# EDGAR Filing Document

**Accession Number:** 0000747540
**File Stem:** 0001213900-26-021131
**Filing Date:** 2026-2
**Character Count:** 207861
**Document Hash:** 3959436d8d6fb92f0979059d884ae11a
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001213900-26-021131.hdr.sgml**: 20260227

**ACCESSION NUMBER**: 0001213900-26-021131

**CONFORMED SUBMISSION TYPE**: 10-K

**PUBLIC DOCUMENT COUNT**: 72

**CONFORMED PERIOD OF REPORT**: 20251130

**FILED AS OF DATE**: 20260227

**DATE AS OF CHANGE**: 20260227

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** SURGE COMPONENTS INC
- **CENTRAL INDEX KEY:** 0000747540
- **STANDARD INDUSTRIAL CLASSIFICATION:** WHOLESALE-ELECTRONIC PARTS & EQUIPMENT, NEC [5065]
- **ORGANIZATION NAME:** 07 Trade & Services
- **EIN:** 112602030
- **STATE OF INCORPORATION:** NY
- **FISCAL YEAR END:** 1130

**FILING VALUES:**
- **FORM TYPE:** 10-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 000-27688
- **FILM NUMBER:** 26693163

**BUSINESS ADDRESS:**
- **STREET 1:** 95 EAST JEFRYN BLVD
- **CITY:** DEER PARK
- **STATE:** NY
- **ZIP:** 11729
- **BUSINESS PHONE:** 5165951818

**MAIL ADDRESS:**
- **STREET 1:** SURGE COMPONENTS INC
- **STREET 2:** 95 EAST JEFRYN BLVD
- **CITY:** DEER PARK
- **STATE:** NY
- **ZIP:** 11729

?xml version='1.0' encoding='ASCII'? sprs-20251130

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, DC 20549**

**FORM 10-K**

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended **November 30, 2025**

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

**Commission File No. 000-27688**

**SURGE COMPONENTS, INC.**

(Exact name of registrant as specified in its charter)

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| | |
|:---|:---|
| Nevada | 11-2602030 |
| (State or Other Jurisdiction of <br> Incorporation or Organization) | (I.R.S. Employer <br> Identification No.) |
| **95 East Jefryn Boulevard**<br> **Deer Park, New York** | 11729 |
| (Address of principal executive offices) | (Zip Code) |
| (631) 595-1818 | (631) 595-1818 |
| (Registrant's telephone number, including area code) | (Registrant's telephone number, including area code) |

---

Securities registered pursuant to Section 12(b) of the Exchange Act:

---

| | |
|:---|:---|
| Title of Each Class to be so Registered: | Name of each exchange on which registered |

---

Securities registered under Section 12(g) of the Act:

**Common Stock, Par Value $0.001**

**Preferred Stock Purchase Rights**

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐&nbsp;&nbsp;&nbsp;&nbsp; No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐&nbsp;&nbsp;&nbsp;&nbsp; No ☒

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 ☒&nbsp;&nbsp;&nbsp;&nbsp; No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒&nbsp;&nbsp;&nbsp;&nbsp; No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

---

| | | | |
|:---|:---|:---|:---|
| Large Accelerated Filer | ☐ | Accelerated Filer | ☐ |
| Non-accelerated Filer | ☒ | Smaller reporting company | ☒ |
| | | Emerging growth company | ☐ |

---

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐&nbsp;&nbsp;&nbsp;&nbsp; No ☒

As of May 31, 2025, the aggregate market value of the issued and outstanding common stock held by non-affiliates of the registrant, based upon the closing price of the common stock, was approximately $6.4 million.

The registrant's common stock outstanding as of February 24, 2026, was 5,716,792 shares of common stock.

**SURGE COMPONENTS, INC.**

**TABLE OF CONTENTS**

---

| | | |
|:---|:---|:---|
| [PART I](#a_001) |  |  |
| Item 1. | [Business](#a_002) | 1 |
| Item 1A. | [Risk Factors](#a_003) | 9 |
| Item 1B. | [Unresolved Staff Comments](#a_004) | 14 |
| Item 1C. | [Cybersecurity](#a_005) | 14 |
| Item 2. | [Properties.](#a_006) | 14 |
| Item 3. | [Legal Proceedings.](#a_007) | 14 |
| Item 4. | [Mine Safety Disclosures.](#a_008) | 14 |
| [PART II](#a_009) |  |  |
| Item 5. | [Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.](#a_010) | 15 |
| Item 6. | [\[Reserved\]](#a_011) | 16 |
| Item 7. | [Management's Discussion and Analysis of Financial Condition and Results of Operations.](#a_012) | 16 |
| Item 7A. | [Quantitative and Qualitative Disclosures About Market Risk.](#a_013) | 20 |
| Item 8. | [Financial Statements and Supplementary Data.](#a_014) | 20 |
| Item 9. | [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.](#a_015) | 20 |
| Item 9A. | [Controls and Procedures.](#a_016) | 21 |
| Item 9B. | [Other Information.](#a_017) | 21 |
| Item 9C. | [Disclosure Regarding Foreign Jurisdictions That Prevent Inspections](#a_018) | 21 |
| [PART III](#a_019) |  |  |
| Item 10. | [Directors, Executive Officers, and Corporate Governance.](#a_020) | 22 |
| Item 11. | [Executive Compensation.](#a_021) | 29 |
| Item 12. | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.](#a_022) | 32 |
| Item 13. | [Certain Relationships and Related Transactions, and Director Independence.](#a_023) | 33 |
| Item 14. | [Principal Accounting Fees and Services.](#a_024) | 33 |
| [PART IV](#a_025) |  |  |
| Item 15. | [Exhibits and Financial Statement Schedules.](#a_026) | 34 |
| Item 16. | [Form 10-K Summary.](#a_027) | 35 |
| [SIGNATURES](#a_028) | [SIGNATURES](#a_028) | 36 |
| [Consolidated Financial Statements](#a_029) | [Consolidated Financial Statements](#a_029) | F-1 |

---

i

**FORWARD-LOOKING STATEMENTS**

This report contains forward-looking statements. All statements other than statements of historical facts contained in this report, including statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, forward-looking statements can be identified by terms such as "may," "will," "should," "expects," "plans," "anticipates," "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these terms or other similar words. These statements are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. We discuss many of the risks in greater detail under the heading "Risk Factors." Also, these forward-looking statements represent our estimates and assumptions only as of the date of the filing of this report. Except as required by law, we assume no obligation to update any forward-looking statements after the date of the filing of this report.

This report also contains estimates. These estimates involve a number of assumptions and limitations, and investors are cautioned not to give undue weight to such estimates. In addition, projections, assumptions and estimates of our future performance and the future performance of the industries in which we operate are subject to a high degree of uncertainty and risk due to a variety of factors, including those described in "Risk Factors" and elsewhere in this report. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.

ii

**PART I**

**Item 1. Business.**

References to "we," "us," "our", "our company" and "the company" refer to Surge Components, Inc. ("Surge" or the "Company") and, unless the context indicates otherwise, includes Surge's wholly-owned subsidiaries, Challenge/Surge, Inc. ("Challenge"), and Surge Components, Limited ("Surge Limited").

We were incorporated under the laws of the State of New York on November 24, 1981, and re-incorporated in Nevada on August 26, 2010. We completed an initial public offering of our securities in 1984 and a second offering in August 1996. Our principal executive offices are located at 95 East Jefryn Boulevard, Deer Park, New York 11729 and our telephone number is (631) 595-1818.

We are a supplier of electronic products and components. These products include capacitors, which are electrical energy storage devices, and discrete components, such as semiconductor rectifiers, transistors and diodes, which are single function low power semiconductor products that are packaged alone as compared to integrated circuits such as microprocessors. The products that we sell are typically utilized in the electronic circuitry of diverse products, including, but not limited to, automobiles, telecomm, audio, cellular telephones, computers, consumer electronics, garage door openers, household appliances, power supplies and security equipment. The products that we sell are sold to both original equipment manufacturers, commonly referred to as OEMs, who incorporate them into their products, and to distributors of the lines of products we sell, who resell these products within their customer base. Surge sells its products through three of the top four distributors for electronic components in the world and also supplies its products to subcontractors who manufacture for their customers. These channels open doors to Surge at customers which Surge may not have access to otherwise. The products that we sell are manufactured predominantly in Asia by approximately sixteen independent manufacturers. We also only have one binding long-term supply agreement with one of our manufacturers, Lelon Electronics. We have an agreement to act as the exclusive sales agent utilizing independent sales representative organizations in North America to sell and market the products for Lelon Electronics. When we act as a sales agent, we receive a commission from our supplier who sold the product to the customer that we introduced to our supplier. The amount of the commission is determined on a sale by sale basis depending on the profit margin of the product. Commission revenue totaled $312,389 and $95,584 for the fiscal years ended November 30, 2025 ("Fiscal 2025") and November 30, 2024 ("Fiscal 2024"), respectively.

Challenge is engaged in the sale of electronic components. In 1999, Challenge began as a division to sell audible components. We have been able to increase the types of products that we sell because some of our suppliers introduced new products, and we also located other products from new suppliers. Our core products include buzzers, speakers, microphones, resonators, alarms, chimes, filters, and discriminators. We now also work with our suppliers to have our suppliers customize many of the products we sell for many customers through the customers' own designs and those that we work with our suppliers to have our suppliers redesign for them at our suppliers' factories. We have engineers on our staff who work with our suppliers on such redesigns and assists with the introduction of new product lines. We are continually looking to expand the line of products that we sell. We sell these products through independent representatives that earn a commission on the products we sell. We are also working with local, regional, and national distributors to sell these products to local accounts in every state Challenge also at times handles the brokering of certain products, helping their customers find parts that regular suppliers cannot deliver.

In order for us to grow, we will depend on, among other things, the continued growth of the electronics and semiconductor industries, our ability to withstand intense price competition, our ability to develop new and innovative products, our ability to obtain new clients, our ability to retain and attract sales and other personnel in order to expand our marketing capabilities, our ability to secure adequate sources of products, which are in demand on commercially reasonable terms, our success in managing growth, including monitoring an expanded level of operations.

**Industry Background**

The United States electronics distribution industry is composed of manufacturers, national and international distributors, as well as regional and local distributors. Electronics distributors market numerous products, including active components (such as transistors, microprocessors, integrated circuits and semiconductors), passive components (such as capacitors and audibles), and electro mechanical, interconnect (such as connectors and wire) and computer products. Surge focuses its efforts on the sale of capacitors, discrete components, and audible products.

The electronics industry has been characterized by intense price cutting and rapid technological changes and development, which could materially adversely affect our future operating results. In addition, the industry has been affected historically by periodic economic downturns, which have had an adverse economic effect upon manufacturers and end-users of the products that we sell, as well as distributors. Furthermore, the life-cycle of existing electronic products and the timing of new product development and introduction can affect the demand for electronic components, including the products that we sell. Accordingly, any downturn in the electronics industry in general could adversely affect our business and results of operations. Due to rising transportation and employment costs in Asia, we have seen some U.S. manufacturers start moving their manufacturing facilities to Mexico to reduce transportation costs and bring manufacturing much closer to home. At this time, however, none of our customers has moved its manufacturing facilities to Mexico.

**Products**

Surge supplies a wide variety of electronic components (some of which bear our private "Surge" label) which can be broadly divided into two categories—capacitors and discrete components. For Fiscal 2025 and Fiscal 2024, capacitors accounted for approximately 28% and 28% of Surge's sales, respectively, of which approximately 75% for each year was Lelon capacitors (discussed below). Discrete components accounted for Surge's remaining sales in Fiscal 2025 and Fiscal 2024. Capacitors and discrete components can be categorized based on various factors, including function, construction, fabrication and capacity.

We sell, under the name of the manufacturer, Lelon Electronics, aluminum electrolytic capacitors, which are capacitors that store and release energy into a circuit incrementally and are used in various applications, including but not limited to, computers, appliances, automotive, lighting, telecommunications devices and various consumer products. Our sales of products under the Lelon Electronics name accounted for approximately 28% of our total sales (and approximately 75% of our capacitor sales as noted above) in Fiscal 2025.

The principal products sold by Surge are sold under the Surge name (except with respect to capacitors, which the Company also sells under the Lelon Electronics name as noted above) or by Challenge are set forth below.

**Capacitors**

A capacitor is an electrical energy storage device used in the electronics industry for varied applications, principally as elements of resonant circuits, coupling and bypass applications, blockage of DC current, frequency determining and timing elements, filters and delay-line components. All products are available in traditional leaded as well as surface mount (chip) packages. The product line of capacitors we sell includes:

Aluminum Electrolytic Capacitors- These capacitors, which are Surge's principal product, are storage devices used in power applications to store and release energy as the electronic circuitry demands. They are commonly used in power supplies and can be found in a wide range of consumer electronics products. Our supplier has one of the largest facilities for these products in Taiwan and China. These facilities are fully certified for the International Quality Standard ISO 9001 and QS9000, and TS16949, which means that they meet the strictest requirements established by the automotive industry and adopted throughout the world to ensure that the facility's manufacturing processes, equipment and associated quality control systems will satisfy specific customer requirements. This system is also intended and designed to facilitate clear and thorough record keeping of all quality control and testing information and to ensure clear communication from one department to another about the information (i.e., quality control, production or engineering). This certification permits us to monitor quality control/manufacturing process information and to respond to any customer questions.

Ceramic Capacitors- These capacitors are the least expensive, and are widely used in the electronics industry. They are commonly used to bypass or filter semiconductors in resonant circuits and are found predominantly in a wide range of low cost products including computer, telecom, appliances, games and toys.

Mylar Film Capacitors- These capacitors are frequently used for noise suppression and filtering. They are commonly used in telecommunication and computer products. Surge's suppliers in China have facilities fully certified for all of the above mentioned quality certifications.

**Discrete Components**

Discrete components, such as semiconductor rectifiers, transistors and diodes, are packaged individually to perform a single or limited function, in contrast to integrated circuits, such as microprocessors and other "chips", which contain from only a few diodes to as many as several million diodes and other elements in a single package, and are usually designed to perform complex tasks. Surge almost exclusively distributes discrete, low power semiconductor components rather than integrated circuits.

The product line of discrete components we sell includes:

Rectifiers- Low power semiconductor rectifiers are devices that convert alternating current, or AC power, into one directional current, or DC power, by permitting current to flow in one direction only. They tend to be found in most electrical apparatuses, especially those drawing power from an AC wall outlet. All products are available in traditional leaded as well as surface mount (chip) packages. Surge's rectifier suppliers all have the aforementioned certifications, giving us an opportunity to market the products that we sell to the automotive industry.

Transistors- These products send a signal to the circuit for transmission of waves. They are commonly used in applications involving the processing or amplification of electric current and electric signals, including data, television, sound and power. All products are available in traditional leaded as well as surface mount (chip) packages. Surge sells many types of ISO 9002 transistors, including power transistors, designed for large currents to safely dissipate large amounts of power.

Diodes- Diodes are two-lead or surface mount components that allow electric current to flow in only one direction. They are used in a variety of electronic applications, including signal processing and direction of current. All products are available in traditional leaded as well as surface mount (chip) packages. Diodes sold include:

Circuit Protection Devices- Our circuit protection devices include transient voltage suppressors and metal oxide varistors, which protect circuits against switching, lightening surges and other uncontrolled power surges and/or interruptions in circuits. Transient voltage suppressors, which offer a higher level of protection for the circuit, are required in telecommunication products and are typically higher priced products than the metal oxide varistors, which are more economically priced and are used in consumer products. All products are available in traditional leaded as well as surface mount (chip) packages.

Audible Components- These include audible transducers, Piezo buzzers, speakers, and microphones, which produce an audible sound for, and are used in back-up power supplies for computers, alarms, appliances, smoke detectors, automobiles, telephones and other products which produce sounds. Challenge has initiated marketing relationships with certain Asian manufacturers of audible components to sell these products worldwide. All products are available in traditional leaded as well as surface mount (chip) packages.

New Products- We periodically introduce new products, which are intended to complement our existing product lines. These products are ones that are commonly used in the same circuit designs as other products that we sell and will further provide a one- stop-shop for the customer. Some of these products are common items used in all applications and others are niche items with a focus towards a particular application. These new products include fuses, printed circuit boards and switches. All products are available in traditional leaded as well as surface mount (chip) versions. In 2019 we were issued a patent on a new pinpoint alarm designed to improve an individual's ability to determine the location of the alarm. The improved alarm can be used in a wide variety of applications including reversing vehicles, medical emergency notification and hardware devices that use Bluetooth or other wireless communication protocols in combination with mobile software applications to locate lost items.

