Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Aug. 31, 2017 | Oct. 16, 2017 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | SURGE COMPONENTS INC | |
Entity Central Index Key | 747,540 | |
Amendment Flag | false | |
Trading Symbol | SPRS | |
Current Fiscal Year End Date | --11-30 | |
Document Type | 10-Q | |
Document Period End Date | Aug. 31, 2017 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q3 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 5,224,431 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Aug. 31, 2017 | Nov. 30, 2016 |
Current assets: | ||
Cash | $ 1,537,367 | $ 7,120,601 |
Accounts receivable - net of allowance for doubtful accounts of $160,895 and $159,976 | 6,043,381 | 5,558,808 |
Inventory, net | 2,813,582 | 2,929,570 |
Prepaid expenses and income taxes | 165,169 | 144,824 |
Deferred income taxes | 310,712 | 304,887 |
Total current assets | 10,870,211 | 16,058,690 |
Fixed assets - net of accumulated depreciation and amortization of $2,209,187 and $2,185,540 | 73,185 | 81,974 |
Deferred income taxes | 621,425 | 609,773 |
Other assets | 13,384 | 13,384 |
Total assets | 11,578,205 | 16,763,821 |
Current liabilities: | ||
Accounts payable | 5,132,010 | 3,237,592 |
Loan Payable | 600,000 | |
Accrued expenses and taxes | 953,018 | 1,544,882 |
Accrued salaries | 540,187 | 431,111 |
Total current liabilities | 7,225,215 | 5,213,585 |
Deferred rent | 36,318 | 39,962 |
Total liabilities | 7,261,533 | 5,253,547 |
Commitments and contingencies | ||
Shareholders' equity: | ||
Common stock - $.001 par value, 75,000,000 shares authorized, 5,224,431 and 10,224,431 shares issued and outstanding | 5,224 | 10,224 |
Additional paid-in capital | 16,557,310 | 23,702,310 |
Accumulated deficit | (12,245,872) | (12,202,270) |
Total shareholders' equity | 4,316,672 | 11,510,274 |
Total liabilities and shareholders' equity | 11,578,205 | 16,763,821 |
Series A Preferred stock | ||
Shareholders' equity: | ||
Preferred stock - $.001 par value, 5,000,000 shares authorized: | ||
Series B Preferred stock | ||
Shareholders' equity: | ||
Preferred stock - $.001 par value, 5,000,000 shares authorized: | ||
Series C Preferred stock | ||
Shareholders' equity: | ||
Preferred stock - $.001 par value, 5,000,000 shares authorized: | 10 | 10 |
Series D Preferred stock | ||
Shareholders' equity: | ||
Preferred stock - $.001 par value, 5,000,000 shares authorized: |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) | Aug. 31, 2017 | Nov. 30, 2016 |
Allowance for doubtful accounts of accounts receivable | $ 160,895 | $ 159,976 |
Accumulated depreciation and amortization on fixed assets | $ 2,209,187 | $ 2,185,540 |
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 | 5,224,431 | 10,224,431 |
Common stock, shares outstanding | 5,224,431 | 10,224,431 |
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 | ||
Preferred stock, shares authorized | 100,000 | 100,000 |
Preferred stock, shares issued | 10,000 | 10,000 |
Preferred stock, shares outstanding | 10,000 | 10,000 |
Preferred stock, liquidation preference per share | $ 5 | $ 5 |
Series D Preferred stock | ||
Preferred stock, shares authorized | 75,000 | 75,000 |
Preferred stock, shares issued | ||
Preferred stock, shares outstanding |
Consolidated Statements of Oper
Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2017 | Aug. 31, 2016 | |
Income Statement [Abstract] | ||||
Net sales | $ 8,695,624 | $ 8,243,197 | $ 21,793,936 | $ 21,639,650 |
Cost of goods sold | 6,445,861 | 6,104,817 | 16,341,339 | 16,209,408 |
Gross profit | 2,249,763 | 2,138,380 | 5,452,597 | 5,430,242 |
Operating expenses: | ||||
Selling and shipping expenses | 671,802 | 657,093 | 1,892,777 | 1,848,239 |
General and administrative expenses | 1,020,208 | 1,003,779 | 3,565,066 | 3,092,754 |
Depreciation and amortization | 7,882 | 7,816 | 23,647 | 23,448 |
Total operating expenses | 1,699,892 | 1,668,688 | 5,481,490 | 4,964,441 |
(Loss) income before other income (expense) and income taxes | 549,871 | 469,692 | (28,893) | 465,801 |
Other income (expense): | ||||
Investment income | 1 | 2,303 | 3,106 | 6,385 |
Interest expense | (9,242) | (16,056) | ||
Other income (expense) | (9,241) | 2,303 | (12,950) | 6,385 |
(Loss) income before income taxes | 540,630 | 471,995 | (41,843) | 472,186 |
Income taxes (benefit) | 125,727 | 80,067 | (3,241) | 93,588 |
Net (loss) income | 414,903 | 391,928 | (38,602) | 378,598 |
Dividends on preferred stock | 2,500 | 2,500 | 5,000 | 5,000 |
Net (loss) income available to common shareholders | $ 412,403 | $ 389,428 | $ (43,602) | $ 373,598 |
Net (loss) income per share available to common shareholders: | ||||
Basic | $ 0.08 | $ 0.04 | $ (0.01) | $ 0.04 |
Diluted | $ 0.08 | $ 0.04 | $ (0.01) | $ 0.04 |
Weighted Shares Outstanding: | ||||
Basic | 5,224,431 | 10,089,131 | 7,323,511 | 10,031,192 |
Diluted | 5,383,029 | 10,205,579 | 7,323,511 | 10,147,640 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Aug. 31, 2017 | Aug. 31, 2016 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net (loss) income | $ (38,602) | $ 378,598 |
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 23,647 | 23,448 |
Stock compensation expense | 74,363 | |
Deferred income taxes | (17,477) | 70,704 |
Allowance for doubtful accounts | 919 | 24,004 |
CHANGES IN OPERATING ASSETS AND LIABILITIES: | ||
Accounts receivable | (485,492) | (909,379) |
Inventory | 115,988 | (133,894) |
Prepaid expenses and income taxes | (20,345) | (31,588) |
Other assets | ||
Accounts payable | 1,894,418 | 522,339 |
Deferred rent | (3,644) | (1,064) |
Accrued expenses | (487,788) | (202,846) |
NET CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES | 981,624 | (185,315) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Acquisition of fixed assets | (14,858) | (1,520) |
NET CASH FLOWS USED IN INVESTING ACTIVITIES | (14,858) | (1,520) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Repurchase of Common Stock | (23,006) | |
Net Borrowings from Loan Payable | 600,000 | |
