Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
May. 31, 2015 | Jul. 15, 2015 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | SURGE COMPONENTS INC | |
Entity Central Index Key | 747,540 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --11-30 | |
Document Type | 10-Q | |
Document Period End Date | May 31, 2015 | |
Document Fiscal Year Focus | 2,015 | |
Document Fiscal Period Focus | Q2 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 9,999,125 | |
Trading Symbol | sprs |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | May. 31, 2015 | Nov. 30, 2014 |
Current assets: | ||
Cash | $ 6,839,296 | $ 6,174,561 |
Accounts receivable - net of allowance for doubtful accounts of $110,648 and $93,765 | 4,482,796 | 4,433,994 |
Inventory, net | 3,716,358 | 3,258,156 |
Prepaid expenses and income taxes | 205,850 | 233,275 |
Deferred income taxes | 350,837 | 295,873 |
Total current assets | 15,595,137 | 14,395,859 |
Fixed assets - net of accumulated depreciation and amortization of $2,131,896 and $2,114,416 | 122,313 | 84,966 |
Deferred income taxes | 701,674 | 887,620 |
Other assets | 11,652 | 11,652 |
Total assets | 16,430,776 | 15,380,097 |
Current liabilities: | ||
Accounts payable | 4,093,503 | 3,288,798 |
Accrued expenses and taxes | 562,732 | 785,002 |
Accrued salaries | 288,181 | 556,805 |
Total current liabilities | 4,944,416 | 4,630,605 |
Deferred rent | 41,540 | 40,564 |
Total liabilities | $ 4,985,956 | $ 4,671,169 |
Commitments and contingencies | ||
Shareholders' equity | ||
Common stock - $.001 par value stock, 75,000,000 shares authorized, 9,957,125 and 9,080,012 shares issued and outstanding | $ 9,958 | $ 9,080 |
Additional paid-in capital | 23,509,852 | 23,192,407 |
Accumulated deficit | (12,075,005) | (12,492,581) |
Total shareholders' equity | 11,444,820 | 10,708,928 |
Total liabilities and shareholders' equity | $ 16,430,776 | $ 15,380,097 |
Series A Preferred stock | ||
Shareholders' equity | ||
Preferred stock, Value | ||
Series B Preferred stock | ||
Shareholders' equity | ||
Preferred stock, Value | ||
Series C Preferred Stock [Member] | ||
Shareholders' equity | ||
Preferred stock, Value | $ 15 | $ 22 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parentheticals) - USD ($) | May. 31, 2015 | Nov. 30, 2014 |
Allowance for doubtful accounts of accounts receivable (in dollars) | $ 110,648 | $ 93,765 |
Accumulated depreciation and amortization on fixed assets (in dollars) | $ 2,131,896 | $ 2,114,416 |
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 75,000,000 | 75,000,000 |
Common stock, shares issued | 9,957,125 | 9,080,012 |
Common stock, shares outstanding | 9,957,125 | 9,080,012 |
Series A Preferred stock | ||
Preferred stock, shares authorized | 260,000 | 260,000 |
Preferred stock, shares outstanding | ||
Series B Preferred stock | ||
Preferred stock, shares authorized | 200,000 | 200,000 |
Preferred stock, shares outstanding | ||
Series C Preferred Stock [Member] | ||
Preferred stock, shares authorized | 100,000 | 100,000 |
Preferred stock, shares outstanding | 14,200 | 21,700 |
Preferred stock, shares issued | 14,200 | 21,700 |
Preferred stock, liquidation preference per share | $ 5 | $ 5 |
Consolidated Statements of Inco
Consolidated Statements of Income (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
May. 31, 2015 | May. 31, 2014 | May. 31, 2015 | May. 31, 2014 | |
Income Statement [Abstract] | ||||
Net sales | $ 7,119,265 | $ 6,706,624 | $ 14,078,890 | $ 12,928,333 |
Cost of goods sold | 5,258,324 | 4,978,110 | 10,372,989 | 9,494,793 |
Gross profit | 1,860,941 | 1,728,514 | 3,705,901 | 3,433,540 |
Operating expenses: | ||||
Selling and shipping expenses | 617,508 | 617,153 | 1,167,070 | 1,142,027 |
General and administrative expenses | 957,742 | 850,259 | 1,962,472 | 1,730,372 |
Depreciation and amortization | 8,957 | 11,094 | 17,480 | 20,765 |
Total operating expenses | 1,584,207 | 1,478,506 | 3,147,022 | 2,893,164 |
Income before other income (expense) and income taxes | $ 276,734 | $ 250,008 | $ 558,879 | $ 540,376 |
Other income(expense): | ||||
Interest expense | ||||
Investment income | $ 2,308 | $ 1,055 | $ 4,305 | $ 1,744 |
Other income(expense) | 2,308 | 1,055 | 4,305 | 1,744 |
Income before income taxes | 279,042 | 251,063 | 563,184 | 542,120 |
Income taxes | 56,358 | 101,121 | 140,183 | 206,288 |
Net income | $ 222,684 | $ 149,942 | 423,001 | 335,832 |
Dividends on preferred stock | 5,425 | 5,925 | ||
Net income available to common shareholders | $ 222,684 | $ 149,942 | $ 417,576 | $ 329,907 |
Net income per share available to common shareholders: | ||||
Basic | $ 0.02 | $ 0.02 | $ 0.04 | $ 0.04 |
Diluted | $ 0.02 | $ 0.02 | $ 0.04 | $ 0.03 |
Weighted Shares Outstanding: | ||||
Basic | 9,485,943 | 9,060,012 | 9,290,532 | 9,060,012 |
Diluted | 9,654,251 | 9,713,842 | 9,458,841 | 9,713,842 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 6 Months Ended | |
May. 31, 2015 | May. 31, 2014 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income | $ 423,001 | $ 335,832 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 17,480 | 20,765 |
Stock compensation expense | 72,167 | 39,248 |
