PART
I. FINANCIAL INFORMATION
|
|
ITEM
1. Financial Statements:
|
|
Consolidated
Statements of Income (unaudited) for the
three and nine months ended August 31, 2007 and 2006...........................................
|
1
|
Consolidated
Balance Sheets at August 31, 2007
(unaudited) and November 30, 2006..........................................................................................
|
2
|
Consolidated
Statements of Cash Flows
(unaudited) for the nine months ended August 31, 2007 and
2006.....................................................
|
3
|
Notes
to Consolidated Financial Statements
(unaudited)............................................................................................................................................
|
4
|
ITEM
2. Management's
Discussion and Analysis or Plan of
Operation....................................................................................................................
|
6
|
ITEM
3. Controls and
Procedures.....................................................................................................................................................................................
|
9
|
PART
II. OTHER INFORMATION
|
|
ITEM
6. Exhibits.....................................................................................................................................................................................................................
|
10
|
Signatures..............................................................................................................................................................................................................................
|
11
|
|
|
|
|
Three
Months Ended
|
|
Nine
Months Ended
|
||||||||||
|
|
|
August
31, 2007
|
|
|
August
31, 2006
|
|
|
August
31, 2007
|
|
|
August
31, 2006
|
|
|
Net
sales
|
|
$
|
2,838,600
|
|
$
|
2,327,246
|
|
$
|
7,989,659
|
|
$
|
7,228,617
|
|
|
Cost
of sales
|
|
|
2,202,729
|
|
|
1,714,339
|
|
|
6,251,782
|
|
|
5,221,472
|
|
|
Gross
profit
|
|
|
635,871
|
|
|
612,907
|
|
|
1,737,877
|
|
|
2,007,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
514,324
|
|
|
453,370
|
|
|
1,294,320
|
|
|
1,375,046
|
|
|
Depreciation
and amortization
|
|
|
8,385
|
|
|
19,751
|
|
|
33,205
|
|
|
66,816
|
|
|
Total
operating expenses
|
|
|
522,709
|
|
|
473,121
|
|
|
1,327,525
|
|
|
1,441,862
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from operations
|
|
|
113,162
|
|
|
139,786
|
|
|
410,352
|
|
|
565,283
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(24,879
|
)
|
|
(32,671
|
)
|
|
(66,290
|
)
|
|
(111,623
|
)
|
|
Other,
net
|
|
|
(1,961
|
)
|
|
1,019
|
|
|
17,432
|
|
|
12,202
|
|
|
Total
other expenses, net
|
|
|
(26,840
|
)
|
|
(31,652
|
)
|
|
(48,858
|
)
|
|
(99,421
|
)
|
|
Income
tax benefit (expense)
|
|
|
15,514
|
|
|
--
|
|
|
173,388
|
|
|
--
|
|
|
Net
income
|
|
$
|
101,836
|
|
$
|
108,134
|
|
$
|
534,882
|
|
$
|
465,862
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted earnings per common share
|
|
$
|
0.01
|
|
$
|
0.01
|
|
$
|
0.04
|
|
$
|
0.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Common Shares Outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
12,146,026
|
|
|
12,116,026
|
|
|
12,141,915
|
|
|
12,116,026
|
|
|
Diluted
|
|
|
12,407,980
|
|
|
12,230,854
|
|
|
12,362,823
|
|
|
12,172,626
|
|
|
|
|
August
31, 2007 (unaudited)
|
|
November 30,
2006
|
|
||
|
|
|
|
|
|
||
ASSETS
|
|
|
|
|
|
||
Current
assets:
|
|
|
|
|
|
||
Cash
and cash equivalents
|
|
$
|
207,038
|
|
$
|
441,860
|
|
Accounts
receivable, net
|
|
1,598,759
|
|
1,519,282
|
|
||
Inventories,
net
|
|
1,159,007
|
|
815,422
|
|
||
Deferred tax asset
|
|
851,178
|
|
634,000
|
|
||
Prepaid
expenses and other
|
|
570,562
|
|
253,477
|
|
||
Total
current assets
|
|
4,386,544
|
|
3,664,041
|
|
||
|
|
|
|
|
|
||
Property
and equipment, net
|
|
611,169
|
|
342,237
|
|
||
Other
assets
|
|
75,702
|
|
75,702
|
|
||
Total
assets
|
|
$
|
5,073,415
|
|
$
|
4,081,980
|
|
|
|
|
|
|
|
||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
||
Current
liabilities:
|
|
|
|
|
|
||
Accounts
payable
|
|
$
|
483,222
|
|
$
|
405,492
|
|
Accrued
liabilities
|
|
4,401
|
|
185,155
|
|
||
Notes
payable - related parties
|
|
--
|
|
43,952
|
|
||
Bank
debt
|
|
1,225,000
|
|
855,850
|
|
||
Current
portion of capital lease obligations
|
|
53,727
|
|
19,728
|
|
||
Total
current liabilities
|
|
1,766,350
|
|
1,510,177