Repurchase of Common Stock in Tender Offer | (7,150,000) | |
NET CASH FLOWS USED IN FINANCING ACTIVITIES | (6,550,000) | (23,006) |
NET CHANGE IN CASH | (5,583,234) | (209,841) |
CASH AT BEGINNING OF PERIOD | 7,120,601 | 7,169,118 |
CASH AT END OF PERIOD | 1,537,367 | 6,959,277 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||
Income taxes paid | 14,875 | 34,865 |
Interest paid | 16,056 | |
NONCASH INVESTING AND FINANCING ACTIVITIES: | ||
Accrued dividends on preferred stock | $ 5,000 | $ 5,000 |
Organization, Description of Co
Organization, Description of Company's Business and Basis of Presentation | 9 Months Ended |
Aug. 31, 2017 | |
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 | 9 Months Ended |
Aug. 31, 2017 | |
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 nine months ended August 31, 2017 and August 31, 2016 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 its suppliers. The Company purchases the merchandise from the supplier and has the supplier directly ship the merchandise to the customer through the freight forwarder. Title passes to the customer upon the merchandise being received by a freight forwarder. Direct shipments were approximately $2,825,000 and $2,885,000 for the nine months ended August 31, 2017 and August 31, 2016 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 $230,646 and $301,396 for the nine months ended August 31, 2017 and August 31, 2016 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 $3,741,000 and $6,434,000 for the nine months ended August 31, 2017 and August 31, 2016 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, 2017 was $1,144,000. At August 31, 2017, the Company has a reserve against slow moving and obsolete inventory of $262,874. 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 in a limited number of financial institutions. At August 31, 2017 and November 30, 2016, the Company’s uninsured cash balances totaled $972,872 and $4,550,807, 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 I. The Company follows the provisions of the Accounting Standards Codification (“ASC”) 740, “Income Taxes.” 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, 2013 , The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of interest expense. There was no accrued interest or penalties associated with any unrecognized benefits, nor was any interest expense recognized during the nine months ended August 31, 2017 and August 31, 2016. (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 $8,070 and $4,991 for the nine months ended August 31, 2017 and August 31, 2016 respectively. (13) Earnings (Loss) Per Share Basic loss (earnings) per share includes no dilution and is computed by dividing net loss (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 will be exercised for shares of common stock. Dilutive securities are excluded from diluted weighted shares outstanding for the nine months ended August 31, 2017 since the Company had a net loss in the period and including the securities would be anti-dilutive. Total potentially dilutive shares excluded from diluted weighted shares outstanding at August 31, 2017 and August 31, 2016 totaled 402,000 and 518,991, respectively. (14) Stock Based Compensation Stock Based Compensation to Employees The Company accounts for its stock-based compensation for employees in accordance with 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 | 9 Months Ended |
Aug. 31, 2017 | |
Fixed Assets [Abstract] | |
FIXED ASSETS | NOTE C – FIXED ASSETS Fixed assets consist of the following: August 31, November 30, 2017 2016 Furniture and Fixtures $ 327,971 $ 327,971 Leasehold Improvements 962,637 956,637 Computer Equipment 991,764 982,906 Less-Accumulated Depreciation (2,209,187 ) (2,185,540 ) Net Fixed Assets $ 73,185 $ 81,974 Depreciation and amortization expense for the nine months ended August 31, 2017 and August 31, 2016 was $23,647 and $23,448, respectively. |
Line of Credit
Line of Credit | 9 Months Ended |
Aug. 31, 2017 | |
Line of Credit [Abstract] | |
LINE OF CREDIT | NOTE D – LINE OF CREDIT In February 2017, the Company obtained a line of credit with a bank for up to $3,000,000 (the “Credit Line”). Borrowings under the Credit Line are due upon demand and accrue interest at the greater of the prime rate or the LIBOR rate plus two percent (and may be increased by three percent in the event the Company fails to (i) repay all amounts due on the Credit Line upon demand or (ii) comply with any terms or conditions relating to the Credit Line). As of August 31, 2017, the balance on the Credit Line was $600,000. As of August 31, 2017, the Company was not in compliance with the covenant for the debt service coverage ratio. |
Accrued Expenses
Accrued Expenses | 9 Months Ended |
Aug. 31, 2017 | |
Accrued Expenses [Abstract] | |
ACCRUED EXPENSES | NOTE E – ACCRUED EXPENSES Accrued expenses consist of the following: August 31, November 30, 2017 2016 Commissions $ 226,268 $ 281,888 Preferred Stock Dividends 136,569 131,569 Other accrued expenses 147,090 321,465 Accrued Professional Fees 443,091 809,960 $ 953,018 $ 1,544,882 |
Retirement Plan
Retirement Plan | 9 Months Ended |
Aug. 31, 2017 | |
Retirement Plan [Abstract] | |
RETIREMENT PLAN | NOTE F – 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. The Company makes a matching contribution of twenty percent (20%) of each employee’s contribution 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 $1,229,000 at November 30, 2016. Pension expense for the nine months ended August 31, 2017 and August 31, 2016 was $773 and $1,535, respectively. |
Shareholders' Equity
Shareholders' Equity | 9 Months Ended |
Aug. 31, 2017 | |
Shareholders' Equity [Abstract] | |
