<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended May 31, 1999
[ ] Transition report pursuant to Section 13 or 15(d) of the Exchange Act
For the transition period from ____________ to ____________
Commission file number 0 - 14188
Surge Components, Inc.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
New York 11-2602030
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1016 Grand Boulevard, Deer Park, NY 11729
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(516) 595 - 1818
- --------------------------------------------------------------------------------
(Issuer's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days
Yes X No
----- ------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by court.
Yes No
----- ------
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: As of June 30, 1999:
4,829,958 shares of common stock, par value $.001 per share.
Transitional Small Business Disclosure Format (check one):
Yes No X
----- ------
<PAGE>
SURGE COMPONENTS, INC. AND SUBSIDIARIES
Index to Form 10-QSB
for the Period Ended May 31, 1999
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets 3 - 4
Consolidated Statements of Income and Comprehensive Income 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7 - 8
Item 2. Management's Discussion and Analysis or Plan of Operation 9 - 13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 14
2
<PAGE>
SURGE COMPONENTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
May 31, November 30,
1 9 9 9 1 9 9 8
-------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 769,204 $1,387,222
Marketable securities 3,182,360 3,237,928
Accounts receivable (net of allowance for
doubtful accounts of $15,724) 1,192,874 1,189,966
Inventory 1,036,959 1,159,111
Prepaid expenses and taxes 168,652 209,213
Cash surrender value 67,841 55,157
---------- ----------
Total current assets 6,417,890 7,238,597
---------- ----------
Fixed assets - net of accumulated depreciation
of $156,767 and $134,036 329,684 324,787
---------- ----------
Other assets:
Security deposits 2,985 2,985
Deferred tax asset 88,549 88,031
---------- ----------
Total other assets 91,534 91,016
---------- ----------
Total assets $6,839,108 $7,654,400
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
SURGE COMPONENTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
May 31, November 30,
1 9 9 9 1 9 9 8
-------- ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 735,321 $1,105,300
Accrued expenses and taxes 167,837 307,960
---------- ----------
Total current liabilities 903,158 1,413,260
---------- ----------
Stockholders' equity:
Preferred stock - $.001 par value stock,
1,000,000 shares authorized, none issued
and outstanding -- -- --
Common stock - $.001 par value stock,
25,000,000 shares authorized,
4,858,958 and 4,852,958 shares issued
and outstanding, respectively 4,859 4,853
Additional paid-in capital 6,385,938 6,369,708
Accumulated other comprehensive income (loss) (22,646) 135,463
Retained deficit (432,201) (268,884)
---------- ----------
Total stockholders' equity 5,935,950 6,241,140
---------- ----------
Total liabilities and stockholders' equity $6,839,108 $7,654,400
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
SURGE COMPONENTS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
May 31, May 31,
1 9 9 9 1 9 9 8 1 9 9 9 1 9 9 8
------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales $4,537,397 $4,255,124 $2,312,431 $1,807,629
Less returns and allowances 38,760 111,640 19,697 39,012
---------- ---------- ---------- ----------
Net sales 4,498,637 4,143,484 2,292,734 1,768,617
Cost of goods sold 3,319,995 3,145,733 1,691,708 1,342,734
---------- ---------- ---------- ----------
Gross profit 1,178,642 997,751 601,026 425,883
---------- ---------- ---------- ----------
Operating expenses:
General and administrative
expenses 934,322 796,748 469,511 401,151
Selling and shipping expenses 491,369 429,615 240,940 235,835
Depreciation 22,731 18,488 11,646 9,244
---------- ---------- ---------- ----------
Total operating expenses 1,448,422 1,244,851 722,097 646,230
---------- ---------- ---------- ----------
Loss from operations (269,780) (247,100) (121,071) (220,347)
Other income and (expense):
Investment income 110,406 142,840 57,417 72,166
Interest expense (2,668) (19,217) (1,672) (12,212)