**Inventory**

In order to adequately service our customers' needs, we believe that it is necessary to maintain large inventories, which makes us more susceptible to price and technology changes. At any given time, we attempt to maintain a one-to-two month inventory on certain products in high demand for customers and at least one month for other products. Our inventory currently contains more than 100 million component units consisting of more than 3,000 different part numbers. The products that we sell range in sales price from less than one cent for a commercial diode to more than $2.00 for high power capacitors and semiconductors. As of November 30, 2025, we maintained inventory valued at $5,086,298.

Because of the experience of our management, including Ira Levy and Steven Lubman, we believe that we know the best prices to buy the products we sell and as a result we generally waive rights to manufacturers' inventory protection agreements (including price protection and inventory return rights), and thereby bear the risk of increases in the prices charged by our manufacturers and decreases in the prices of products held in our inventory or covered by purchase commitments. If prices of components, which we hold in inventory decline, or if new technology is developed that displaces products that we sell, our business could be materially adversely affected. The Company has experienced very little impact from customer design changes and slowdown but this can potentially increase due to economic conditions and customer-specific business conditions. If our customers experience these changes, our business could be adversely affected.

**Product Availability**

Surge and Challenge obtain a significant amount of their products from manufacturers in Asia. Of the total goods purchased by Surge and Challenge in Fiscal 2025, those foreign manufactured products were supplied from manufacturers in Taiwan (30%), Hong Kong (19%), elsewhere in Asia including China, South Korea and Singapore (47%) and overseas outside of Asia (less than 1%). The Company purchases the balance of its products from the United States. The Company purchases its products from approximately sixteen different manufacturers.

Most of the facilities that manufacture products for Surge have obtained International Quality Standard ISO 9002 and other certifications. We typically purchase the products that we sell in United States currency in order to minimize the risk of currency fluctuations. In most cases, Surge utilizes two or more alternative sources of supply for each of its products with one primary and one complementary supplier for each product. Surge's relationships with many of its suppliers date back to the commencement of our import operations in 1983. We have established payment terms with our manufacturers of between 30 and 60 day open account terms.

We only have one long-term supply agreement with a supplier, Lelon Electronics, which is terminable by either party upon six months' notice to the other party. We also have an agreement to act as the sales agent in North America for Lelon Electronics. While we believe that we have established close working relationships with our principal manufacturers, our success depends, in large part, on maintaining these relationships and developing new supplier relationships for our existing and future product lines. Because of the lack of long- term contracts, we may not be able to maintain these relationships.

For Fiscal 2025 and Fiscal 2024, one of Surge's vendors, Lelon Electronics, accounted for approximately 28% and 28% of Surge's consolidated purchases, respectively. The loss of or a significant disruption in the relationship with Lelon Electronics, which is our major supplier, could have a material adverse effect on our business and results of operations until a suitable replacement could be obtained.

The Company has a written agreement with Lelon Electronics regarding the supply of inventory for the Company's customers. The Company purchases products under both the Company's name and Lelon's brand name for the Company's inventory in order to supply the Company's customers. For the majority of purchases from Lelon Electronics, the Company takes title to the products, houses them in the Company's warehouse and sells directly to the Company's customers. There is no right of return on the products purchased from Lelon and the Company accepts all credit risk with regards to sales of these products.

The components business has, from time to time, experienced periods of shortages in product supply, usually as the result of demand exceeding available supply. When these shortages occur, suppliers tend to either increase prices and or reduce the number of units sold to given customers. Should there be shortages in the future, such shortages may benefit our business if we get preferential supply from our manufacturers. It could also have an adverse effect upon our business, in the case that our manufacturers do not have enough capacity to provide enough components. Conversely, due to poor market demand, there could be an excess of components in the market, causing stronger competition and an erosion of prices. In cases of shortages, customers may purchase more than they need and thus reducing future demand for their products while they use up their excess inventory.

**Marketing and Sales**

Surge's sales efforts are directed towards Original Equipment Manufacturer (OEM) customers in numerous industries where the products that we sell have wide application. Surge currently employs twelve sales and marketing personnel, not including two of its executive officers, who are responsible for certain key customer relationships. In addition, Surge has expanded its sales team, hiring a Europe manager based in London as well as one based in China.

We also use independent sales representatives or organizations, which often specialize in specific products and areas and have specific knowledge of and contacts in particular markets. We currently have representation agreements with approximately 30 sales representative organizations. Sales representative organizations, which are generally paid a 5% commission on net sales, are generally responsible in their respective geographic markets for identifying customers and soliciting customer orders. Pursuant to arrangements with our independent sales representatives, they are permitted to represent other electronics manufacturers, but are generally prohibited from carrying a line of products competitive with the products that we sell. These arrangements can be terminated on written notice by either party or if breached by either party. These organizations normally employ between one and twelve sales representatives. The individual sales representatives employed by the sales organizations generally possess an expertise which enhances the scope of our marketing and sales efforts. This permits us to avoid the significant costs associated with creating a direct marketing network. We have had relationships with certain sales organizations since 1988 and continue to engage new sales organizations as needed. We believe that additional sales organizations and representatives are available to us, if required.

We have a formal national distribution program to attract more distributors to promote the products that we sell. We expect this market segment to continue to contribute significantly to our sales growth over time.

Many customers require their suppliers to have a local presence and Surge's network of independent sales representatives are responsive to these needs. Surge formed a Hong Kong corporation, Surge Components, Limited and hired a regional sales manager to service the Hong Kong/Greater China region customers.

Other marketing efforts include generation and distribution of catalogs and brochures of the products we sell and attendance at trade shows. We have produced an exhibit for display at electronics trade shows throughout the year. The products that we sell have been exhibited at the electronic distribution show in Las Vegas, and we intend to continue our commitment and focus on the distribution segment of the industry by our visibility at the Electronic Distributor Trade Show. In addition, we have updated our website to make it more informative and user friendly. Our search engines have been improved so that customers can find us more easily and we have developed a new portal system to help with lead management and disbursement.

**Customers**

The products that we sell are sold to distributors and OEMs in such diverse industries as the automotive, computer, communications, cellular telephones, consumer electronics, garage door openers, security equipment, audio equipment, telecomm products, computer related products, power supply products, utility meters and household appliances industries. We request our distributors to provide point of sales reporting, which enables us to gain knowledge of the breakdown of industries into which the products that we sell are sold. Two of our customers accounted for 18% and 14% of net sales for Fiscal 2025, and 19% and 15% of net sales for Fiscal 2024. Our discrete components are often sold to the same clients as our capacitors. These OEM customers typically accept samples for evaluation and, if approved, we work towards procuring the next orders for these items.

Typically, we do not maintain contracts with our customers and generally sell products pursuant to customer purchase orders. Although our customer base has increased, the loss of our largest customers as well as, to a lesser extent, the loss of any other material customer, could have a materially adverse effect on our operations during the short-term until we are able to generate replacement business, although we may not be able to obtain such replacement business. Because of our contracts and good working relationships with our distributors, we offer the OEMs, when purchasing through distributors, extended payment terms, just-in- time deliveries and one-stop shopping for many types of electronic products.

**Competition**

We conduct business in the highly competitive electronic components industry. We expect this industry to remain competitive. We face intense competition in both our selling efforts and purchasing efforts from the many companies that manufacture or distribute electronic components. Our principal competitors in the sale of capacitors include Nichicon, Panasonic, Illinois Capacitor, NIC, AVX, Murata, Epcos, United Chemicon, Rubycon, Vishay and Kemet. Our principal competitors in the sale of discrete components include Vishay, General Semiconductor Division, General Instrument Corp., OnSemi, Inc., Microsemi Corp., Diodes, Inc. and Littlefuse, and Copper Bussman Division. Our principal competition in the audible business include AVX, Murata, Panasonic, Projects Unlimited, International Components Corp. and Star Micronics. Many of these companies are well established with substantial expertise, and have much greater assets and greater financial, marketing, personnel, and other resources than we do. Many larger competing suppliers also carry product lines which we do not carry. Generally, large semiconductor manufacturers and distributors do not focus their direct selling efforts on small to medium sized OEMs and distributors, which constitute many of our customers. As our customers become larger, and as the market becomes more competitive, our competitors may find it beneficial to focus direct selling efforts on those customers, which could result in our facing increased competition, the loss of customers or pressure on our profit margins. We are finding increased competition from manufacturers located in Asia due to the increased globalization nature of the business. There can be no assurance that we will be able to continue to compete effectively with existing or potential competitors. Other factors that will affect our success in these markets include our continued ability to attract additional experienced marketing, sales and management talent, and our ability to expand our support, training and field service capabilities. Additionally, since the tsunami and earthquake in Japan in 2012, our competitors have established manufacturing facilities in China enabling them to be more competitive by lowering their labor rates and manufacturing costs. Also, as the world continues to become global and customers have easier access to suppliers in Asia, our business could be adversely affected since the internet enables customers to meet and interact with suppliers through Google and other search engines which customers had not previously done.

**Customer Service**

We have customer service employees whose time is dedicated largely to responding to customer inquiries such as price quote requests, delivery status of new or existing purchase orders, changes of existing order dates, quantities, dates, etc. We intend to increase our customer service capabilities, as necessary.

**Foreign Trade Regulation**

Most products sold by Surge are manufactured in Asia, including such countries as Taiwan, South Korea, Hong Kong, India, Japan and China. The purchase of goods manufactured in foreign countries is subject to a number of risks, including economic disruptions, transportation delays and interruptions, foreign exchange rate fluctuations, impositions of tariffs and import and export controls, and changes in governmental policies, any of which could have a material adverse effect on our business and results of operations. Potential concerns may include drastic devaluation of currencies, loss of supplies and increased competition within the region.

From time to time, protectionist pressures have influenced United States trade policy concerning the imposition of significant duties or other trade restrictions upon foreign products. We cannot predict whether additional United States customs quotas, duties, taxes or other charges or restrictions will be imposed upon the importation of foreign components in the future or what effect such actions could have on our business, financial condition or results of operations.

Our ability to remain competitive with respect to the pricing of imported components could be adversely affected by increases in tariffs or duties, changes in trade treaties, strikes in air or sea transportation, and possible future United States legislation with respect to pricing and import quotas on products from foreign countries. Our ability to remain competitive could also be affected by other governmental actions related to, among other things, anti-dumping legislation and international currency fluctuations. While we do not believe that any of these factors adversely impact our business at the present time, there can be no assurance that these factors will not materially adversely affect us in the future. Since July 2018, when tariffs started to impact some of the Company's sales, the Company has been able to pass on the tariffs to its U.S. and Canadian customers. We have also changed our shipping terms with our Mexico customers to Free Carrier, which means we deliver the goods to the customers' Hong Kong freight forwarder, who then becomes responsible for the transportation and tariff costs. Any significant disruption in the delivery of merchandise from our suppliers, substantially all of whom are foreign, could have a materially adverse impact on our business and results of operations.

**Government Regulation**

Various laws and regulations relating to safe working conditions, including the Occupational Safety and Health Act, are applicable to our Company. We believe we are in substantial compliance with all material federal, state and local laws and regulations regarding safe working conditions. We believe that the cost of compliance with such governmental regulations is not material.

We are subject to the United States Foreign Corrupt Practices Act, which generally prohibits United States companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Foreign companies, including some that may compete with us, are not subject to these prohibitions. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations. To the Company's knowledge, none of our employees or other agents have engaged in such practices.

The Company has been impacted by the tariffs in effect or being considered by the United States to impose on Chinese goods being imported into the United States, which includes the Company's products. The imposition of such tariffs will likely cause our costs, as well as the prices we charge customers, to increase.

**Environmental and Regulatory Compliance**

We are subject to various environmental laws and regulations relating to the protection of the environment, including those governing the handling and management of certain chemicals used in electronic components.

We do not believe that compliance with these laws and regulations will have a material adverse effect on our capital expenditures, earnings, or competitive position.

**Patents, Trademarks and Proprietary Information**

In September 2018, we were issued a U.S. patent application with the United States Patent and Trademark Office for an improved pinpoint alarm designed to improve an individual's ability to determine the location of an alarm versus standard single, multi-frequency, or broadband alarms. The improved alarm can be used in a wide variety of applications, including reversing vehicles, medical emergency notification, and hardware devices that use Bluetooth or other wireless communications protocols in combination with mobile software applications to locate lost items, including phones, wallets, and keys. Our patent issued on December 31, 2019, as United States Patent No. 10,522,008. With regard to our other products, although we have no knowledge that such products infringe patents or trademarks, or violate proprietary rights of others, it is possible that alleged infringement of existing or future patents, trademarks or proprietary rights of others may occur. In the event that the products that we sell are alleged to infringe proprietary rights of others, these products may have to be modified or redesigned. However, there can be no assurance that any infringing products will be able to be modified or redesigned in a way that does not infringe on the proprietary rights of others, which could have a material adverse effect upon our operations. In addition, there can be no assurance that we will have the financial or other resources necessary to enforce or defend a patent infringement or proprietary rights violation action. Moreover, if the products we sell infringe patents, trademarks or proprietary rights of others, we could, under certain circumstances, become liable for damages, which also could have a material adverse effect on our business.

With respect to the other products that we sell, we have no patents, trademarks or copyrights registered in the United States Patent and Trademark Office or in any state. Additionally, to the best of our knowledge the manufacturers of the products that we sell do not have patents, trademarks or copyrights registered in the United States Patent and Trademark Officer or in any state. We rely on the know-how, experience and capabilities of our management personnel.

**Backlog**

As of November 30, 2025, our backlog was approximately $12,012,000, as compared with $9,433,000 at November 30, 2024. Substantially all backlog is expected to be shipped by us within 365 days of booking date. Year to year comparisons of backlog are not necessarily indicative of future operating results.

**Employees**

As of November 30, 2025, Surge and Challenge employed 46 persons, two of whom are employed in executive capacities, twelve are engaged in sales, four in engineering, four in purchasing, five in administrative capacities, twelve in customer service, three in accounting and four in warehousing. None of our employees are covered by a collective bargaining agreement, and we consider our relationship with our employees to be good.

Competitive pay and benefits. The Company's compensation programs are designed to provide the proper incentives to attract, retain and motivate employees to achieve superior results. We provide employee wages that are competitive and consistent with employee positions, skill levels, experience, knowledge and geographic location. Annual increases and incentive compensation are based on merit, which is communicated to the employees at the time of hiring. Employees are eligible for paid and unpaid leaves, a retirement plan, and disability/accident coverage.

**Item 1A. Risk Factors**

*An investment in our common stock involves a high degree of risk. An investor should carefully consider the risks described below as well as other information contained in this annual report on Form 10-K. If any of the following risks actually occur, our business, financial condition or results of operations could be materially adversely affected, the value of our common stock could decline, and an investor may lose all or part of his or her investment.*

**Risks Related to our Business**

***We have an agreement with only one of our suppliers and we depend on a limited number of suppliers***

We have an agreement with only one of our suppliers (Lelon Electronics), which agreement is terminable by either party upon notice to the other party. Lelon Electronics accounted for approximately 28% and 28% of the Company's consolidated purchases in the years ending November 30, 2025 and November 30, 2024. We also act as the exclusive sales agent in North America for Lelon Electronics. While we believe that we have established close working relationships with our principal suppliers, our success depends, in large part, on maintaining these relationships and developing new supplier relationships for our existing and future product lines. There is no assurance that we will be able to maintain these relationships. While we believe that there are alternative semiconductor and capacitor suppliers whose replacement products may be acceptable to our customers, the loss of, or a significant disruption in the relationship with, one or more of our major suppliers would likely have a material adverse effect on our business and results of operations.

***We need to maintain large inventories in order to succeed and as a result, price fluctuations could harm us.***

In order to adequately service our customers, we believe that it is necessary to maintain a large inventory of products. Accordingly, we attempt to maintain a one-to-two month inventory of those products which we supply to our customers. As a result of our strategic inventory purchasing policies, under which we order products to obtain preferential pricing, we generally waive the right to manufacturers' inventory protection agreements (including price protection and inventory return rights). As a result, we bear the risk of increases in the prices charged by our manufacturers to the Company and decreases in the prices we are able to charge our customers. If prices of components which we hold in inventory decline or if new technology is developed that displaces products which we sell, our business could be materially adversely affected. Typically the Company has experienced very little impact from customer design changes and slowdown but this can potentially increase due to economic conditions and specific customers business conditions. If our customers experience these changes, our business could be adversely affected... There can be no assurances that we will be required to take additional reserves in the future.

