<PAGE>
   
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                  FORM 10-QSB/A
                                 Amendment No. 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, 1998

/ / Transition report pursuant to Section 13 or 15(d) of the Exchange Act

For the transition period from ____________ to ____________

Commission file number  1 - 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, 1998:
4,823,958 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, 1998



PART I .  FINANCIAL INFORMATION

Item 1.  Financial Statements:

Consolidated Balance Sheets                                               3 - 4

Consolidated Statements of Income                                         5

Consolidated Statements of Cash Flows                                     6

Notes to Consolidated Financial Statements                                7


Item 2.  Management's Discussion and Analysis or Plan of Operation        8 - 12


PART II.  OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K                                 13

Signatures                                                                13


                                       2

<PAGE>



                     SURGE COMPONENTS, INC. AND SUBSIDIARY

                          CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>


                           ASSETS
                           ------

                                                                       February 28,        November 30,
                                                                          1998                1997
                                                                          ----                ----
<S>                                                                     <C>                 <C>
Current assets:
     Cash                                                               $2,993,971          $2,895,695
     Marketable securities                                               2,266,860           2,217,370
     Accounts receivable (net of allowance for
       doubtful accounts of $15,724)                                     1,127,507           1,544,536
     Inventory                                                           1,037,743           1,228,941
     Prepaid expenses and taxes                                            109,634             130,844
     Cash surrender value                                                   29,789              29,789
                                                                        ----------          ----------

         Total current assets                                            7,565,504           8,047,175

Fixed assets (net of accumulated depreciation
     of  $170,102 and $160,858, respectively)                              115,507             123,942

Other assets:
     Security deposits                                                       2,985               2,985
                                                                        ----------          ----------

         Total assets                                                   $7,683,996          $8,174,102
                                                                        ==========          ==========

</TABLE>

         See accompanying notes to consolidated financial statements.

                                      3


<PAGE>


                     SURGE COMPONENTS, INC. AND SUBSIDIARY

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                          LIABILITIES AND STOCKHOLDERS' EQUITY
                          ------------------------------------

                                                                        February 28,        November 30,
                                                                            1998                1997   
                                                                            ----                ----   
<S>                                                                    <C>                  <C>
Current liabilities:
     Loan payable - bank                                               $   186,878          $   495,495
     Accounts payable                                                      925,696              960,073
     Accrued expenses                                                      105,835              294,734
     Corporation taxes payable                                                  --                  456
                                                                        ----------           ----------

         Total current liabilities                                       1,218,409            1,750,758

Long term debt:
     Deferred income tax                                                     1,104                1,396
                                                                        ----------           ----------

         Total liabilities                                               1,219,513            1,752,154
                                                                        ----------           ----------

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, 4,823,958
         shares issued and outstanding respectively                          4,824                4,824
     Additional paid-in capital                                          6,335,862            6,335,862
     Unrealized holding gain                                                90,378               75,980
     Retained earnings                                                      33,419                5,282
                                                                        ----------           ----------

         Total stockholders' equity                                      6,464,483            6,421,948
                                                                        ----------           ----------

         Total liabilities and stockholders' equity                     $7,683,996           $8,174,102
                                                                        ==========           ==========

</TABLE>
         See accompanying notes to consolidated financial statements.

                                       4


<PAGE>

   
                     SURGE COMPONENTS, INC. AND SUBSIDIARY

                       CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
                                                                              Three Months Ended
                                                                                  February 28,
                                                                           1998                 1997                       
                                                                           ----                 ----                       
<S>                                                                     <C>                  <C>

Sales                                                                   $2,447,495           $2,137,379
   Less returns and allowances                                              72,628                7,767
                                                                        ----------           ----------

Net sales                                                                2,374,867            2,129,612

Cost of goods sold                                                       1,802,999            1,565,271
                                                                        ----------           ----------

Gross profit                                                               571,868              564,341
                                                                        ----------           ----------

Operating expenses:
   General and administrative
    expenses                                                               438,589              452,158
   Selling and shipping expenses                                           150,788              146,945
   Depreciation                                                              9,244               13,766
                                                                        ----------           ----------