---------- ---------- ---------- ----------
Loss before income taxes (162,042) (123,477) (65,326) (160,393)
Income taxes 1,275 892 (628) (7,887)
---------- ---------- ---------- ----------
Net loss (163,317) (124,369) (64,698) (152,506)
Other comprehensive (loss) income:
Unrealized holding (loss) gain on
securities arising during the period, net of tax (158,109) 15,983 (19,954) 4,897
---------- ---------- ---------- ----------
Total comprehensive (loss) income $ (321,426) $ (108,386) $ (84,652) $ (147,609)
========== ========== ========== ==========
Weighted average shares outstanding
Basic 4,857,084 4,827,645 4,858,958 4,831,251
Diluted 4,857,084 4,827,645 4,858,958 4,831,251
Earnings (loss) per share
Basic $ (.03) $ (.03) $ (.01) $ (.03)
Diluted $ (.03) $ (.03) $ (.01) $ (.03)
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
SURGE COMPONENTS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
May 31,
1 9 9 9 1 9 9 8
------- -------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (163,317) $ (124,369)
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 22,731 18,488
Deferred income taxes (518) (1,396)
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Accounts receivable (2,908) 621,512
Inventory 122,152 155,302
Other current assets 27,877 31,224
Accounts payable (369,979) (16,019)
Accrued expenses and taxes (140,123) (205,814)
---------- ----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (504,085) 478,928
---------- ----------
INVESTING ACTIVITIES
Purchase of marketable securities (102,541) (872,359)
Acquisition of fixed assets (27,628) (156,729)
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (130,169) (1,029,088)
---------- ----------
FINANCING ACTIVITIES
Net borrowings under
letter-of-credit agreement -- (153,762)
Proceeds from exercise of employee stock options 7500 --
Proceeds from issuance of stock 8,736 13,625
---------- ----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 16,236 (140,137)
---------- ----------
NET CHANGE IN CASH (618,018) (690,297)
CASH AT BEGINNING OF PERIOD 1,387,222 2,895,695
---------- ----------
CASH AT END OF PERIOD $ 769,204 $2,205,398
========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid $ 1,793 $ 1,506
========== ==========
Interest paid $ 2,668 $ 19,217
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
SURGE COMPONENTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1999
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
In the opinion of management, the accompanying consolidated financial statements
of Surge Components Inc. and subsidiaries contain all adjustments necessary to
present fairly the Company's consolidated financial position as of May 31, 1999
and November 30, 1998 and the consolidated results of operations and
comprehensive income for the six and three months ended May 31, 1999 and 1998
and consolidated cash flows for the six months ended May 31, 1999 and 1998.
The consolidated results of operations for the six months and three months ended
May 31, 1999 and 1998 are not necessarily indicative of the results to be
expected for the full year.
Except as follows, the accounting policies followed by the Company are set forth
in Note 2 to the Company's financial statements included in its Annual Report on
Form 10-KSB, for the year ended November 30, 1998.
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of the Company and
its directly wholly-owned subsidiaries, Challenge/Surge Inc. ("Challenge") and
Surge Acquisition Corporation ("SAC"). All material intercompany transactions
have been eliminated in consolidation.
Reclassifications
- -----------------
Certain prior year information has been reclassified to conform to the current
year's reporting presentation.
NOTE 2 - MERGER AGREEMENT
On December 29, 1998, the Company entered into a letter of intent to purchase
all the issued and outstanding capital stock of Orbit Network, Inc. ("Orbit") in
exchange for approximately 30,000,000 shares of the Company's common stock. On
March 2, 1999, the Company entered into a Merger agreement and Plan of
Reorganization with Orbit. The Merger is subject to the satisfaction of
conditions precedent. In July 1999, both parties agreed to extend the Merger
agreement through July 30, 1999 to allow the resolution of certain matters.