***Our operations would be adversely effected if we lose certain of our customers.***

For Fiscal 2025, approximately 18% and 14% of our net sales were derived from sales to two customers. Although our customer base has increased, the loss of our largest customers as well as, to a lesser extent, the loss of any other material customer, would be expected to have a materially adverse effect on our operations until we are able to generate replacement business, although we may not be able to obtain such replacement business.

***We may not be able to compete against large competitors who have better resources.***

We face intense competition, in both our selling efforts and purchasing efforts, from the many companies that manufacture or distribute electronic components and semiconductors. Our principal competitors in the sale of capacitors include Nichicon, Panasonic, Illinois Capacitor, NIC, AVX, Murata, Epcos, United Chemicon, Rubycon, Vishay and Kemet, General Semiconductor Division, General Instrument Corp., OnSemi, Inc., Microsemi Corp., Diodes, Inc. and Littlefuse, and Copper Bussman Division. Many of these companies are well established with substantial expertise, and have much greater assets and greater financial, marketing, personnel, and other resources than we do. Many larger competing suppliers also carry product lines which we do not carry. Generally, large semiconductor manufacturers and distributors do not focus their direct selling efforts on small to medium sized OEMs and distributors, which constitute most of our customers. As our customers become larger, however, our competitors may find it beneficial to focus direct selling efforts on those customers, which could result in our facing increased competition, the loss of customers or pressure on our profit margins. There can be no assurance that we will be able to continue to compete effectively with existing or potential competitors. The Company periodically introduces new products to the market.

***System failure or cybersecurity breaches of our network security could subject us to increased operating costs, as well as litigation and other potential losses***.

The computer systems and network infrastructure that we use could be vulnerable to unforeseen hardware and cybersecurity issues, including "hacking" and "identity theft." Our operations are dependent upon our ability to protect our computer equipment against damage from fire, power loss, telecommunications failure or a similar catastrophic event. Any damage or failure that causes an interruption in our operations could have an adverse effect on our financial condition and results of operations. In addition, our operations are dependent upon our ability to protect our computer systems and network infrastructure against damage from physical break-ins, cybersecurity breaches and other disruptive problems caused by the Internet or other users. Such computer break-ins and other disruptions would jeopardize the security of information stored in and transmitted through our computer systems and network infrastructure, which may result in significant liability to us and damage our reputation.

Despite efforts to ensure the integrity of our systems, we will not be able to anticipate all security breaches of these types, nor will we be able to implement guaranteed preventive measures against such security breaches. Persistent attackers may succeed in penetrating defenses given enough resources, time and motive. The techniques used by cyber criminals change frequently, may not be recognized until launched and can originate from a wide variety of sources, including outside groups such as external service providers, organized crime affiliates, terrorist organizations or hostile foreign governments.

A successful attack to our system security could cause us serious negative consequences, including significant disruption of operations, misappropriation of confidential information, or damage to our computers or systems or those of our customers. A successful security breach could result in violations of applicable privacy and other laws, financial loss to us or to our customers, loss of confidences in our security measures, significant litigation exposure, and harm to our reputation, all of which could have a material adverse effect on our business and results of operations.

In April 2021, the Company launched an investigation into a ransomware attack on the Company's systems. Based on the review of the forensic files, it was determined that the threat actor used ransomware to access Company files. No ransom was paid to the threat actors and all parties associated with the compromised files were notified.

***Our business will be adversely affected if there is a shortage of components.***

The components business has, from time to time, experienced periods of extreme shortages in product supply, generally as the result of demand exceeding available supply. When these shortages occur, suppliers tend to either increase prices or reduce the number of units sold to customers. We believe that because of our large inventory and our relationships with our manufacturers, we have not been adversely affected by shortages in certain discrete semiconductor components. However, future shortages may have an adverse effect upon our business especially if we were to reduce inventory to cut costs and reduce risks of obsolescence. The Company believes that it currently has sufficient inventory levels. However, our business could be affected if the Company is unable to maintain the levels of inventory needed to keep our customers lines running. In addition, customers could order extra inventory of products from several suppliers when they are concerned about a possible shortage and then not reorder such products in the future for such time as they work off their excess inventory purchased.

***Our success depends on key personnel whose continued service is not guaranteed.***

Our continued success and our ability to manage anticipated future growth depend, in large part, upon the efforts of key personnel, particularly Ira Levy and Steven Lubman, our chief executive officer and vice president, respectively, who have extensive industry knowledge and relationships and exercise substantial influence over our operations. The loss of services of one or both of these individuals, or our inability to attract and retain highly qualified personnel, could adversely affect our business, and weaken our relationships with suppliers, business partners, and industry personnel, which could adversely affect our financial condition, results of operations, cash flow and trading price of our common stock.

***Our business is subject to risks from trade regulation and foreign economic conditions.***

Approximately 97% of the total goods which we purchased in Fiscal 2025 were manufactured in foreign countries, with the majority purchased from Taiwan (30%), Hong Kong (19%), elsewhere in Asia (47%) and outside of Asia (less than 1%). These purchases subject us to a number of risks, including economic disruptions, transportation delays and interruptions, foreign exchange rate fluctuations, imposition of tariffs and import and export controls and changes in governmental policies, any of which could have a materially adverse effect on our business and results of operations. Potential concerns may include drastic devaluation of currencies, loss of supplies and increased competition within the region.

The ability to remain competitive with respect to the pricing of imported components could be adversely affected by increases in tariffs or duties, changes in trade treaties, strikes in air or sea transportation, and possible future United States legislation with respect to pricing and import quotas on products from foreign countries. For example, it is possible that political or economic developments in China, or with respect to the United States' relationship with China, could have an adverse effect on our business. Our ability to remain competitive could also be affected by other governmental actions related to, among other things, tariffs, anti-dumping legislation and international currency fluctuations. While we do not believe that any of these factors have adversely impacted our business in the past, there can be no assurance that these factors will not materially adversely affect us in the future. Because the China internal consumption market is depressed, this will increase competition, as there is now a smaller market potential target. Therefore, we believe certain of our competitors will reduce their pricing to capture more market share.

***Electronics industry cyclicality may adversely affect our operations.***

The electronics industry has been affected historically by general economic downturns, which have had an adverse economic effect upon manufacturers and end-users of capacitors and semiconductors. In addition, the life-cycle of existing electronic products and the timing of new product developments and introductions can affect demand for semiconductor components. Any downturns in the electronics distribution industry could adversely affect our business and results of operations.

***Most of our products are not protected by patents, trademarks and proprietary information.***

On December 31, 2019, a U.S. patent which was issued by the United States Patent and Trademark Office for an improved pinpoint alarm designed to improve an individual's ability to determine the location of an alarm versus standard single, multi-frequency, or broadband alarms, which can be used in a wide variety of applications, including reversing vehicles, medical emergency notification, and hardware devices that use Bluetooth or other wireless communications protocols in combination with mobile software applications to locate lost items, including phones, wallets, and keys. We have no other patents, trademarks or copyrights registered with the United States Patent and Trademark Office.

Although we have no knowledge that our products infringe patents or trademarks, or violate proprietary rights of others, it is possible that alleged infringement of existing or future patents, trademarks or proprietary rights of others may occur. In the event that the products that we sell are alleged to infringe proprietary rights of others, these products may have to be modified or redesigned. However, there can be no assurance that any infringing products will be able to be modified or redesigned in a way that does not infringe on the proprietary rights of others, which could have a material adverse effect upon our operations. In addition, there can be no assurance that we will have the financial or other resources necessary to enforce or defend a patent infringement or proprietary rights violation action. Moreover, if the products we sell infringe patents, trademarks or proprietary rights of others, we could, under certain circumstances, become liable for damages, which also could have a material adverse effect on our business.

Additionally to the best of our knowledge the manufacturers of the products that we sell do not have patents, trademarks or copyrights registered in the United States Patent and Trademark Officer or in any state.

**Risks Related to our Common Stock**

***Our common stock is quoted on the OTC Market, which may limit the liquidity and price of our common stock more than if our common stock were listed on the Nasdaq Stock Market or another national exchange.***

Our securities are currently quoted on the OTC Market, an inter-dealer electronic quotation and trading system or equity securities. Quotation of our securities on the OTC Market may limit the liquidity and price of our securities more than if our securities were listed on The Nasdaq Stock Market or another national exchange. Some investors may perceive our securities to be less attractive because they are traded in the over-the-counter market. In addition, as an OTC quoted company, we do not attract the extensive analyst coverage that accompanies companies listed on national exchanges. Further, institutional and other investors may have investment guidelines that restrict or prohibit investing in securities traded on the OTC Market. These factors may have an adverse impact on the trading and price of our common stock.

The market price of our common stock may fluctuate significantly in response to the following factors, most of which are beyond our control:

● variations in our quarterly operating results;

● changes in general economic conditions;

● changes in market valuations of similar companies;

● announcements by us or our competitors of significant new contracts, acquisitions, strategic partnerships or joint ventures, or capital commitments;

● loss of a major supplier or customer; and

● the addition or loss of key managerial and collaborative personnel.

Any such fluctuations may adversely affect the market price of our common stock, regardless of our actual operating performance. As a result, stockholders may be unable to sell their shares, or may be forced to sell them at a loss.

***The application of the "penny stock" rules could adversely affect the market price of our common stock and increase an investor's transaction costs to sell those shares.***

Rule 3a51-1 of the Exchange Act defines "penny stock," in part, as any equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, Rule 15g-9 of the Exchange Act requires that a broker or dealer:

● approve a person's account for transactions in penny stocks; and

● receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

In order to approve a person's account for transactions in penny stocks, the broker or dealer must:

● obtain financial information and investment experience and objectives of the person; and

● make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which:

● sets forth the basis on which the broker or dealer made the suitability determination; and

● that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.

***Anti-takeover provisions in our organizational documents and the shareholder rights plan that we have adopted may discourage or prevent a change of control, even if an acquisition would be beneficial to our stockholders, which could affect our stock price adversely and prevent attempts by our stockholders to replace or remove our current management.***

Our articles of incorporation and bylaws currently contain provisions that could delay or prevent a change of control of our company or changes in our Board of Directors that our stockholders might consider favorable. Some of these provisions:

● authorize the issuance of preferred stock which can be created and issued by the Board of Directors without prior stockholder approval, with rights senior to those of our common stock;

● prohibit our stockholders from calling special stockholder meetings or taking action by written consent; and

● require advance written notice of stockholder proposals and director nominations.

We maintain a shareholder rights plan that could make it more difficult for a third party to acquire, or could discourage a third party from acquiring, us or a large block of our common stock. A third party that acquires 10% or more of our common stock could suffer substantial dilution of its ownership interest under the terms of the shareholder rights plan through the issuance of our shares to all stockholders other than the acquiring person. These and other provisions in our articles of incorporation and bylaws could make it more difficult for stockholders or potential acquirers to obtain control of our Board of Directors or initiate actions that are opposed by our then-current Board of Directors, including a merger, tender offer, or proxy contest involving our company. Any delay or prevention of a change of control transaction or changes in our Board of Directors could cause the market price of our common stock to decline.

**Item 1B. Unresolved Staff Comments**

Not applicable.

**Item 1C. Cybersecurity**

We have developed and implemented a cybersecurity risk management program intended to protect the confidentiality, integrity, and availability of our critical systems and information. Our cybersecurity risk management program is integrated into our overall enterprise risk management program, and shares common methodologies, reporting channels and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas.

Key elements of our cybersecurity risk management program include but are not limited to,

● risk assessments designed to help identify material risks from cybersecurity threats to our critical systems, information, services, and our broader enterprise IT environment;

● individuals, including employees and external third party service providers, who are responsible for managing our cybersecurity risk assessment processes, our security controls, and our response to cybersecurity incidents; cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and

● a cybersecurity insurance policy in place to help mitigate monetary losses of a potential cybersecurity attack.

Our management team is responsible for assessing and managing our material risks from cybersecurity threats. The team has primary responsibility for our overall cybersecurity risk management program and supervises our retained external cybersecurity consultants.

Our management team takes steps to stay informed and monitors efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in the IT environment

Our Board considers cybersecurity risk as part of its risk oversight function. Management updates the Board where it deems appropriate, regarding any cybersecurity incidents it considers to be significant or potentially significant.

**Item 2. Properties.**

Our executive offices and warehouse facilities are located at 95 East Jefryn Boulevard, Deer Park, New York, 11729. We lease our facilities from Great American Realty of Jefryn Blvd., LLC ("Great American"), an entity that is 50% owned by Ira Levy, Surge's president and Steven Lubman, Surge's vice president. Our lease is through September 30, 2030 and our monthly rent for the year ended November 30, 2025 was $17,473 We occupy approximately 23,250 square feet of office space and warehouse space. The rental rate is typical for the type and location of Surge's and Challenge's facilities.

The Company has a lease to rent office space and a warehouse in Hong Kong Through November 2027. Annual minimum rental payments for this space are approximately $79,564.

The Company has a lease to rent additional warehouse space in Hong Kong through November 30, 2027. Annual minimum rental payments for this space are approximately $77,097.

**Item 3. Legal Proceedings.**

None.

**Item 4. Mine Safety Disclosures.**

Not applicable.

**PART II**

**Item 5. Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities**

Shares of our common stock are quoted on the OTC Pink Market maintained by OTC Markets Group under the symbol "SPRS". Trading in our common stock is limited. Quotations represent inter-dealer prices without retail mark-up, mark-down, or commission and may not necessarily represent actual transactions.

As of the date of the filing of this report, there are 5,716,792 shares of common stock issued and outstanding.

As of the date of the filing of this report, there are approximately 176 holders of record of our common stock.

<u>Purchases of Equity Securities by the Issuer and Affiliated Purchasers</u>

None.

<u>Equity Compensation Plan Information</u>

The following table provides information as of November 30, 2025 with respect to the shares of common stock that may be issued under our existing equity compensation plans:

---

| | | | |
|:---|:---|:---|:---|
| **Plan Category** | **Number of <br> securities to be <br> issued upon <br> exercise of <br> outstanding <br> options, <br> warrants <br> and rights <br> (a)** | **Weighted-<br> average <br> exercise <br> price of <br> outstanding <br> options, <br> warrants <br> and <br> rights <br> (b)** | **Number of <br> securities <br> remaining <br> available for <br> future <br> issuance under <br> equity <br> compensation <br> plans <br> (excluding <br> securities <br> reflected in <br> column a<br> (c)** |
| Equity compensation plan approved by security holders (1) | 645000 | $2.59 | 1365433 |
| Equity compensation plan not yet approved by security holders | - | - | - |
| Total | 645000 | $2.59 | 1365433 |

---

<sup>(1)</sup> Represents the Company's 2015 Incentive Stock Plan and the 2024 Equity Incentive Stock Plan.

***Recent Sales of Unregistered Securities.***

None.

***Dividend Policy***

We have never declared or paid cash dividends on our common stock. We currently do not anticipate paying any cash dividends in the foreseeable future for our common stock. Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to applicable laws, and will depend on our financial condition, results of operations, capital requirements, general business conditions and other factors that our board of directors may deem relevant.

**Item 6. [Reserved]**

We are a smaller reporting company and therefore, we are not required to provide information required by this Item of Form 10-K.

**Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations**

This report contains forward-looking statements. All statements other than statements of historical facts contained herein, including statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, forward-looking statements can be identified by terms such as "may," "will," "should," "expects," "plans," "anticipates," "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these terms or other similar words. These statements are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. We discuss many of the risks in greater detail under the heading "Risk Factors." Also, these forward-looking statements represent our estimates and assumptions only as of the date of the filing of this report. Except as required by law, we assume no obligation to update any forward-looking statements after the date of the filing of this report.

**Overview**

The Company operates with two sales groups, Surge Components ("Surge") and Challenge Electronics ("Challenge"). Surge is a supplier of electronic products and components. These products include capacitors, which are electrical energy storage devices, and discrete semiconductor components, such as rectifiers, transistors and diodes, which are single function low power semiconductor products that are packaged alone as compared to integrated circuits such as microprocessors. The products sold by Surge are typically utilized in the electronic circuitry of diverse products, including, but not limited to, automobiles, audio products, temperature control products, lighting products, energy related products, computer related products, various types of consumer products, garage door openers, household appliances, power supplies and security equipment. These products are sold to both original equipment manufacturers, commonly referred to as OEMs, who incorporate them into their products, and to distributors of the lines of products we sell, who resell these products within their customer base. These products are manufactured predominantly in Asia by approximately sixteen independent manufacturers. We act as the master distribution agent utilizing independent sales representative organizations in North America to sell and market the products for one such manufacturer pursuant to a written agreement. When we act as a sales agent, our supplier who sold the product to the customer that we introduced to our supplier pays us a commission. The amount of the commission is determined on a sale by sale basis depending on the profit margin of the product. Commission revenue totaled $312,389 and $95,584 for the fiscal year ended November 30, 2025 and November 30, 2024 respectively.