Deferred income taxes | 130,982 | 182,076 |
Allowance for doubtful accounts | 16,883 | 16,883 |
CHANGES IN OPERATING ASSETS AND LIABILITIES: | ||
Accounts receivable | (65,685) | 560,236 |
Inventory | (458,201) | (216,471) |
Prepaid expenses and income taxes | $ 27,425 | $ 17,891 |
Other assets | ||
Accounts payable | $ 804,704 | $ 287,211 |
Deferred rent | 976 | 2,630 |
Accrued expenses | (393,921) | (139,021) |
NET CASH FLOWS FROM OPERATING ACTIVITIES | 575,811 | 1,107,279 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Acquisition of fixed assets | (54,826) | (21,834) |
NET CASH FLOWS USED IN INVESTING ACTIVITIES | (54,826) | $ (21,834) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from exercising stock options | 143,750 | |
NET CASH FLOWS FROM FINANCING ACTIVITIES | 143,750 | |
NET CHANGE IN CASH | 664,735 | $ 1,085,445 |
CASH AT BEGINNING OF PERIOD | 6,174,561 | 4,288,090 |
CASH AT END OF PERIOD | 6,839,296 | 5,373,535 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||
Income taxes paid | $ 8,978 | $ 62,279 |
Interest paid | ||
NONCASH INVESTING AND FINANCING ACTIVITIES: | ||
Accrued dividends on preferred stock | $ 5,425 | $ 5,925 |
Common stock issued in payment of accrued interest | $ 102,399 |
Organization, Description of Co
Organization, Description of Company's Business and Basis of Presentation | 6 Months Ended |
May. 31, 2015 | |
Organization Description of Company's Business 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 Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
May. 31, 2015 | |
Summary of Significant 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 six months ended May 31, 2015 and May 31, 2014 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 accounts 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 the customer upon the merchandise being received by a freight forwarder. Direct shipments were approximately $1,727,000 and $1,564,000 for the six months ended May 31, 2015 and May 31, 2014 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 $113,998 and $230,646 for the six months ended May 31, 2015 and May 31, 2014 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 $4,680,000 and $3,379,000 for the six months ended May 31, 2015 and May 31, 2014 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 May 31, 2015 approximated $1,859,000. The Company, at May 31, 2015, had a reserve against slow moving and obsolete inventory of $324,957. 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 May 31, 2015 and November 30, 2014, the Company's uninsured cash balances totaled approximately $3,658,936 and $2,994,000, 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, 2011, and state tax examinations for years before fiscal years ending November 30, 2010. 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 six months ended May 31, 2015 and May 31, 2014. (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 $4,926 and $6,618 for the six months ended May 31, 2015 and May 31, 2014 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 May 31, 2015 and May 31, 2014 totaled 390,130 and 569,608, 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. |
Fixed Assets
Fixed Assets | 6 Months Ended |
May. 31, 2015 | |
Fixed Assets [Abstract] | |
FIXED ASSETS | NOTE C - FIXED ASSETS Fixed assets consist of the following: May 31, November 30, 2015 2014 Furniture and Fixtures $ 327,971 $ 322,586 Leasehold Improvements 956,637 940,204 Computer Equipment 969,601 936,592 Less-Accumulated Depreciation (2,131,896 ) (2,114,416 ) Net Fixed Assets $ 122,313 $ 84,966 Depreciation and amortization expense for the six months ended May 31, 2015 and May 31, 2014 was $17,480 and $20,765, respectively. |
Accrued Expenses
Accrued Expenses | 6 Months Ended |
May. 31, 2015 | |
Accrued Expenses [Abstract] | |
ACCRUED EXPENSES | NOTE D - ACCRUED EXPENSES Accrued expenses consist of the following: May 31, November 30, 2015 2014 Commissions $ 244,210 $ 263,796 Preferred Stock Dividends 152,232 200,557 Interest — 102,399 Other accrued expenses 166,290 218,250 $ 562,732 $ 785,002 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 the fiscal year ended November 30, 2014. In February 2015, the Company issued 113,803 shares of common stock to the holders of the notes in payment of the accrued interest at a conversion rate of $0.90 per share. |
Retirement Plan
Retirement Plan | 6 Months Ended |
May. 31, 2015 | |
Retirement Plan [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 $1,054,000 at November 30, 2014. Pension expense for the six months ended May 31, 2015 and May 31, 2014 was $1,613 and $9,286, respectively. |
Shareholders' Equity
Shareholders' Equity | 6 Months Ended |
May. 31, 2015 | |