7
<PAGE>
SURGE COMPONENTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1999
NOTE 3 - EMPLOYEE STOCK OPTIONS
In April 1999, the Board of Directors authorized the granting of options to
purchase 24,000 shares of common stock of the Company at an exercise price of
$2.00 to certain employees, pursuant to the Option Plan. The options expire in
five years from the date of the grant and are exercisable prorata over a
three-year period.
NOTE 4 - EXERCISE OF UNDERWRITER WARRANTS
In March 1999, the underwriters exercised a portion of their warrants received
during the Company's July 1996 Initial Public Offering. In exchange for $8,736,
the underwriters received 54,600 warrants. These warrants are identical to those
issued pursuant to the Company's Public Offering.
8
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
Except for historical information, the materials contained in this
Management's Discussion and Analysis or Plan of Operation is forward-looking
(within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act) and involve a number of risks and uncertainties. These include the
Company's ability to complete the merger with Orbit, lack of profitability, need
to manage its growth, general economic downturns, intense price cutting in the
electronics industry, seasonality of quarterly results, and other risks detailed
from time to time in the Company's filings with the Securities and Exchange
Commission. Although forward-looking statements in this Report reflect the good
faith judgment of the Company's management, such statements can only be based on
facts and factors currently known by the Company. Consequently, forward-looking
statements are inherently subject to risks and uncertainties, and actual results
and outcomes may differ materially from the results and outcomes discussed in
the forward-looking statements. Readers are urged to carefully review and
consider the various disclosures made by the Company in this Report and the
Company's Annual Report on Form 10-KSB for the year ended November 30, 1998,
both of which have been filed with the Commission. These reports attempt to
advise interested parties of the risks and factors that may affect the Company's
business, financial condition and results of operations and prospects.
Results of Operations
Net sales for Surge Components, Inc. and Subsidiary (the "Company") for the
six months ended May 31, 1999 increased by $355,153, or 9%, to $4,498,637 as
compared to net sales of $4,143,484 for the six months ended May 31, 1998. The
Company's net sales for the three months ended May 31, 1999 increased by
$524,117, or 30%, to $2,292,734 as compared to net sales of $1,768,617 for the
three months ended May 31, 1998. This increase results from an increase in sales
of the Company offset in part, by a decrease in sales of the Company's
subsidiary, Challenge/Surge Inc. ("Challenge"). The net sales for the Company
without Challenge's sales increased by $903,822, or 36% when compared to the six
months ended May 31, 1998. This growth was attributable primarily to increased
sales volumes as a result of the Company's investment in an increased sales
force. There can be no assurance, however, that the growth in sales volume
experienced in the past will continue. Challenge's net sales decreased by
$533,279, or 33% when compared to the six months ended May 31, 1998. This
decrease was primarily attributable to the economic effect of the over-abundance
of electronic components in the broker distributor market in which Challenge
operates in the beginning of 1999. This has resulted in the migration of some of
Challenge's customers to distributors who have established direct factory
relationships, in-house offices and inventory in the customer's facilities.
However, Challenge's sales for the three months ended May 31, 1999 remained
relatively the same as compared to the three months ended May 31, 1998, as a
result of the increased scarcity of electronic components in the broker
9
<PAGE>
distributor market. There can be no assurance, however, that these improving
conditions may continue into latter part of 1999. The Company will continue to
attempt to increase sales by introducing new products, hiring more salespeople
and sales representatives.
The Company's gross profit for the six months ended May 31, 1999
increased by $180,891, or 18%, as compared to the six months ended May 31, 1998.
The Company's gross profit for the three months ended May 31, 1999 increased by
$175,143, or 41%, as compared to the three months ended May 31, 1998. Gross
margin as a percentage of net sales increased from 24.1% in the six months ended
May 31, 1998 to 26.2% in the six months ended May 31, 1999. The higher margins
were primarily a result of the Company making its operations more efficient by
reducing inventory acquisition costs. The Company is making an effort to improve
the efficiency of inventory management and has instituted a policy of increasing
direct shipments to its customer's factories overseas. This has resulted in a
substantial reduction of import related fees.