Challenge is engaged in the sale of electronic components. In 1999, Challenge began as a division to sell audible components. We have been able to increase the types of products that we sell because some of our suppliers introduced new products, and we also located other products from new suppliers. Our core products include buzzers, speakers, microphones, resonators, alarms, chimes, filters, and discriminators. We now also work with our suppliers to have our suppliers customize many of the products we sell for many customers through the customers' own designs and those that we work with our suppliers to have our suppliers redesign for them at our suppliers' factories. We have engineers on our staff who work with our suppliers on such redesigns and assists with the introduction of new product lines. We are continually looking to expand the line of products that we sell. We sell these products through independent representatives that earn a commission on the products we sell. We are also working with local, regional, and national distributors to sell these products to local accounts in every state. Challenge also at times handles the brokering of certain products, helping their customers find parts that that regular suppliers cannot deliver.

The Company has a Hong Kong office to effectively handle the transfer business from United States customers purchasing and manufacturing in Asia after designing the products in the United States. This office has strengthened the Company's global position, improving our capabilities and service to our customer base.

The world of business continues to change because of "disruptors," which are significant changes in traditional business practices that did not previously exist. For example, customers continue to centralize purchasing from regional purchasing and are stretching their payment terms. These changes also include customers moving their manufacturing operations from North America to Asia, and the trend of globalization. Some of our customers have been involved in mergers and acquisitions, causing consolidation. This trend makes business more complicated and costly for the Company. The Company must have a presence in Asia to service and further develop the business. The Surge sales division has a sales and marketing office and warehouse in Hong Kong for these reasons, we established Surge Ltd., our Hong Kong subsidiary. The Surge divisions regional sales in their Europe office are growing strong throughout the entire European continent and management looks forward to their continued growth. The Challenge Electronics sales division is in the process of opening up a sales and marketing office in Europe as well. Currency fluctuations may also have an effect on doing business outside of North America. Customers have moved to reduce their supply chain, which could adversely affect the Company. In some market segments, demand for electronic components has decreased, and in other segments, the demand is still strong. Some technologies have become obsolete, while customers develop new products using different kinds of components. The Challenge Electronics division in the Company has had success in designing new products for customers to better their products performance capabilities. This proactive approach separates the Company from selling commodity products to also selling more customized products. Management is encouraged by the results of 2025 providing strong growth in sales and profitability. Exclusive of the one time charge of the employee stock options the Company has doubled it's profitability in 2025. Management is cautiously optimistic about continued growth in 2026 but expects 2026, to be a period of continued challenge, in regard to inflation and general economic conditions, in maintaining consistent flow of products during shortages of certain products, and growth as we see our customers slowly return to full production pace. These challenges could affect the Company in negative ways, possibly reducing sales and or profitability. Because of a labor shortage, our customers engineering staff has been challenged, so getting our products approved has been and will continue to take longer to achieve. Additionally, the cost of some raw materials has continued to increase, therefore our costs have increased. In order for the Company to continue to grow, we will depend on, among other things, the continued growth of the electronics and semiconductor industries, our ability to withstand intense price competition, our ability to obtain new customers, our ability to retain and attract high performing sales and other key personnel in order to expand our marketing capabilities, our ability to secure adequate sources of products, which are in demand on commercially reasonable terms, our success in executing and managing growth, including monitoring an expanded level of operations and systems, controlling costs, the availability of adequate cash flow, the continued supply of products from our factories, the ability to withstand higher transportation costs, tariffs, and longer travel times and our ability to deal successfully, with new and future disruptors. The tariffs continue to impact the Company, although less now then previously. The general supply chain challenges present both a challenge and opportunity to the Company. The Company is cautiously optimistic about its ability to meet these challenges with continued growth unless the general global or electronics industry economic conditions deteriorate. Challenging economic conditions could have a negative impact on sales into 2026. The combination of possible disruptors such as increased costs and longer lead times from factories to the Company could also have negative impacts on the business in the future. The tense relations between America and China could also impact the Company's business. China could impose rules and laws that make it more difficult to do business in Hong Kong and China. The Company is taking steps to be well prepared in case of any actions from China that would cause us business disruption. For example, many of the Company's factory partners have opened production facilities outside of China. As there are many challenges in this complicated and competitive market, there are also many great opportunities that the Company is involved in. Therefore management looks forward to continued growth in 2026 an beyond.

**Critical Accounting Policies**

*Accounts Receivable*

The allowance for credit losses is based on the Company's assessment of the collectability of specific customer accounts and an assessment of international, political and economic risk as well as the aging of the accounts receivable. If there is a change in actual defaults from the Company's historical experience, the Company's estimates of recoverability of amounts due could be affected and the Company would adjust the allowance accordingly.

*Revenue Recognition*

Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed and determinable, collectability is reasonably assured and title and risk of loss have been transferred to the customer. This occurs when product is shipped from the Company's warehouse. For direct shipments from our suppliers to our customer, revenue is recognized when product is shipped from the Company's supplier. The Company acts as a sales agent for certain customers buying direct from one of its suppliers. The Company reports these commissions as revenues in the period earned.

The Company performs ongoing credit evaluations of its customers and maintains reserves for potential credit losses.

*Inventory Valuation*

Inventories are recorded at the lower of cost or net realizable value. Write-downs of inventories to net realizable value are based on stock rotation, historical sales requirements and obsolescence as well as in the changes in the backlog. Reserves required for obsolescence were not material in any of the periods in the financial statements presented. Reserves related to stock rotation and future sales requirements for specific inventory parts involve subjective estimates to be made by management based on current and expected market conditions. If market conditions are less favorable than those projected by management, additional write-downs of inventories could be required. For example, each additional 1% of obsolete inventory would reduce operating income by approximately $55,000.

The Company does not have price protection agreements with any of its vendors and assumes the risk of changes in the prices of its products. The Company does not believe there to be a significant risk with regards to the lack of price protection agreements as many of its inventory items are purchased to fulfill purchase orders received.

*Income Taxes*

We have made a number of estimates and assumptions relating to the reporting of a deferred income tax asset to prepare our financial statements in accordance with generally accepted accounting principles. These estimates may have a significant impact on our valuation allowance relating to deferred income taxes. Our estimates could materially impact the financial statements.

**Results of Operations**

Consolidated net sales for the fiscal year ended November 30, 2025 increased by $5,108,966 or 16.4%, to $36,320,105 as compared to net sales of $31,211,139 for the fiscal year ended November 30, 2024. We attribute the increase to an increase in business with new customers as well as an increase in business with existing customers. We can also attribute the increase to an increase in business from the Company's distribution channels. Net sales for the fiscal years ended November 30, 2025 and November 30, 2024 reflect $941,564 and $549,564, respectively of tariff costs that the Company was able to pass on to its customers.

Our gross profit for the fiscal year ended November 30, 2025 increased by $1,551,477 to $10,455,171 or 17.4%, as compared to $8,903,694 for the fiscal year ended November 30, 2024. Gross margin as a percentage of net sales increased slightly to 28.8% for the fiscal year ended November 30, 2025 compared to 28.5% for the fiscal year ended November 30, 2024. The increase can be attributed to the increase in sales to certain customers whose sales are at a higher gross profit margin. Our industry will continue to receive pressure from customers for price reductions. Some of them further demand periodic price reductions on a quarterly or semi-annual basis, as opposed to annual fixed pricing. We work with electronic manufacturing service subcontractor customers who manufacture products for other customers who do not have their own manufacturing operations. At times we are not able to recover these price reductions from our suppliers. The Company has agreements with these subcontractor customers to provide periodic cost reductions through rebates in the amount of 5%. These reductions only affect future shipments of our products, and do not affect existing orders. These reductions can have a negative impact on our profit margins since they reduce the amount of commissions we can earn. Even though this rebate can impact the Company's gross profit margin, these subcontractor customers represent very significant potential growth for the Company, because they can help the Company become an approved supplier at the customers they manufacture for, and they purchase our components for these customers. We believe it would be very difficult for the Company to achieve business at these customers without the help of these subcontractor customers. During Fiscal 2025, the Company was impacted by tariff costs on certain products imported from China, which went into effect as of July 6, 2018. The Company has been able to pass along a portion of these costs to its customers and will do so under potential tariffs imposed upon us. The Company has also moved some customer deliveries directly to Hong Kong in order to mitigate some of these costs.

Selling and shipping expenses for the fiscal year ended November 30, 2025 was $2,906,782, an increase of $166,788, or 6.1%, as compared to $2,739,994 for the fiscal year ended November 30, 2024. We attribute the increase to increases in sales and the resulting selling expenses such as commission expenses, the hiring of new salespeople which increased sales payroll, travel and entertainment and auto expenses, offset by decreases in freight out and printing expenses.

General and administrative expenses for the fiscal year ended November 30, 2025 was $6,223,384, an increase of $1,034,015, or 19.9%, as compared to $5,189,369 for the fiscal year ended November 30, 2025. The increase is due primarily to non cash stock based compensation of $538,361 during the fiscal year ended November 30, 2025. As well as increases in officer salaries, other salaries and related payroll taxes, general insurance expenses as well as health insurance expenses, utilities and office expenses and professional fees, computer expenses and consulting expenses and pension expenses as well as increases in bank charges and bad debt expenses, offset by decreases in rent, directors fees and public company expenses.

Depreciation expense for the fiscal year ended November 30, 2025 was $70,603, an increase of $219, or less than 1%, as compared to $70,384 for the fiscal year ended November 30, 2024.

Other income for the fiscal year ended November 30, 2025 was $356,612, an increase of $24,909 as compared to $331,703 for the fiscal year ended November 30, 2024. We attribute the increase to income from investment in the acquisition of Treasury Bonds and notes issued by the United States Treasury.

Tax expense for the fiscal year ended November 30, 2025 was $474,301, an increase of $64,328 as compared to a tax expense of $409,973 for the fiscal year ended November 30, 2024. The changes result from our increase in net income for the 2025 period.

As a result of the foregoing, net income for the fiscal year ended November 30, 2025 was $1,136,713, compared to a net income of $825,677 for the fiscal year ended November 30, 2024.

**Liquidity and Capital Resources**

As of November 30, 2025 we had cash of $5,331,609, marketable securities in the amount of $8,438,017, and working capital of $20,763,574. We believe that our working capital levels are adequate to meet our operating requirements during the next twelve months. The Company is exploring and evaluating opportunities for growth and expansion using the Company's cash resources.

During the fiscal year ended November 30, 2025, we had net cash flow provided by operating activities of $916,147, as compared to net cash flow provided by operating activities of $1,823,390 for the fiscal year ended November 30, 2024. . The decrease in cash flow from operating activities was primarily the result of decreased cash flows from accounts receivable, inventory and prepaid expenses as partially offset by an increase in net income, accrued expenses and non cash expenses including stock based compensation.

We had net cash flow used in investing activities of $(1,350,231) for the fiscal year ended November 30, 2025, as compared to net cash flow used in investing activities of $(3,830,496) for the fiscal year ended November 30, 2024. We attribute the change to reduced purchases by the Company of marketable debt securities in the form of Treasury bills and notes issued by the United States Treasury.

We had net cash flow used in financing activities of $138,000 during the fiscal year ended November 30, 2025 as compared to $0 provided by financing activities for the fiscal year ended November 30, 2024. We attribute the increase to the proceeds from the exercise of stock options.

As a result of the foregoing, the Company had a net decrease in cash of $(296,084) for the fiscal year ended November 30, 2025, as compared to a net decrease in cash of $(2,007,106) for the fiscal year ended November 30, 2024, but Marketable securities increased by more than $1.3M.

The table below sets forth our contractual obligations, including long-term debt, operating leases and other long-term obligations, as of November 30, 2025:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | | **Payments due** | **Payments due** | | |
| <br>**Contractual Obligations** |<br>**Total** | **0 – 12**<br>**Months** | **13 – 36**<br>**Months** |<br>**37 – 60**<br>**Months** |<br>**More than**<br>**60 Months** |
| Financing Lease Obligations | $- | $- | $- | $- | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- |
| Operating leases | $1369528 | 367033 | 590113 | 412382 | - |
| Total obligations | $1369528 | $367033 | $590113 | $412382 | $- |

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**Inflation**

In the past two fiscal years, inflation has not had a significant impact on our business. The Company has been able to pass along increases in purchasing costs to their Customers. Any significant increase in inflation and interest rates could have a significant effect on the economy in general and, thereby, could affect our future operating results.

**Off Balance Sheet Arrangements**

We do not have any off balance sheet arrangements.

**Item 7A. Quantitative and Qualitative Disclosures About Market Risk.**

We are a smaller reporting company and therefore, we are not required to provide information required by this Item of Form 10-K.

**Item 8. Financial Statements and Supplementary Information**

Our financial statements, together with the independent registered public accounting firm's report of Seligson & Giannattasio, CPAs PC, begin on page F-1, immediately after the signature page.

**Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.**

None**.**

**Item 9A. Controls and Procedures.**

<u>Evaluation of Disclosure Controls and Procedures.</u>

We maintain "disclosure controls and procedures," as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

As of November 30, 2025 we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective.

<u>Management's Report of Internal Control over Financial Reporting.</u>

We are responsible for establishing and maintaining adequate internal control over financial reporting in accordance with Exchange Act Rule 13a-15. With the participation of our Chief Executive Officer and Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of November 30, 2025 based on the criteria established in *Internal Control-Integrated Framework* issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was effective as of November 30, 2025. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

<u>Changes in Internal Controls.</u>

During the quarter ended November 30, 2025, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

**Item 9B. Other Information**

None.

**Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections**

None.

**PART III**

**Item 10. Directors, Executive Officers, and Corporate Governance.**

Our board of directors have a term of office of one year and were all reelected at the 2025 annual meeting of stockholders. In 2025, each director will be up for reelection for a term of one year to end at the next annual meeting of shareholders.

Our executive officers and directors, and their ages, positions and offices with us are as follows:

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| | | |
|:---|:---|:---|
| Name | Age | Position |
| Ira Levy | 69 | Chief Executive Officer, Chief Financial Officer, President and Director |
| Steven J. Lubman | 71 | Vice President, Secretary, Treasurer and Director |
| Alan Plafker\* (2)(3) | 67 | Director |
| Lawrence Chariton\* (2)(3) | 68 | Director |
| Gary Jacobs\* (1)(2)(3) | 68 | Director |
| Peter Levy\* (1)(2)(3) | 65 | Director |

---

\* Independent director

<sup>(1)</sup> Member of Compensation Committee.

<sup>(2)</sup> Member of Audit Committee

<sup>(3)</sup> Member of Nominating and Corporate Governance Committee

**Directors**

***Ira Levy*** has served as our President, Chief Executive Officer and director since our inception in November 1981, and as our Chief Financial Officer since March 2010. From 1976 to 1981, Mr. Levy was employed by Capar Components Corp., an importer and supplier of capacitor and resistor products. Mr. Levy has served on the board of trustees of the Bellmore Jewish Center since 2002 and served as its president from 2006 to 2008. From 2000 to 2004, he served as a member of the board of trustees of METNY, the governing body of the Conservative movement of Judaism for New York, New Jersey, and Connecticut. Mr. Levy studied Business Management at Hofstra University. Mr. Levy's experience in, and knowledge of, the electronics components business led to the conclusion that he should serve on our board.

***Steven J. Lubman*** has served as our Vice President, Secretary and a director since our inception in November 1981. In June 1988, Mr. Lubman founded Challenge Electronics, a division of the Company. From 1980 through 1981, he served as the sales manager for NIC Components Corp., a division of Nu Horizons Electronics Corp., a distributor of electronic components which was acquired by Arrow Electronics, Inc. (NYSE: ARW) in January 2011. From 1976 through 1980, Mr. Lubman served as both an inside and then outside salesperson for Capar Components Corp., a division of Diplomat Electronics Inc., a broad line distributor of electronic components including integrated circuits, diodes, transistors, and capacitor products. Mr. Lubman's more than 35 years of experience in, and knowledge of the electronics components business, led to the conclusion that he should serve on our board.