         Total operating expenses                                          598,621              612,869
                                                                        ----------           ----------

Loss from operations                                                       (26,753)             (48,528)

Other income and (expense):
  Investment income                                                         70,674               71,100
  Interest expense                                                          (7,005)             (11,486)
                                                                        ----------           ----------

Income  before income taxes                                                 36,916               11,086

Income taxes                                                                 8,779                2,855
                                                                        ----------           ----------

Net income                                                              $   28,137           $    8,231
                                                                        ==========           ==========

Weighted average shares outstanding
   Basic                                                                 4,823,958            4,823,958
   Diluted                                                               4,973,409            4,872,926

Earnings per share
   Basic                                                                $      .01           $       --
   Diluted                                                              $      .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,
                                                                             1998                1997
                                                                             ----                ----
<S>                                                                    <C>                  <C>
OPERATING ACTIVITIES:
   Net income                                                           $   28,137            $   8,231
   Adjustments to reconcile net income to net cash provided
    by operating activities:
         Depreciation                                                        9,244               13,766
         Deferred income taxes                                                (292)                 550
CHANGES IN OPERATING ASSETS AND LIABILITIES:
   Accounts receivable                                                     417,029             (179,503)
   Inventory                                                               191,198              (49,351)
   Prepaid expenses and taxes                                               21,210              (23,136)
   Accounts payable                                                        (34,374)            (160,211)
   Accrued expenses and taxes                                             (189,355)            (177,795)
                                                                        ----------           ----------

NET CASH PROVIDED (USED) IN  OPERATING ACTIVITIES                          442,797             (567,449)
                                                                        ----------           ----------

INVESTING ACTIVITIES
   Purchase of marketable securities                                       (35,097)             (34,840)
   Acquisition of fixed assets                                                (807)              (5,305)
                                                                        ----------           ----------

NET CASH USED IN INVESTING ACTIVITIES                                      (35,904)             (40,145)
                                                                        ----------           ----------

FINANCING ACTIVITIES
   Net borrowings under letter-of-credit agreement                        (308,617)               2,157
                                                                        ----------           ----------

NET CHANGE IN CASH                                                          98,276             (605,437)

CASH AT BEGINNING OF PERIOD                                              2,895,695            3,241,360
                                                                        ----------           ----------

CASH AT END OF PERIOD                                                   $2,993,971          $ 2,635,923
                                                                        ==========          ===========

SUPPLEMENTAL CASH FLOW INFORMATION:
   Income taxes paid                                                    $    1,506          $    74,607
                                                                        ==========          ===========
   Interest paid                                                        $    7,005          $    11,486
                                                                        ==========          ===========
</TABLE>

         See accompanying notes to consolidated financial statements.

                                       6


<PAGE>


                     SURGE COMPONENTS, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               February 28, 1998

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, 1998 and November 30, 1997 and the results of
operations and cash flows for the three months ended February 28, 1998 and
1997.

The consolidated results of operations for the three months ended February 28,
1998 and 1997 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, 1997.

Earnings per Share - Effective December 1, 1997, the Company adopted Financial
Accounting Standards Board Statement of Financial Accounting Standards Number
128, "Earnings Per Share". Under this standard, the method for calculation of
earnings per share was changed and requires the presentation of "basic" and
"diluted" earnings per share. Prior period earnings per share have been
restated to conform with these provisions.

NOTE 2 - SUBSQUENT EVENTS

1995 Employee Stock Option Plan - In March 1998, the 1995 Employee Stock
Option Plan was amended, subject to shareholder approval, to increase the
number of aggregate common shares available under the plan from 350,000 to
850,000.

In March 1998, two employees exercised 6,000 shares at an aggregate exercise
price of $7,500.

Employment Agreements - The employment agreements between the Company and two
of its officers have been amended to extend the termination dates from July
30, 2001 to July 30, 2003. Furthermore, the amended agreements will
automatically renew and extend all terms of the agreements.