Shareholders' Equity [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 May 31, 2015. 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 May 31, 2015. 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. 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. In October 2014, 2,000 shares of Series C Preferred were converted into 20,000 shares of common stock. In April 2015, the Company entered into a settlement agreement with a shareholder pursuant to which 7,500 shares of Series C Preferred were returned to the Company for cancellation in exchange for 110,000 shares of common stock plus $65,000 for accrued dividends and legal fees and expenses. Dividends aggregating $152,232 have not been declared or paid for the semiannual periods ended December 31, 2001 through the semiannual payment due December 31, 2014. The Company has accrued these dividends. At May 31, 2015 there are 14,200 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 Stock 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 Plan activity for the six months ended May 31, 2015 is summarized as follows: Weighted Average Shares Exercise Price Options outstanding December 1, 2014 986,438 $ 0.50 Options issued in the six months ended May 31, 2015 — $ — Options exercised in the six months ended May 31, 2015 575,000 $ 0.25 Options cancelled in the six months ended May 31, 2015 — $ — Options outstanding at May 31, 2015 411,438 $ 0.84 Options exercisable at May 31, 2015 411,438 $ 0.84 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 per share, the value of the common stock on the date of the grant. These options vest over a three year period and expires ten years from the grant date. 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-employee director to purchase 50,000 shares of common stock at an exercise price of $0.51 per share, the market price of the common stock on the date of the grant. This option vested immediately and expires five years from the grant date. 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. In November 2013, the Company granted a stock option to (a) one employee-director and all non-employee directors to purchase 25,000 shares of common stock, and (b) one employee-director to purchase 50,000 shares of common stock at an exercise price of $0.82 per share, the market price of the common stock on the date of the grant. These options vested immediately and expire five years from the grant date. The fair value of these stock options is estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions: expected volatility of 18% (based on the Company’s historical stock volatility); average risk-free interest rate of 1.36% (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. In April 2014, the Company granted a stock option to (a) one employee-director to purchase 62,500 shares of common stock, and (b) one employee-director to purchase 45,938 shares of common stock, at an exercise price of $.80 per share, the market price of the common stock on the date of the grant. These options vest immediately and expire five years from the grant date. Also in April 2015, two non-employee directors each exercised options to acquire 25,000 shares of common stock for $0.25 per share. The fair value 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 20% (based on the Company’s historical stock volatility); average risk-free interest rate of 1.65% (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. In March 2015, the Company awarded one employee director 48,530 shares of its common stock and another employee director 29,780 shares of its common stock as part of their 2014 bonus. The Company recorded a cost of $57,166 relating to the issuance of these shares. In April 2015, two employee directors each exercised options to acquire 250,000 shares for $0.25 per share. The intrinsic value of the exercisable options at May 31, 2015 totaled $12,000. At May 31, 2015 the weighted average remaining life of the stock options is 3.85 years. At May 31, 2015, there was no unrecognized compensation cost related to the stock options granted under the Stock Plan. [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-employee 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-employee director to purchase 25,000 shares of common stock at an exercise price of $0.25 per share. In July 2012, a stock option was granted to one non-employee 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-employee director exercised an option and acquired 25,000 shares of common stock for $0.25 per share. In November 2013, each non-employee director was granted an option to purchase 25,000 shares of common stock at an exercise price of $0.82 per share. Starting December 1, 2013 the compensation for each non-employee director was increased to $2,500 per month (and $3,500 per month for a non-employee director that serves as the chairman of more than two committees of the Board of Directors). In February 2015, one non-employee director exercised an option and acquired 25,000 shares of common stock for $0.25 per share. In April 2015, two non-employee directors exercised options and acquired 25,000 shares each of common stock for $0.25 per share. |
Income Taxes
Income Taxes | 6 Months Ended |
May. 31, 2015 | |