***Alan Plafker*** has served as a director since June 2001. Since November 2016, he has served as Vice President of Garber Atlas Fries & Associates, Inc., an insurance agency providing commercial and personal insurance coverage. From July 2000 to November 2016, Mr. Plafker served as President and Chief Executive Officer of Member Brokerage Service LLC, a credit union service organization, and also served as director of business services for the Credit Union. From January 1993 to July 2000, he served as a member of the credit union's board of directors and supervisory committee. Mr. Plafker has more than 35 years of executive and management experience in the insurance and credit union industries. He is a New York State licensed insurance agent and broker. Mr. Plafker has earned certification as a Certified Professional Insurance Agent from the AIMS Society and earned the CIC designation from the Society of Certified Insurance Counsellors. He has also earned the CUBLP (Credit Union Business Lending Professional) designation from the CUNA Business Lending Certification Institute. In addition, he is a past President of the Professional Insurance Agents Association of New York State. He currently serves as Treasurer and as a member of the Board of Directors for the New York Independent Livery Drivers Benefit Fund, a New York State benefit fund providing injury benefits for livery drivers, to comply with the Workers' Compensation Board regulations. Mr. Plafker received a Bachelor's degree in business administration from Adelphi University. Mr. Plafker's experience in the insurance industry, knowledge of financial matters, and Board Member experience led to the conclusion that he should serve on our board.

***Lawrence Chariton*** has served as a director since 2001. He worked for 50 years in the retail jewelry industry at Linda Shop Jewelry and Great American Jewelry as Chief Operating Officer. Since February 2018 Mr. Chariton has served as a member of the Board of Trustees of the State University of Old Westbury in New York. Mr. Chariton has served previously from 1998 as a member of the Board of Directors of New Island Hospital in Bethpage, N.Y. Subsequently he remained after the merger as a member of the Board of Directors with St. Joseph's Hospital until December 2010. Mr. Chariton served as a member of The Board of Directors of the Jewish National Fund of Long Island. Mr. Chariton has a Bachelor's Degree in Accounting from Hofstra University. He is a graduate of The Gemological Institute of America in Diamonds and Color Stones. Mr. Chariton's experience on several Boards of Directors as well as running a small business led to the conclusion that he should serve on our board.

***Gary M. Jacobs*** has served as a director since July 2003. Mr. Jacobs is currently serving as Chief Commercial Officer of AOG, LLC d/b/a Tandem Foods, the acquirer of Bar Bakers, LLC effective May 2, 2024. Previously, since October 2014, he served as President of Bar Bakers, LLC, a commercial food manufacturer of nutritional bars, cookies and other baked goods. From March 2011 to October 2014, he served as a consultant to several companies, providing advisory services in the areas of turn-around and financial and operational efficiencies. Mr. Jacobs served as the Chief Financial Officer of Chem Rx from June 2008 until March 2011. From May 2005 to June 2008, Mr. Jacobs was the Chief Financial Officer and Chief Operating Officer of Gold Force International, Ltd., a supplier of gold, silver and pearl jewelry to U.S. retail chains, and Karat Platinum LLC, a developer of an alternative to platinum. From July 2003 to April 2005, Mr. Jacobs served as President of The Innovative Companies, LLC, a supplier of natural stone. From October 2001 to February 2003, Mr. Jacobs served as Executive Vice President of Operations and Corporate Secretary of The Hain Celestial Group, Inc., a food and personal care products company. Mr. Jacobs also served as Executive Vice President of Finance, Chief Financial Officer and Treasurer of The Hain Celestial Group, Inc. from September 1998 to October 2001. Prior to that, Mr. Jacobs was the Chief Financial Officer of Graham Field Health Products, Inc., a manufacturing and distribution company. Mr. Jacobs served for 13 years as a member of the audit staff of Ernst & Young LLP, where he attained the position of senior manager. He is a certified public accountant and holds a Bachelor's of Business Administration in Accounting from Adelphi University. Mr. Jacobs's experience as a certified public accountant and as a chief financial officer led to the conclusion that he should serve on our board.

***Peter A. Levy*** has been a director of the Company since April 2017. He is an equity shareholder at the law firm of Mandelbaum Barrett, one of the region's oldest and most renowned law firms. He joined Mandelbaum as a member in September of 2015, and now serves on the firm's Executive Committee with the responsibility for all department practices within the firm. In addition to practicing law for 15 years, Mr. Levy spent 12 years as a partner at a regional accounting firm, Sobel & Company, and has served as the chief operating officer of two different public companies, The Empire Sports & Entertainment and MYOS Corporation. As the president of MYOS Corporation, he successfully positioned the company on the NASDAQ stock exchange. Mr. Levy has significant experience in mergers and acquisitions, joint venture partnering, corporate governance, business processes, and strategic planning. Community service is an important aspect of Mr. Levy's life. For over 20 years he has been on the Board and also served as the Corporate Liaison to Easter Seals – Camp ASCCA, America's flagship camp for People with Disabilities, and he is the co-builder of the Roswal-Levy Tower, the world's largest wheelchair-accessible interactive climbing tower for the disabled. For over a decade, Mr. Levy has been on the Board of Hamp's Camp, a charity founded by former N.Y. Giants running back Rodney Hampton, which is dedicated to providing leadership tools to underprivileged children in Atlanta, Newark, and Houston. Mr. Levy's financial experience led to the conclusion that he should serve on our board.

The Board has determined that each of Messrs. Chariton, Jacobs, Plafker, and Peter Levy qualify as "independent" under the Nasdaq Stock Market Rules as well as Rule 10A-3 promulgated under the Exchange Act.

**Board and Committee Meetings**

During the fiscal year ended November 30, 2025, the Board held five meetings. Each of the directors attended at least 75% of the aggregate of (i) the total number of meetings of the Board (held during the period for which he served as a director), and (ii) the total number of meetings held by all committees of the Board on which he served (during the periods that he served on such committees). We have no written policy regarding director attendance at annual meetings of stockholders. Our last annual meeting of stockholders was held on November 25, 2025 and all of our directors attended such meeting.

**Board Committees**

The composition and responsibilities of each of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee are described below. Members will serve on these committees until their resignation or until otherwise determined by the Board. Each committee operates under a charter that has been approved by the Board, and which is available on our website at *https://surgecomponents.com/about/investors/*.

***Audit Committee***

Our Audit Committee is comprised of Messrs. Chariton, Plafker, Jacobs and Peter Levy, each of whom is an independent director of the Board. Mr. Jacobs serves as chairman of the Audit Committee. Our Board has determined that Mr. Jacobs is an "audit committee financial expert" as defined in Item 407(d)(5)(ii) of Regulation S-K. The audit committee members are "independent" as that term is defined under the Nasdaq Stock Market Rules. During the fiscal year ended November 30, 2025, the Audit Committee held four meetings.

The Audit Committee is authorized to:

● approve and retain the independent auditors to conduct the annual audit of our books and records;

● review the proposed scope and results of the audit;

● review and pre-approve the independent auditor's audit and non-audit services rendered;

● approve the audit fees to be paid;

● review accounting and financial controls with the independent auditors and our financial and accounting staff;

● review and approve transactions between us and our directors, officers and affiliates;

● recognize and prevent prohibited non-audit services;

● establish procedures for complaints received by us regarding accounting matters;

● oversee internal audit functions; and

● prepare the report of the Audit Committee that SEC rules require to be included in our annual meeting proxy statement.

***Compensation Committee***

Our Compensation Committee is comprised of Peter Levy and Gary Jacobs, each of whom is an independent director. Mr. Levy serves as chairman of the Compensation Committee. During the fiscal year ended November 30, 2025, the Compensation Committee held two meetings.

The Compensation Committee is authorized to:

● review and recommend the compensation arrangements for management, including the compensation for our chief executive officer;

● establish and review general compensation policies with the objective of attracting and retaining superior talent, rewarding individual performance and achieving our financial goals;

● administer our stock incentive plans; and

● prepare the report of the Compensation Committee that SEC rules require to be included in our annual meeting proxy statement.

***Nominating and Corporate Governance Committee***

Our Nominating and Corporate Governance Committee is comprised of Messrs. Chariton, Plafker, Peter Levy and Jacobs, each of whom is an independent director. Mr. Jacobs serves as chairman of the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee held one meeting during the fiscal year ended November 30, 2025.

The Nominating and Corporate Governance Committee is authorized to:

● identify and nominate members of the board of directors;

● oversee the evaluation of the board of directors and management;

● develop and recommend corporate governance guidelines to the board of directors;

● evaluate the performance of the members of the board of directors; and

● make recommendations to the board of directors as to the structure, composition and functioning of the board of directors and its committees.

**Director Nominations**

In evaluating and determining whether to nominate a candidate for a position on the Board, the Nominating and Corporate Governance Committee utilizes a variety of methods and considers criteria such as high professional ethics and values, experience on the policy-making level in business or experience relevant to our product candidates and a commitment to enhancing stockholder value. Candidates may be brought to the attention of the Nominating and Corporate Governance Committee by current Board members, stockholders, officers or other persons. The Nominating and Corporate Governance Committee will review all candidates in the same manner regardless of the source of the recommendation.

We have no formal policy regarding board diversity. Our Nominating and Corporate Governance Committee and Board may therefore consider a broad range of factors relating to the qualifications and background of nominees, which may include diversity, which is not only limited to race, gender or national origin. Our Nominating and Corporate Governance Committee's and Board's priority in selecting board members is identification of persons who will further the interests of our stockholders through his or her established record of professional accomplishment, the ability to contribute positively to the collaborative culture among board members and professional and personal experiences and expertise relevant to our growth strategy.

The Nominating and Corporate Governance Committee also considers stockholder recommendations for director nominees that are properly received in accordance with our Bylaws and applicable rules and regulations of the SEC. In order to validly nominate a candidate for election or reelection as a director, stockholders must give timely notice of such nomination in writing to our Corporate Secretary and include, as to each person whom the stockholder proposes to nominate, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act, and the rules and regulations thereunder (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected). For more information on director candidate nominations by stockholders, see "Procedures for Nominating Directors".

**Procedures for Nominating Directors**

Effective December 30, 2021, the Company began to be governed by newly adopted bylaws (the "Bylaws").The Bylaws provide, among other things, for advance notice of director nominations.

The exclusive means by which a stockholder may nominate a director is as follows: (1) was a stockholder of record at the time of the giving of the notice required by Section 2.4(ii) of the Bylaws and on the record date for the determination of stockholders entitled to vote at the annual meeting and (2) has complied with the notice procedures set forth in this Section 2.4(ii) of the Bylaws. In addition to any other applicable requirements, for a nomination to be made by a stockholder, the stockholder must have given timely notice thereof in proper written form to the secretary of the corporation. To comply with clause (B) of Section 2.4(ii) of the Bylaws, a nomination to be made by a stockholder must set forth all information required under Section 2.4(ii) of the Bylaws and must be received by the secretary of the corporation at the principal executive offices of the corporation at the time set forth in, and in accordance with, the final three sentences of Section 2.4(i)(a) of the Bylaws. This includes how a stockholder's notice a stockholder's notice must set forth all information required under this Section 2.4(i) and must be timely received by the secretary of the corporation. To be timely, a stockholder's notice must be received by the secretary at the principal executive offices of the corporation not later than the 45<sup>th</sup> day nor earlier than the 75<sup>th</sup> day before the one-year anniversary of the date on which the corporation first mailed its proxy materials or a notice of availability of proxy materials (whichever is earlier) for the preceding year's annual meeting; *provided*, *however*, that in the event that no annual meeting was held in the previous year or if the date of the annual meeting is advanced by more than 30 days prior to or delayed by more than 60 days after the one-year anniversary of the date of the previous year's annual meeting, then, for notice by the stockholder to be timely, it must be so received by the secretary not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of (i) the 90th day prior to such annual meeting, or (ii) the tenth day following the day on which Public Announcement (as defined below) of the date of such annual meeting is first made. In no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period for the giving of a stockholder's notice as described in this Section 2.4(i)(a). "<u>Public Announcement</u>" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or a comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the 1934 Act.

Additionally, to be in proper written form, such stockholder's notice to the secretary must set forth: (1) as to each person (a "<u>nominee</u>") whom the stockholder proposes to nominate for election or re-election as a director: (A) the name, age, business address and residence address of the nominee, (B) the principal occupation or employment of the nominee, (C) the class and number of shares of the corporation that are held of record or are beneficially owned by the nominee and any derivative positions held or beneficially held by the nominee, (D) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of the nominee with respect to any securities of the corporation, and a description of any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares), the effect or intent of which is to mitigate loss to, or to manage the risk or benefit of share price changes for, or to increase or decrease the voting power of the nominee, (E) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nominations are to be made by the stockholder, (F) a written statement executed by the nominee acknowledging that as a director of the corporation, the nominee will owe a fiduciary duty under Nevada law with respect to the corporation and its stockholders, and (G) any other information relating to the nominee that would be required to be disclosed about such nominee if proxies were being solicited for the election or re-election of the nominee as a director, or that is otherwise required, in each case pursuant to Regulation 14A under the 1934 Act (including without limitation the nominee's written consent to being named in the proxy statement, if any, as a nominee and to serving as a director if elected or re-elected, as the case may be); and (2) as to such stockholder giving notice, (A) the information required to be provided pursuant to clauses (2) through (5) of Section 2.4(i)(b) above, and the supplement referenced in the second sentence of Section 2.4(i)(b) above (except that the references to "business" in such clauses shall instead refer to nominations of directors for purposes of this paragraph), and (B) a statement whether either such stockholder or Stockholder Associated Person will deliver a proxy statement and form of proxy to holders of a number of the corporation's voting shares reasonably believed by such stockholder or Stockholder Associated Person to be necessary to elect or re-elect such nominee(s) (such information provided and statements made as required by clauses (A) and (B) above, a "<u>Nominee Solicitation Statement</u>").

In addition to all other requirements set forth in the Bylaws, a nominating stockholder (including its affiliates) and each director nominee must also comply with all applicable requirements of state law and of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in the Bylaws.

**Board Leadership Structure and Role in Risk Oversight**

Although we have not adopted a formal policy on whether the Chairman and Chief Executive Officer positions should be separate or combined, we have traditionally determined that it is in our best interests and in the best interests of our stockholders to combine these roles. Mr. Levy has served as our Chairman since November 1981. Due to our small size, we believe it is currently most effective to have the Chairman and Chief Executive Officer positions combined.

Our board of directors is primarily responsible for overseeing our risk management processes. The Board receives and reviews periodic reports from management, auditors, legal counsel, and others, as considered appropriate regarding our assessment of risks. The Board focuses on the most significant risks facing us and our general risk management strategy, and also ensures that risks undertaken by management are consistent with the board's appetite for risk. While the Board oversees our risk management, management is responsible for day-to-day risk management processes. We believe this division of responsibilities is the most effective approach for addressing the risks facing us and that our board leadership structure supports this approach.

**Code of Ethics**

We have adopted a code of ethics that applies to our officers, directors and employees. A copy of the code of ethics is accessible on our website at *https://surgecomponents.com/about/investors/*. Additional copies of the code of ethics may be obtained without charge, from us by writing or calling: 95 East Jefryn Blvd., Deer Park, New York 11729, Attention: Corporate Secretary, Telephone: (631) 595-1818.

**Stockholder Communications with the Board**

Stockholders who wish to do so may communicate directly with the Board or specified individual directors by writing to:

Board of Directors (or name of individual director)

c/o Corporate Secretary

Surge Components, Inc.

95 East Jefryn Blvd.

Deer Park, New York 11729

The Board of Directors maintains a process for stockholders or other interested parties to communicate with the Board or any Board member. Stockholders or interested parties who desire to communicate with the Board should send any communication to the Company's Corporate Secretary, Surge Components, Inc., 95 East Jefryn Blvd., Deer Park, New York 11729. We will forward all communications from security holders and interested parties to the full Board, to non-management directors, to an individual director or to the chairperson of the Board committee that is most closely related to the subject matter of the communication, except for the following types of communications: (i) communications that advocate that we engage in illegal activity; (ii) communications that, under community standards, contain offensive or abusive content; (iii) communications that have no relevance to our business or operations; and (iv) mass mailings, solicitations and advertisements. The Corporate Secretary will determine when a communication is not to be forwarded. Our acceptance and forwarding of communications to directors does not imply that directors owe or assume any fiduciary duties to persons submitting the communications.