SHAREHOLDERS' EQUITY | NOTE G – 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 Stock”). None of the Series A Preferred Stock is outstanding as of August 31, 2017. In November 2000, the Company authorized 200,000 shares of preferred stock as Voting Redeemable Convertible Series B Preferred Stock (“Series B Preferred Stock”). None of the Series B Preferred Stock is outstanding as of August 31, 2017. 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. In July 2015, 4,200 shares of Series C Preferred were exchanged for 42,000 shares of common stock and $29,838 in accrued dividends. Dividends aggregating $136,569 have not been paid for the semi-annual periods ended December 31, 2001 through the semi-annual payment due June 30, 2017. The Company has accrued these dividends. At August 31, 2017, there are 10,000 shares of Series C Preferred issued and outstanding. In October 2016, the Company authorized 75,000 shares of preferred stock as Voting Non-Redeemable Convertible Series D Preferred Stock (“Series D Preferred”). None of the Series D Preferred Stock is outstanding as of August 31, 2017. [2] 2010 Incentive Stock Plan In March 2010, the Company adopted, and in April 2010 the shareholders ratified, the 2010 Incentive Stock Plan (“2010 Incentive Plan”). The 2010 Incentive 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. Activity in the 2010 Incentive Plan for the nine months ended August 31, 2017 is summarized as follows: Weighted Average Shares Exercise Price Options outstanding December 1, 2016 352,000 $ 0.87 Options issued in the nine months ended August 31, 2017 - $ - Options exercised in the nine months ended August 31, 2017 - $ - Options cancelled in the nine months ended August 31, 2017 (50,000 ) $ 0.51 Options outstanding at August 31, 2017 302,000 $ 0.92 Options exercisable at August 31, 2017 302,000 $ 0.92 [3] 2015 Equity Incentive Plan In November 2015, the Company adopted and its shareholders ratified, the 2015 Equity Incentive Plan (“2015 Incentive Plan”). The 2015 Incentive Plan provides for the grant of awards to officers, employees, directors or consultants to the Company to purchase up to an aggregate of 1,500,000 shares of common stock. In May 2016 a total of 99,151 shares were issued to the Company’s officers as part of their 2015 bonus compensation under the 2015 Incentive Plan. Stock Compensation In May 2016, the Company awarded one employee director 67,901 shares of its common stock and another employee director 31,250 shares of its common stock under the 2015 Incentive Plan as part of their 2015 bonus. The Company recorded a cost of $74,363 relating to the issuance of these shares. In October 2016 one employee director exercised options to acquire 50,000 shares of common stock at $0.82 per share and 62,500 shares of common stock at $0.80 per share. In October 2016, one employee director exercised options to acquire 25,000 shares of common stock at $0.82 per share and 45,938 shares of common stock at $0.80 per share. The intrinsic value of the exercisable options at August 31, 2017 totaled $0. At August 31, 2017 the weighted average remaining life of the stock options is 1.3 years. At August 31, 2017, there was no unrecognized compensation cost related to the stock options granted under the Company’s incentive plans. [4] Authorized Repurchase of Shares In November 2015, the Board of Directors authorized the Company to purchase up to $500,000 of common stock in the open market or in privately negotiated transactions. Pursuant to such authority and pursuant to Rule 10b-18 under the Securities Exchange Act of 1934, as amended (“Exchange Act”), a total of 57,283 shares were repurchased by the Company for approximately $48,300. In January 2017, the Company terminated its repurchase program. In March 2017, the Company completed a tender offer whereby it purchased for cash 5,000,000 shares of its common stock, at a price of $1.43 per share, or $7,150,000. [5] Compensation of Directors Compensation for each non-employee director is $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). |
Settlement Agreement
Settlement Agreement | 9 Months Ended |
Aug. 31, 2017 | |
Settlement Agreement [Abstract] | |
SETTLEMENT AGREEMENT | NOTE H – SETTLEMENT AGREEMENT On or about October 31, 2016, Michael D. Tofias and Bradley P. Rexroad (collectively, the “Stockholders”) filed a Complaint and Motion for Preliminary Injunction against the Company in the eighth Judicial District Court, Clark County, Nevada, Case No. A-16-745890-B, seeking relief including, inter alia, immediate inspection of certain books and records and a 60-day postponement of the scheduled annual meeting of stockholders (“Annual Meeting”). On November 16, 2016, after the Company postponed the Annual Meeting and provided certain books and records to the Stockholders, the Stockholders filed an Amended Complaint, which named all members of the Board as defendants and alleged that the directors had breached their fiduciary duty to the Stockholders. On December 1, 2016, following a hearing, the Court denied the request for a preliminary injunction. On December 22, 2016, the Company entered into a settlement agreement (the “Settlement Agreement”) with the Stockholders. The Settlement Agreement provides that: ● the Stockholders irrevocably withdraw their director nominations for the Board and stockholder proposals for the Company’s annual meeting of stockholders for fiscal year 2015 (the “Meeting”); ● the Stockholders will vote all of their shares of common stock of the Company in accordance with the Board’s recommendations with respect to the election of the Board’s director nominees, the ratification of the Company’s independent registered public accounting firm for the fiscal year ending November 30, 2016 (the “2017 Meeting”) and the ratification of the Company’s rights plan; ● the Company will hold the Meeting on January 5, 2017 and will hold its annual meeting of stockholders for fiscal year 2016 by December 29, 2017; ● the Board and the Stockholders will identify a mutually acceptable independent director to join the Board as a Class C director by February 28, 2017 and the Board will include that new director among its director nominees for the 2017 Meeting; ● the Company will not make any stock or option grants or grant any other non-cash compensation to its