Income Taxes [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: May 31, November 30, 2015 2014 Deferred Tax Assets Net operating loss $ 4,204,053 $ 4,366,694 Allowance for bad debts 34,306 29,317 Inventory 63,449 120,219 Deferred Rent 16,591 16,201 Depreciation 168,613 170,131 Total deferred tax assets 4,487,012 4,702,562 Valuation allowance (3,434,501 ) (3,519,069 ) Deferred Tax Assets $ 1,052,511 $ 1,183,493 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. The valuation allowance decreased by approximately $85,000 during the six months ended May 31, 2015. 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 Company's income tax expense consists of the following: Six Months Ended May 31, 2015 May 31, 2014 Current: Federal $ 4,627 $ 11,911 States 4,574 12,301 9,201 24,212 Deferred: Federal 106,724 143,840 States 24,258 38,236 130,982 182,076 Provision for income taxes $ 140,183 $ 206,288 The Company files a consolidated income tax return with its wholly-owned subsidiaries and has net operating loss carryforwards of approximately $11,000,000 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: Six Months ended May 31, May 31, 2015 2014 U.S Federal Income tax statutory rate 34 % 34 % Valuation allowance (14 )% 21 % State income taxes 5 % 2 % Other — — Effective tax rate 25 % 38 % |
Rental Commitments
Rental Commitments | 6 Months Ended |
May. 31, 2015 | |
Rental Commitments [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 $169,000 for the year ended November 30, 2014, 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 May 31, 2015 are as follows: Twelve Months Ended May 31, 2016 $ 170,882 2017 $ 174,299 2018 $ 177,785 2019 $ 181,341 2020 $ 184,968 2021 & thereafter $ 62,062 $ 951,337 Net rental expense for the six months ended May 31, 2015 and May 31, 2014 were $151,254 and $154,086 respectively, of which $124,662 and $125,841 respectively, was paid to the Related Company. |
Employment and Other Agreements
Employment and Other Agreements | 6 Months Ended |
May. 31, 2015 | |
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, 2015 (renewable on each July 30th for an additional one year period) with two officers of the Company, which provides one with a base salary of $275,000 and the other 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. A bonus pool has been accrued for the two officers through May 31, 2015 totaling $109,375. 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 | 6 Months Ended |
May. 31, 2015 | |
Major Customers [Abstract] | |
MAJOR CUSTOMERS | NOTE J– MAJOR CUSTOMERS The Company had one customer who accounted for 27% of net sales for the six months ended May 31, 2015 and one customer who accounted for 17% of net sales for the six months ended May 31, 2014. The Company had no customers who accounted for over 10% of accounts receivable at May 31, 2015 and one customer who accounted for 11% of accounts receivable at November 30, 2014. |
Major Suppliers
Major Suppliers | 6 Months Ended |
May. 31, 2015 | |
Major Suppliers [Abstract] | |
MAJOR SUPPLIERS | NOTE K- MAJOR SUPPLIERS During the six months ended May 31, 2015 and May 31, 2014 there was one foreign supplier who accounted for 62% and 46% of total inventory purchased. The Company purchases substantially all of its products overseas. For the six months ended May 31, 2015, the Company purchased 62% of its products from Taiwan, 10% from Hong Kong, 28% 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 | 6 Months Ended |
May. 31, 2015 | |
Export Sales [Abstract] | |
EXPORT SALES | NOTE L - EXPORT SALES The Company’s export sales were as follows: Six Months Ended May 31, May 31, 2015 2014 Canada 1,493,805 1,262,290 China 2,414,607 2,194,262 Other Asian Countries 573,083 430,095 South America 215,084 273,164 Europe 590,768 490,036 Revenues are attributed to countries based on location of customer. |
Subsequent Events
Subsequent Events | 6 Months Ended |
May. 31, 2015 | |
Subsequent Events[Abstract] | |
SUBSEQUENT EVENTS | NOTE M – SUBSEQUENT EVENTS In July 2015, the Company issued 42,000 shares of its common stock in exchange for 4,200 shares of the Series C Preferred. |
Summary of Significant Accoun19
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
May. 31, 2015 | |
Summary of Significant 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 six months ended May 31, 2015 and May 31, 2014 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 accounts 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 the customer upon the merchandise being received by a freight forwarder. Direct shipments were approximately $1,727,000 and $1,564,000 for the six months ended May 31, 2015 and May 31, 2014 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 $113,998 and $230,646 for the six months ended May 31, 2015 and May 31, 2014 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 $4,680,000 and $3,379,000 for the six months ended May 31, 2015 and May 31, 2014 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 May 31, 2015 approximated $1,859,000. The Company, at May 31, 2015, had a reserve against slow moving and obsolete inventory of $324,957. 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 May 31, 2015 and November 30, 2014, the Company's uninsured cash balances totaled approximately $3,658,936 and $2,994,000, 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, 2011, and state tax examinations for years before fiscal years ending November 30, 2010. 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 six months ended May 31, 2015 and May 31, 2014. |
