated Balance Sheets (unaudited) (USD $) | Aug. 31, 2013 | Nov. 30, 2012 |
Current assets: | ||
Cash | $3,114,048 | $3,443,964 |
Accounts receivable - net of allowance for doubtful accounts of $51,559 and $34,676 | 5,635,636 | 3,962,034 |
Inventory, net | 3,759,198 | 2,788,958 |
Prepaid expenses and income taxes | 182,187 | 106,364 |
Deferred income taxes | 311,089 | 315,197 |
Total current assets | 13,002,158 | 10,616,517 |
Fixed assets - net of accumulated depreciation and amortization of $2,164,772 and $2,126,238 | 73,030 | 80,629 |
Deferred income taxes | 1,244,355 | 1,260,788 |
Other assets | 11,652 | 7,370 |
Total assets | 14,331,195 | 11,965,304 |
Current liabilities: | ||
Accounts payable | 3,311,288 | 1,921,631 |
Accrued expenses and taxes | 665,054 | 600,903 |
Accrued salaries | 233,454 | 475,184 |
Total current liabilities | 4,209,796 | 2,997,718 |
Deferred rent | 34,269 | 27,893 |
Total liabilities | 4,244,065 | 3,025,611 |
Commitments and contingencies | ||
Shareholders' equity | ||
Preferred stock, Value | ||
Common stock - $.001 par value stock, 75,000,000 shares authorized, 9,060,012 and 9,060,012 shares issued and outstanding | 9,060 | 9,060 |
Additional paid-in capital | 23,120,277 | 23,082,844 |
Accumulated deficit | -13,042,231 | -14,152,235 |
Total shareholders' equity | 10,087,130 | 8,939,693 |
Total liabilities and shareholders' equity | 14,331,195 | 11,965,304 |
Series A Preferred stock | ||
Shareholders' equity | ||
Preferred stock, Value | ||
Series B Preferred stock | ||
Shareholders' equity | ||
Preferred stock, Value | ||
Series C Preferred Stock | ||
Shareholders' equity | ||
Preferred stock, Value | $24 | $24 |
Consolidated_Balance_Sheets_un1
Consolidated Balance Sheets (unaudited) (Parentheticals) (USD $) | Aug. 31, 2013 | Nov. 30, 2012 |
Allowance for doubtful accounts of accounts receivable (in dollars) | $51,559 | $34,676 |
Accumulated depreciation and amortization on fixed assets (in dollars) | $2,164,772 | $2,126,238 |
Preferred stock, par value (in dollars per share) | $0.00 | $0.00 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Common stock, par value (in dollars per share) | $0.00 | $0.00 |
Common stock, shares authorized | 75,000,000 | 75,000,000 |
Common stock, shares issued | 9,060,012 | 9,060,012 |
Common stock, shares outstanding | 9,060,012 | 9,060,012 |
Series A Preferred stock | ||
Preferred stock, shares authorized | 260,000 | 260,000 |
Preferred stock, shares outstanding | ||
Preferred stock, shares issued | ||
Preferred stock, liquidation preference per share (in dollars per share) | ||
Series B Preferred stock | ||
Preferred stock, shares authorized | 200,000 | 200,000 |
Preferred stock, shares outstanding | ||
Preferred stock, shares issued | ||
Preferred stock, liquidation preference per share (in dollars per share) | ||
Series C Preferred Stock | ||
Preferred stock, shares authorized | 100,000 | 100,000 |
Preferred stock, shares outstanding | 23,700 | 23,700 |
Preferred stock, shares issued | 23,700 | 23,700 |
Preferred stock, liquidation preference per share (in dollars per share) | $5 | $5 |
Consolidated_Statements_of_Ope
Consolidated Statements of Operations (Unaudited) (USD $) | 3 Months Ended | 9 Months Ended | ||
Aug. 31, 2013 | Aug. 31, 2012 | Aug. 31, 2013 | Aug. 31, 2012 | |
Income Statement [Abstract] | ||||
Net sales | $6,955,770 | $6,059,072 | $18,033,342 | $16,891,754 |
Cost of goods sold | 5,079,602 | 4,326,069 | 12,936,597 | 11,930,233 |
Gross profit | 1,876,168 | 1,733,003 | 5,096,745 | 4,961,521 |
Operating expenses: | ||||
Selling and shipping expenses | 513,407 | 554,448 | 1,514,226 | 1,598,747 |
General and administrative expenses | 807,919 | 744,257 | 2,377,194 | 2,335,915 |
Depreciation and amortization | 13,940 | 13,996 | 38,534 | 41,334 |
Total operating expenses | 1,335,266 | 1,312,701 | 3,929,954 | 3,975,996 |
Income before other income (expense) and income taxes | 540,902 | 420,302 | 1,166,791 | 985,525 |
Other income: | ||||
Investment income | 1,036 | 734 | 3,439 | 1,777 |
Other income | 1,036 | 734 | 3,439 | 1,777 |
Income before income taxes | 541,938 | 421,036 | 1,170,230 | 987,302 |
Income taxes | 1,602 | 10,289 | 48,376 | 212,764 |
Net income | 540,336 | 410,747 | 1,121,854 | 774,538 |
Dividends on preferred stock | 5,925 | 5,925 | 11,850 | 11,850 |
Net income available to common shareholders | $534,411 | $404,822 | $1,110,004 | $762,688 |
Net income per share available to common shareholders: | ||||
Basic | $0.06 | $0.04 | $0.12 | $0.08 |
Diluted | $0.06 | $0.04 | $0.11 | $0.08 |
Weighted Shares Outstanding: | ||||
Basic | 9,060,012 | 9,060,012 | 9,060,012 | 9,044,285 |
Diluted | 9,668,621 | 9,689,649 | 9,668,621 | 9,673,922 |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (unaudited) (USD $) | 9 Months Ended | |
Aug. 31, 2013 | Aug. 31, 2012 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income | $1,121,854 | $774,538 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 38,534 | 41,334 |
Stock compensation expense | 37,433 | 25,434 |
Deferred income taxes | 20,541 | 189,525 |
Allowance for doubtful accounts | 16,883 | 5,000 |
CHANGES IN OPERATING ASSETS AND LIABILITIES: | ||
Accounts receivable | -1,690,485 | 19,151 |
Inventory | -970,240 | -7,655 |
Prepaid expenses and income taxes | -75,823 | 30,172 |
Other assets | -4,282 | -1,644 |
Accounts payable | 1,389,657 | 385,966 |
Deferred rent | 6,376 | 8,760 |
Accrued expenses | -189,429 | -136,465 |
NET CASH FLOWS USED IN OPERATING ACTIVITIES | -298,981 | 1,334,106 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Acquisition of fixed assets | -30,935 | -11,339 |
NET CASH FLOWS PROVIDED BY INVESTING ACTIVITIES | -30,935 | -11,339 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from exercising stock options | 6,250 | |
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES | 6,250 | |
NET CHANGE IN CASH | -329,916 | 1,329,017 |
CASH AT BEGINNING OF PERIOD | 3,443,964 | 1,905,455 |
CASH AT END OF PERIOD | 3,114,048 | 3,234,472 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||
Income taxes paid | 48,376 | 47,745 |
Interest paid | ||
NONCASH INVESTING AND FINANCING ACTIVITIES: | ||
Accrued dividends on preferred stock | $11,850 | $11,850 |
ORGANIZATION_DESCRIPTION_OF_CO
ORGANIZATION, DESCRIPTION OF COMPANY'S BUSINESS AND BASIS OF PRESENTATION | 9 Months Ended |
Aug. 31, 2013 | |
Business Description and Basis Of Presentation [Abstract] | |
ORGANIZATION, DESCRIPTION OF COMPANY'S BUSINESS AND BASIS OF PRESENTATION | NOTE A – ORGANIZATION, DESCRIPTION OF COMPANY'S BUSINESS AND BASIS OF PRESENTATION |
Surge Components, Inc. (“Surge”) was incorporated in the State of New York and commenced operations on November 24, 1981 as an importer of electronic products, primarily capacitors and discrete semi-conductors selling to customers located principally throughout North America. On June 24, 1988, Surge formed Challenge/Surge Inc. (“Challenge”), a wholly-owned subsidiary to engage in the sale of electronic component products and sounding devices from established brand manufacturers to customers located principally throughout North America. | |
In May 2002, Surge and an officer of Surge founded and became sole owners of Surge Components, Limited (“Surge Limited”), a Hong Kong corporation. Under current Hong Kong law, Surge Limited is required to have at least two shareholders. Surge owns 999 shares of the outstanding common stock and the officer of Surge owns 1 share of the outstanding common stock. The officer of Surge has assigned his rights regarding his 1 share to Surge. Surge Limited started doing business in July 2002. Surge Limited operations have been consolidated with the Company. Surge Limited is responsible for the sale of Surge’s products to customers located in Asia. | |
On August 31, 2010, the Company changed its corporate domicile by merging into a newly-formed corporation, Surge Components, Inc. (Nevada), which was formed in the State of Nevada for that purpose. Surge Components Inc. is the surviving entity. The number of common stock shares authorized for issuance was increased to 75,000,000 shares. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended | |
Aug. 31, 2013 | ||
Accounting Policies [Abstract] | ||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
[1] Principles of Consolidation: | ||
The consolidated financial statements include the accounts of Surge, Challenge, and Surge Limited (collectively the “Company”). All material intercompany balances and transactions have been eliminated in consolidation. | ||
The accompanying interim consolidated financial statements have been prepared without audit, in accordance with the instructions to Form 10-Q for interim financial reporting pursuant to the rules and regulations of the Securities and Exchange Commission. | ||