current officers and directors until December 23, 2017; ● the Company will take all steps to (i) change its state of incorporation from the State of Nevada to the State of Delaware and (ii) declassify the Board on a rolling basis by June 30, 2017, and the Company will convene a special meeting of stockholders of the Company for the purpose of approving such actions, at which meeting the Stockholders and the Insiders will vote all of their shares of common stock of the Company in favor of such actions; ● The Company will commence an issuer tender offer to all of its stockholders to repurchase at least 5,000,000 shares of its common stock at at price of $1.43 per share (the “Tender Offer”), which Tender Offer will be completed by March 15, 2017. ● until the day after the announcement of the completion of the Tender Offer, the Board will be composed of no more than seven individuals; ● the Stockholders will tender all of the shares of common stock of the Company that they hold beneficially or of record in the Tender Offer, subject to limited exceptions; ● the Company’s officers and directors will not participate in the Tender Offer and will not transfer or sell any of their shares until six months after the Tender Offer is completed; ● subject to certain conditions, if the Tender Offer is not completed by March 15, 2017, the Company will (i) appoint the Stockholders to the Board as Class A directors with terms expiring at the Company’s annual meeting of stockholders for fiscal year 2018 (the “2019 Meeting”) and (ii) reduce the size of the Board to six directors, including the Stockholders; ● the Stockholders will withdraw with prejudice their lawsuit against the Company and the Insiders pending in the State of Nevada; and ● the Stockholders will be subject to customary standstill provisions until the termination of the Settlement Agreement. Pursuant to the Settlement Agreement, the Company also agreed to reimburse the expenses of the Stockholders associated with their investment in the Company, including their proxy solicitation and litigation costs, in an amount not to exceed $300,000. The Settlement Agreement terminates on the date that is 15 business days prior to the deadline for the submission of director nomination and stockholder proposals for the 2019 Meeting. |
Income Taxes
Income Taxes | 9 Months Ended |
Aug. 31, 2017 | |
Income Taxes [Abstract] | |
INCOME TAXES | NOTE I – 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, 2017 2016 Deferred Tax Assets Net operating loss $ 3,937,672 $ 4,208,030 Allowance for bad debts 49,643 49,276 Inventory 97,126 100,446 Deferred Rent 14,505 15,961 Depreciation 148,548 149,172 Total deferred tax assets 4,247,494 4,522,885 Valuation allowance (3,315,357 ) (3,608,225 ) Total $ 932,137 $ 914,660 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 $293,000 during the nine months ended August 31, 2017. 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: Nine Months Ended August 31, August 31, Current: Federal $ 821 $ 5,217 States 13,415 17,667 14,236 22,884 Deferred: Federal (13,544 ) 54,796 States (3,933 ) 15,908 (17,477 ) 70,704 Provision for income taxes $ (3,241 ) $ 93,588 The Company files a consolidated income tax return with its wholly-owned subsidiaries and has net operating loss carryforwards of approximately $9,844,000 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, 2017 2016 U.S Federal Income tax statutory rate (34 )% 34 % Valuation allowance 30 % (22 )% State income taxes (3 )% 8 % Other - - Effective tax rate (7 )% 20 % |
Rental Commitments
Rental Commitments | 9 Months Ended |
Aug. 31, 2017 | |
Rental Commitments [Abstract] | |
RENTAL COMMITMENTS | NOTE J – 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 $173,000 for the year ended November 30, 2016, 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 June 2015, the Company renewed its lease to rent office space and a warehouse in Hong Kong for two years and is currently in negotiations to renew the lease. Annual minimum rental payments for this space are approximately $58,500. The Company’s future minimum rental commitments at August 31, 2017 are as follows: 2018 $ 178,662 2019 $ 182,236 2020 $ 185,880 2021 $ 15,516 $ 562,294 Net rental expense for the nine months ended August 31, 2017 and August 31, 2016 were $235,334 and $233,504 respectively, of which $192,102 and $189,522 respectively, was paid to the Related Company. |
Employment and Other Agreements
Employment and Other Agreements | 9 Months Ended |
Aug. 31, 2017 | |
Employment and Other Agreements [Abstract] | |
EMPLOYMENT AND OTHER AGREEMENTS | NOTE K – EMPLOYMENT AND OTHER AGREEMENTS In February 2016, the Company entered into revised employment agreements with two officers of the Company. Pursuant to these agreements, the base salary for one officer is $275,000 and the base salary for the other officer is $225,000. The agreements continue until terminated by either party. The Company’s compensation committee may award these officers with bonuses and will review the base salary amounts for each of the officers on an annual basis to determine if any changes to the base salary amounts need to be made and may also award these officers with annual bonuses. Pursuant to the employment agreements, the officers are prohibited from engaging in activities which are competitive with those of the Company during their employment with the Company and for one year following termination. If the agreement is terminated other than for cause, the officer would be entitled to all base salary earned through the date of termination, accrued but unused vacation, all vested equity, and bonus amounts payable to the officer through the date of termination. The officers would also be entitled to receive an additional thirty-six months of annual compensation equal to the average of his base salary and bonus for the three calendar years prior to the date of termination, payable in accordance with the Company’s regular payroll practice over a 52-week period. |