Additionally, the Audit Committee has established procedures for the receipt, retention and confidential treatment of complaints received by Surge regarding accounting, internal accounting controls or auditing matters, including procedures for confidential, anonymous submissions by employees with respect to such matters. Employees and stockholders may raise a question or concern to the Audit Committee regarding accounting, internal accounting controls or auditing matters by writing to:

Chairman, Audit Committee

c/o Corporate Secretary

Surge Components, Inc.

95 East Jefryn Blvd.

Deer Park, New York 11729

**Section 16(a) Beneficial Ownership Reporting Compliance**

Section 16(a) of the Securities Exchange Act of 1934 requires that our officers and directors, and persons who own more than ten percent of a registered class of our equity securities, file reports of ownership and changes in ownership with the Securities and Exchange Commission. Officers, directors and persons owning more than ten percent of such securities are required by Commission regulation to file with the Commission and furnish the Company with copies of all reports required under Section 16(a) of the Exchange Act. To our knowledge, based solely upon our review of the copies of such reports furnished to us, during the fiscal year ended November 30, 2025, all Section 16(a) filing requirements applicable to our officers, directors and greater than 10% beneficial owners were complied with.

**Item 11. Executive Compensation.**

**Summary Compensation Table**

The following table sets forth information regarding compensation paid to our executive officers for the years ended November 30, 2025 and November 30, 2024:

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| **Name and Position** | **Fiscal <br> Year** | **Salary<br> ($)** | **Bonus<br> ($)** | **Stock<br> Awards<br> ($)** | **Option<br> Awards<br> ($)** | **All Other<br> Compensation<br> ($)(1)** | **Total<br> ($)** |
| Ira Levy | 2025 | 330000 | 165000 |  |  | 50378 | 545378 |
| &nbsp;&nbsp;&nbsp;President CEO and CFO | 2024 | 320000 | 80625 | 32250 |  | 65890 | 498765 |
| Steven J. Lubman | 2025 | 275000 | 123752 |  |  | 52617 | 451369 |
| &nbsp;&nbsp;&nbsp;Vice President and Secretary | 2024 | 266667 | 172115 |  |  | 49545 | 488327 |

---

<sup>(1)</sup> Amounts in this column include payments for medical insurance, automobile allowance and life and personal insurance. With respect to Fiscal 2025, the amounts were comprised of the following items:

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| | | | |
|:---|:---|:---|:---|
|  | **Medical<br> Insurance** | **Automobile<br> Allowances** | **Life and<br> Personal<br> Insurance** |
| Ira Levy | $19904 | $20520 | $9954 |
| Steven J. Lubman | $28216 | $15000 | $9401 |

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**2025 Base Salary and Bonus**

In February 2016, the Company entered into revised employment agreements with two officers of the Company. Pursuant to these agreements, the base salary for Ira Levy is $275,000 and the base salary for Steven Lubman is $225,000. The agreements continue until terminated by either party. In April 2021, the employment agreements for Ira Levy and Steven Lubman were amended to increase the base salary to $300,000 and $250,000, respectively. In April 2024, the employment agreements for Ira Levy and Steven Lubman were amended to increase the base salary to $330,000 and $275,000, respectively.

The Company's compensation committee may award these officers with bonuses and will review the base salary amounts for each of the officers on an annual basis to determine if any changes to the base salary amounts need to be made. Pursuant to the employment agreements, the officers are prohibited from engaging in activities which are competitive with those of the Company during their employment with the Company and for one year following termination. If the agreement is terminated other than for cause, the officer would be entitled to all base salary earned through the date of termination, accrued but unused vacation, all vested equity, and bonus amounts payable to the officer through the date of termination. The officers would also be entitled to receive an additional thirty-six months of annual compensation equal to the average of his base salary and bonus for the three calendar years prior to the date of termination, payable in accordance with the Company's regular payroll practice over a 52-week period.

The bonus granted to the named executive officers for 2024, paid in 2025 was based on certain performance goals that were set prior to the year by the Compensation Committee and the executive, but ultimately the bonus is discretionary, as the Compensation Committee has the authority to make all final decisions regarding the amount and form of bonuses provided to the executive officers. For Mr. Levy, his target bonus amount is equal to fifty percent (50%) of his base salary, and Mr. Lubman's target is equal to forty-five percent (45%) of his base salary.

In 2025 the Compensation Committee used four performance markers to guide their decisions regarding bonus amounts. The performance guidelines that were applicable to Messrs. Levy and Lubman's bonuses for the 2024 year included individual performance goals, revenue growth, achieving the operating plan goals for specific divisions of the company, and achieving the operating plan for the company as a whole. Each performance guideline was generally intended to make up twenty-five percent of the potential bonus amount for each executive. Based upon the Company's and the executives' performance during the 2024 year, the Compensation Committee granted awards in 2025 that were approximately one hundred percent (100%) of the executives' target award amount.

**2025 Equity Compensation Awards**

We have historically granted fully vested stock awards and stock option awards. The amount of awards granted in any given year is determined based on the performance of the company and the executive in the previous year. Performance is generally based upon the same performance guidelines that are used for the annual cash bonus award for that year. The Compensation Committee sets a target award amount based upon a percentage of the executive's base salary. At the end of the year, the Compensation Committee determines the cash amount that resulted from the previous year's performance, with any discretionary adjustments that the Compensation Committee deems to be appropriate, and converts that cash amount into a number of shares of stock awards or stock option awards, as applicable.

During the 2024 year, the Compensation Committee set a target amount of twenty percent (20%) of base salary for Mr. Levy and a target of fifteen percent (15%) of base salary for Mr. Lubman. Following the end of the 2024 year, the Compensation Committee determined that Messrs. Levy and Lubman should receive equity awards equal in value to twenty five percent (25%) and fifty percent (50%), respectively, of their target award amount. The Compensation Committee used the Company's stock price of $2.20 on April 09, 2025 to convert the resulting cash award into 14,659 stock awards for Mr. Levy. The equity awards, if any, that will be granted to the named executive officers with respect to 2025 year performance will not be granted until the 2026 year, therefore they will be included in the compensation disclosures that we file for the 2026 year.

Generally, meetings of the Compensation Committee are scheduled far in advance and generally occur after earnings are announced and do not time the disclosure of material non public information for the purpose of affecting the value of executive compensation.

**Employment Agreements**

In February 2016, the Company entered into revised employment agreements (the "Levy Agreement" and the "Lubman Agreement", individually, and collectively, the "Employment Agreements") with Ira Levy and Steven Lubman, respectively, which provides the executives with a base salary of $275,000 and $225,000, respectively ("Base Salary"). In April 2021, the employment agreements for Ira Levy and Steven Lubman were amended to increase their base salaries to $300,000 and $250,000, respectively. In April 2024, the employment agreements for Ira Levy and Steven Lubman were amended to increase the base salary to $330,000 and $275,000, respectively.

The executives shall receive an annual bonus as shall be determined by the Board or the Compensation Committee, as applicable, in its sole discretion, based upon criteria to be established in its sole discretion. The executives shall also be entitled to receive additional cash, equity or other compensation or benefits in consideration for their services to the Company, at such times and in such amounts as shall be determined in the sole discretion of the Board or the Compensation Committee. In addition, the executives shall be entitled to receive grants of stock options, stock and/or any other equity incentive awards available to senior executives, under the Company's equity incentive plans, at such times and in such amounts as shall be determined in the sole discretion of the Board or the Compensation Committee.

The Employment Agreements will remain in effect until terminated by either the Company or the executive. In the event an executive's employment is terminated by the Company for Cause (as defined in the Employment Agreements), or if an executive resigns other than for Good Reason (as defined in the Employment Agreements), he shall be entitled to receive (i) any earned but unpaid salary, all vested equity, and any earned but unpaid bonus awards through the date of termination, and (ii) reimbursement for any unreimbursed business expenses incurred by him in accordance with the Company's policy prior to the date of termination.

In the event an executive's employment is terminated by the Company other than for Cause or if an executive resigns for Good Reason, including a Change of Control (as defined in the Employment Agreements) that is accompanied by the executive's resignation within a twelve month period following that Change of Control, such executive shall be entitled to any earned but unpaid salary, all vested equity, and any earned but unpaid bonus awards through the date of termination. Such executive will also be paid an additional thirty-six months of annual compensation equal to the average of his base salary and bonus for the three calendar years prior to the date of termination, payable in accordance with the Company's regular payroll practice over a 52-week period. The Company shall also (i) accelerate the vesting on any of the executive's unvested stock options, restricted stock grants or other equity incentive awards; and (ii) reimburse the executive for any unreimbursed business expenses incurred by him in accordance with the Company's policy prior to the date of termination. In the event that the executive is terminated without Cause due to our inability to pay our debts when they generally become due, we will not be liable for the cash severance payments or the payment of annual bonuses due to the executive. The severance benefits potentially payable upon a termination other than for Cause or for Good Reason will be provided subject to the executive signing a general release of claims in our favor prior to payment.

In the event an executive's employment is terminated by the Company upon death or disability, the executive or his estate shall be entitled to receive his salary then in effect along with all other fringe benefits (including, without limitation, family medical benefits) for a period of one year following the date of such termination. In addition, the executive or his estate shall have the right to exercise any unexercised and vested options for a period of ninety days following the date of termination and to receive payment for any accrued but unpaid vacation time.

The Employment Agreements contain customary non-competition and non-solicitation provisions that extend to one year after the date of termination of the executives' employment with the Company. The executives also agreed to customary terms regarding confidentiality and ownership of product ideas.

**Outstanding Equity Awards at November 30, 2025**

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| | | | | |
|:---|:---|:---|:---|:---|
| **Name** | **Number of<br> securities<br> underlying<br> options,<br> Unexercisable<br> (#)** | **Number of<br> Securities<br> Underlying<br> Unexercised<br> Options, <br> Exercisable<br> (#)** | **Option<br> Exercise <br> Price<br> ($)** | **Option<br> Expiration<br> Date** |
| Ira Levy | 40000 | 40000 | 3.55 | 03/15/2027 |
| Steven Lubman | 40000 | 40000 | 3.55 | 03/15/2027 |
| Ira Levy | 50000 | 50000 | 2.42 | 05/22/2030 |
| Steven Lubman | 50000 | 50000 | 2.42 | 05/22/2030 |

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**Director Compensation for Year Ending November 30, 2025**

The following table summarizes the compensation for our non-employee board of directors for the fiscal year ended November 30, 2025. All compensation paid to our employee directors is included under the summary compensation table above. With respect to the 2025 fiscal year, the director compensation program consisted of a monthly cash fee of $3,000 per month, and $4,000 per month for a non-employee director that serves as the chairman of more than two committees on the Board of Directors. The non-employee directors are also eligible to receive equity awards, although there is no annual target amount set for the non-employee directors.

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| | | |
|:---|:---|:---|
| **Name** | **Fees<br> Earned or<br> Paid in<br> Cash<br> ($)** | **Total<br> ($)** |
| Alan Plafker | 36000 | 36000 |
| Peter Levy | 36000 | 36000 |
| Lawrence Chariton | 36000 | 36000 |
| Gary Jacobs | 48000 | 48000 |

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**Item 12. Security Ownership of Certain Beneficial Owners and Management.**

Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights.

The following table sets forth as of February 21, 2026, information regarding the beneficial ownership of our common stock by: (i) each person known by the Company to be the beneficial owner of than five percent of the outstanding shares of common stock, (ii) each of our directors and officers and (iii) all officers and directors, as a group:

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| | | | |
|:---|:---|:---|:---|
| <br>**Name and address of Beneficial Owner<sup>(1)</sup>** | **Amount and <br> Nature of**<br>**Common <br> Stock**<br>**Beneficially**<br>**Owned** |  | **Percentage of**<br>**Common <br> Stock**<br>**Beneficially**<br>**Owned<sup>(2)</sup>** |
| Ira Levy | 1434946 | (3)(6) | 25.1% |
| Steven J. Lubman | 1161952 | (3)(6) | 20.3% |
| Lawrence Chariton | 222573 | (5)(7) | 3.9% |
| Alan Plafker | 76334 | (5)(7) | 1.3% |
| Peter Levy | 50000 | (7) | 0.9% |
| Gary Jacobs | 212000 | (4)(7) | 3.7% |
| All directors and executive officers as a group (6 persons) | 3157805 |  | 55.2% |

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\* Less than 1%

<sup>(1)</sup> Except as otherwise indicated, the address of each beneficial owner is c/o Surge Components, Inc., 95 East Jefryn Boulevard, Deer Park, NY 11729.

<sup>(2)</sup> Applicable percentage ownership is based on 5,716,792 shares of common stock outstanding as of February 21, 2026.

<sup>(3)</sup> Includes 40,000 shares issuable upon exercise of options with an exercise price of $3.55, which are exercisable within 60 days.

<sup>(4)</sup> Also includes 30,000 shares issuable upon exercise of options with an exercise price of $3.55, which are exercisable within 60 days.

<sup>(5)</sup> Includes 20,000 shares issuable upon exercise of options with an exercise price of $3.55, which are exercisable within 60 days.

<sup>(6)</sup> Includes 50,000 shares issuable upon exercise of options with an exercise price of $2.42, which are exercisable within 60 days.

<sup>(7)</sup> Includes 30,000 shares issuable upon exercise of options with an exercise price of $2.20, which are exercisable within 60 days.

**Item 13. Certain Relationships And Related Transactions, and Director Independence.**

**Certain Relationships and Related Transactions**

Surge and Challenge each lease their current executive offices from Great American Realty of Jefryn Blvd., LLC, an entity owned 50% by Ira Levy, our Chief Executive Officer, and President and Steven Lubman, our Vice President, Secretary and Treasurer. Our lease is through September 2030 and our annual rent payments were approximately $287,000 and $282,000 for Fiscal 2025 and Fiscal 2024, respectively.

**Item 14. Principal Accounting Fees And Services**

**Fees Billed by Our Independent Registered Public Accounting Firm During Fiscal 2024 and 2025**

The following table sets forth the aggregate fees billed to us for the fiscal years ended November 30, 2024 and 2025 by Seligson & Giannattasio, CPAs PC (PCAOB ID 759)

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| | | |
|:---|:---|:---|
|  | **2024** | **2025** |
| Audit Fees<sup>(1)</sup> | $176801 | $185600 |
| Tax Fees<sup>(2)</sup> | $12978 | $13610 |

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<sup>(1)</sup> Audit Fees represent the aggregate fees for professional services for the audit of our annual financial statements and review of financial statements included in our quarterly reports on Form 10-Q or services that are normally provided in connection with statutory and regulatory filings or engagements for those fiscal years.

<sup>(2)</sup> Tax fees represent the aggregate fees billed for tax compliance, tax advice, and tax planning.

**Audit Committee Pre-Approval Policies and Procedures**

Pursuant to its charter, the Audit Committee is responsible for the pre-approval of all audit and permissible non-audit services provided by our principal independent accountants on a case-by-case basis. Our Audit Committee has established a policy regarding approval of all audit and permissible non-audit services provided by our principal independent accountants. Our Audit Committee pre-approves these services by category and service. Our Audit Committee has preapproved all of the services provided by our principal independent accountants in the fiscal year ending November 30, 2025.