The results and trends in these interim consolidated financial statements for the nine months ended August 31, 2013 and August 31, 2012 may not be representative of those for the full fiscal year or any future periods. | ||
(2) Accounts Receivable: | ||
Trade accounts receivable are recorded at the net invoice value and are not interest bearing. The Company considers receivables past due based on the payment terms. The Company reviews its exposure to amounts receivable and reserves specific amounts if collectability is no longer reasonably assured. The Company also reserves a percentage of its trade receivable balance based on collection history and current economic trends that might impact the level of future credit losses. The Company re-evaluates such reserves on a regular basis and adjusts its reserves as needed. Based on the Company’s operating history and customer base, bad debts to date have not been material. | ||
(3) Revenue Recognition: | ||
Revenue is recognized for products sold by the Company when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed and determinable, collectability is reasonably assured and title and risk of loss have been transferred to the customer. This occurs when product is shipped from the Company's warehouse. | ||
For direct shipments, revenue is recognized when product is shipped from the Company’s supplier. The Company has a long term supply agreement with one of our suppliers. The Company purchases the merchandise from the supplier and has the supplier directly ship to the customer through a freight forwarder. Title passes to customer upon the merchandise being received by a freight forwarder. Direct shipments were approximately $2,088,000 and $2,550,000 for the nine months ended August 31, 2013 and August 31, 2012 respectively. | ||
The Company also acts as a sales agent to certain customers in North America for one of its suppliers. The Company reports these commissions as revenues in the period earned. Commission revenue totaled $452,734 and $215,644 for the nine months ended August 31, 2013 and August 31, 2012 respectively. | ||
The Company performs ongoing credit evaluations of its customers and maintains reserves for potential credit losses. | ||
The Company and its subsidiaries currently have agreements with several distributors. There are no provisions for the granting of price concessions in any of the agreements. Revenues under these distribution agreements were approximately $2,931,000 and $2,830,000 for nine months ended August 31, 2013 and August 31, 2012 respectively. | ||
(4) Inventories: | ||
Inventories, which consist solely of products held for resale, are stated at the lower of cost (first-in, first-out method) or market. Products are included in inventory when the Company obtains title and risk of loss on the products, primarily when shipped from the supplier. Inventory in transit principally from foreign suppliers at August 31, 2013 approximated $1,264,000. The Company, at August 31, 2013, has a reserve against slow moving and obsolete inventory of $559,458.. From time to time the Company’s products are subject to legislation from various authorities on environmental matters. | ||
(5) Depreciation and Amortization:. | ||
Fixed assets are recorded at cost. Depreciation is generally calculated on a straight line method and amortization of leasehold improvements is provided for on the straight-line method over the estimated useful lives of the various assets as follows: | ||
Furniture, fixtures and equipment | 5 - 7 years | |
Computer equipment | 5 years | |
Leasehold Improvements | Estimated useful life or lease term, whichever is shorter | |
Maintenance and repairs are expensed as incurred while renewals and betterments are capitalized. | ||
(6) Concentration of Credit Risk: | ||
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of accounts receivable. The Company maintains substantially all of its cash balances in a limited number of financial institutions. At August 31, 2013 and November 30, 2012, the Company's uninsured cash balances totaled approximately $1,920,075 and $1,341,304, respectively. | ||
(7) Income Taxes: | ||
The Company's deferred income taxes arise primarily from the differences in the recording of net operating losses, allowances for bad debts, inventory reserves and depreciation expense for financial reporting and income tax purposes. A valuation allowance is provided when it has been determined to be more likely than not that the likelihood of the realization of deferred tax assets will not be realized. See Note G. | ||
The Company follows the provisions of the Accounting Standards Codification topic, ASC 740, “Income Taxes” (ASC 740). There have been no unrecognized tax benefits and, accordingly, there has been no effect on the Company’s financial condition or results of operations as a result of ASC 740. | ||
The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company is no longer subject to U.S. federal tax examinations for years before fiscal years ending November 30, 2009, and state tax examinations for years before fiscal years ending November 30, 2008. Management does not believe there will be any material changes in our unrecognized tax positions over the next twelve months. | ||
The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. As of the date of adoption of ASC 740, there was no accrued interest or penalties associated with any unrecognized tax benefits, nor was any interest expense recognized during the nine months ended August 31, 2013 and August 31, 2012. | ||
(8) Cash Equivalents: | ||
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. | ||
(9) Use of Estimates: | ||
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. | ||
(10) Marketing and promotional costs: | ||
Marketing and promotional costs are expensed as incurred and have not been material to date. The Company has contractual arrangements with several of its distributors which provide for cooperative advertising rights to the distributor as a percentage of sales. Cooperative advertising is reflected as a reduction in revenues and has not been material to date. | ||
(11) Fair Value of Financial Instruments: | ||
The carrying amount of cash balances, accounts receivable, accounts payable and accrued expenses approximate their fair value based on the nature of those items. Estimated fair values of financial instruments are determined using available market information and appropriate valuation methodologies. Considerable judgment is required to interpret the market data used to develop the estimates of fair value, and accordingly, the estimates are not necessarily indicative of the amounts that could be realized in a current market exchange. | ||
(12) Shipping Costs | ||
The Company classifies shipping costs as a component of selling expenses. Shipping costs totaled $11,826 and $10,468 for the nine months ended August 31, 2013 and August 31, 2012 respectively. | ||
(13) Earnings Per Share | ||
Basic earnings per share includes no dilution and is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. The difference between reported basic and diluted weighted-average common shares results from the assumption that all dilutive stock options and convertible preferred stock exercised into common stock. Total potentially dilutive shares excluded from diluted weighted shares outstanding at August 31, 2013 and August 31, 2012 totaled 331,391and 316,363, respectively. | ||
(14) Stock Based Compensation | ||
Stock Based Compensation to Employees | ||
The Company accounts for its stock-based compensation for employees in accordance with Accounting Standards Codification (“ASC”) 718. The Company recognizes in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees and non-employees over the related vesting period. | ||
Stock Based Compensation to Other than Employees | ||
The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with ASC 718. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably determinable. The value of equity instruments issued for consideration other than employee services is determined on the earlier of a performance commitment or completion of performance by the provider of goods or services. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement. | ||
(15) Recent Accounting Standards: | ||
Comprehensive Income — In June 2011, the Financial Accounting Standards Board (“FASB”) issued new guidance on the presentation of comprehensive income. Specifically, the new guidance allows an entity to present components of net income and other comprehensive income in one continuous statement, referred to as the statement of comprehensive income, or in two separate, but consecutive statements. The new guidance eliminates the current option to report other comprehensive income and its components in the statement of changes in equity. While the new guidance changes the presentation of comprehensive income, there are no changes to the components that are recognized in net income or other comprehensive income under current accounting guidance. This new guidance is effective for fiscal years and interim periods beginning after December 15, 2011. The adoption of the new guidance in the first quarter of fiscal 2013 had no impact on our consolidated financial position, results of operations or cash flows. | ||