General and administrative expenses for the six months ended May 31,
1999 increased by $137,574, or 17%, as compared to the six months ended May 31,
1998. For the three months ended May 31, 1999, general and administrative
expenses increased by $68,360, or 17%, as compared to the three months ended May
31, 1998. The increase is primarily due to costs associated with additional
filings with the Securities and Exchange Commission and costs related to the
proposed merger with Orbit Network Inc.
Selling and shipping expenses for the six months ended May 31, 1999
increased by $61,754, or 14%, as compared to the six months ended May 31, 1998.
For the three months ended May 31, 1999, selling and shipping expenses increased
by $5,105, or 2%, as compared to the three months ended May 31, 1998. These
increases are primarily due to the Company's commitment towards increasing sales
and its related investment in additional salespeople during the second quarter
1999. The Company is committed to increasing sales through authorized
distributors, global and domestic sales representatives, an Internet Website,
literature, and participation in trade shows.
Interest expense for the six months ended May 31, 1999 decreased by
$16,549, or 86%, as compared to the six months ended May 31, 1998. Interest
expense for the three months ended May 31, 1999 decreased by $10,540, or 86%, as
compared to the three months ended May 31, 1998. This decrease is primarily due
to the Company's decreased purchasing through letters of credit and bankers
acceptances. The Company intends to continue utilizing letters of credit and
bankers acceptances on an as needed basis based on its cash needs.
Investment income decreased by $ 32,434 for the six months ended May
31, 1999 as compared to the six months ended May 31,1998. Investment income
decreased by $14,749 for the three months ended May 31, 1999, as compared to the
three months ended May 31, 1998. This decrease is primarily due to the Company's
use of previously invested funds in its operations.
10
<PAGE>
As a result of the foregoing, the Company had net loss of $163,317 for the six
months ended May 31, 1999 as compared to a net loss of $124,369 for the six
months ended May 31, 1998. The Company had net loss of $64,698 for the three
months ended May 31, 1999, as compared to a net loss of $152,506 for the three
months ended May 31, 1998.
Liquidity and Capital Resources
Working capital decreased by $310,605 during the six months ended May
31, 1999 from $5,825,337 at November 30, 1998, to $5,514,732 at May 31, 1999.
This decrease resulted primarily from the decrease in cash, as partially offset
by a decrease in accounts payable and accrued expenses and taxes. The Company's
Current Ratio improved to 7.1:1 at May 31, 1999, as compared to 5.1:1 at
November 30, 1998, as a result of decreased accounts payable. Inventory turned
about the same amount in the six months ended May 31, 1999 as compared to the
six months ended May 31, 1998. The average number of days to collect receivables
decreased from 57 days to 48 days. Management believes that working capital
levels are adequate to meet the current operating requirements of the Company.
In April 1998, the Company renewed the letter of credit agreement with
its bank through May 31,1999 allowing the Company to obtain up to $800,000 in
outstanding letters of credit and $300,000 in direct borrowings with a maximum
borrowing limit of $1,000,000. The direct borrowings incur interest at the
bank's prime rate per annum. The agreement also provides for the creation of
banker's acceptances (drafts drawn on and accepted by a bank). Direct borrowings
are limited to advances based on 80% of eligible receivables and 25% of eligible
inventory capped at $100,000. The Company is charged one-half percent (1/2%)
upon opening of the letter of credit, one-half percent (1/2%) on negotiation and
two percent (2%) per annum over the banker's acceptance rate over the borrowed
term. The agreement requires the Company to be in compliance with certain
financial ratios including a debt to equity ratio and a minimum amount of
tangible net worth. The Company was in compliance with the required financial
ratios as of May 31,1999. As of May 31, 1999 and November 30, 1998, there were
no outstanding direct borrowings, outstanding banker's acceptances or letters of
credit. Borrowings are collateralized by the assets of the Company. Currently,
the Company is in the process of renewing the letter of credit agreement.