**PART IV**

**Item 15. Exhibits and Financial Statement Schedules.**

The following documents are filed as a part of this report or incorporated herein by reference:

1. Our Consolidated Financial Statements commencing on page F-1 of this Annual Report.

2. Exhibits:

The following documents are included as exhibits to this Annual Report:

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| | |
|:---|:---|
| Exhibit <br> Number | Description |
| 3.1 | [Articles of Incorporation of Surge Components, Inc. (filed as exhibit 3.3 to Form 8-K filed on January 24, 2022 and incorporated herein by reference).](https://www.sec.gov/Archives/edgar/data/747540/000121390022003344/ea153581ex3-3_surgecomp.htm) |
| 3.2 | [Bylaws of Surge Components, Inc. (filed as exhibit 3.4 to Form 8-K filed on January 24, 2022 and incorporated herein by reference).](https://www.sec.gov/Archives/edgar/data/747540/000121390022003344/ea153581ex3-4_surgecomp.htm) |
| 4.1 | [Rights Agreement dated as of October 7, 2016 between Surge Components, Inc., as the Company, and Continental Stock Transfer & Trust Company, as Rights Agent (filed as exhibit to Form 8-K filed on October 7, 2016 and incorporated herein by reference).](https://www.sec.gov/Archives/edgar/data/747540/000121390016017357/f8k100716ex4i_surge.htm) |
| 10.1 | [Lease between Surge Components and Great American Realty of 95 Jefryn Blvd., LLC (filed as exhibit to Amendment No. 1 to Form 10 filed on August 20, 2010 and incorporated herein by reference)](https://www.sec.gov/Archives/edgar/data/747540/000101376210002035/ex101.htm) |
| 10.2 | [Lease between Challenge Electronics and Great American Realty of 95 Jefryn Blvd., LLC (filed as exhibit to Amendment No. 1 to Form 10 filed on August 20, 2010 and incorporated herein by reference)](https://www.sec.gov/Archives/edgar/data/747540/000101376210002035/ex102.htm) |
| 10.3 | [Employment Agreement between Surge Components, Inc. and Ira Levy (filed as exhibit to Form 8-K filed on February 24, 2016 and incorporated herein by reference)](https://www.sec.gov/Archives/edgar/data/747540/000101376216001341/f8k021816ex10i_surge.htm) |
| 10.4 | [Employment Agreement between Surge Components Inc. and Steven Lubman (filed as exhibit to Form 8-K filed on February 24, 2016 and incorporated herein by reference)](https://www.sec.gov/Archives/edgar/data/747540/000101376216001341/f8k021816ex10ii_surge.htm) |
| 10.5 | [Declaration of Trust (filed as exhibit to Amendment No. 1 to Form 10 filed on August 20, 2010 and incorporated herein by reference)](https://www.sec.gov/Archives/edgar/data/747540/000101376210002035/ex1019.htm) |
| 10.6 | [2010 Incentive Stock Plan (filed as exhibit to Amendment No. 2 to Form 10 filed on November 4, 2010 and incorporated herein by reference)](https://www.sec.gov/Archives/edgar/data/747540/000101376210002574/ex1020.htm) |
| 10.7 | [2015 Incentive Stock Plan (filed as exhibit to Form 10-K filed on February 26, 2016 and incorporated herein by reference)](https://www.sec.gov/Archives/edgar/data/747540/000101376216001345/f10k2015ex10viii_surge.htm) |
| 10.8 | [Lease Agreement, dated October 1, 2010, between Great American Realty of Jefryn Boulevard, LLC and Surge Components, Inc. (filed as exhibit to Amendment No. 2 to Form 10 filed on November 4, 2010 and incorporated herein by reference)](https://www.sec.gov/Archives/edgar/data/747540/000101376210002574/ex1021.htm) |
| 10.9 | [Lease Agreement, dated October 1, 2010, between Great American Realty of Jefryn Boulevard, LLC and Challenge Electronics, Inc. (filed as exhibit to Amendment No. 2 to Form 10 filed on November 4, 2010 and incorporated herein by reference)](https://www.sec.gov/Archives/edgar/data/747540/000101376210002574/ex1022.htm) |
| 10.10 | [Agreement, dated March 18, 1999 between Surge Components, Inc. and Future Electronics Incorporated (filed as exhibit to Amendment No. 3 to Form 10 filed on January 11, 2011 and incorporated herein by reference)](https://www.sec.gov/Archives/edgar/data/747540/000101376211000062/ex1023.htm) |
| 10.11 | [Addendum A, dated March 18, 1999, between Surge Components, Inc. and Future Electronics (filed as exhibit to Amendment No. 3 to Form 10 filed on January 11, 2011 and incorporated herein by reference)](https://www.sec.gov/Archives/edgar/data/747540/000101376211000062/ex1024.htm) |
| 10.12 | [Agreement, dated October 21, 2009, between Challenge Electronics, Inc. and Cam RPC Electronics (filed as exhibit to Amendment No. 3 to Form 10 filed on January 11, 2011 and incorporated herein by reference)](https://www.sec.gov/Archives/edgar/data/747540/000101376211000062/ex1025.htm) |

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| | |
|:---|:---|
| Exhibit <br> Number | Description |
| 10.13 | [Agreement, dated October 21, 2009, between Challenge Electronics, Inc. and Nu-Way Electronics (filed as exhibit to Amendment No. 3 to Form 10 filed on January 11, 2011 and incorporated herein by reference)](http://www.sec.gov/Archives/edgar/data/747540/000101376211000062/ex1026.htm) |
| 10.14 | [Agreement, dated October 19, 2009 between Challenge Electronics, Inc. and Aesco Electronics (filed as exhibit to Amendment No. 3 to Form 10 filed on January 11, 2011 and incorporated herein by reference)](http://www.sec.gov/Archives/edgar/data/747540/000101376211000062/ex1027.htm) |
| 10.15 | [Agreement, dated May 5, 2009, between Challenge Electronics, Inc. and TLC Electronics, Inc. (filed as exhibit to Amendment No. 3 to Form 10 filed on January 11, 2011 and incorporated herein by reference)](http://www.sec.gov/Archives/edgar/data/747540/000101376211000062/ex1028.htm) |
| 10.16 | [Distributor Agreement, dated August 14, 2012, between Surge Components, Inc. and TTI, Inc. (filed as exhibit to Form 10-K filed on February 28, 2013 and incorporated herein by reference)](http://www.sec.gov/Archives/edgar/data/747540/000101376213000315/ex1016.htm) |
| 10.17 | [Sole Agent Agreement, dated January 1, 2007, between Surge Components, Inc. and Lelon Electronics (filed as exhibit to Form 10-K filed on February 28, 2012 and incorporated herein by reference)](http://www.sec.gov/Archives/edgar/data/747540/000101376212000398/ex1017.htm) |
| 10.18 | [Master Distributor Agreement, dated February 7, 2011, between Surge Components, Inc. and Avnet, Inc. (filed as exhibit to Form 10-K filed on February 28, 2012 and incorporated herein by reference)](http://www.sec.gov/Archives/edgar/data/747540/000101376212000398/ex1018.htm) |
| 10.19 | [First Amendment to Master Distributor Agreement, dated February 17, 2011, between Surge Components, Inc. and Avnet, Inc. (filed as exhibit to Form 10-K filed on February 28, 2012 and incorporated herein by reference)](http://www.sec.gov/Archives/edgar/data/747540/000101376212000398/ex1019.htm) |
| 10.20 | [Rental Agreement with Adcock Investment Company Limited dated May 5, 2013 (filed as exhibit to Form 10-Q filed on July 15, 2013 and incorporated herein by reference)](http://www.sec.gov/Archives/edgar/data/747540/000101376213000931/ex101.htm) |
| 10.21 | [Settlement Agreement, dated as of December 22, 2016, by and among Surge Components, Inc., Ira Levy, Steven J. Lubman, Alan Plafker, Lawrence Chariton, Gary Jacobs and Martin Novick, and Messrs. Michael D. Tofias and Bradley P. Rexroad (filed as exhibit to Form 8-K filed on December 23, 2016 and incorporated herein by reference).](http://www.sec.gov/Archives/edgar/data/747540/000121390016019689/f8k122216ex10i_surgecom.htm) |
| 10.22 | [Amendment to Settlement Agreement, dated as of August 16, 2018, by and among Surge Components, Inc., Ira Levy, Steven J. Lubman, Alan Plafker, Lawrence Chariton, Gary Jacobs and Martin Novick, and Messrs. Michael D. Tofias and Bradley P. Rexroad (filed as exhibit 10.1 to Form 8-K filed on August 22, 2018 and incorporated herein by reference).](http://www.sec.gov/Archives/edgar/data/747540/000121390018011581/f8k081618ex10-1_surgecomp.htm) |
| 21.1 | [Subsidiaries (filed as exhibit to Amendment No. 1 to Form 10 filed on August 20, 2010 and incorporated herein by reference)](http://www.sec.gov/Archives/edgar/data/747540/000101376210002035/ex211.htm) |
| 23.1 | [Consent of Seligson & Giannattasio, Independent Registered Public Accounting Firm](ea027768601ex23-1_surge.htm) |
| 31 | [Certification of principal executive officer and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.](ea027768601ex31_surgecomp.htm) |
| 32 | [Certification of principal executive officer and principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.](ea027768601ex32_surgecomp.htm) |
| 101.INS | Inline XBRL Instance Document. |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |

---

**Item 16. Form 10-K Summary.**

None.

**SIGNATURES**

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

---

| | | |
|:---|:---|:---|
|  | SURGE COMPONENTS, INC. | SURGE COMPONENTS, INC. |
| Date: February 27, 2026 | By: | /s/ Ira Levy |
|  |  | Ira Levy |
|  |  | Chief Executive Officer and Chief Financial Officer |

---

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

---

| | |
|:---|:---|
| /s/ Ira Levy |  |
| Ira Levy | February 27, 2026 |
| Chief Executive Officer, Chief Financial Officer and<br> Chairman of the Board (Principal Executive Officer,<br> Principal Financial Officer and Principal Accounting Officer) |  |
| /s/ Steven J. Lubman |  |
| Steven J. Lubman | February 27, 2026 |
| Vice President, Secretary, Treasurer and<br> Director |  |
| /s/ Alan Plafker |  |
| Alan Plafker | February 27, 2026 |
| Director |  |
| /s/ Lawrence Chariton |  |
| Lawrence Chariton | February 27, 2026 |
| Director |  |
| /s/ Peter A. Levy |  |
| Peter A. Levy | February 27, 2026 |
| Director |  |
| /s/ Gary M. Jacobs |  |
| Gary M. Jacobs | February 27, 2026 |
| Director |  |

---

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

To the Board of Directors and

Stockholders of Surge Components, Inc.

**Opinion on the Financial Statements**

We have audited the accompanying consolidated balance sheets of Surge Components, Inc. and subsidiaries (the "Company") as of November 30, 2025 and 2024, and the related consolidated statements of operations, comprehensive income, changes in shareholders' equity, and cash flows for each of the years in the two-year period ended November 30, 2025, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of November 30, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the two-year period ended November 30, 2025, in conformity with accounting principles generally accepted in the United States of America.

**Basis for Opinion**

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

**Critical Audit Matters**

**Valuation of Inventory Reserves**

As described in Note B(4) to the financial statements, the Company maintains reserves for excess and obsolete inventory to reflect inventory at the lower of cost or net realizable value. As of November 30, 2025, inventory totaled $5,086,298 and included an allowance for inventory reserves of $415,054.

We identified the valuation of inventory reserves as a critical audit matter because management's estimate involves significant judgment in evaluating historical sales activity, forecasted demand, excess quantities on hand, and the identification of obsolete or slow-moving inventory. Changes in these assumptions could have a significant effect on the recorded reserve.

**How the Critical Audit Matter Was Addressed in the Audit**

Our audit procedures related to the valuation of inventory reserves included, among others:

● Evaluating the design and testing the operating effectiveness of controls over management's process for estimating inventory reserves;

● Observing physical inventory counts and inspecting inventory items for potential obsolescence or excess quantities;

● Obtaining and analyzing inventory aging and historical sales data by part number;

● Testing the mathematical accuracy of management's reserve calculation;

● Evaluating the reasonableness of management's assumptions regarding slow-moving inventory by comparing historical sales trends and subsequent sales activity;

● Comparing our independently developed expectation of required reserves to management's recorded reserve.

During the audit, we identified differences related to the inventory reserve; however, these differences were not material to the financial statements.

/s/ Seligson & Giannattasio, CPAs PC

We have served as the Company's auditor since 2002.

White Plains, New York

February 27, 2026

**SURGE COMPONENTS, INC. AND SUBSIDIARIES**

Consolidated Balance Sheets

---

| | | |
|:---|:---|:---|
|  | **November 30,<br> 2025** | **November 30, <br> 2024** |
| ASSETS |  |  |
| Current assets: |  |  |
| Cash | $5331609 | $5627693 |
| Marketable Securities | 8438017 | 7108979 |
| Accounts receivable - net of allowance for credit losses of $120,915 and $80,297 | 6460109 | 5960418 |
| Inventory, net | 5086298 | 5000707 |
| Prepaid expenses and income taxes | 460289 | 290401 |
| Total current assets | 25776322 | 23988198 |
| Fixed assets – net of accumulated depreciation and amortization of $1,898,800 and $1,828,156 | 162033 | 110727 |
| Operating lease right of use asset | 918387 | 1050445 |
| Deferred income taxes | 229212 | 260856 |
| Other assets | 34299 | 34299 |
| Total assets | $27120253 | $25444525 |

---

**SURGE COMPONENTS, INC. AND SUBSIDIARIES**

Consolidated Balance Sheets

(Continued)

---

| | | |
|:---|:---|:---|
|  | **November 30, <br> 2025** | **November 30,<br> 2024** |
| LIABILITIES AND SHAREHOLDERS' EQUITY |  |  |
| Current liabilities: |  |  |
| Accounts payable | $3225926 | $3344952 |
| Operating lease liabilities, current maturities | 367033 | 330166 |
| Accrued expenses and taxes | 647439 | 688640 |
| Accrued salaries | 772350 | 714879 |
| Total current liabilities | 5012748 | 5078637 |
| Operating lease liabilities net of current maturities | 709942 | 876808 |
| Total liabilities | 5722690 | 5955445 |
| Commitments and contingencies |  |  |
| Shareholders' equity: |  |  |
| Preferred stock - $.001 par value, 5,000,000 shares authorized: |  |  |
| Series C–100,000 shares authorized, 10,000 and 10,000 shares issued and outstanding, redeemable, convertible, and a liquidation preference of $5 per share | 10 | 10 |
| Series D – 75,000 shares authorized, none issued or outstanding, voting, convertible, redeemable. |  |  |
| Common stock - $.001 par value, 50,000,000 shares authorized, 5,716,792 and 5,582,783 shares issued and outstanding | 5715 | 5581 |
| Additional paid-in capital | 18401747 | 17725520 |
| Accumulated other comprehensive income – unrealized gain on marketable debt securities | 185739 | 85330 |
| Accumulated equity | 2804352 | 1672639 |
| Total shareholders' equity | 21397563 | 19489080 |
| Total liabilities and shareholders' equity | $27120253 | $25444525 |

---

**SURGE COMPONENTS, INC. AND SUBSIDIARIES**

Consolidated Statements of Operations

---

| | | |
|:---|:---|:---|
|  | **Year Ended<br> November 30,** | **Year Ended<br> November 30,** |
|  | **2025** | **2024** |
| Net sales | $36320105 | $31211139 |
| Cost of goods sold | 25864934 | 22307445 |
| Gross profit | 10455171 | 8903694 |
| Operating expenses: |  |  |
| &nbsp;&nbsp;&nbsp;Selling and shipping expenses | 2906782 | 2739994 |
| &nbsp;&nbsp;&nbsp;General and administrative expenses | 6223384 | 5189369 |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization | 70603 | 70384 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses | 9200769 | 7999747 |
| Income before other income and income taxes | 1254402 | 903947 |
| Other income (expense): |  |  |
| Interest expense |  |  |
| Investment income | 356612 | 331703 |
| Other income (expense): | 356612 | 331703 |
| Income before income taxes | 1611014 | 1235650 |
| Income taxes | 474301 | 409973 |
| Net income | $1136713 | $825677 |
| Dividends on preferred stock | 5000 | 5000 |
| Net income available to common shareholders | $1131713 | $820677 |
| Net income per share available to common shareholders: |  |  |
| Basic | $.20 | $.15 |
| Diluted | $.20 | $.14 |
| Weighted Shares Outstanding: |  |  |
| Basic | 5662042 | 5580949 |
| Diluted | 5799747 | 5757987 |

---

See notes to consolidated financial statements.