                                       7
<PAGE>


Item 2. Management's Discussion and Analysis or Plan of Operation

The statements discussed in this Report include forward looking statements
that involve a number of risks and uncertainties. These include the Company's
marginal 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.

Results of Operations

         Net sales for Surge Components, Inc. and Subsidiary (the "Company")
for the three months ended February 28, 1998 increased by $245,255, or 12%, to
$2,374,867 as compared to net sales of $2,129,612 for the three months ended
February 28, 1997. This is a continuation of the Company's growth pattern
throughout 1997. This growth was attributable primarily to increased sales
volumes. There can be no assurance, however, that the growth in sales volume
experienced in the past will be attained.

         The Company's gross profit for the three months ended February 28,
1998 increased by $ 7,527, or 1%, as compared to the three months ended
February 28, 1997. This increase was primarily due to increased sales volume.
Gross margin as a percentage of net sales, however, decreased from 26.5% in
February 28, 1997 to 24.1% in February 28, 1998. The lower margins were
primarily a result of modest price erosion in the highly competitive,
fast-growing electronics industry in which the Company competes. The Company
is expected to make its operations more efficient and reduce inventory
acquisition costs, including air shipment costs, by purchasing inventory in
larger quantities, at more opportune times and/or at more favorable prices.

         General and administrative expenses for the three months ended
February 28, 1998 decreased by $13,569, or 3%, as compared to the three months
ended February 28, 1997. The decrease is primarily due to the expiration of
the Company's contract with its investment banker for consulting fees in July
1997 netted against increased additional employee benefits. The Company's
investment in personnel in 1998 is expected to significantly increase costs
prior to the generation of increased sales attributable to such additional
employees.

         Selling and shipping expenses for the three months ended February 28,
1998 increased by $3,843, or 3%, as compared to the three months ended
February 28, 1997. This increase is primarily due to increased sales
commissions resulting from the increase in sales volume. The Company is
committed to increasing sales through authorized distributors, sales
representatives, an Internet Website, literature, and participation in trade
shows. Significant resources, including personnel, have been allocated to
assist the Company with the development of the distribution market.

                                       8


<PAGE>



         Interest expense for the three months ended February 28, 1998
decreased by $4,481, or 39%, as compared to the three months ended February
28, 1997. The Company is utilizing letters of credit and banker's acceptances
on an as needed basis based upon its cash needs in order to reduce costs.

         Investment income remained relatively unchanged for the three months
ended February 28, 1998 and 1997. This income is derived from the investment
of any unused funds from the public offering and excess operating funds.

         As result of the foregoing, the Company had net loss from operations
of $33,758 for the three months ended February 28, 1998, as compared to a net
loss from operations of $60,014 for the three months ended February 28, 1997.
The Company had net income of $28,137, or $.01 per basic and diluted share,
for the three months ended February 28, 1998, as compared to a net income of
$8,231, or $.00 per basic and diluted share, for the three months ended
February 28, 1997.

Liquidity and Capital Resources

         Working capital increased by $50,678 during the three months ended
February 28, 1998 from $6,296,417 at November 30, 1997, to $6,347,095 at
February 28, 1998. This increase resulted primarily from the decrease in
accounts receivable, inventory, accounts payable and accrued expenses and the
use of letters of credit and banker's acceptances. The Company's Current Ratio
improved to 6.2:1 at February 28, 1998, as compared to 4.6:1 at November 30,
1997, as a result of decreased borrowings. Inventory turned more in the three
months ended February 28, 1998 as compared to the three months ended February
28, 1997. Inventory turned more frequently in the first fiscal quarter 1998 as
a result of the Company's increased sales. The average number of days to
collect receivables increased from 41 days to 51 days. Management believes
that working capital levels are adequate to meet the current operating
requirements of the Company.

         In May 1996, the Company renewed the letter of credit agreement with
its bank allowing the Company to obtain up to $800,000 in outstanding letters
of credit and $200,000 in direct borrowings. The direct borrowings incur
interest at a prime rate plus one percent per annum. The agreement also
provides for the creation of banker's acceptance (a draft 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
required the Company to be in compliance with certain financial ratios
including a debt to equity ratio and a minimum amount of tangible net worth.