Fair Value Measurement — In April 2011, the FASB issued new guidance to achieve common fair value measurement and disclosure requirements between GAAP and International Financial Reporting Standards. This new guidance amends current fair value measurement and disclosure guidance to include increased transparency around valuation inputs and investment categorization. This new guidance is effective for fiscal years and interim periods beginning after December 15, 2011. The adoption of the new guidance in the first quarter of fiscal 2013 had no impact on our consolidated financial position, results of operations or cash flows. | ||
(16) Reclassifications: | ||
Certain amounts included in 2012 financial statements have been reclassified to conform to the 2013 presentation. |
FIXED_ASSETS
FIXED ASSETS | 9 Months Ended | ||||||||
Aug. 31, 2013 | |||||||||
Property, Plant and Equipment [Abstract] | |||||||||
FIXED ASSETS | NOTE C - FIXED ASSETS | ||||||||
Fixed assets consist of the following: | |||||||||
August 31, | November 30, | ||||||||
2013 | 2012 | ||||||||
Furniture and Fixtures | $ | 322,586 | $ | 321,099 | |||||
Leasehold Improvements | 932,091 | 909,014 | |||||||
Computer Equipment | 983,125 | 976,754 | |||||||
Less-Accumulated Depreciation | (2,164,772 | ) | (2,126,238 | ) | |||||
Net Fixed Assets | $ | 73,030 | $ | 80,629 | |||||
Depreciation and amortization expense for the nine months ended August 31, 2013 and August 31, 2012 was $38,534 and $41,334, respectively. |
ACCRUED_EXPENSES
ACCRUED EXPENSES | 9 Months Ended | ||||||||
Aug. 31, 2013 | |||||||||
Payables and Accruals [Abstract] | |||||||||
ACCRUED EXPENSES | NOTE D - ACCRUED EXPENSES | ||||||||
Accrued expenses consist of the following: | |||||||||
August 31, | November 30, | ||||||||
2013 | 2012 | ||||||||
Commissions | $ | 268,827 | $ | 238,003 | |||||
Preferred Stock Dividends | 188,707 | 176,857 | |||||||
Interest | 102,399 | 102,399 | |||||||
Other accrued expenses | 105,121 | 83,644 | |||||||
$ | 665,054 | $ | 600,903 | ||||||
In March 2000, the Company completed a $7,000,000 private placement of convertible notes. The face value of the notes was converted into common stock in July 2001 pursuant to the automatic conversion provisions of the notes. However, approval by holders of the notes was required to convert the interest accrued on the notes to common stock. The accrued interest set forth in the Company’s financial statements relates to the portion of the accrued interest for which note holder approval was not obtained and therefore not converted into common stock. No additional interest accrues on these amounts and none of the accrued interest was repaid during any of the periods presented. |
RETIREMENT_PLAN
RETIREMENT PLAN | 9 Months Ended |
Aug. 31, 2013 | |
Compensation and Retirement Disclosure [Abstract] | |
RETIREMENT PLAN | NOTE E – RETIREMENT PLAN |
In June 1997, the Company adopted a qualified 401(k) retirement plan for all full-time employees who are twenty-one years of age and have completed twelve months of service. The plan allows total employee contributions of up to fifteen percent (15%) of the eligible employee’s salary through salary reduction. The Company makes a matching contribution of twenty percent (20%) of each employee’s contribution for each dollar of employee deferral up to five percent (5%) of the employee’s salary. Net assets for the plan, as estimated by Union Central, Inc., which maintains the plan’s records, were approximately $898,000 at November 30, 2012. Pension expense for the nine months ended August 31, 2013 and August 31, 2012 was $4,673 and $2,766, respectively. |
SHAREHOLDERS_EQUITY
SHAREHOLDERS' EQUITY | 9 Months Ended | ||||||||
Aug. 31, 2013 | |||||||||
Stockholders Equity Note [Abstract] | |||||||||
SHAREHOLDERS' EQUITY | NOTE F – SHAREHOLDERS’ EQUITY | ||||||||
[1] Preferred Stock: | |||||||||
In February 1996, the Company amended its Certificate of Incorporation to authorize the issuance of 1,000,000 shares of preferred stock in one or more series. In August 2010, the number of preferred shares authorized for issuance was increased to 5,000,000 shares. | |||||||||
In January 2000, the Company authorized 260,000 shares of preferred stock as Non-Voting Redeemable Convertible Series A Preferred Stock (“Series A Preferred”). None of the Series A preferred stock is outstanding as of August 31, 2013. | |||||||||
In November 2000, the Company authorized 200,000 shares of preferred stock as Voting Redeemable Convertible Series B Preferred Stock (“Series B Preferred”). None of the Series B Preferred Stock is outstanding as of August 31, 2013. | |||||||||
In November 2000, the Company authorized 100,000 shares of preferred stock as Non-Voting Redeemable Convertible Series C Preferred Stock (“Series C Preferred”). Each share of Series C Preferred is automatically convertible into 10 shares of our common stock upon shareholder approval. If the Series C Preferred were converted into common stock on or before April 15, 2001, these shares were entitled to cumulative dividends at the rate of $.50 per share per annum commencing April 15, 2001 payable on June 30 and December 31 of each year. In November 2000, 70,000 shares of the Series C Preferred were issued in payment of financial consulting services to its investment banker and a shareholder of the Company. In April 2001, 8,000 shares of the Series C Preferred were repurchased and cancelled. Dividends aggregating $188,707 have not been declared or paid for the semiannual periods ended December 31, 2001 through the semiannual payment due June 30, 2013. The Company has accrued these dividends. | |||||||||
In April 2002, in connection with a Mutual Release, Settlement, Standstill and Non-Disparagement Agreement among other provisions, certain investors transferred back to the Company 252,000 shares of common stock, 19,300 shares of Series C preferred stock, and certain warrants, in exchange for $225,000. These repurchased shares were cancelled. | |||||||||
In February 2006, the Company settled with a shareholder to repurchase 10,000 shares of Series C Preferred plus accrued dividends for $50,000. | |||||||||
Pursuant to exchange agreements dated as of March 14, 2011, 9,000 shares of Series C Preferred were returned to the Company for cancellation in exchange for 112,500 shares of common stock. | |||||||||
At August 31, 2013 there are 23,700 shares of Series C Preferred issued and outstanding. | |||||||||
[2] 2010 Incentive Stock Plan | |||||||||
In March 2010, the Company adopted, and in April 2010 the shareholders ratified, the 2010 Incentive Stock Plan (“Stock Plan”). The plan provides for the grant of options to officers, employees, directors or consultants to the Company to purchase an aggregate of 1,500,000 common shares. | |||||||||
Stock option incentive plan activity for the six months ended August 31, 2013 is summarized as follows: | |||||||||
Weighted | |||||||||
Average | |||||||||
Shares | Exercise Price | ||||||||
Options outstanding December 1, 2011 | 685,000 | $ | 0.25 | ||||||
Options issued in the year ended November 30, 2012 | 50,000 | $ | 0.51 | ||||||
Options exercised in the year ended November 30, 2012 | (25,000 | ) | $ | 0.25 | |||||
Options cancelled in the year ended November 30, 2012 | (7,000 | ) | $ | 1.15 | |||||
Options outstanding at August 31, 2013 | 703,000 | $ | 0.37 | ||||||
Options exercisable at August 31, 2013 | 677,000 | $ | 0.34 | ||||||
Stock Compensation | |||||||||
On February 25, 2011, the Company granted stock options to employees to purchase 85,000 shares of the Company’s common stock at an exercise price of $1.15, the value of the common stock on the date of the grant. These options vest over a three year period and expire in ten years. The fair values of these stock options are estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions: expected volatility of 60% (based on stock volatility of public company industry peers); average risk-free interest rate of 3.42% (the ten year treasury note rate on the date of the grant); initial expected life of 10 years (based on the term of the options); no expected dividend yield; and amortized over the vesting period. | |||||||||