Major Customers
Major Customers | 9 Months Ended |
Aug. 31, 2017 | |
Major Customers [Abstract] | |
MAJOR CUSTOMERS | NOTE L – MAJOR CUSTOMERS The Company had one customer who accounted for 13% of net sales for the nine months ended August 31, 2017 and two customers who accounted for 12% and 11% of net sales for the nine months ended August 31, 2016. The Company had no customers who accounted for 10% of accounts receivable at August 31, 2017 and November 30, 2016. |
Major Suppliers
Major Suppliers | 9 Months Ended |
Aug. 31, 2017 | |
Major Suppliers [Abstract] | |
MAJOR SUPPLIERS | NOTE M – MAJOR SUPPLIERS During the nine months ended August 31, 2017 and August 31, 2016, there was one foreign supplier accounting for 49% and 51% of total inventory purchased. The Company purchases substantially all of its products overseas. For the nine months ended August 31, 2017, the Company purchased 52% of its products from Taiwan, 14% from Hong Kong, 30% 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, 2017 | |
Export Sales [Abstract] | |
EXPORT SALES | NOTE N – EXPORT SALES The Company’s export sales were as follows: Nine Months Ended August 31, August 31, 2017 2016 Canada 2,945,872 3,397,316 China 3,506,149 4.597,904 Other Asian Countries 1,391,537 993,521 South America 300,130 235,960 Europe 1,042,237 314,814 Revenues are attributed to countries based on location of customer. |
Summary of Significant Accoun20
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Aug. 31, 2017 | |
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 nine months ended August 31, 2017 and August 31, 2016 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 its suppliers. The Company purchases the merchandise from the supplier and has the supplier directly ship the merchandise to the customer through the freight forwarder. Title passes to the customer upon the merchandise being received by a freight forwarder. Direct shipments were approximately $2,825,000 and $2,885,000 for the nine months ended August 31, 2017 and August 31, 2016 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 $230,646 and $301,396 for the nine months ended August 31, 2017 and August 31, 2016 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 $3,741,000 and $6,434,000 for the nine months ended August 31, 2017 and August 31, 2016 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, 2017 was $1,144,000. At August 31, 2017, the Company has a reserve against slow moving and obsolete inventory of $262,874. 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 in a limited number of financial institutions. At August 31, 2017 and November 30, 2016, the Company’s uninsured cash balances totaled $972,872 and $4,550,807, 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 I. The Company follows the provisions of the Accounting Standards Codification (“ASC”) 740, “Income Taxes.” 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, 2013 , The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of interest expense. There was no accrued interest or penalties associated with any unrecognized benefits, nor was any interest expense recognized during the nine months ended August 31, 2017 and August 31, 2016. |
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 $8,070 and $4,991 for the nine months ended August 31, 2017 and August 31, 2016 respectively. |
Earnings (Loss) Per Share | (13) Earnings (Loss) Per Share Basic loss (earnings) per share includes no dilution and is computed by dividing net loss (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 will be exercised for shares of common stock. Dilutive securities are excluded from diluted weighted shares outstanding for the nine months ended August 31, 2017 since the Company had a net loss in the period and including the securities would be anti-dilutive. Total potentially dilutive shares excluded from diluted weighted shares outstanding at August 31, 2017 and August 31, 2016 totaled 402,000 and 518,991, 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 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 Accoun21
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Aug. 31, 2017 | |
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) | 9 Months Ended |
Aug. 31, 2017 | |
Fixed Assets [Abstract] | |
Schedule of fixed assets | August 31, November 30, 2017 2016 Furniture and Fixtures $ 327,971 $ 327,971 Leasehold Improvements 962,637 956,637 Computer Equipment 991,764 982,906 Less-Accumulated Depreciation (2,209,187 ) (2,185,540 ) Net Fixed Assets $ 73,185 $ 81,974 |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 9 Months Ended |
Aug. 31, 2017 | |
Accrued Expenses [Abstract] | |
Schedule of accrued expenses | August 31, November 30, 2017 2016 Commissions $ 226,268 $ 281,888 Preferred Stock Dividends 136,569 131,569 Other accrued expenses 147,090 321,465 Accrued Professional Fees 443,091 809,960 $ 953,018 $ 1,544,882 |
Shareholders' Equity (Tables)
Shareholders' Equity (Tables) | 9 Months Ended |
Aug. 31, 2017 | |
Shareholders' Equity [Abstract] | |
Schedule of stock option incentive plan activity | Weighted Average Shares Exercise Price Options outstanding December 1, 2016 352,000 $ 0.87 Options issued in the nine months ended August 31, 2017 - $ - Options exercised in the nine months ended August 31, 2017 - $ - Options cancelled in the nine months ended August 31, 2017 (50,000 ) $ 0.51 Options outstanding at August 31, 2017 302,000 $ 0.92 Options exercisable at August 31, 2017 302,000 $ 0.92 |
Income Taxes (Tables)
Income Taxes (Tables) | 9 Months Ended |
Aug. 31, 2017 | |
Income Taxes [Abstract] | |
Schedule of deferred income taxes | August 31, November 30, 2017 2016 Deferred Tax Assets Net operating loss $ 3,937,672 $ 4,208,030 Allowance for bad debts 49,643 49,276 Inventory 97,126 100,446 Deferred Rent 14,505 15,961 Depreciation 148,548 149,172 Total deferred tax assets 4,247,494 4,522,885 Valuation allowance (3,315,357 ) (3,608,225 ) Total $ 932,137 $ 914,660 |