                                       9


<PAGE>



         In July 1997, the Company renewed the letter of credit agreement with
the bank through May 31, 1998. Pursuant to the agreement all terms and
conditions remain the same except for the following: 1) the interest rate on
direct borrowings has been reduced to the prime rate, 2) the requirement of
officer guarantees has been removed, 3) the amount of minimum tangible net
worth was increased and the debt to equity ratio decreased to more accurately
reflect the Company's financial position. The Company was in compliance with
the required financial ratios as of February 28, 1998. As of February 28, 1998
and 1997, there were no outstanding direct borrowings, although outstanding
banker's acceptances and letters of credit totaled approximately $569,000 and
$207,406, respectively. 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 OEM and distribution market, the introduction
of new products and the upgrade of existing product lines. In order to effect
this expansion, the Company has 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 renovation of its current
facilities will take place in the second and third fiscal quarters of 1998.
Additionally, the renovation plans contain provisions for additional space for
test labs, which will allow the Company to provide customers with prompt
information regarding the specifications of its products and additional sales
staff expected to manage the Company's sales growth. The Company plans to
lease an additional 2,000 square feet at its corporate headquarters to
facilitate the above changes and improvements.

         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, marketing and
facilities related charges, as well as professional fees associated with being
a public company. Upon the updating of its current facilities and the
potential opening of new facilities, facilities related charges are expected
to rise dramatically. Staffing requirements for any new facilities may
substantially increase payroll related costs. The future profitability of the
Company will therefore depend on increased future sales levels. In that
regard, the Company does not plan on opening new facilities unless demand
warrants such opening.

         Effective January 1, 1996, Challenge entered into an agreement to
supply audible transducers for computer motherboards to Intel Corporation. The
agreement was for one year with a one year renewal option; however, it is
terminable at will by Intel Corporation. Intel Corporation renewed the
agreement in January 1998.

                                      10

<PAGE>



         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,
expand sales to its existing customer base by offering a broad range of
complementary products and newly introduced product lines. The Company has
initiated a public relations program to promote these products throughout the
market. In 1997, the Company established a Website, giving the engineering
community exposure and access to any and all of the Company's 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 will commence 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
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 financial position,
liquidity or results of operations.

         The Company has minimized the risk of currency fluctuations by
purchasing and selling its products in United States currency. The Company,
however, may be severely impacted by the recent and current economic
conditions in Southeast Asia, based upon the amount of business it transacts
there. Potential concerns may include drastic devaluations of currencies, loss
of suppliers and increased competition within the region. The Company can not
estimate at the current time any potential impact of these conditions to its
financial position, liquidity or results of operations.

         During the three months ended February 28, 1998, the Company had net
cash provided by operating activities of $442,797, as compared to $567,449
used in operating activities in the three months ended February 28, 1997. The
decrease in cash provided by operating activities resulted from a decrease in
accounts receivable and inventory and decreased accounts payable and accrued
expenses and taxes.

         The Company had net cash used by investing activities of $35,904 for
February 28, 1998, as compared to $40,145 for the three months ended February
28, 1997. The Company invested the unused proceeds from the Public Offering in
marketable securities and reinvested the dividends in these securities in the
first quarter of 1998 and 1997.

                                      11


<PAGE>



         During the three months ended February 28, 1998, The Company had net
cash used by financing activities of $308,617 as compared with $2,157 provided
in the three months ended February 29, 1997. The increase in the cash used by
financing activities was the result of the reduction of net borrowings under
the letter-of-credit agreement during the first quarter of 1998. As a result
of the forgoing, the Company had a net increase in cash of $98,276 during the
three months ended February 28, 1998 as compared to a decrease in cash of
$605,437 during the three months ended February 28, 1997.

         The Company expects that its cash flow from operations, the proceeds
from its public offering and the Company's line of credit agreement will be
sufficient to meet its current financial requirements over at least the next
twelve months.

















                                      12


<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) No Reports on Form 8-K were filed during the quarter for
which this report is filed.


                                  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:  December 2, 1998
    

                                      13