In July 2012, the Company granted a stock option to one non-officer director to purchase 50,000 shares of common stock at an exercise price of $0.51, the market price of the common stock on the date of the grant. This option vested immediately and expires in five years. The fair value of this stock option is estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions: expected volatility of 35% (based on stock volatility of public company industry peers); average risk-free interest rate of 0.67% (the five year treasury note rate on the date of the grant); initial expected life of 5 years (based on the term of the options) and no expected dividend yield. | |||||||||
The weighted average grant date fair value of the stock options granted during the year ended November 30, 2012 was $0.82. During the nine months ended August 31, 2013, the Company recorded stock based compensation totaling $17,433 as a result of these stock option grants. | |||||||||
The intrinsic value of the exercisable options at August 31, 2013 totaled $268,750. At August 31, 2013 the weighted average remaining life of the stock options is 2.59 years. At August 31, 2013, there was $11,617 of total unrecognized compensation cost related to the stock options granted under the plan. This cost is expected to be recognized over a weighted average period of .375 years. | |||||||||
[3] Authorized Repurchase: | |||||||||
In November 2002, the Board of Directors authorized the repurchase of up to 1,000,000 Common Shares at a price between $.04 and $.045. The Company has not repurchased any shares to date pursuant to such authority. | |||||||||
[4] Compensation of Directors | |||||||||
In May 2010, the Company issued 12,000 shares of its common stock to each non-officer director as compensation for services on the Board of Directors. These shares were valued at $0.18 per share, the closing price of the common stock on the over-the-counter market. Starting April 1, 2012, the amount directors each receive for their services on the Board of Directors was increased from $200 a month to $2,000 a month. In May 2010, options were granted to each non-officer director to purchase 25,000 shares of common stock at an exercise price of $0.25. In July 2012, a stock option was granted to one non-officer director to purchase 50,000 shares of common stock at an exercise price of $0.51. (See Note F[2] for disclosure on the valuation and terms of these options). In May 2012, one non-officer director exercised an option and acquired 25,000 shares of common stock for $6,250. |
INCOME_TAXES
INCOME TAXES | 9 Months Ended | ||||||||
Aug. 31, 2013 | |||||||||
Income Tax Disclosure [Abstract] | |||||||||
INCOME TAXES | NOTE G – INCOME TAXES | ||||||||
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes using the enacted tax rates in effect in the years in which the differences are expected to reverse. | |||||||||
The Company’s deferred income taxes are comprised of the following: | |||||||||
August 31, | November 30, | ||||||||
2013 | 2012 | ||||||||
Deferred Tax Assets | |||||||||
Net operating loss | $ | 3,850,454 | $ | 4,606,652 | |||||
Allowance for bad debts | 16,842 | 11,853 | |||||||
Inventory | 303,328 | 311,730 | |||||||
Deferred Rent | 13,687 | 10,186 | |||||||
Depreciation | 182,810 | 187,302 | |||||||
Total deferred tax assets | 4,367,121 | 5,127,723 | |||||||
Valuation allowance | (2,811,677 | ) | (3,551,738 | ) | |||||
Deferred Tax Assets | $ | 1,555,444 | $ | 1,575,985 | |||||
The valuation allowance for the deferred tax assets relates principally to the uncertainty of the utilization of deferred tax assets and was calculated in accordance with the provisions of ASC 740, which requires that a valuation allowance be established or maintained when it is “more likely than not” that all or a portion of deferred tax assets will not be realized. This valuation is based on management estimates of future taxable income. Although the degree of variability inherent in the estimates of future taxable income is significant and subject to change in the near term, management believes, that the estimate is adequate. The estimated valuation allowance is continually reviewed and as adjustments to the allowance become necessary, such adjustments are reflected in the current operations. | |||||||||
The valuation allowance decreased by approximately $740,000 during the nine months ended August 31, 2013. This change in the valuation allowance is based on management estimates of future taxable income. The degree of variability inherent in the estimates of future taxable income is significant and subject to change in the near term. The Company reviews its estimates of future taxable income in each reporting period and adjustments to the valuation allowance are reflected in the current operations. | |||||||||
The Company's income tax expense consists of the following: | |||||||||
Nine Months Ended | |||||||||
August 31, | August 31, | ||||||||
2013 | 2012 | ||||||||
Current: | |||||||||
Federal | $ | 22,285 | $ | 193,860 | |||||
States | 26,091 | 18,904 | |||||||
48,376 | 212,764 | ||||||||
Deferred: | |||||||||
Federal | - | - | |||||||
States | - | - | |||||||
- | - | ||||||||
Provision for income taxes | $ | 48,376 | $ | 212,764 | |||||
The Company files a consolidated income tax return with its wholly-owned subsidiaries and has net operating loss carryforwards of approximately $12,900,000 for federal and state purposes, which expire through 2020. A reconciliation of the difference between the expected income tax rate using the statutory federal tax rate and the Company's effective rate is as follows: | |||||||||
Nine Months ended | |||||||||
August 31, | August 31, | ||||||||
2013 | 2012 | ||||||||
U.S Federal Income tax statutory rate | 34 | % | 34 | % | |||||
Valuation allowance | -32 | % | -14 | % | |||||
State income taxes | 2 | % | 2 | % | |||||
Other | - | - | |||||||
Effective tax rate | 4 | % | 22 | % |
RENTAL_COMMITMENTS
RENTAL COMMITMENTS | 9 Months Ended | ||||
Aug. 31, 2013 | |||||
Operating Leases Of Lessor Disclosure [Abstract] | |||||
RENTAL COMMITMENTS | NOTE H– RENTAL COMMITMENTS | ||||
The Company leases its office and warehouse space through 2020 from a corporation that is controlled by officers/shareholders of the Company (“Related Company”). Annual minimum rental payments to the Related Company approximated $160,000 for the year ended November 30, 2012, and increase at the rate of three per cent per annum throughout the lease term. | |||||
Pursuant to the lease, rent expense charged to operations differs from rent paid because of scheduled rent increases. Accordingly, the Company has recorded deferred rent. Rent expense is calculated by allocating to rental payments, including those attributable to scheduled rent increases, on a straight line basis, over the lease term. | |||||
In May 2013, the Company entered into a lease to rent office space and a warehouse in Hong Kong for two years. Annual minimum rental payments for this space are approximately $51,200. | |||||
The Company’s future minimum rental commitments at August 31, 2013 are as follows: | |||||
Twelve Months Ended | |||||
August 31, | |||||
2014 | $ | 214,287 | |||
2015 | $ | 211,620 | |||
2016 | $ | 171,725 | |||
2017 | $ | 175,159 | |||
2018 | $ | 178,662 | |||
2019 & thereafter | $ | 398,843 | |||
$ | 1,350,296 | ||||
Net rental expense for the nine months ended August 31, 2013 and August 31, 2012 were $225,262 and $184,628 respectively, of which $194,391 and $112,240 respectively, was paid to the Related Company. |
EMPLOYMENT_AND_OTHER_AGREEMENT
EMPLOYMENT AND OTHER AGREEMENTS | 9 Months Ended |
Aug. 31, 2013 | |
Employment and Other Agreements [Abstract] | |
EMPLOYMENT AND OTHER AGREEMENTS | NOTE I – EMPLOYMENT AND OTHER AGREEMENTS |
The Company has employment agreements, with terms through July 30, 2014 (renewable on each July 30th for an additional one year period) with two officers of the Company, which provides each with a base salary of $225,000, subject to certain increases as defined, per annum, plus fringe benefits and bonuses. The Compensation Committee of the Company’s Board of Directors determines the bonuses. Bonuses have been accrued to the two officers through August 31, 2013 totaling $150,000. The agreements also contain provisions prohibiting the officers from engaging in activities which are competitive with those of the Company during employment and for one year following termination. The agreements further provide that in the event of a change of control, as defined, or a change in ownership of at least 25% of the issued and outstanding stock of the Company, and such issuance was not approved by either officer, or if they are not elected to the Board of Directors of the Company and/or are not elected as an officer of the Company, then the non-approving officer may elect to terminate his employment agreement. If either officer elects to terminate the agreement, he will receive 2.99 times his annual compensation (or such other amount then permitted under the Internal Revenue Code without an excess penalty), in addition to the remainder of his compensation under his existing employment contract. In addition, if the Company makes or receives a “firm commitment” for a public offering of Common Shares, each officer will receive a warrant to purchase, at a nominal value, up to 9.5% of the Company’s common stock, provided they do not voluntarily terminate employment. |