Schedule of income tax expense | Nine Months Ended August 31, August 31, Current: Federal $ 821 $ 5,217 States 13,415 17,667 14,236 22,884 Deferred: Federal (13,544 ) 54,796 States (3,933 ) 15,908 (17,477 ) 70,704 Provision for income taxes $ (3,241 ) $ 93,588 |
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, 2017 2016 U.S Federal Income tax statutory rate (34 )% 34 % Valuation allowance 30 % (22 )% State income taxes (3 )% 8 % Other - - Effective tax rate (7 )% 20 % |
Rental Commitments (Tables)
Rental Commitments (Tables) | 9 Months Ended |
Aug. 31, 2017 | |
Rental Commitments [Abstract] | |
Schedule of future minimum rental commitments | 2018 $ 178,662 2019 $ 182,236 2020 $ 185,880 2021 $ 15,516 $ 562,294 |
Export Sales (Tables)
Export Sales (Tables) | 9 Months Ended |
Aug. 31, 2017 | |
Export Sales [Abstract] | |
Schedule of export sales | Nine Months Ended August 31, August 31, 2017 2016 Canada 2,945,872 3,397,316 China 3,506,149 4.597,904 Other Asian Countries 1,391,537 993,521 South America 300,130 235,960 Europe 1,042,237 314,814 |
Organization, Description of 28
Organization, Description of Company's Business and Basis of Presentation (Details) | May 31, 2002Shareholdershares | Aug. 31, 2017shares | Nov. 30, 2016shares | Aug. 31, 2010shares |
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 for issuance | 75,000,000 | 75,000,000 | 75,000,000 |
Summary of Significant Accoun29
Summary of Significant Accounting Policies (Details) | 9 Months Ended |
Aug. 31, 2017 | |
Furniture, fixtures and equipment [Member] | Maximum [Member] | |
Property, Plant and Equipment [Line Items] | |
Property, plant and equipment, useful life | 7 years |
Furniture, fixtures and equipment [Member] | Minimum [Member] | |
Property, Plant and Equipment [Line Items] | |
Property, plant and equipment, useful life | 5 years |
Computer equipment [Member] | |
Property, Plant and Equipment [Line Items] | |
Property, plant and equipment, useful life | 5 years |
Leasehold Improvements [Member] | |
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 Accoun30
Summary of Significant Accounting Policies (Details Textual) - USD ($) | 9 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | Nov. 30, 2016 | |
Summary of Significant Accounting Policies (Textual) | |||
Direct shipments revenue | $ 2,825,000 | $ 2,885,000 | |
Commission revenue | 230,646 | 301,396 | |
Revenues from distribution agreements | 3,741,000 | 6,434,000 | |
Inventory in transit from foreign suppliers | 1,144,000 | ||
Reserve against slow moving and obsolete inventory | 262,874 | ||
Amount of uninsured cash balances | 972,872 | $ 4,550,807 | |
Shipping costs | $ 8,070 | $ 4,991 | |
Diluted weighted shares outstanding | 402,000 | 518,991 |
Fixed Assets (Details)
Fixed Assets (Details) - USD ($) | Aug. 31, 2017 | Nov. 30, 2016 |
Schedule of fixed assets | ||
Less-Accumulated Depreciation | $ (2,209,187) | $ (2,185,540) |
Net Fixed Assets | 73,185 | 81,974 |
Furniture and Fixtures [Member] | ||
Schedule of fixed assets | ||
Fixed assets gross | 327,971 | 327,971 |
Leasehold Improvements [Member] | ||
Schedule of fixed assets | ||
Fixed assets gross | 962,637 | 956,637 |
Computer Equipment [Member] | ||
Schedule of fixed assets | ||
Fixed assets gross | $ 991,764 | $ 982,906 |
Fixed Assets (Details Textual)
Fixed Assets (Details Textual) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2017 | Aug. 31, 2016 | |
Fixed Assets (Textual) | ||||
Depreciation and amortization expense | $ 7,882 | $ 7,816 | $ 23,647 | $ 23,448 |
Line of Credit (Details)
Line of Credit (Details) - USD ($) | 9 Months Ended | |
Aug. 31, 2017 | Feb. 28, 2017 | |
Line of Credit (Textual) | ||
Line of credit | $ 600,000 | $ 3,000,000 |
Line of credit, interest rate, description | Borrowings under the Credit Line are due upon demand and accrue interest at the greater of the prime rate or the LIBOR rate plus two percent (and may be increased by three percent in the event the Company fails to (i) repay all amounts due on the Credit Line upon demand or (ii) comply with any terms or conditions relating to the Credit Line). |
Accrued Expenses (Details)
Accrued Expenses (Details) - USD ($) | Aug. 31, 2017 | Nov. 30, 2016 |
Schedule of accrued expenses | ||
Commissions | $ 226,268 | $ 281,888 |
Preferred Stock Dividends | 136,569 | 131,569 |
Other accrued expenses | 147,090 | 321,465 |
Accrued Professional Fees | 443,091 | 809,960 |
Accrued expenses, Total | $ 953,018 | $ 1,544,882 |
Retirement Plan (Details)
Retirement Plan (Details) - USD ($) | 1 Months Ended | 9 Months Ended | ||
Jun. 30, 1997 | Aug. 31, 2017 | Aug. 31, 2016 | Nov. 30, 2016 | |
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 | $ 1,229,000 | |||
Pension expense | $ 773 | $ 1,535 |
Shareholders' Equity (Details)
Shareholders' Equity (Details) - 2010 Incentive Stock Plan [Member] - Stock options [Member] | 9 Months Ended |
Aug. 31, 2017$ / sharesshares | |
Shares | |
Options outstanding December 1, 2016 | shares | 352,000 |
Options issued in the nine months ended August 31, 2017 | shares | |
Options exercised in the nine months ended August 31, 2017 | shares | |
Options cancelled in the nine months ended August 31, 2017 | shares | (50,000) |
Options outstanding at August 31, 2017 | shares | 302,000 |
Options exercisable at August 31, 2017 | shares | 302,000 |
Weighted Average Exercise Price | |
Options outstanding December 1, 2016 | $ / shares | $ 0.87 |
Options issued in the nine months ended August 31, 2017 | $ / shares | |
Options exercised in the nine months ended August 31, 2017 | $ / shares | |
Options cancelled in the nine months ended August 31, 2017 | $ / shares | 0.51 |
Options outstanding at August 31, 2017 | $ / shares | 0.92 |
Options exercisable at August 31, 2017 | $ / shares | $ 0.92 |
Shareholders' Equity (Details T
Shareholders' Equity (Details Textual) - USD ($) | Mar. 14, 2011 | Mar. 31, 2017 | Jul. 31, 2015 | Apr. 30, 2015 | Oct. 31, 2014 | Feb. 28, 2006 | Apr. 30, 2002 | Apr. 30, 2001 | Nov. 30, 2000 | Aug. 31, 2017 | Nov. 30, 2016 | Oct. 31, 2016 | Aug. 31, 2010 | Dec. 31, 2001 | Jan. 31, 2000 | Feb. 29, 1996 |
