<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A-1
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended February 28, 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 March 31, 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 SUBSIDIARY
Index to Form 10-QSB
for the Period Ended February 28, 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 SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
February 28, November 30,
1 9 9 9 1 9 9 8
------- -------
ASSETS (Note 4)
------
Current assets:
<S> <C> <C>
Cash $ 799,222 $1,387,222
Marketable securities 3,153,456 3,237,928
Accounts receivable (net of allowance for
doubtful accounts of $15,724) 1,168,895 1,189,966
Inventory 1,014,975 1,159,111
Prepaid expenses and taxes 181,133 209,213
Cash surrender value 61,499 55,157
---------- ----------
Total current assets 6,379,180 7,238,597
---------- ----------
Fixed assets - net of accumulated depreciation
of $145,121 and $134,036 335,777 324,787
---------- ----------
Other assets:
Security deposits 2,985 2,985
Deferred tax asset 88,489 88,031
---------- ----------
Total other assets 91,474 91,016
---------- ----------
Total assets $6,806,431 $7,654,400
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
SURGE COMPONENTS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
February 28, November 30,
1 9 9 9 1 9 9 8
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
<S> <C> <C>
Accounts payable $ 677,901 $ 1,105,300
Accrued expenses and taxes 116,664 307,960
----------- -----------
Total current liabilities 794,565 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 6,377,202 6,369,708
Unrealized holding gain (loss) (2,692) 135,463
Retained deficit (367,503) (268,884)
----------- -----------
Total stockholders' equity 6,011,866 6,241,140
----------- -----------
Total liabilities and stockholders' equity $ 6,806,431 $ 7,654,400
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
SURGE COMPONENTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
Three Months Ended
February 28,
1 9 9 9 1 9 9 8
------- -------
<S> <C> <C>
Sales $ 2,224,966 $ 2,447,495
Less returns and allowances 19,063 72,628
----------- -----------
Net sales 2,205,903 2,374,867
Cost of goods sold 1,628,287 1,802,999
----------- -----------
Gross profit 577,616 571,868
----------- -----------
Operating expenses:
General and administrative
expenses 464,811 395,597
Selling and shipping expenses 250,429 193,780
Depreciation 11,085 9,244
----------- -----------
Total operating expenses 726,325 598,621
----------- -----------
Loss from operations (148,709) (26,753)
Other income (expense):
Investment income 52,989 70,674
Interest expense (996) (7,005)
----------- -----------
Total other income (expense) 51,993 63,669
----------- -----------
Income (loss) before income taxes (96,716) 36,916
Income taxes 1,903 8,779
----------- -----------
Net (loss) income (98,619) 28,137
Other comprehensive (loss) income, net of tax
unrealized holding (loss) gain on securities
arising during the period (138,155) 76,467
----------- -----------
Total comprehensive (loss) income $ (236,774) $ 104,604
=========== ===========
Weighted average shares outstanding
Basic 4,855,169 4,823,958
Diluted 4,855,169 4,973,409
Earnings per share
Basic $ (.02) $ .01
Diluted $ (.02) $ .01
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
SURGE COMPONENTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
February 28,
1 9 9 9 1 9 9 8
------- -------
<S> <C> <C>
OPERATING ACTIVITIES:
Net (loss) income $ (98,619) $ 28,137
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 11,085 9,244
Deferred income taxes (458) (292)
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Accounts receivable 21,071 417,029
Inventory 144,136 191,198
Prepaid expenses and taxes 21,736 21,210
Accounts payable (427,398) (34,374)
Accrued expenses and taxes (191,296) (189,355)
----------- -----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (519,743) 442,797
----------- -----------
INVESTING ACTIVITIES
Purchase of marketable securities (53,682) (35,097)
Acquisition of fixed assets (22,075) (807)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (75,757) (35,904)
----------- -----------
FINANCING ACTIVITIES
Net borrowings under letter-of-credit agreement -- (308,617)
Proceeds from exercise of employee stock options 7,500 --
----------- -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 7,500 (308,617)
----------- -----------
NET CHANGE IN CASH (588,000) 98,276
CASH AT BEGINNING OF PERIOD 1,387,222 2,895,695
----------- -----------
CASH AT END OF PERIOD $ 799,222 $ 2,993,971
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid $ 800 $ 1,506
=========== ===========
Interest paid $ 996 $ 7,005
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
SURGE COMPONENTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 1999
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
In the opinion of management, the accompanying consolidated financial statements
of Surge Components Inc. and Challenge/Surge, Inc.("Subsidiary") contain all
adjustments necessary to present fairly the Company's financial position as of
February 28, 1999 and November 30, 1998 and the results of operations and
comprehensive income and cash flows for the three months ended February 28, 1999
and 1998.