MAJOR_CUSTOMERS
MAJOR CUSTOMERS | 9 Months Ended |
Aug. 31, 2013 | |
Risks and Uncertainties [Abstract] | |
MAJOR CUSTOMERS | NOTE J– MAJOR CUSTOMERS |
The Company had no customers who accounted for 10% of net sales for the nine months ended August 31, 2013 and one customer who accounted for 10% of net sales for the nine months ended August 31, 2012. The Company had two customers who accounted for 12% and 13% of accounts receivable at August 31, 2013 and one customer who accounted for 19% of accounts receivable at November 30, 2012. |
MAJOR_SUPPLIERS
MAJOR SUPPLIERS | 9 Months Ended |
Aug. 31, 2013 | |
Major Suppliers [Abstract] | |
MAJOR SUPPLIERS | NOTE K- MAJOR SUPPLIERS |
During the nine months ended August 31, 2013 and August 31, 2012 there was one foreign supplier accounting for 51% and 42% of total inventory purchased. | |
The Company purchases substantially all of its products overseas. For the nine months ended August 31, 2013, the Company purchased 60% of its products from Taiwan, 13% from Hong Kong, 22% from elsewhere in Asia and less than 1% overseas outside of Asia. The Company purchases the balance of its products in the United States. |
EXPORT_SALES
EXPORT SALES | 9 Months Ended | ||||||||
Aug. 31, 2013 | |||||||||
Segment Reporting [Abstract] | |||||||||
EXPORT SALES | NOTE L - EXPORT SALES | ||||||||
The Company’s export sales were as follows: | |||||||||
Nine Months Ended | |||||||||
August 31, | August 31, | ||||||||
2013 | 2012 | ||||||||
Canada | 1,343,052 | 2,041,882 | |||||||
China | 2,927,658 | 3,178,617 | |||||||
Other Asian Countries | 522,738 | 1,079,456 | |||||||
South America | 438,786 | 26,229 | |||||||
Europe | 669,430 | 112,047 | |||||||
Revenues are attributed to countries based on location of customer. |
LINE_OF_CREDIT
LINE OF CREDIT | 9 Months Ended |
Aug. 31, 2013 | |
Line Of Credit Facility [Abstract] | |
LINE OF CREDIT | NOTE M – LINE OF CREDIT |
In June 2011, the Company replaced its existing credit line with a line of credit with a new bank totaling $1,000,000. Borrowings under the line accrued interest at 2.56% over the LIBOR rate. The line was collateralized by all the Company’s assets and included working capital and tangible net worth covenants. The credit line expired in March 2013. The Company did not renew the credit line since it does not believe that such additional funds are required at this time. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended | |
Aug. 31, 2013 | ||
Accounting Policies [Abstract] | ||
Principles of Consolidation | [1] Principles of Consolidation: | |
The consolidated financial statements include the accounts of Surge, Challenge, and Surge Limited (collectively the “Company”). All material intercompany balances and transactions have been eliminated in consolidation. | ||
The accompanying interim consolidated financial statements have been prepared without audit, in accordance with the instructions to Form 10-Q for interim financial reporting pursuant to the rules and regulations of the Securities and Exchange Commission. | ||
The results and trends in these interim consolidated financial statements for the nine months ended August 31, 2013 and August 31, 2012 may not be representative of those for the full fiscal year or any future periods. | ||
Accounts Receivable | (2) Accounts Receivable: | |
Trade accounts receivable are recorded at the net invoice value and are not interest bearing. The Company considers receivables past due based on the payment terms. The Company reviews its exposure to amounts receivable and reserves specific amounts if collectability is no longer reasonably assured. The Company also reserves a percentage of its trade receivable balance based on collection history and current economic trends that might impact the level of future credit losses. The Company re-evaluates such reserves on a regular basis and adjusts its reserves as needed. Based on the Company’s operating history and customer base, bad debts to date have not been material. | ||
Revenue Recognition | (3) Revenue Recognition: | |
Revenue is recognized for products sold by the Company when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed and determinable, collectability is reasonably assured and title and risk of loss have been transferred to the customer. This occurs when product is shipped from the Company's warehouse. | ||
For direct shipments, revenue is recognized when product is shipped from the Company’s supplier. The Company has a long term supply agreement with one of our suppliers. The Company purchases the merchandise from the supplier and has the supplier directly ship to the customer through a freight forwarder. Title passes to customer upon the merchandise being received by a freight forwarder. Direct shipments were approximately $2,088,000 and $2,550,000 for the nine months ended August 31, 2013 and August 31, 2012 respectively. | ||
The Company also acts as a sales agent to certain customers in North America for one of its suppliers. The Company reports these commissions as revenues in the period earned. Commission revenue totaled $452,734 and $215,644 for the nine months ended August 31, 2013 and August 31, 2012 respectively. | ||
The Company performs ongoing credit evaluations of its customers and maintains reserves for potential credit losses. | ||
The Company and its subsidiaries currently have agreements with several distributors. There are no provisions for the granting of price concessions in any of the agreements. Revenues under these distribution agreements were approximately $2,931,000 and $2,830,000 for nine months ended August 31, 2013 and August 31, 2012 respectively. | ||
Inventories | (4) Inventories: | |
Inventories, which consist solely of products held for resale, are stated at the lower of cost (first-in, first-out method) or market. Products are included in inventory when the Company obtains title and risk of loss on the products, primarily when shipped from the supplier. Inventory in transit principally from foreign suppliers at August 31, 2013 approximated $1,264,000. The Company, at August 31, 2013, has a reserve against slow moving and obsolete inventory of $559,458.. From time to time the Company’s products are subject to legislation from various authorities on environmental matters. | ||
Depreciation and Amortization | (5) Depreciation and Amortization: | |
Fixed assets are recorded at cost. Depreciation is generally calculated on a straight line method and amortization of leasehold improvements is provided for on the straight-line method over the estimated useful lives of the various assets as follows: | ||
Furniture, fixtures and equipment | 5 - 7 years | |
Computer equipment | 5 years | |
Leasehold Improvements | Estimated useful life or lease term, whichever is shorter | |
Maintenance and repairs are expensed as incurred while renewals and betterments are capitalized. | ||
Concentration of Credit Risk | (6) Concentration of Credit Risk: | |
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of accounts receivable. The Company maintains substantially all of its cash balances in a limited number of financial institutions. At August 31, 2013 and November 30, 2012, the Company's uninsured cash balances totaled approximately $1,920,075 and $1,341,304, respectively. | ||
Income Taxes | (7) Income Taxes: | |
The Company's deferred income taxes arise primarily from the differences in the recording of net operating losses, allowances for bad debts, inventory reserves and depreciation expense for financial reporting and income tax purposes. A valuation allowance is provided when it has been determined to be more likely than not that the likelihood of the realization of deferred tax assets will not be realized. See Note G. | ||
The Company follows the provisions of the Accounting Standards Codification topic, ASC 740, “Income Taxes” (ASC 740). There have been no unrecognized tax benefits and, accordingly, there has been no effect on the Company’s financial condition or results of operations as a result of ASC 740. | ||
The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company is no longer subject to U.S. federal tax examinations for years before fiscal years ending November 30, 2009, and state tax examinations for years before fiscal years ending November 30, 2008. Management does not believe there will be any material changes in our unrecognized tax positions over the next twelve months. | ||