Shareholders' Equity (Textual) | ||||||||||||||||
Preferred stock, shares authorized | 5,000,000 | 5,000,000 | ||||||||||||||
Dividend payable | $ 136,569 | |||||||||||||||
Number of shares repurchased during the period | 5,000,000 | |||||||||||||||
Common Stock [Member] | ||||||||||||||||
Shareholders' Equity (Textual) | ||||||||||||||||
Number of shares repurchased during the period | (57,283) | |||||||||||||||
Preferred Stock [Member] | ||||||||||||||||
Shareholders' Equity (Textual) | ||||||||||||||||
Preferred stock, shares authorized | 5,000,000 | 1,000,000 | ||||||||||||||
Non-Voting Redeemable Convertible Series A Preferred Stock ("Series A Preferred") [Member] | ||||||||||||||||
Shareholders' Equity (Textual) | ||||||||||||||||
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] | ||||||||||||||||
Shareholders' Equity (Textual) | ||||||||||||||||
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] | ||||||||||||||||
Shareholders' Equity (Textual) | ||||||||||||||||
Preferred stock, shares authorized | 100,000 | 100,000 | 100,000 | |||||||||||||
Preferred stock, shares outstanding | 10,000 | 10,000 | ||||||||||||||
Preferred stock, shares issued | 10,000 | 10,000 | ||||||||||||||
Number of shares converted into common stock upon conversion | 4,200 | 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 | ||||||||||||||
Amount paid for repurchase under Standstill and Non-Disparagement Agreement | $ 225,000 | |||||||||||||||
Number of shares repurchased during the period | 10,000 | |||||||||||||||
Accrued dividends | $ 29,838 | $ 65,000 | $ 50,000 | |||||||||||||
Number of preferred stock returned for cancellation in exchange for shares of common stock | 9,000 | 7,500 | ||||||||||||||
Number of common shares issued in conversion of preferred stock | 112,500 | 110,000 | 20,000 | |||||||||||||
Non-Voting Redeemable Convertible Series C Preferred Stock ("Series C Preferred") [Member] | Common Stock [Member] | ||||||||||||||||
Shareholders' Equity (Textual) | ||||||||||||||||
Number of shares converted into common stock upon conversion | 42,000 | |||||||||||||||
Stock repurchased and cancelled | 252,000 | |||||||||||||||
Voting Non-Redeemable Convertible Series D Preferred Stock ("Series D Preferred") [Member] | ||||||||||||||||
Shareholders' Equity (Textual) | ||||||||||||||||
Preferred stock, shares authorized | 75,000 | 75,000 | 75,000 | |||||||||||||
Preferred stock, shares outstanding | ||||||||||||||||
Preferred stock, shares issued |
Shareholders' Equity (Details38
Shareholders' Equity (Details Textual 1) - USD ($) | 1 Months Ended | 9 Months Ended | 12 Months Ended | ||
Oct. 31, 2016 | May 31, 2016 | Mar. 31, 2010 | Aug. 31, 2017 | Nov. 30, 2015 | |
Stock options [Member] | |||||
Shareholders' Equity (Textual) | |||||
Recorded cost of shares | $ 0 | ||||
Weighted average remaining life | 1 year 3 months 19 days | ||||
Stock options [Member] | Another employee director [Member] | |||||
Shareholders' Equity (Textual) | |||||
Number of common shares purchased for options granted | 31,250 | ||||
Options granted cost | $ 74,363 | ||||
Stock options [Member] | One employee director [Member] | |||||
Shareholders' Equity (Textual) | |||||
Number of common shares purchased for options granted | 67,901 | ||||
Options granted cost | $ 74,363 | ||||
Exercise of options, shares | 50,000 | ||||
Options exercised shares of common stock per share | $ 0.82 | ||||
Stock options [Member] | One employee director 1 [Member] | |||||
Shareholders' Equity (Textual) | |||||
Exercise of options, shares | 62,500 | ||||
Options exercised shares of common stock per share | $ 0.80 | ||||
Stock options [Member] | One employee director 2 [Member] | |||||
Shareholders' Equity (Textual) | |||||
Exercise of options, shares | 25,000 | ||||
Options exercised shares of common stock per share | $ 0.82 | ||||
Stock options [Member] | One employee director 3 [Member] | |||||
Shareholders' Equity (Textual) | |||||
Exercise of options, shares | 45,938 | ||||
Options exercised shares of common stock per share | $ 0.80 | ||||
2010 Incentive Stock Plan [Member] | Stock options [Member] | |||||
Shareholders' Equity (Textual) | |||||
Number of common shares purchased for options granted | 1,500,000 | ||||
Exercise of options, shares | |||||
Options exercised shares of common stock per share | |||||
2015 Incentive Stock Plan [Member] | Officer One [Member] | |||||
Shareholders' Equity (Textual) | |||||
Issuance of shares as compensation, shares | 99,151 | ||||
2015 Incentive Stock Plan [Member] | Stock options [Member] | |||||
Shareholders' Equity (Textual) | |||||
Number of common shares purchased for options granted | 1,500,000 |
Shareholders' Equity (Details39
Shareholders' Equity (Details Textual 2) - USD ($) | 1 Months Ended | 12 Months Ended | |
Mar. 31, 2017 | Nov. 30, 2015 | Aug. 31, 2017 | |
Shareholders' Equity (Textual) | |||
Stock repurchased during period, Value | $ 7,150,000 | ||
Board of Directors [Member] | |||
Shareholders' Equity (Textual) | |||
Stock repurchased during period, Value | $ 500,000 | ||
Repurchase of common stock, Shares | 57,283 | ||
Repurchase of common stock, Value | $ 48,300 |
Shareholders' Equity (Details40
Shareholders' Equity (Details Textual 3) - USD ($) | 9 Months Ended | |
Aug. 31, 2017 | Mar. 31, 2017 | |
Shareholders' Equity (Textual) | ||
Common stock, per share | $ 1.43 | |
Non-employee director [Member] | Stock options [Member] | ||
Shareholders' Equity (Textual) | ||
Compensation | $ 3,500 | |
Non-employee director one [Member] | Stock options [Member] | ||
Shareholders' Equity (Textual) | ||
Compensation | $ 2,500 |
Settlement Agreement (Details)
Settlement Agreement (Details) - USD ($) | 1 Months Ended | 9 Months Ended | |
Mar. 31, 2017 | Dec. 22, 2016 | Aug. 31, 2017 | |
Settlement Agreement (Textual) | |||
Repurchase of common stock | 5,000,000 | ||
Common stock, per share | $ 1.43 | ||
Settlement Agreement [Member] | |||