The consolidated results of operations for the three months ended February 28,
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.
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.
NOTE 3 - EMPLOYEE STOCK OPTIONS
In December 1998, the Board of Directors authorized the granting of options to
purchase 5,300,000 shares of common stock of the Company to certain officers and
directors subject to shareholder approval. The options expire in five years from
the date of the grant and are exercisable at $2.00 per share. The options are
not exercisable until the fourth anniversary of the date of grant, however, in
the event the Company's proposed merger with Orbit is approved by the
shareholders, the options shall become immediately exercisable. The options are
exercisable on a cashless basis whereby the Company advances the exercise price
to the officers and directors who in turn execute a promissory note, due 180
days from the date the options were exercised.
7
<PAGE>
SURGE COMPONENTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 1999
NOTE 3 - EMPLOYEE STOCK OPTIONS (Continued)
In December 1998, the Board of Directors authorized the granting of options to
purchase 38,000 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 immediately.
In January 1999, two employees exercised 6,000 shares at an aggregate exercise
price of $7,500.
NOTE 4 - COMMON STOCK
In December 1998, the Board of Directors proposed amending its Certificate of
Incorporation to increase the number of common shares authorized from
25,000,000. The proposed increase is conditioned upon shareholder approval.
NOTE 5 - SUBSEQUENT EVENTS
Newly Formed Subsidiary
- -----------------------
On March 2, 1999, Surge Acquisition Corporation, a newly-formed wholly-owned
subsidiary of the Company, was formed for the purpose of merging with Orbit.
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 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 three months ended February 28, 1999 decreased by $168,964, or 7%, to
$2,205,903 as compared to net sales of $2,374,867 for the three months ended
February 28, 1998. This decrease was primarily attributable to the economic
effect of the over-abundance of electronic components in the broker distributor
market in which the Company's subsidiary, Challenge Surge Inc. ("Challenge"),
operates. 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. This condition may continue into the
latter part of 1999, if not longer. The net sales for the Company without
Challenge's sales increased by $346,602, or 25% when compared to the three
months ended February 28, 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. The Company is attempting to increase
sales by introducing new products, hiring more salespeople and sales
representatives.
9
<PAGE>
The Company's gross profit for the three months ended February 28, 1999
increased by $ 5,748, or 1%, as compared to the three months ended February 28,
1998. Gross margin as a percentage of net sales, however, increased from 24.1%
for the three months ended February 28, 1998 to 26.2% for the three months ended
February 28, 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 three months ended February
28, 1999 increased by $69,214, or 18%, as compared to the three months ended
February 28, 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. The Company's continued
investment in personnel is expected to increase overhead in the latter part of
1999.
Selling and shipping expenses for the three months ended February 28,
1999 increased by $56,649, or 29%, as compared to the three months ended
February 28, 1998. This increase is primarily due to the Company's commitment
towards increasing sales and its related investment during the second quarter
1998 of additional salespeople. 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 three months ended February 28, 1999 decreased
by $6,009, or 86%, as compared to the three months ended February 28, 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 for the three months ended February 28, 1999
decreased by $17,685, or 25%, as compared to the three months ended February 28,
1998. This decrease is primarily due to the Company's use of previously invested
funds in its operations.
As result of the foregoing, the Company had a net loss from operations
of $148,709 for the three months ended February 28, 1999, as compared to a net
loss from operations of $26,753 for the three months ended February 28, 1998.