The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. As of the date of adoption of ASC 740, there was no accrued interest or penalties associated with any unrecognized tax benefits, nor was any interest expense recognized during the nine months ended August 31, 2013 and August 31, 2012. | ||
Cash Equivalents | (8) Cash Equivalents: | |
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. | ||
Use of Estimates | 9) Use of Estimates: | |
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. | ||
Marketing and promotional costs | (10) Marketing and promotional costs: | |
Marketing and promotional costs are expensed as incurred and have not been material to date. The Company has contractual arrangements with several of its distributors which provide for cooperative advertising rights to the distributor as a percentage of sales. Cooperative advertising is reflected as a reduction in revenues and has not been material to date. | ||
Fair Value of Financial Instruments | (11) Fair Value of Financial Instruments: | |
The carrying amount of cash balances, accounts receivable, accounts payable and accrued expenses approximate their fair value based on the nature of those items. Estimated fair values of financial instruments are determined using available market information and appropriate valuation methodologies. Considerable judgment is required to interpret the market data used to develop the estimates of fair value, and accordingly, the estimates are not necessarily indicative of the amounts that could be realized in a current market exchange. | ||
Shipping Costs | (12) Shipping Costs | |
The Company classifies shipping costs as a component of selling expenses. Shipping costs totaled $11,826 and $10,468 for the nine months ended August 31, 2013 and August 31, 2012 respectively. | ||
Earnings Per Share | (13) Earnings Per Share | |
Basic earnings per share includes no dilution and is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. The difference between reported basic and diluted weighted-average common shares results from the assumption that all dilutive stock options and convertible preferred stock exercised into common stock. Total potentially dilutive shares excluded from diluted weighted shares outstanding at August 31, 2013 and August 31, 2012 totaled 331,391and 316,363, respectively. | ||
Stock Based Compensation | (14) Stock Based Compensation | |
Stock Based Compensation to Employees | ||
The Company accounts for its stock-based compensation for employees in accordance with Accounting Standards Codification (“ASC”) 718. The Company recognizes in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees and non-employees over the related vesting period. | ||
Stock Based Compensation to Other than Employees | ||
The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with ASC 718. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably determinable. The value of equity instruments issued for consideration other than employee services is determined on the earlier of a performance commitment or completion of performance by the provider of goods or services. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement. | ||
Recent Accounting Standards | (15) Recent Accounting Standards: | |
Comprehensive Income — In June 2011, the Financial Accounting Standards Board (“FASB”) issued new guidance on the presentation of comprehensive income. Specifically, the new guidance allows an entity to present components of net income and other comprehensive income in one continuous statement, referred to as the statement of comprehensive income, or in two separate, but consecutive statements. The new guidance eliminates the current option to report other comprehensive income and its components in the statement of changes in equity. While the new guidance changes the presentation of comprehensive income, there are no changes to the components that are recognized in net income or other comprehensive income under current accounting guidance. This new guidance is effective for fiscal years and interim periods beginning after December 15, 2011. The adoption of the new guidance in the first quarter of fiscal 2013 had no impact on our consolidated financial position, results of operations or cash flows. | ||
Fair Value Measurement — In April 2011, the FASB issued new guidance to achieve common fair value measurement and disclosure requirements between GAAP and International Financial Reporting Standards. This new guidance amends current fair value measurement and disclosure guidance to include increased transparency around valuation inputs and investment categorization. This new guidance is effective for fiscal years and interim periods beginning after December 15, 2011. The adoption of the new guidance in the first quarter of fiscal 2013 had no impact on our consolidated financial position, results of operations or cash flows. | ||
Reclassifications | (16) Reclassifications: | |
Certain amounts included in 2012 financial statements have been reclassified to conform to the 2013 presentation. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended | |
Aug. 31, 2013 | ||
Accounting Policies [Abstract] | ||
Schedule of estimated useful life of fixed assets | ||
Furniture, fixtures and equipment | 5 - 7 years | |
Computer equipment | 5 years | |
Leasehold Improvements | Estimated useful life or lease term, whichever is shorter | |
FIXED_ASSETS_Tables
FIXED ASSETS (Tables) | 9 Months Ended | ||||||||
Aug. 31, 2013 | |||||||||
Property, Plant and Equipment [Abstract] | |||||||||
Schedule of fixed assets | August 31, | November 30, | |||||||
2013 | 2012 | ||||||||
Furniture and Fixtures | $ | 322,586 | $ | 321,099 | |||||
Leasehold Improvements | 932,091 | 909,014 | |||||||
Computer Equipment | 983,125 | 976,754 | |||||||
Less-Accumulated Depreciation | (2,164,772 | ) | (2,126,238 | ) | |||||
Net Fixed Assets | $ | 73,030 | $ | 80,629 | |||||
ACCRUED_EXPENSES_Tables
ACCRUED EXPENSES (Tables) | 9 Months Ended | ||||||||
Aug. 31, 2013 | |||||||||
Payables and Accruals [Abstract] | |||||||||
Schedule of accrued expenses | |||||||||
August 31, | November 30, | ||||||||
2013 | 2012 | ||||||||
Commissions | $ | 268,827 | $ | 238,003 | |||||
Preferred Stock Dividends | 188,707 | 176,857 | |||||||
Interest | 102,399 | 102,399 | |||||||
Other accrued expenses | 105,121 | 83,644 | |||||||
$ | 665,054 | $ | 600,903 |
SHAREHOLDERS_EQUITY_Tables
SHAREHOLDERS' EQUITY (Tables) | 9 Months Ended | ||||||||
Aug. 31, 2013 | |||||||||
Stockholders Equity Note [Abstract] | |||||||||
Schedule of stock option incentive plan activity | Weighted | ||||||||
Average | |||||||||
Shares | Exercise Price | ||||||||
Options outstanding December 1, 2011 | 685,000 | $ | 0.25 | ||||||
Options issued in the year ended November 30, 2012 | 50,000 | $ | 0.51 | ||||||
Options exercised in the year ended November 30, 2012 | (25,000 | ) | $ | 0.25 | |||||
Options cancelled in the year ended November 30, 2012 | (7,000 | ) | $ | 1.15 | |||||
Options outstanding at August 31, 2013 | 703,000 | $ | 0.37 | ||||||
Options exercisable at August 31, 2013 | 677,000 | $ | 0.34 | ||||||
INCOME_TAXES_Tables
INCOME TAXES (Tables) | 9 Months Ended | ||||||||
Aug. 31, 2013 | |||||||||
Income Tax Disclosure [Abstract] | |||||||||
Schedule of deferred income taxes | |||||||||
August 31, | November 30, | ||||||||
2013 | 2012 | ||||||||
Deferred Tax Assets | |||||||||
Net operating loss | $ | 3,850,454 | $ | 4,606,652 | |||||
Allowance for bad debts | 16,842 | 11,853 | |||||||
Inventory | 303,328 | 311,730 | |||||||
Deferred Rent | 13,687 | 10,186 | |||||||
Depreciation | 182,810 | 187,302 | |||||||
Total deferred tax assets | 4,367,121 | 5,127,723 | |||||||
Valuation allowance | (2,811,677 | ) | (3,551,738 | ) | |||||
Deferred Tax Assets | $ | 1,555,444 | $ | 1,575,985 | |||||
Schedule of income tax expense | |||||||||
Nine Months Ended | |||||||||
August 31, | August 31, | ||||||||
2013 | 2012 | ||||||||
Current: | |||||||||
Federal | $ | 22,285 | $ | 193,860 | |||||
States | 26,091 | 18,904 | |||||||
48,376 | 212,764 | ||||||||
Deferred: | |||||||||
Federal | - | - | |||||||
States | - | - | |||||||
- | - | ||||||||
Provision for income taxes | $ | 48,376 | $ | 212,764 | |||||
Schedule of difference between expected income tax rate using statutory federal tax rate and company's effective rate | |||||||||
Nine Months ended | |||||||||
August 31, | August 31, | ||||||||
2013 | 2012 | ||||||||
U.S Federal Income tax statutory rate | 34 | % | 34 | % | |||||
Valuation allowance | -32 | % | -14 | % | |||||
State income taxes | 2 | % | 2 | % | |||||
Other | - | - | |||||||