Settlement Agreement (Textual) | |||
Repurchase of common stock | 5,000,000 | ||
Common stock, per share | $ 1.43 | ||
Tender offer, description | Tender Offer is not completed by March 15, 2017, the Company will (i) appoint the Stockholders to the Board as Class A directors with terms expiring at the Company's annual meeting of stockholders for fiscal year 2018 (the "2019 Meeting") and (ii) reduce the size of the Board to six directors, including the Stockholders. | ||
Litigation costs | $ 300,000 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | Aug. 31, 2017 | Nov. 30, 2016 |
Deferred Tax Assets | ||
Net operating loss | $ 3,937,672 | $ 4,208,030 |
Allowance for bad debts | 49,643 | 49,276 |
Inventory | 97,126 | 100,446 |
Deferred Rent | 14,505 | 15,961 |
Depreciation | 148,548 | 149,172 |
Total deferred tax assets | 4,247,494 | 4,522,885 |
Valuation allowance | (3,315,357) | (3,608,225) |
Total | $ 932,137 | $ 914,660 |
Income Taxes (Details 1)
Income Taxes (Details 1) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2017 | Aug. 31, 2016 | |
Current: | ||||
Federal | $ 821 | $ 5,217 | ||
States | 13,415 | 17,667 | ||
Current, total | 14,236 | 22,884 | ||
Deferred: | ||||
Federal | (13,544) | 54,796 | ||
States | (3,933) | 15,908 | ||
Deferred, total | (17,477) | 70,704 | ||
Provision for income taxes | $ 125,727 | $ 80,067 | $ (3,241) | $ 93,588 |
Income Taxes (Details 2)
Income Taxes (Details 2) | 3 Months Ended | |
Aug. 31, 2017 | Aug. 31, 2016 | |
Schedule of difference between expected income tax rate using statutory federal tax rate and company's effective rate | ||
U.S Federal Income tax statutory rate | (34.00%) | 34.00% |
Valuation allowance | 30.00% | (22.00%) |
State income taxes | (3.00%) | 8.00% |
Other | ||
Effective tax rate | (7.00%) | 20.00% |
Income Taxes (Details Textual)
Income Taxes (Details Textual) | 9 Months Ended |
Aug. 31, 2017USD ($) | |
Income Taxes (Textual) | |
Valuation allowance for deferred tax assets | $ 293,000 |
Net operating loss carryforwards | $ 9,844,000 |
Net operating loss carryforwards, expiration date | Nov. 30, 2020 |
Rental Commitments (Details)
Rental Commitments (Details) | Aug. 31, 2017USD ($) |
Schedule of future minimum rental commitments | |
2,018 | $ 178,662 |
2,019 | 182,236 |
2,020 | 185,880 |
2,021 | 15,516 |
Future minimum rental commitments | $ 562,294 |
Rental Commitments (Details Tex
Rental Commitments (Details Textual) - USD ($) | Jun. 30, 2015 | Aug. 31, 2017 | Aug. 31, 2016 | Nov. 30, 2016 |
Rental Commitments (Textual) | ||||
Lease expiration period | Nov. 30, 2020 | |||
Net rental expense | $ 235,334 | $ 233,504 | ||
Related Company [Member] | ||||
Rental Commitments (Textual) | ||||
Annual minimum rental payments | $ 173,000 | |||
Percentage of increase in rental payment | 3.00% | |||
Net rental expense | $ 192,102 | $ 189,522 | ||
Related Company [Member] | Hong Kong [Member] | ||||
Rental Commitments (Textual) | ||||
Annual minimum rental payments | $ 58,500 | |||
Term of lease | 2 years |
Employment and Other Agreemen48
Employment and Other Agreements (Details) | 1 Months Ended |
Feb. 29, 2016USD ($)Shareholder | |
Employment and Other Agreements (Textual) | |
Number of officers involved in employment agreements | Shareholder | 2 |
Period officer prohibited involving in competitive activities during employment, description | One year following termination. |
Compensation, description | An additional thirty-six months of annual compensation equal to the average of his base salary and bonus for the three calendar years prior to the date of termination, payable in accordance with the Company's regular payroll practice over a 52-week period. |
Officer One [Member] | |
Employment and Other Agreements (Textual) | |
Base salary | $ 275,000 |
Officer Two [Member] | |
Employment and Other Agreements (Textual) | |
Base salary | $ 225,000 |
Major Customers (Details)
Major Customers (Details) | 1 Months Ended | 9 Months Ended | |
Nov. 30, 2016 | Aug. 31, 2017Customers | Aug. 31, 2016CustomersSupplier | |
Sales [Member] | |||
Major Customers (Textual) | |||
Number of customers | 1 | ||
Percentage of concentration | 13.00% | ||
Sales [Member] | Customer One [Member] | |||
Major Customers (Textual) | |||
Number of customers | 2 | ||
Percentage of concentration | 12.00% | ||
Sales [Member] | Customer Two [Member] | |||
Major Customers (Textual) | |||
Number of customers | Supplier | 2 | ||
Percentage of concentration | 11.00% | ||
Accounts receivable [Member] | |||
Major Customers (Textual) | |||
Percentage of concentration | 10.00% | 10.00% |
Major Suppliers (Details)
Major Suppliers (Details) - Supplier concentration risk [Member] - Total Inventory Purchased [Member] - Supplier | 9 Months Ended | |
Aug. 31, 2017 | Aug. 31, 2016 | |
Foreign supplier [Member] | ||
Major Suppliers (Textual) | ||
Percentage of inventory purchased of products | 49.00% | 51.00% |
Number of supplier | 1 | 1 |
Taiwan [Member] | ||
Major Suppliers (Textual) | ||
Percentage of inventory purchased of products | 52.00% | |
Hong Kong [Member] | ||
Major Suppliers (Textual) | ||
Percentage of inventory purchased of products | 14.00% | |
Asia [Member] | ||
Major Suppliers (Textual) | ||
Percentage of inventory purchased of products | 30.00% | |
Overseas outside of Asia [Member] | ||
Major Suppliers (Textual) | ||
Portion of overseas products | Less than 1%. |
Export Sales (Details)
Export Sales (Details) - USD ($) | 9 Months Ended | |
Aug. 31, 2017 | Aug. 31, 2016 | |
Canada [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Export sales | $ 2,945,872 | $ 3,397,316 |
China [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Export sales | 3,506,149 | 4,597,904 |
Other Asian Countries [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Export sales | 1,391,537 | 993,521 |
South America [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Export sales | 300,130 | 235,960 |
Europe [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Export sales | $ 1,042,237 | $ 314,814 |