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 $4,926 and $6,618 for the six months ended May 31, 2015 and May 31, 2014 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 May 31, 2015 and May 31, 2014 totaled 390,130 and 569,608, 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. |
Summary of Significant Accoun20
Summary of Significant Accounting Policies (Tables) | 6 Months Ended |
May. 31, 2015 | |
Summary of Significant 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) | 6 Months Ended |
May. 31, 2015 | |
Fixed Assets [Abstract] | |
Schedule of fixed assets | May 31, November 30, 2015 2014 Furniture and Fixtures $ 327,971 $ 322,586 Leasehold Improvements 956,637 940,204 Computer Equipment 969,601 936,592 Less-Accumulated Depreciation (2,131,896 ) (2,114,416 ) Net Fixed Assets $ 122,313 $ 84,966 |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 6 Months Ended |
May. 31, 2015 | |
Accrued Expenses [Abstract] | |
Schedule of accrued expenses | May 31, November 30, 2015 2014 Commissions $ 244,210 $ 263,796 Preferred Stock Dividends 152,232 200,557 Interest — 102,399 Other accrued expenses 166,290 218,250 $ 562,732 $ 785,002 |
Shareholders' Equity (Tables)
Shareholders' Equity (Tables) | 6 Months Ended |
May. 31, 2015 | |
Shareholders' Equity [Abstract] | |
Schedule of stock option incentive plan activity | Weighted Average Shares Exercise Price Options outstanding December 1, 2014 986,438 $ 0.50 Options issued in the six months ended May 31, 2015 — $ — Options exercised in the six months ended May 31, 2015 575,000 $ 0.25 Options cancelled in the six months ended May 31, 2015 — $ — Options outstanding at May 31, 2015 411,438 $ 0.84 Options exercisable at May 31, 2015 411,438 $ 0.84 |
Income Taxes (Tables)
Income Taxes (Tables) | 6 Months Ended |
May. 31, 2015 | |
Income Taxes [Abstract] | |
Schedule of deferred income taxes | May 31, November 30, 2015 2014 Deferred Tax Assets Net operating loss $ 4,204,053 $ 4,366,694 Allowance for bad debts 34,306 29,317 Inventory 63,449 120,219 Deferred Rent 16,591 16,201 Depreciation 168,613 170,131 Total deferred tax assets 4,487,012 4,702,562 Valuation allowance (3,434,501 ) (3,519,069 ) Deferred Tax Assets $ 1,052,511 $ 1,183,493 |
Schedule of income tax expense | Six Months Ended May 31, 2015 May 31, 2014 Current: Federal $ 4,627 $ 11,911 States 4,574 12,301 9,201 24,212 Deferred: Federal 106,724 143,840 States 24,258 38,236 130,982 182,076 Provision for income taxes $ 140,183 $ 206,288 |
Schedule of difference between expected income tax rate using statutory federal tax rate and company's effective rate | Six Months ended May 31, May 31, 2015 2014 U.S Federal Income tax statutory rate 34 % 34 % Valuation allowance (14 )% 21 % State income taxes 5 % 2 % Other — — Effective tax rate 25 % 38 % |
Rental Commitments (Tables)
Rental Commitments (Tables) | 6 Months Ended |
May. 31, 2015 | |
Rental Commitments [Abstract] | |
Schedule of future minimum rental commitments | Twelve Months Ended May 31, 2016 $ 170,882 2017 $ 174,299 2018 $ 177,785 2019 $ 181,341 2020 $ 184,968 2021 & thereafter $ 62,062 $ 951,337 |
Export Sales (Tables)
Export Sales (Tables) | 6 Months Ended |
May. 31, 2015 | |
Export Sales [Abstract] | |
Schedule of export sales | Six Months Ended May 31, May 31, 2015 2014 Canada 1,493,805 1,262,290 China 2,414,607 2,194,262 Other Asian Countries 573,083 430,095 South America 215,084 273,164 Europe 590,768 490,036 |
Organization, Description of 27
Organization, Description of Company's Business and Basis of Presentation (Details) | 1 Months Ended | ||
May. 31, 2002Shareholdershares | May. 31, 2015shares | Nov. 30, 2014shares | |
Organization Description of Company's Business and Basis of Presentation [Textual ] | |||
Minimum number of shareholders to hold equity | Shareholder | 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 |
Summary of Significant Accoun28
Summary of Significant Accounting Policies (Details) | 6 Months Ended |
May. 31, 2015 | |
Furniture, fixtures and equipment | Maximum [Member] | |
Property, Plant and Equipment [Line Items] | |
Property, Plant and Equipment, useful life | 7 years |
Furniture, fixtures and equipment | Minimum [Member] | |
Property, Plant and Equipment [Line Items] | |
Property, Plant and Equipment, useful life | 5 years |
Computer equipment | |
Property, Plant and Equipment [Line Items] | |
Property, Plant and Equipment, useful life | 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 Accoun29
Summary of Significant Accounting Policies (Details Textual) - USD ($) | 6 Months Ended | ||
May. 31, 2015 | May. 31, 2014 | Nov. 30, 2014 | |
Summary of Significant Accounting Policies [Abstract] | |||
Direct shipments revenue | $ 1,727,000 | $ 1,564,000 | |
Commission revenue | 113,998 | 230,646 | |
Revenues from distribution agreements | 4,680,000 | 3,379,000 | |
Inventory in transit from foreign suppliers | 1,859,000 | ||
Reserve against slow moving and obsolete inventory | 324,957 | ||
Amount of uninsured cash balances | 3,658,936 | $ 2,994,000 | |