Effective tax rate | 4 | % | 22 | % | |||||
RENTAL_COMMITMENTS_Tables
RENTAL COMMITMENTS (Tables) | 9 Months Ended | ||||
Aug. 31, 2013 | |||||
Operating Leases Of Lessor Disclosure [Abstract] | |||||
Schedule of future minimum rental commitments | |||||
Twelve Months Ended | |||||
August 31, | |||||
2014 | $ | 214,287 | |||
2015 | $ | 211,620 | |||
2016 | $ | 171,725 | |||
2017 | $ | 175,159 | |||
2018 | $ | 178,662 | |||
2019 & thereafter | $ | 398,843 | |||
$ | 1,350,296 | ||||
EXPORT_SALES_Tables
EXPORT SALES (Tables) | 9 Months Ended | ||||||||
Aug. 31, 2013 | |||||||||
Segment Reporting [Abstract] | |||||||||
Schedule of export sales | |||||||||
Nine Months Ended | |||||||||
August 31, | August 31, | ||||||||
2013 | 2012 | ||||||||
Canada | 1,343,052 | 2,041,882 | |||||||
China | 2,927,658 | 3,178,617 | |||||||
Other Asian Countries | 522,738 | 1,079,456 | |||||||
South America | 438,786 | 26,229 | |||||||
Europe | 669,430 | 112,047 |
ORGANIZATION_DESCRIPTION_OF_CO1
ORGANIZATION, DESCRIPTION OF COMPANY'S BUSINESS AND BASIS OF PRESENTATION (Detail Textuals) | 1 Months Ended | |||
31-May-02 | Aug. 31, 2013 | Nov. 30, 2012 | Aug. 31, 2010 | |
Shareholder | ||||
Business Description and Basis Of Presentation [Abstract] | ||||
Minimum number of shareholders to hold equity | 2 | |||
Number of shares outstanding - held by surge | 999 | |||
Number of shares outstanding - held by officers of surge | 1 | |||
Ownership rights transferred to parent company | 1 | |||
Common stock, shares authorized | 75,000,000 | 75,000,000 | 75,000,000 |
SUMMARY_OF_SIGNIFICANT_ACCOUNT3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Summary of estimated useful lives of assets (Details) | 9 Months Ended |
Aug. 31, 2013 | |
Furniture, fixtures and equipment | |
Property, Plant and Equipment [Line Items] | |
Property, plant and equipment, estimated useful lives | 5 - 7 years |
Computer equipment | |
Property, Plant and Equipment [Line Items] | |
Property, plant and equipment, estimated useful lives | 5 years |
Leasehold Improvements | |
Property, Plant and Equipment [Line Items] | |
Property, plant and equipment, estimated useful lives | Estimated useful life or lease term, whichever is shorter |
SUMMARY_OF_SIGNIFICANT_ACCOUNT4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Detail Textuals) (USD $) | 9 Months Ended | ||
Aug. 31, 2013 | Aug. 31, 2012 | Nov. 30, 2012 | |
Accounting Policies [Abstract] | |||
Direct shipments revenue | $2,088,000 | $2,550,000 | |
Commission revenue | 452,734 | 215,644 | |
Revenues from distribution agreements | 2,931,000 | 2,830,000 | |
Inventory in transit from foreign suppliers | 1,264,000 | ||
Reserve against slow moving and obsolete inventory | 559,458 | ||
Amount of uninsured cash balances | 1,920,075 | 1,341,304 | |
Shipping costs | $11,826 | $10,468 | |
Potentially dilutive shares excluded from diluted weighted shares outstanding (in shares) | 331,391 | 316,363 |
FIXED_ASSETS_Summary_of_fixed_
FIXED ASSETS - Summary of fixed assets (Details) (USD $) | Aug. 31, 2013 | Nov. 30, 2012 |
Property, Plant and Equipment [Line Items] | ||
Less-Accumulated Depreciation | ($2,164,772) | ($2,126,238) |
Net Fixed Assets | 73,030 | 80,629 |
Furniture and Fixtures | ||
Property, Plant and Equipment [Line Items] | ||
Fixed assets gross | 322,586 | 321,099 |
Leasehold Improvements | ||
Property, Plant and Equipment [Line Items] | ||
Fixed assets gross | 932,091 | 909,014 |
Computer Equipment | ||
Property, Plant and Equipment [Line Items] | ||
Fixed assets gross | $983,125 | $976,754 |
FIXED_ASSETS_Detail_Textuals
FIXED ASSETS (Detail Textuals) (USD $) | 3 Months Ended | 9 Months Ended | ||
Aug. 31, 2013 | Aug. 31, 2012 | Aug. 31, 2013 | Aug. 31, 2012 | |
Property, Plant and Equipment [Abstract] | ||||
Depreciation and amortization expense | $13,940 | $13,996 | $38,534 | $41,334 |
ACCRUED_EXPENSES_Summary_of_ac
ACCRUED EXPENSES - Summary of accrued expenses (Details) (USD $) | Aug. 31, 2013 | Nov. 30, 2012 |
Payables and Accruals [Abstract] | ||
Commissions | $268,827 | $238,003 |
Preferred Stock Dividends | 188,707 | 176,857 |
Interest | 102,399 | 102,399 |
Other accrued expenses | 105,121 | 83,644 |
Accrued expenses, Total | $665,054 | $600,903 |
ACCRUED_EXPENSES_Detail_Textua
ACCRUED EXPENSES (Detail Textuals) (USD $) | 1 Months Ended |
Mar. 31, 2000 | |
Payables and Accruals [Abstract] | |
Proceeds from of private placement | $7,000,000 |
RETIREMENT_PLAN_Detail_Textual
RETIREMENT PLAN (Detail Textuals) (USD $) | 1 Months Ended | 9 Months Ended | ||
Jun. 30, 1997 | Aug. 31, 2013 | Aug. 31, 2012 | Nov. 30, 2012 | |
Compensation and Retirement Disclosure [Abstract] | ||||
Number of completed age for qualification of retirement plan | 21 years | |||
Number of completed years of service for qualification of retirement plan | 12 months | |||
Description for retirement plan | Company adopted a qualified 401(k) retirement plan for all full-time employees who are twenty-one years of age and have completed twelve months of service. | |||
Total employee contributions | 15.00% | |||
Employer matching contribution percentage | 20.00% | |||
Employee deferral percentage | 5.00% | |||
Net assets for plan | $898,000 | |||
Pension expense | $4,673 | $2,766 |
SHAREHOLDERS_EQUITY_Summary_of
SHAREHOLDERS' EQUITY - Summary of stock option incentive plan activity (Details) (2010 Incentive Stock Plan, Stock options, USD $) | 9 Months Ended |
Aug. 31, 2013 | |
2010 Incentive Stock Plan | Stock options | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | |
Options outstanding December 1, 2011 | 685,000 |
Options issued in the year ended November 30, 2012 | 50,000 |
Options exercised in the year ended November 30, 2012 | -25,000 |
Options cancelled in the year ended November 30,2012 | -7,000 |
Options outstanding at August 31, 2013 | 703,000 |
Options exercisable at August 31, 2013 | 677,000 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward] | |
Options outstanding December 1, 2011 | $0.25 |
Options issued in the year ended November 30, 2012 | $0.51 |
Options exercised in the year ended November 30, 2012 | $0.25 |
Options cancelled in the year ended November 30,2012 | $1.15 |
Options outstanding at August 31, 2013 | $0.37 |
Options exercisable at August 31, 2013 | $0.34 |
SHAREHOLDERS_EQUITY_Preferred_
SHAREHOLDERS' EQUITY - Preferred Stock (Detail Textuals) (USD $) | 1 Months Ended | 1 Months Ended | 0 Months Ended | 1 Months Ended | ||||||||||||||
Apr. 30, 2002 | Aug. 31, 2013 | Nov. 30, 2012 | Aug. 31, 2010 | Feb. 29, 1996 | Apr. 30, 2002 | Aug. 31, 2013 | Nov. 30, 2012 | Aug. 31, 2013 | Nov. 30, 2012 | Mar. 14, 2011 | Feb. 28, 2006 | Apr. 30, 2002 | Apr. 30, 2001 | Nov. 30, 2000 | Aug. 31, 2013 | Jun. 30, 2013 | Nov. 30, 2012 | |
Common Stock | Non-Voting Redeemable Convertible Series A Preferred Stock ("Series A Preferred") | Non-Voting Redeemable Convertible Series A Preferred Stock ("Series A Preferred") | Voting Redeemable Convertible Series B Preferred Stock ("Series B Preferred") | Voting Redeemable Convertible Series B Preferred Stock ("Series B Preferred") | Non-Voting Redeemable Convertible Series C Preferred Stock ("Series C Preferred") | Non-Voting Redeemable Convertible Series C Preferred Stock ("Series C Preferred") | Non-Voting Redeemable Convertible Series C Preferred Stock ("Series C Preferred") | Non-Voting Redeemable Convertible Series C Preferred Stock ("Series C Preferred") | Non-Voting Redeemable Convertible Series C Preferred Stock ("Series C Preferred") | Non-Voting Redeemable Convertible Series C Preferred Stock ("Series C Preferred") | Non-Voting Redeemable Convertible Series C Preferred Stock ("Series C Preferred") | Non-Voting Redeemable Convertible Series C Preferred Stock ("Series C Preferred") | ||||||
Class of Stock [Line Items] | ||||||||||||||||||
Preferred stock, shares authorized | 5,000,000 | 5,000,000 | 5,000,000 | 1,000,000 | 260,000 | 260,000 | 200,000 | 200,000 | 100,000 | 100,000 | ||||||||
Preferred stock, shares issued | 23,700 | 23,700 | ||||||||||||||||
Preferred stock, shares outstanding | 23,700 | 23,700 | ||||||||||||||||
Number of shares converted into common stock upon conversion | 10 | |||||||||||||||||
Cumulative dividend per share per annum | $0.50 | |||||||||||||||||
Preferred stock issued in payment of financial consulting services to investment banker and a shareholder | 70,000 | |||||||||||||||||
Stock repurchased and cancelled | 252,000 | 19,300 | 8,000 | |||||||||||||||
Dividend payable | $188,707 | |||||||||||||||||
Amount paid for repurchase under standstill and non disparagement agreement | 225,000 | |||||||||||||||||
Number of shares repurchased during the period | 10,000 | |||||||||||||||||
Accrued dividends | $50,000 | |||||||||||||||||