The Company had net loss of $98,619 for the three months ended February 28,
1999, as compared to net income of $28,137 for the three months ended February
28, 1998.
10
<PAGE>
Liquidity and Capital Resources
Working capital decreased by $240,722 during the three months ended
February 28, 1999 from $5,825,337 at November 30, 1998, to $5,584,615 at
February 28, 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 8.0:1 at February 28, 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 three months ended
February 28, 1999 as compared to the three months ended February 28, 1998. The
average number of days to collect receivables decreased from 57 days to 42 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 February 28, 1999. As of February 28, 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.
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 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.
11
<PAGE>
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 should be minimal since the Company is
utilizing the same office space used by its supplier management group.
Effective January 1, 1996, Challenge entered into an agreement to
supply audible transducers for computer keyboards to Intel Corporation. The
agreement was for one year with a one-year renewal option; however, it is
terminable at will by Intel Corporation. Although the contract was not renewed
in January 1999, Intel has honored the current contract and is in the process of
reviewing any potential ongoing relationship with Challenge. There can be no
assurance that Challenge will continue to have a relationship with Intel.
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 is in the process of updating its equipment, procedures and
personnel which it hopes 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.
During the three months ended February 28, 1999, the Company had net
cash used by operating activities of $519,743, as compared to $442,797 provided
by operating activities in the three months ended February 28, 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 $75,757 for
the three months ended February 28, 1999, as compared to $35,904 for the three
months ended February 28, 1998. In April 1998, Challenge, pursuant to its
investment program, invested a portion of their operating funds into marketable
securities. Additionally, the Company incurred costs related to the improvements
of their current facilities.
The Company had net cash provided by financing activities of $7,500 for
three months ended February 28, 1999, as compared to $308,617 used in the three
months ended February 28. This increase in the cash provided by financing
activities was the result of the proceeds from the exercise of employee stock
options 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 $588,000 during the three
months ended February 28, 1999, as compared to a net increase of $98,276 for the
three months ended February 28, 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 current report on Form 8-K was filed by the Company on
January 13, 1999 to report an Item 5. Other Event which
occurred on December 29, 1998.
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: April 13, 1999
14
<PAGE>
SURGE COMPONENTS, INC. AND SUBSIDIARY
EXHIBIT 11.1
COMPUTATION OF EARNINGS PER COMMON SHARE
----------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
February 28,
1 9 9 9 1 9 9 8
------- -------
<S> <C> <C>
Basic earnings:
Net income $ (97,516) $ 28,137
Shares:
Weighted common shares outstanding 4,855,169 4,823,958
Employees stock options -- --
----------- -----------
Total weighted shares outstanding 4,855,169 4,823,958
----------- -----------
Basic earnings per common share $ (.02) $ .01
=========== ===========
Diluted earnings:
Net income (loss) $ (97,516) $ 28,137
Shares:
Weighted common shares outstanding 4,855,169 4,823,958
Employees stock options -- 149,451
----------- -----------
Total weighted shares outstanding 4,855,169 4,973,409
----------- -----------
Diluted earnings per common share $ (.02) $ .01
=========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the 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> 3-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-END> FEB-28-1999
<CASH> 799,222
<SECURITIES> 3,153,456
<RECEIVABLES> 1,184,619
<ALLOWANCES> 15,724
<INVENTORY> 1,014,975
<CURRENT-ASSETS> 6,379,180
<PP&E> 480,898
<DEPRECIATION> 145,121
<TOTAL-ASSETS> 6,806,431
<CURRENT-LIABILITIES> 794,565
<BONDS> 0
0
0
<COMMON> 4,859
<OTHER-SE> 6,007,007
<TOTAL-LIABILITY-AND-EQUITY> 6,011,866
<SALES> 2,205,903
<TOTAL-REVENUES> 2,258,892
<CGS> 1,628,287
<TOTAL-COSTS> 726,325
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 996
<INCOME-PRETAX> (96,716)
<INCOME-TAX> 1,903
<INCOME-CONTINUING> (98,619)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (98,619)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