Shipping costs | $ 4,926 | $ 6,618 | |
Potentially dilutive shares excluded from diluted weighted shares outstanding (in shares) | 390,130 | 569,608 |
Fixed Assets (Details)
Fixed Assets (Details) - USD ($) | May. 31, 2015 | Nov. 30, 2014 |
Property, Plant and Equipment [Line Items] | ||
Less-Accumulated Depreciation | $ (2,131,896) | $ (2,114,416) |
Net Fixed Assets | 122,313 | 84,966 |
Furniture and Fixtures | ||
Property, Plant and Equipment [Line Items] | ||
Fixed assets gross | 327,971 | 322,586 |
Leasehold Improvements | ||
Property, Plant and Equipment [Line Items] | ||
Fixed assets gross | 956,637 | 940,204 |
Computer Equipment | ||
Property, Plant and Equipment [Line Items] | ||
Fixed assets gross | $ 969,601 | $ 936,592 |
Fixed Assets (Details Textual)
Fixed Assets (Details Textual) - USD ($) | 3 Months Ended | 6 Months Ended | ||
May. 31, 2015 | May. 31, 2014 | May. 31, 2015 | May. 31, 2014 | |
Fixed Assets [Abstract] | ||||
Depreciation and amortization expense | $ 8,957 | $ 11,094 | $ 17,480 | $ 20,765 |
Accrued Expenses (Details)
Accrued Expenses (Details) - USD ($) | May. 31, 2015 | Nov. 30, 2014 |
Accrued Expenses [Abstract] | ||
Commissions | $ 244,210 | $ 263,796 |
Preferred Stock Dividends | $ 152,232 | 200,557 |
Interest | 102,399 | |
Other accrued expenses | $ 166,290 | 218,250 |
Accrued expenses, Total | $ 562,732 | $ 785,002 |
Accrued Expenses (Details Textu
Accrued Expenses (Details Textual) - USD ($) | 1 Months Ended | |
Feb. 28, 2015 | Mar. 31, 2000 | |
Accrued Expenses (Textual) | ||
Proceeds from of private placement | $ 7,000,000 | |
Number of common stock issued | 113,803 | |
Conversion price per share | $ 0.9 |
Retirement Plan (Details)
Retirement Plan (Details) - USD ($) | 1 Months Ended | 6 Months Ended | ||
Jun. 30, 1997 | May. 31, 2015 | May. 31, 2014 | Nov. 30, 2014 | |
Retirement Plan (Textual) | ||||
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 | $ 1,054,000 | |||
Pension expense | $ 1,613 | $ 9,286 |
Shareholders' Equity (Details)
Shareholders' Equity (Details) - May. 31, 2015 - 2010 Incentive Stock Plan [Member] - Stock options [Member] - $ / shares | Total |
Shares | |
Options outstanding December 1, 2014 | 986,438 |
Options issued in the six months ended May 31, 2015 | |
Options exercised in the six months ended May 31, 2015 | 575,000 |
Options cancelled in the six months ended May 31, 2015 | |
Options outstanding at May 31, 2015 | 411,438 |
Options exercisable at May 31, 2015 | 411,438 |
Weighted Average Exercise Price | |
Options outstanding December 1, 2014 | $ 0.50 |
Options issued in the six months ended May 31, 2015 | |
Options exercised in the six months ended May 31, 2015 | $ 0.25 |
Options cancelled in the six months ended May 31, 2015 | |
Options outstanding at May 31, 2015 | $ 0.84 |
Options exercisable at May 31, 2015 | $ 0.84 |
Shareholders' Equity (Details T
Shareholders' Equity (Details Textual) - USD ($) | Mar. 14, 2011 | Apr. 30, 2015 | Oct. 31, 2014 | Feb. 28, 2006 | Apr. 30, 2002 | Apr. 30, 2001 | Nov. 30, 2000 | May. 31, 2015 | Nov. 30, 2014 | Aug. 31, 2010 | Dec. 31, 2001 | Jan. 31, 2000 | Feb. 29, 1996 |
Class of Stock [Line Items] | |||||||||||||
Preferred stock, shares authorized | 5,000,000 | 5,000,000 | 5,000,000 | 1,000,000 | |||||||||
Dividend payable | $ 152,232 | ||||||||||||
Amount paid for repurchase under standstill and non disparagement agreement | $ 225,000 | ||||||||||||
Common Stock [Member] | |||||||||||||
Class of Stock [Line Items] | |||||||||||||
Stock repurchased and cancelled | 252,000 | ||||||||||||
Accrued dividends | $ 65,000 | ||||||||||||
Cancellation of shares pursuant to settlement agreement | 7,500 | ||||||||||||
Non-Voting Redeemable Convertible Series A Preferred Stock ("Series A Preferred") [Member] | |||||||||||||
Class of Stock [Line Items] | |||||||||||||
Preferred stock, shares authorized | 260,000 | 260,000 | 260,000 | ||||||||||
Preferred stock, shares outstanding | |||||||||||||
Voting Redeemable Convertible Series B Preferred Stock ("Series B Preferred") [Member] | |||||||||||||
Class of Stock [Line Items] | |||||||||||||
Preferred stock, shares authorized | 200,000 | 200,000 | 200,000 | ||||||||||
Preferred stock, shares outstanding | |||||||||||||
Non-Voting Redeemable Convertible Series C Preferred Stock ("Series C Preferred") [Member] | |||||||||||||
Class of Stock [Line Items] | |||||||||||||
Preferred stock, shares authorized | 100,000 | 100,000 | 100,000 | ||||||||||
Preferred stock, shares outstanding | 14,200 | 21,700 | |||||||||||
Preferred stock, shares issued | 14,200 | 21,700 | |||||||||||
Number of shares converted into common stock upon conversion | 2,000 | 10 | |||||||||||
Cumulative dividend per share per annum | $ 0.50 | ||||||||||||
Preferred stock issued in payment of financial consulting services | 70,000 | ||||||||||||
Stock repurchased and cancelled | 19,300 | 8,000 | |||||||||||
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 conversion of preferred stock | 112,500 | 20,000 | |||||||||||
Cancellation of shares pursuant to settlement agreement | 110,000 |
Shareholders' Equity (Details37