Number of preferred stock returned for cancellation in exchange for shares of common stock | 9,000 | |||||||||||||||||
Number of common shares issued in exchange of preferred stock returned and cancelled | 112,500 |
SHAREHOLDERS_EQUITY_2010_Incen
SHAREHOLDERS' EQUITY - 2010 Incentive Stock Plan (Detail Textuals 1) (USD $) | 9 Months Ended | 12 Months Ended | 1 Months Ended | |||
Aug. 31, 2013 | Nov. 30, 2012 | Jul. 31, 2012 | 31-May-10 | Feb. 25, 2011 | Mar. 31, 2010 | |
Stock options | Stock options | Stock options | 2010 Incentive Stock Plan | |||
Non-officer director | Non-officer director | Employees | Stock options | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Number of common shares purchased for options granted | 1,500,000 | |||||
Number of options granted for common stock | 50,000 | 25,000 | 85,000 | |||
Number of options granted for common stock, exercise price per share | $0.51 | $0.25 | $1.15 | |||
Vesting period | 3 years | |||||
Expiration period | 5 years | 10 years | ||||
Fair values of stock options assumption method used | Black-Scholes option pricing model | Black-Scholes option pricing model | ||||
Expected volatility rate | 35.00% | 60.00% | ||||
Average risk-free interest rate | 0.67% | 3.42% | ||||
Expected dividend yield | ||||||
Treasury note, maturity | 5 years | 10 years | ||||
Initial expected life | 5 years | 10 years | ||||
Weighted average grant date fair value | $0.82 | |||||
Stock based compensation expenses | $17,433 | |||||
Intrinsic value of the exercisable options | 268,750 | |||||
Weighted average remaining life | 2 years 7 months 2 days | |||||
Unrecognized compensation cost | $11,617 | |||||
Weighted average period of compensation cost recognition | 4 months 15 days |
SHAREHOLDERS_EQUITY_Authorized
SHAREHOLDERS' EQUITY - Authorized Repurchase (Detail Textuals 2) (USD $) | 1 Months Ended |
Nov. 30, 2002 | |
Stockholders Equity Note [Abstract] | |
Number of shares authorized to repurchase (in shares) | 1,000,000 |
Price per share, minimum (in dollars per share) | $0.04 |
Price per share, maximum (in dollars per share) | $0.05 |
SHAREHOLDERS_EQUITY_Compensati
SHAREHOLDERS' EQUITY - Compensation of Directors (Detail Textuals 3) (Non-officer director, USD $) | 1 Months Ended | 0 Months Ended | 1 Months Ended | |||
31-May-10 | Apr. 01, 2012 | Apr. 01, 2012 | Jul. 31, 2012 | 31-May-12 | 31-May-10 | |
Minimum | Maximum | Stock options | Stock options | Stock options | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Number of common stock issued for services | 12,000 | |||||
Number of common stock issued for services, closing price per share | $0.18 | |||||
Officers' compensation per month | $200 | $2,000 | ||||
Number of options granted for common stock | 50,000 | 25,000 | ||||
Number of options granted for common stock, exercise price per share | $0.51 | $0.25 | ||||
Options exercised | 25,000 | |||||
Options exercised for purchase of common stock, value | $6,250 |
INCOME_TAXES_Summary_of_deferr
INCOME TAXES - Summary of deferred income taxes (Details) (USD $) | Aug. 31, 2013 | Nov. 30, 2012 |
Deferred Tax Assets | ||
Net operating loss | $3,850,454 | $4,606,652 |
Allowance for bad debts | 16,842 | 11,853 |
Inventory | 303,328 | 311,730 |
Deferred Rent | 13,687 | 10,186 |
Depreciation | 182,810 | 187,302 |
Total deferred tax assets | 4,367,121 | 5,127,723 |
Valuation allowance | -2,811,677 | -3,551,738 |
Deferred Tax Assets | $1,555,444 | $1,575,985 |
INCOME_TAXES_Summary_of_income
INCOME TAXES - Summary of income tax expense (Details 1) (USD $) | 3 Months Ended | 9 Months Ended | ||
Aug. 31, 2013 | Aug. 31, 2012 | Aug. 31, 2013 | Aug. 31, 2012 | |
Current: | ||||
Federal | $22,285 | $193,860 | ||
States | 26,091 | 18,904 | ||
Current, total | 48,376 | 212,764 | ||
Deferred: | ||||
Federal | ||||
States | ||||
Deferred, total | ||||
Income (benefit) taxes | $1,602 | $10,289 | $48,376 | $212,764 |
INCOME_TAXES_Reconciliation_of
INCOME TAXES - Reconciliation of the difference between the expected income tax rate using the statutory federal tax rate and the company's effective rate (Details 2) | 9 Months Ended | |
Aug. 31, 2013 | Aug. 31, 2012 | |
Income Tax Disclosure [Abstract] | ||
U.S Federal Income tax statutory rate | 34.00% | 34.00% |
Valuation allowance | -32.00% | -14.00% |
State income taxes | 2.00% | 2.00% |
Other | ||
Effective tax rate | 4.00% | 22.00% |
INCOME_TAXES_Detail_Textuals
INCOME TAXES (Detail Textuals) (USD $) | 9 Months Ended |
Aug. 31, 2013 | |
Income Tax Disclosure [Abstract] | |
Decrease in valuation allowance for deferred tax asset | $740,000 |
Net operating loss carryforwards | $12,900,000 |
RENTAL_COMMITMENTS_Future_mini
RENTAL COMMITMENTS - Future minimum rental commitments (Details) (USD $) | Aug. 31, 2013 |
In Thousands, unless otherwise specified | |
Operating Leases Of Lessor Disclosure [Abstract] | |
2014 | $214,287 |
2015 | 211,620 |
2016 | 171,725 |
2017 | 175,159 |
2018 | 178,662 |
2019 & thereafter | 398,843 |
Future minimum rental commitments | $1,350,296 |
RENTAL_COMMITMENTS_Detail_Text
RENTAL COMMITMENTS (Detail Textuals) (USD $) | 9 Months Ended | 12 Months Ended | 1 Months Ended | |||
Aug. 31, 2013 | Aug. 31, 2012 | Aug. 31, 2013 | Aug. 31, 2012 | Nov. 30, 2012 | 31-May-13 | |
Related Company | Related Company | Related Company | Related Company | |||
Hong Kong | ||||||
Operating Leased Assets [Line Items] | ||||||
Annual minimum rental payments | $160,000 | $51,200 | ||||
Percentage of increase in rental payment | 3.00% | |||||
Term of lease | 2 years | |||||
Net rental expense | $225,262 | $184,628 | $194,391 | $112,240 |
EMPLOYMENT_AND_OTHER_AGREEMENT1
EMPLOYMENT AND OTHER AGREEMENTS (Detail Textuals) (USD $) | 9 Months Ended |
Aug. 31, 2013 | |
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items] | |
Issued and outstanding stock, percentage | 25.00% |
Officer | |
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items] | |
Additional period of employment agreements | 1 year |
Number of officers involved in employment agreements | 2 |
Base salary of each officer | 225,000 |
Total accrued bonuses for two officers | 150,000 |
Multiples of annual compensation | 2.99 |
Nominal value of common stock | 9.50% |
Period officer prohibited involving in competitive activities during employment | one year following termination |
MAJOR_CUSTOMERS_Detail_Textual
MAJOR CUSTOMERS (Detail Textuals) (Customer concentration risk) | 9 Months Ended | 12 Months Ended | 9 Months Ended | ||
Aug. 31, 2012 | Aug. 31, 2013 | Aug. 31, 2013 | Nov. 30, 2012 | Aug. 31, 2013 | |
Sales revenue | Sales revenue | Accounts receivable | Accounts receivable | Accounts receivable | |
Customer one | Customers no | Customer one | Customer one | Customers two | |
Customer | Customer | Customer | Customer | ||
Concentration Risk [Line Items] | |||||
Percentage of concentration | 10.00% | 10.00% | 12.00% | 19.00% | 13.00% |
Number of customers | 1 | 1 | 2 |
MAJOR_SUPPLIERS_Detail_Textual
MAJOR SUPPLIERS (Detail Textuals) (Supplier concentration risk, Total Inventory Purchased, Foreign supplier) | 9 Months Ended | |
Aug. 31, 2013 | Aug. 31, 2012 | |
Supplier | Supplier | |
Supplier concentration risk | Total Inventory Purchased | Foreign supplier | ||
Concentration Risk [Line Items] | ||
Percentage of concentration | 51.00% | 42.00% |
Number of supplier | 1 | 1 |
MAJOR_SUPPLIERS_Detail_Textual1
MAJOR SUPPLIERS (Detail Textuals 1) (Supplier concentration risk, Total Inventory Purchased) | 9 Months Ended |
Aug. 31, 2013 | |
Taiwan | |
Concentration Risk [Line Items] | |
Portion of overseas products | 60.00% |
Hong Kong | |
Concentration Risk [Line Items] | |
Portion of overseas products | 13.00% |
Elsewhere in Asia | |
Concentration Risk [Line Items] | |
Portion of overseas products | 22.00% |
Overseas outside of Asia | |
Concentration Risk [Line Items] | |
Portion of overseas products | less than 1 |
EXPORT_SALES_Summary_of_export
EXPORT SALES - Summary of export sales (Details) (USD $) | 9 Months Ended | |
Aug. 31, 2013 | Aug. 31, 2012 | |
Canada | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Export sales | $1,343,052 | $2,041,882 |
China | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Export sales | 2,927,658 | 3,178,617 |
Other Asian Countries | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Export sales | 522,738 | 1,079,456 |
South America | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Export sales | 438,786 | 26,229 |
Europe | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Export sales | $669,430 | $112,047 |
LINE_OF_CREDIT_Detail_Textuals
LINE OF CREDIT (Detail Textuals) (Line of credit, USD $) | 1 Months Ended |
Jun. 30, 2011 | |
Line of credit | |
Line of Credit Facility [Line Items] | |
Maximum borrowing capacity | $1,000,000 |
Line of credit facility, description of variable rate basis | LIBOR rate |
Rate of interest | 2.56% |