|
|
||
|
|
|
|
|
|
||
Capital
lease obligations, net of current portion
|
|
82,258
|
|
19,685
|
|
||
Total
liabilities
|
|
1,848,608
|
|
1,529,862
|
|
||
|
|
|
|
|
|
||
Commitments
and contingencies
|
|
--
|
|
--
|
|
||
|
|
|
|
|
|
||
Stockholders'
equity:
|
|
|
|
|
|
||
Preferred
stock-$.001 par value; 5,000,000 shares authorized; no shares issued
and
outstanding
|
|
--
|
|
--
|
|
||
Common
stock-$.001 par value; 25,000,000 shares authorized; 12,146,026 and
12,116,026 shares issued and outstanding at August 31, 2007 and
November 30, 2006, respectively
|
|
12,146
|
|
12,116
|
|
||
Additional
paid-in capital
|
|
8,493,271
|
|
8,355,497
|
|
||
Accumulated
deficit
|
|
(5,280,610)
|
|
(5,815,495)
|
|
||
Total
stockholders' equity
|
|
3,224,807
|
|
2,552,118
|
|
||
Total
liabilities and stockholders' equity
|
|
$
|
5,073,415
|
|
$
|
4,081,980
|
|
|
|
Nine
Months Ended
|
|
||||
|
|
August
31, 2007
|
|
August
31, 2006
|
|
||
Cash
flows from operating activities:
|
|
|
|
|
|
||
Net
income
|
|
$
|
534,882
|
|
$
|
465,862
|
|
Adjustments
to reconcile net income to net cash provided by operating
activities
|
|
|
|
|
|
||
Depreciation
and amortization
|
|
124,914
|
|
174,996
|
|
||
Deferred
taxes
|
|
(217,178)
|
|
--
|
|
||
Stock
based compensation
|
132,705
|
||||||
Changes
in operating assets and liabilities:
|
|
|
|
|
|
||
Accounts
receivable
|
|
(79,477)
|
|
(163,511
|
)
|
||
Inventories
|
|
(343,585)
|
|
110,066
|
|
||
Prepaid
expenses and other
|
|
(317,085)
|
|
132,848
|
|
||
Accounts
payable and accrued liabilities
|
|
(103,024)
|
|
(652,518
|
)
|
||
Net cash provided by (used in) operating activities
|
|
(267,848)
|
|
67,743
|
|
||
Cash
flows from investing activities:
|
|
|
|
|
|
||
Purchases of property and equipment
|
|
(284,843)
|
|
(47,087)
|
|
||
Net cash used in
investing
|
|
(284,843)
|
|
(47,087)
|
|
||
Cash
flows from financing activities:
|
|
|
|
|
|
||
Net borrowings (repayments) under line of credit
|
|
369,150
|
|
66,133
|
|
||
Repayments
under term loan
|
--
|
(70,885)
|
|||||
Repayments of long-term obligations
|
|
(56,380)
|
|
(81,132)
|
|
||
Exercise of stock
options
|
|
5,099
|
|
--
|
|
||
Net cash provided by (used in) financing activities
|
|
317,869
|
|
(85,884)
|
|
||
Net change in cash and cash equivalents
|
|
(234,822)
|
|
(65,228)
|
|
||
Cash
and cash equivalents, beginning of period
|
|
441,860
|
|
407,039
|
|
||
Cash
and cash equivalents, end of period
|
|
$
207,038
|
|
$
341,811
|
|
||
Supplemental
disclosures of cash flow information
|
|
|
|
|
|
||
Cash paid during the period for:
|
|
|
|
|
|
||
Interest
|
|
$
|
66,920
|
|
$
|
111,623
|
|
Income taxes
|
|
$
|
28,450
|
|
$
|
45,800
|
|
|
|||||||
Non-cash
transaction
|
|
||||||
Equipment
acquired via capital lease
|
|
$
|
109,000
|
$
|
--
|
|
|
Three-Months
Ended
|
Nine-Months
Ended
|
|||||
|
|
|
August
31, 2006
|
|
|
August
31, 2006
|
|
|
Net
income available to common stockholders
|
|
$
|
108,134
|
|
$
|
465,862
|
|
|
|
|
|
|
|
|
|
|
|
Plus:
Stock-based employee compensation included in reported net
income
|
|
|
-
|
|
|
-
|
|
|
Less:
Total stock-based employee compensation determined using fair value
based
method
|
|
|
(1,700
|
)
|
|
(11,200
|
)
|
|
Pro
forma net income available to common stockholders
|
|
|
106,434
|
|
|
454,662
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per common share - as reported:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
0.01
|
|
|
0.04
|
|
|
Diluted
|
|
|
0.01
|
|
|
0.04
|
|
|
Net
income per common share - pro forma:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
0.01
|
|
|
0.04
|
|
|
Diluted
|
|
|
0.01
|
|
|
0.04
|
|
|
Shares
|
|
Weighted
Average Price
|
|
Weighted
Average Remaining Contractual Term (Years)
|
|
Aggregate
Intrinsic Value
|
||
Outstanding
at November, 2006
|
475,000
|
|
$
|
0.94
|
|
|
|
|
|
Cancelled
or expired
|
(200,000
|
)
|
$
|
1.52
|
|
|
|
|
|
Exercised
|
(30,000
|
)
|
$
|
0.17
|
|
|
|
|
|
Granted
|
183,200
|
$
|
0.90
|
||||||
Outstanding
at August 31, 2007
|
428,200
|
|
$
|
0.71
|
|
7.17
|
|
$
|
132,200
|
Options
exercisable at August 31, 2007
|
368,200
|
|
$
|
0.78
|
|
7.38
|
|
$
|
80,200
|
|
|
August
31, 2007 (unaudited)
|
|
|
November
30, 2006
|
Raw
Materials
|
$
|
594,732
|
|
$
|
355,773
|
Work-in-process
|
|
175,656
|
|
|
94,949
|
Finished
Goods
|
|
393,419
|
|
|
364,700
|
Less
allowance for obsolete inventories
|
|
4,800
|
|
|
--
|
|
$
|
1,159,007
|
|
$
|
815,422
|