The Company intends to expand its facilities over the next several
years in order to achieve and maintain the growth expected primarily through the
increased penetration of the global OEM and distribution market, the
introduction of new products and the upgrade of existing product lines. In order
to effect this expansion, the Company allocated a portion of the net proceeds
from its July 1996 public offering toward the significant up-front expenditures
associated with the expansion of office and warehouse space at its current
facilities in addition to potentially establishing additional sales/stocking
facilities in other strategic locations. The Company renovated its current
facilities during 1998. The total cost of the renovation of its current
facilities was approximately $237,000. Additionally, the renovation provides
additional space for test
11
<PAGE>
labs, which allows the Company to provide customers with prompt information
regarding the specifications of its products and provides space for additional
sales staff. In May 1998, the Company leased an additional 2,500 square feet at
its corporate headquarters to facilitate the above changes and improvements,
increase warehouse space, improve efficiency and provide for the future
expansion of staffing needs.
In addition to the costs associated with the expansion of the Company's
facilities, the Company expects to continue to incur significant operating
costs. These costs consist principally of payroll and marketing related charges.
The future profitability of the Company will therefore depend on increased sales
levels. In March 1999, the Company opened a marketing office in Taiwan. This
office will provide marketing and customer service for the Asian market. The
cost and related expenses of this office has been minimal since the Company is
utilizing the same office space used by its supplier management group.
In March 1999, the Company entered into an agreement with Future
Electronics Inc. ("Future") for the marketing, promotion and distribution of
Surge's products. The agreement is for a one-year period and automatically
renews for one-year periods unless terminated in writing by either party. Future
is a world wide authorized distributor of passive components. Management
anticipates that this relationship with Future will introduce Surge's products
to many new potential customers.
The Company has updated its equipment, procedures and personnel in the
hopes it will better enable itself to attract new customers as well as increase
the sales volume with its existing customers, and is seeking to expand sales to
its existing customer base by offering a broad range of complementary products.
In 1997, the Company established a Website, giving the engineering community
exposure and access to any and all information about the Company and its
products, which they would consider to include in their design.
The Company believes that many of its suppliers and customers have Year
2000 Issues ("Year 2000 Issue") which could affect the Company. Many older
computer software programs recognize only the last two digits of the year in any
date (e.g., "98" for "1998"). These programs were designed and developed without
considering the impact of the upcoming change in the century. If the software is
not reprogrammed or replaced, many computer applications could fail or create
erroneous results by or at the year 2000. The Company commenced a program to
pursue compliance by those with whom it electronically interconnects. It is not
possible, however, at present, to quantify the overall cost of resolving this
issue for the Company's suppliers and customers. The Company has been advised
that their own software has been recently designed and developed with a
resolution to the Year 2000 Issue and as such the Company presently believes
that the cost of fixing the Year 2000 Issue will not have a material effect on
the Company's current
12
<PAGE>
financial position, liquidity or results of operations. Challenge was advised by
its computer consultants that some of its software needed to be updated to
resolve the Year 2000 Issue. The cost to resolve this problem was $5,600, which
was incurred in the year ended November 30, 1998.
On December 29, 1998, the Company entered into a letter of intent to
purchase all the issued and outstanding capital stock of Orbit Network, Inc.
("Orbit") in exchange for approximately 30,000,000 shares of the Company's
common stock. On March 2, 1999, the Company entered into a Merger agreement and
Plan of Reorganization with Orbit. The Merger is subject to the satisfaction of
conditions precedent. In July 1999, the Company signed an agreement extending
the Merger agreement and Plan of Reorganization with Orbit to July 30, 1999.
During the six months ended May 31, 1999, the Company had net cash used
by operating activities of $504,085, as compared to $478,928 provided by
operating activities in the six months ended May 31, 1998. The increase in cash
used by operating activities resulted from a reduction of accounts payable and
accrued expenses.