Shareholders' Equity (Details Textual 1) - USD ($) | Apr. 30, 2015 | Mar. 31, 2015 | Apr. 30, 2014 | Nov. 30, 2013 | Jul. 31, 2012 | Feb. 25, 2011 | May. 31, 2010 | Mar. 31, 2010 | May. 31, 2015 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Intrinsic value of the exercisable options | $ 12,000 | ||||||||
Weighted average remaining life | 3 years 10 months 6 days | ||||||||
Unrecognized compensation cost | |||||||||
Stock options [Member] | Non Employee Director [Member] | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Number of common shares purchased for options granted | 250,000 | ||||||||
Number of options granted for common stock | 25,000 | 50,000 | 25,000 | ||||||
Number of options granted for common stock, exercise price per share | $ 0.25 | $ 0.25 | $ 0.51 | $ 0.25 | |||||
Expiration period | 5 years | ||||||||
Fair values of stock options assumption method used | Black-Scholes option pricing model | ||||||||
Expected volatility rate | 35.00% | ||||||||
Average risk-free interest rate | 0.67% | ||||||||
Expected dividend yield | |||||||||
Treasury note, maturity | 5 years | ||||||||
Initial expected life | 5 years | ||||||||
Stock options [Member] | Employees [Member] | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Number of options granted for common stock | 85,000 | ||||||||
Number of options granted for common stock, exercise price per share | $ 1.15 | ||||||||
Vesting period | 3 years | ||||||||
Expiration period | 10 years | ||||||||
Fair values of stock options assumption method used | Black-Scholes option pricing model | ||||||||
Expected volatility rate | 60.00% | ||||||||
Average risk-free interest rate | 3.42% | ||||||||
Expected dividend yield | |||||||||
Treasury note, maturity | 10 years | ||||||||
Initial expected life | 10 years | ||||||||
Stock options [Member] | Employee-director and non-employee directors [Member] | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Number of options granted for common stock | 25,000 | ||||||||
Stock options [Member] | Employee-director One [Member] | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Number of common shares purchased for options granted | 250,000 | 29,780 | |||||||
Number of options granted for common stock | 62,500 | ||||||||
Number of options granted for common stock, exercise price per share | $ 0.25 | ||||||||
Stock options [Member] | Employee-director [Member] | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Number of common shares purchased for options granted | 250,000 | 48,530 | |||||||
Number of options granted for common stock | 45,938 | 50,000 | |||||||
Number of options granted for common stock, exercise price per share | $ 0.25 | $ 0.80 | $ 0.82 | ||||||
Vesting period | 5 years | 5 years | |||||||
Fair values of stock options assumption method used | Black-Scholes option pricing model | Black-Scholes option pricing model | |||||||
Expected volatility rate | 20.00% | 18.00% | |||||||
Average risk-free interest rate | 1.65% | 1.36% | |||||||
Expected dividend yield | |||||||||
Treasury note, maturity | 5 years | 5 years | |||||||
Initial expected life | 5 years | 5 years | |||||||
Intrinsic value of the exercisable options | $ 57,166 | ||||||||
2010 Incentive Stock Plan [Member] | Stock options [Member] | |||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||
Number of common shares purchased for options granted | 1,500,000 |
Shareholders' Equity (Details38
Shareholders' Equity (Details Textual 2) - Nov. 30, 2002 - $ / shares | Total |
Shareholders' Equity [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) | $ 0.045 |
Shareholders' Equity (Details39
Shareholders' Equity (Details Textual 3) - Non-employee directors [Member] - USD ($) | Apr. 01, 2012 | Apr. 30, 2015 | Feb. 28, 2015 | Nov. 30, 2013 | Jul. 31, 2012 | May. 31, 2012 | May. 31, 2010 | Nov. 30, 2013 |
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 | $ 2,500 | |||||||
Minimum [Member] | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Officers' compensation per month | $ 200 | |||||||
Maximum [Member] | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Officers' compensation per month | $ 2,000 | |||||||
Stock options [Member] | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Number of options granted for common stock | 25,000 | 25,000 | 25,000 | 50,000 | 25,000 | 25,000 | ||
Number of options granted for common stock, exercise price per share | $ 0.25 | $ 0.25 | $ 0.82 | $ 0.51 | $ 0.25 | $ 0.25 | ||
Chairman [Member] | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Officers' compensation per month | $ 3,500 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | May. 31, 2015 | Nov. 30, 2014 |
Deferred Tax Assets | ||
Net operating loss | $ 4,204,053 | $ 4,366,694 |
Allowance for bad debts | 34,306 | 29,317 |
Inventory | 63,449 | 120,219 |
Deferred Rent | 16,591 | 16,201 |
Depreciation | 168,613 | 170,131 |
Total deferred tax assets | 4,487,012 | 4,702,562 |
Valuation allowance | (3,434,501) | (3,519,069) |
Deferred Tax Assets | $ 1,052,511 | $ 1,183,493 |
Income Taxes (Details 1)
Income Taxes (Details 1) - USD ($) | 3 Months Ended | 6 Months Ended | ||
May. 31, 2015 | May. 31, 2014 | May. 31, 2015 | May. 31, 2014 | |
Current: | ||||
Federal | $ 4,627 | $ 11,911 | ||
States | 4,574 | 12,301 | ||
Current, total | 9,201 | 24,212 | ||
Deferred: | ||||
Federal | 106,724 | 143,840 | ||
States | 24,258 | 38,236 | ||
Deferred, total | 130,982 | 182,076 | ||
Provision for income taxes | $ 56,358 | $ 101,121 | $ 140,183 | $ 206,288 |
Income Taxes (Details 2)
Income Taxes (Details 2) | 6 Months Ended | |
May. 31, 2015 | May. 31, 2014 | |
Income Taxes [Abstract] | ||
U.S Federal Income tax statutory rate | 34.00% | 34.00% |
Valuation allowance | (14.00%) | 21.00% |
State income taxes | 5.00% | 2.00% |
Other | ||
Effective tax rate | 25.00% | 38.00% |
Income Taxes (Details Textual)
Income Taxes (Details Textual) - May. 31, 2015 - USD ($) | Total |
Income Taxes [Textual] | |
Decrease in valuation allowance for deferred tax asset | $ 85,000 |
Net operating loss carryforwards | $ 11,000,000 |
Net operating loss carryforwards, expiration date | Nov. 30, 2020 |
Rental Commitments (Details)
Rental Commitments (Details) | May. 31, 2015USD ($) |
Rental Commitments [Abstract] | |
2,016 | $ 170,882 |
2,017 | 174,299 |
2,018 | 177,785 |
2,019 | 181,341 |
2,020 | 184,968 |
2021 & thereafter | 62,062 |
Future minimum rental commitments | $ 951,337 |
Rental Commitments (Details Tex
Rental Commitments (Details Textual) - USD ($) | 1 Months Ended | 6 Months Ended | 12 Months Ended | |
May. 31, 2013 | May. 31, 2015 | May. 31, 2014 | Nov. 30, 2014 | |
Operating Leased Assets [Line Items] | ||||
Lease expiration period | Nov. 30, 2020 | |||
Net rental expense | $ 151,254 | $ 154,086 | ||
Related Company | ||||
Operating Leased Assets [Line Items] | ||||
Annual minimum rental payments | $ 169,000 | |||
Percentage of increase in rental payment | 3.00% | |||
Net rental expense | $ 124,662 | $ 125,841 | ||
Related Company | Hong Kong | ||||
Operating Leased Assets [Line Items] | ||||
Annual minimum rental payments | $ 51,200 | |||
Term of lease | 2 years |
Employment and Other Agreemen46
Employment and Other Agreements (Details) - May. 31, 2015 | USD ($)Officer |
Officer [Member] | |
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items] | |
Additional period of employment agreements | 1 year |
Number of officers involved in employment agreements | Officer | 2 |
Base salary of each officer | $ 225,000 |
Total accrued bonuses for two officers | $ 109,375 |
Issued and outstanding stock, percentage | 25.00% |
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 |
Officer One [Member] | |
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items] | |
Base salary of each officer | $ 275,000 |
Major Customers (Details)
Major Customers (Details) - Concentration Risk Type [Domain] - Customer | 6 Months Ended | |
May. 31, 2015 | May. 31, 2014 | |
Sales revenue | ||
Major Customers (Textual) | ||
Number of customers | 1 | 1 |
Percentage of concentration | 27.00% | 17.00% |
Accounts receivable | ||
Major Customers (Textual) | ||
Number of customers | 1 | |
Percentage of concentration | 10.00% | 11.00% |
Major Suppliers (Details Textua
Major Suppliers (Details Textual) - Supplier concentration risk - Total Inventory Purchased - Foreign supplier - Supplier | 6 Months Ended | |
May. 31, 2015 | May. 31, 2014 | |
Concentration Risk [Line Items] | ||
Percentage of concentration | 62.00% | 46.00% |
Number of supplier | 1 | 1 |
Major Suppliers (Details Text49
Major Suppliers (Details Textual 1) - 6 months ended May. 31, 2015 - Supplier concentration risk - Total Inventory Purchased | Total |
Taiwan | |
Concentration Risk [Line Items] | |
Portion of overseas products | 62.00% |
Hong Kong | |
Concentration Risk [Line Items] | |
Portion of overseas products | 10.00% |
Elsewhere in Asia | |
Concentration Risk [Line Items] | |
Portion of overseas products | 28.00% |
Overseas outside of Asia | |
Concentration Risk [Line Items] | |
Portion of overseas products | Less than 1 |
Export Sales (Details)
Export Sales (Details) - USD ($) | 6 Months Ended | |
May. 31, 2015 | May. 31, 2014 | |
Canada | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Export sales | $ 1,493,805 | $ 1,262,290 |
China | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Export sales | 2,414,607 | 2,194,262 |
Other Asian Countries | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Export sales | 573,083 | 430,095 |
South America | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Export sales | 215,084 | 273,164 |
Europe | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Export sales | $ 590,768 | $ 490,036 |
Subsequent Events (Details)
Subsequent Events (Details) - Series C Preferred Stock [Member] - shares | Mar. 14, 2011 | Jul. 31, 2015 | Oct. 31, 2014 | Nov. 30, 2000 |
Subsequent Events (Textual) | ||||
Number of shares converted into common stock upon conversion | 2,000 | 10 | ||
Number of common shares issued in conversion of preferred stock | 112,500 | 20,000 | ||
Subsequent Event [Member] | ||||
Subsequent Events (Textual) | ||||
Number of shares converted into common stock upon conversion | 4,200 | |||
Number of common shares issued in conversion of preferred stock | 42,000 |