The Company had net cash used in investing activities of $130,169 for
the six months ended May 31, 1999, as compared to $1,029,088 for the six months
ended May 31, 1998. In April 1998, Challenge, pursuant to its investment
program, invested a portion of its operating funds into marketable securities.
Additionally, the Company incurred costs related to the improvements of its
current facilities during 1998.
The Company had net cash provided by financing activities of $16,236
for six months ended May 31, 1999, as compared to $140,137 used in the six
months ended May 31, 1998. This increase in the cash provided by financing
activities was the result of the proceeds from the exercise of employee stock
options and underwriter warrants and the result of the reduction of net
borrowings under the letter-of-credit agreement during the first quarter of
1999. As a result of the foregoing, the Company had a net decrease in cash of
$618,018 during the six months ended May 31, 1999, as compared to a net decrease
of $690,297 for the six months ended May 31, 1998.
The Company expects that its cash flow from operations, current
investment program and the Company's line of credit agreement will be sufficient
to meets its current financial requirements over at least the next twelve
months.
13
<PAGE>
PART II
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit No. Description
11.1 Statement re: Computation of per share earnings.
27. Statement re: Financial Data Schedule
(b) A Report on Form 8-K was filed by the Company on March 2,
1999 to report an Item 5. Other Event which occurred on March 2, 1999.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SURGE COMPONENTS, INC.
By: /s/ Steven J Lubman
-----------------------------------------
Steven J. Lubman
Vice President, Principal
Financial Officer, Secretary and Director
Dated: July 14, 1999
14
<PAGE>
SURGE COMPONENTS, INC. AND SUBSIDIARY
EXHIBIT 11.1
COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
May 31, May 31,
1 9 9 9 1 9 9 8 1 9 9 9 1 9 9 8
------- ------- ------- -------
<S> <C> <C> <C> <C>
Basic earnings:
Net income $ (163,317) $ (124,369) $ (64,698) $ (152,506)
Shares:
Weighted common shares outstanding 4,857,084 4,827,645 4,858,958 4,831,251
Employees stock options -- -- -- --
---------- ---------- ---------- ----------
Total weighted shares outstanding 4,857,084 4,827,645 4,858,958 4,831,251
---------- ---------- ---------- ----------
Basic earnings per common share $ (.03) $ (.03) $ (.01) $ (.03)
========== ========== ========== ==========
Diluted earnings:
Net income $ (163,317) $ (124,369) $ (64,698) $ (152,506)
Shares:
Weighted common shares outstanding 4,857,084 4,827,645 4,858,958 4,831,251
Employees stock options -- -- -- --
---------- ---------- ---------- ----------
Total weighted shares outstanding 4,857,084 4,827,645 4,858,958 4,831,251
---------- ---------- ---------- ----------
Diluted earnings per common share $ (.03) $ (.03) $ (.01) $ (.03)
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet and Statements of Income filed as part of the report
on Form 10-QSB and is qualified in its entirety by reference to such report on
Form 10-QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-END> MAY-31-1999
<CASH> 769,204
<SECURITIES> 3,182,360
<RECEIVABLES> 1,208,598
<ALLOWANCES> 15,724
<INVENTORY> 1,036,959
<CURRENT-ASSETS> 6,417,890
<PP&E> 486,451
<DEPRECIATION> 156,767
<TOTAL-ASSETS> 6,839,108
<CURRENT-LIABILITIES> 903,158
<BONDS> 0
0
0
<COMMON> 4,859
<OTHER-SE> 5,931,091
<TOTAL-LIABILITY-AND-EQUITY> 5,935,950
<SALES> 4,498,637
<TOTAL-REVENUES> 4,609,043
<CGS> 3,319,995
<TOTAL-COSTS> 1,448,422
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,668
<INCOME-PRETAX> (162,042)
<INCOME-TAX> 1,275
<INCOME-CONTINUING> (163,317)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (163,317)
<EPS-BASIC> (.03)
<EPS-DILUTED> (.03)
</TABLE>