**SURGE COMPONENTS, INC. AND SUBSIDIARIES**

Consolidated Statements of Comprehensive Income

---

| | | |
|:---|:---|:---|
|  | **Year Ended<br> November 30,** | **Year Ended<br> November 30,** |
|  | **2025** | 2024 |
| Net income | $1136713 | $825677 |
| Other comprehensive income: |  |  |
| Reclassification of realized gain on investment securities |  | (200) |
| Unrealized gain on marketable debt securities,net of tax | 100409 | 84502 |
| Net comprehensive income | $1237122 | $909979 |

---

See notes to Consolidated financial statements

**SURGE COMPONENTS, INC. AND SUBSIDIARIES**

Consolidated Statements of Changes in Shareholders' Equity

Years ended November 30, 2024 and November 30, 2025

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Series C <br> Preferred** | **Series C <br> Preferred** | **Common** | **Common** | | | | |
|  | **Shares** | **Amount** | **Shares** | **Amount** | **Additional Paid-In**<br>**Capital** | **Other Comprehensive**<br>**Income** | **Accumulated**<br>**Equity** |<br>**Total** |
| Balance – December 1, 2023 | 10000 | $10 | 5577698 | $5576 | $17710525 | $828 | $851962 | $18568901 |
| Preferred stock dividends |  |  |  |  |  |  | (5000) | (5000) |
| Issuance of shares as compensation |  |  | 5085 | 5 | 14995 |  |  | 15000 |
| Stock option exercise |  |  |  |  |  |  |  |  |
| Charge in unrealized gain in available for sale debt securities |  |  |  |  |  | 84502 |  | 84502 |
| Net Income | - | - | - | - | - | - | 825677 | 825677 |
| Balance – November 30, 2024 | 10000 | 10 | 5582783 | 5581 | 17725520 | 85330 | 1672639 | 19489080 |
| Preferred stock dividends |  |  |  |  |  |  | (5000) | (5000) |
| Stock options awarded |  |  |  |  | 538361 |  |  | 538361 |
| Issuance of shares as compensation |  |  | 14659 | 15 | 32235 |  |  | 32250 |
| Change in unrealized gain in available for sale debt securities |  |  |  |  |  | 100409 |  | 100409 |
| Stock option exercise |  |  | 119350 | 119 | 105631 |  |  | 105750 |
| Net Income | - | - | - | - | - | - | 1136713 | 1136713 |
| Balance – November 30, 2025 | 10000 | $10 | 5716792 | $5715 | $18401747 | $185739 | $2804352 | $21397563 |

---

**SURGE COMPONENTS, INC. AND SUBSIDIARIES**

Consolidated Statements of Cash Flows

---

| | | |
|:---|:---|:---|
|  | **Year Ended<br> November 30,** | **Year Ended<br> November 30,** |
|  | **2025** | **2024** |
| CASH FLOWS FROM OPERATING ACTIVITIES: |  |  |
| &nbsp;&nbsp;&nbsp;Net Income | $1136713 | $825677 |
| &nbsp;&nbsp;&nbsp;Adjustments to reconcile net income to net cash provided by operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization | 70603 | 70384 |
| &nbsp;&nbsp;&nbsp; Gain on marketable securities | (348) | (200) |
| &nbsp;&nbsp;&nbsp;Deferred income taxes | 31644 | (19528) |
| &nbsp;&nbsp;&nbsp;Allowance for credit losses | 40618 | 956 |
| Stock Compensation Expense | 538361 | 15000 |
| &nbsp;&nbsp;&nbsp;CHANGES IN OPERATING ASSETS AND LIABILITIES: |  |  |
| &nbsp;&nbsp;&nbsp;Accounts receivable | (540309) | 136037 |
| &nbsp;&nbsp;&nbsp;Inventory | (85591) | 422117 |
| &nbsp;&nbsp;&nbsp;Prepaid expenses and income taxes | (169847) | 229703 |
| &nbsp;&nbsp;&nbsp;Other assets | 2059 | 18804 |
| &nbsp;&nbsp;&nbsp;Accounts payable | (119026) | 128362 |
| &nbsp;&nbsp;&nbsp;Accrued expenses | 11270 | (3922) |
| NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES | 916147 | 1823390 |
| CASH FLOWS FROM INVESTING ACTIVITIES: |  |  |
| &nbsp;&nbsp;&nbsp;Acquisition of fixed assets | $(121950) | $(10991) |
| &nbsp;&nbsp;&nbsp;Acquisition of marketable securities | (2883281) | (5949505) |
| &nbsp;&nbsp;&nbsp;Proceeds from the sale of marketable securities | 1655000 | 2130000 |
| NET CASH FLOWS USED IN INVESTING ACTIVITIES | $(1350231) | $(3830496) |

---

**SURGE COMPONENTS, INC. AND SUBSIDIARIES**

Consolidated Statements of Cash Flows

(Continued)

---

| | | |
|:---|:---|:---|
|  | **Year Ended<br> November 30,** | **Year Ended<br> November 30,** |
|  | **2025** | **2024** |
| CASH FLOWS FROM FINANCING ACTIVITIES: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Proceeds from exercise of stock options | $138000 | $- |
| NET CASH FLOWS USED IN FINANCING ACTIVITIES | 138000 | - |
| NET CHANGE IN CASH | (296084) | (2007106) |
| CASH AT BEGINNING OF PERIOD | 5627693 | 7634799 |
| CASH AT END OF PERIOD | $5331609 | $5627693 |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |  |  |
| Income taxes paid | $380298 | $353806 |
| Interest paid | $- | $- |
| NONCASH INVESTING AND FINANCING ACTIVITIES: |  |  |
| Accrued dividends on preferred stock | $5000 | $5000 |

---

See notes to consolidated financial statements.

**SURGE COMPONENTS, INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

<u>NOTE A – ORGANIZATION, DESCRIPTION OF COMPANY'S BUSINESS AND BASIS OF PRESENTATION</u>

Surge Components, Inc. ("Surge") was incorporated in the State of New York and commenced operations on November 24, 1981 as an importer of electronic products, primarily capacitors and discrete semi-conductors selling to customers located principally throughout North America. On June 24, 1988, Surge formed Challenge/Surge Inc. ("Challenge"), a wholly-owned subsidiary to engage in the sale of electronic component products and sounding devices from established brand manufacturers to customers located principally throughout North America.

In May 2002, Surge and an officer of Surge founded and became sole owners of Surge Components, Limited ("Surge Limited"), a Hong Kong corporation. Under current Hong Kong law, Surge Limited is required to have at least two shareholders. Surge owns 999 shares of the outstanding common stock and the officer of Surge owns 1 share of the outstanding common stock. The officer of Surge has assigned his rights regarding his 1 share to Surge. Surge Limited started doing business in July 2002. Surge Limited operations have been consolidated with the Company. Surge Limited is responsible for the sale of Surge's products to customers located in Asia.

On August 31, 2010, the Company changed its corporate domicile by merging into a newly-formed corporation, Surge Components, Inc. (Nevada), which was formed in the State of Nevada for that purpose. Surge Components Inc. is the surviving entity.

In February 2019, the Company converted into a Delaware corporation. The number of authorized shares of common stock was decreased to 50,000,000 shares.

In December 2021, the Company changed its corporate domicile to Nevada.

<u>NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</u>

(1) <u>Principles of Consolidation</u>:

The consolidated financial statements include the accounts of Surge, Challenge, and Surge Limited (collectively the "Company"). All material intercompany balances and transactions have been eliminated in consolidation.

(2) <u>Accounts Receivable</u>:

Trade accounts receivable are recorded at the net invoice value net of the allowance for credit losses in the consolidated balance sheet and are not interest bearing. The Company considers receivables past due based on the payment terms. The Company reviews its exposure to accounts receivable and reserves specific amounts if collectability is no longer reasonably assured. The Company also reserves a percentage of its trade receivable balance based on collection history and current economic trends that might impact the level of future credit losses. The Company re-evaluates such reserves on a regular basis and adjusts its reserves as needed. Based on the Company's operating history and customer base, bad debts to date have not been material. Repayment terms vary from customer to customer and range from 15 days to 120 days.

(3) <u>Revenue Recognition</u>:

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2014-09, "Revenue from Contracts with Customers: Topic 606." This ASU replaces nearly all existing U.S. generally accepted accounting principles guidance on revenue recognition. The standard prescribes a five-step model for recognizing revenue, the application of which will require significant judgment by the Company. The Company adopted the standard using the modified retrospective approach in its fiscal year beginning December 1, 2017. The preponderance of the Company's contracts with customers are standard ship and bill arrangements where revenue is recognized at the time of shipment.

**SURGE COMPONENTS, INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

<u>NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)</u>

(3) <u>Revenue Recognition (continued)</u>:

Revenue is recognized for products sold by the Company when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed and determinable, collectability is reasonably assured and title and risk of loss have been transferred to the customer. This occurs when product is shipped from the Company's warehouse.

For direct shipments, revenue is recognized when product is shipped from the Company's supplier. The Company has a long term supply agreement with one of our suppliers. The Company purchases the merchandise from the supplier and has the supplier directly ship to the customer through a freight forwarder. Title passes to customer upon the merchandise being received by a freight forwarder. Direct shipments were approximately $6,174,341 and $4,540,576 for the years ended November 30, 2025 and November 30, 2024 respectively.

The Company also acts as a sales agent to certain customers in North America for one of its suppliers. The Company reports these commissions as revenues in the period earned. Commission revenue totaled $312,389 and $95,584 for the years ended November 30, 2025 and November 30, 2024 respectively.

The Company performs ongoing credit evaluations of its customers and maintains reserves for potential credit losses.

The Company and its subsidiaries currently have agreements with several distributors. There are no provisions for the granting of price concessions in any of the agreements. Revenues under these distribution agreements were approximately $5,696,000 and $5,204,000 for the years ended November 30, 2025 and November 30, 2024 respectively.

(4) <u>Inventories</u>:

Inventories, which consist solely of products held for resale, are stated at the lower of cost (first-in, first-out method) or net realizable value. Products are included in inventory when the Company obtains title and risk of loss on the products, primarily when shipped from the supplier. Inventory in transit principally from foreign suppliers at November 30, 2025 was $2,125,268. The Company, at November 30, 2025 has a reserve against slow moving and obsolete inventory of $415,054. From time to time the Company's products are subject to legislation from various authorities on environmental matters.

(5) <u>Depreciation and Amortization</u>:

Fixed assets are recorded at cost. Depreciation is generally calculated on a straight line method and amortization of leasehold improvements is provided for on the straight-line method over the estimated useful lives of the various assets as follows:

---

| | |
|:---|:---|
| Furniture, fixtures and equipment | 5 - 7 years |
| Computer equipment | 5 years |
| Leasehold Improvements | Estimated useful life or lease term, whichever is shorter |

---

Maintenance and repairs are expensed as incurred while renewals and betterments are capitalized.

(6) <u>Concentration of Credit Risk</u>:

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of accounts receivable and cash. The Company maintains substantially all of its cash balances in a limited number of financial institutions. At November 30, 2025 and November 30, 2024, the Company's uninsured cash balances totaled $4,267,113 and $4,563,198, respectively.

**SURGE COMPONENTS, INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

<u>NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)</u>

(7) <u>Income Taxes</u>:

The Company's deferred income taxes arise primarily from the differences in the recording of allowances for bad debts, inventory reserves and depreciation expense for financial reporting and income tax purposes. A valuation allowance is provided when it has been determined to be more likely than not that the likelihood of the realization of deferred tax assets will not be realized. See Note H.

The Company follows the provisions of the Accounting Standards Codification topic, ASC 740, "Income Taxes" (ASC 740). There have been no unrecognized tax benefits and, accordingly, there has been no effect on the Company's financial condition or results of operations as a result of ASC 740.

The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company is no longer subject to U.S. federal tax examinations for years before fiscal years ending November 30, 2021, and state tax examinations for years before fiscal years ending November 30, 2020. Management does not believe there will be any material changes in our unrecognized tax positions over the next twelve months.

The Company's policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. As of the date of adoption of ASC 740, there was no accrued interest or penalties associated with any unrecognized benefits, nor was any interest expense recognized during the years ended November 30, 2025 and November 30, 2024.

(8) <u>Cash Equivalents</u>:

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

(9) <u>Use of Estimates</u>:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

(10) <u>Marketing and promotional costs</u>:

Marketing and promotional costs are expensed as incurred and have not been material to date. The Company has contractual arrangements with several of its distributors which provide for cooperative advertising rights to the distributor as a percentage of sales. Cooperative advertising is reflected as a reduction in revenues and has not been material to date.

(11) <u>Fair Value Measurements and Fair Value of Financial Instruments:</u>

Accounting Standard Codification ("ASC") Topic 820, *Fair Value Measurements*, clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

Level 1: Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

Level 2: Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

Level 3: Inputs are unobservable inputs which reflect the reporting entity's own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

**SURGE COMPONENTS, INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

<u>NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)</u>

(11) <u>Fair Value Measurements and Fair Value of Financial Instruments (continued):</u>

The estimated fair value of certain financial instruments, including all current liabilities are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

ASC subtopic 825-10, *Financial Instruments* ("ASC 825-10") requires disclosure of the fair value of certain financial instruments. The carrying value of cash and cash equivalents, accounts payable and accrued liabilities as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments. All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Where practicable the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise only available information pertinent to fair value has been disclosed.

The Company follows ASC subtopic 820-10, *Fair Value Measurements and Disclosures* ("ASC 820-10") and ASC 825-10, which permits entities to choose to measure many financial instruments and certain other items at fair value. The following table represents the Company's assets and liabilities by level measured at fair value on a recurring basis at November 30, 2025 and 2024.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **November 30, 2025** | **November 30, 2025** | **November 30, 2025** | **November 30, 2024** | **November 30, 2024** | **November 30, 2024** |
| <br>**Description** | **Level 1** | **Level 2** | **Level 3** | **Level 1** | **Level 2** | **Level 3** |
| Assets |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Marketable securities | $8438017 |  |  | $7108979 |  |  |

---

(12) <u>Marketable securities and other investments</u>

Our marketable securities are stated at fair value in accordance with ASC Topic 321, *Investments- Equity Securities*. Any changes in the fair value of the Company's marketable debt securities are included in the statement of other comprehensive income. The market value of the securities is determined using prices as reflected on an established market. Realized and unrealized gains and losses are determined on an average cost basis. The marketable securities are investments predominately in Treasury bills treasury notes which are being invested until such time the funds are needed for operations and reflected as available for sale debt securities.

The value of these marketable securities at November 30, 2025 and November 30, 2024 is as follows:

---

| | | |
|:---|:---|:---|
|  | **November 30,**<br>**2025** | **November 30,**<br>**2024** |
| Cost | $8252278 | $7023649 |
| Gross unrealized gain | 187669 | 89701 |
| Gross unrealized loss | (1930) | (4371) |
| Fair value | $8438017 | $7108979 |

---

(13) <u>Shipping Costs</u>

The Company classifies shipping costs as a component of selling expenses. Shipping costs totaled $3,469 and $2,747 for the years ended November 30, 2025, and November 30, 2024 respectively.

**SURGE COMPONENTS, INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

<u>NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)</u>

(14) <u>Earnings Per Share</u>

Basic earnings per share includes no dilution and is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. The difference between reported basic and diluted weighted-average common shares results from the assumption that all dilutive stock options and convertible preferred stock exercised into common stock. Total potentially dilutive shares excluded from diluted weighted shares outstanding at November 30, 2025 and November 30, 2024 totaled 607,295 and 282,962, respectively.

The following sets forth the computation of basic and Diluted earnings per share:

---

| | | |
|:---|:---|:---|
|  | **Year Ended** | **Year Ended** |
|  | **November 30, <br> 2025** | **November 30, <br> 2024** |
| Numerator: Net income | $1136713 | $825677 |
| Less: Preferred dividends | 5000 | 5000 |
| Net income available to common shareholders | $1131713 | $820677 |
| Denominator: |  |  |
| Weighted average shares outstanding – Basic | 5662042 | 5580949 |
| Effect of convertible preferred stock | 100000 | 100000 |
| Effect of stock options | 37705 | 77038 |
| Weighted average shares outstanding – diluted | 5799747 | 5757987 |
| Basic earnings per share | $.20 | $.15 |
| Diluted earnings per share | $.20 | $.14 |

---

(15) <u>Stock Based Compensation</u>

*Stock Based Compensation to Employees*

The Company accounts for its stock-based compensation for employees in accordance with Accounting Standards Codification ("ASC") 718. The Company recognizes in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees and non-employees over the related vesting period.

*Stock Based Compensation to Other than Employees*

The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with ASC 718. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably determinable. The value of equity instruments issued for consideration other than employee services is determined on the earlier of a performance commitment or completion of performance by the provider of goods or services. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement.

(16) <u>Leases</u>:

The Company determines if a contract contains a lease at inception based on whether it conveys the right to control the use of an identified asset. Substantially all of the Company's leases are classified as operating leases. The Company records operating lease right-of-use assets within "Other assets" and lease liabilities are recorded within "current and noncurrent liabilities" in the consolidated balance sheets. Lease expenses are recorded within "General and administrative expenses" in the consolidated statements of operations. Operating lease payments are presented within "Operating cash flows" in the consolidated statements of cash flows.

**SURGE COMPONENTS, INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

<u>NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)</u>

(16) <u>Leases (continued):</u>

Operating lease right-of-use assets and lease liabilities are recognized based on the net present value of future minimum lease payments over the lease term starting on the commencement date. The Company generally is not able to determine the rate implicit in its leases and, as such, applies an incremental borrowing rate based on the Company's cost of borrowing for the relevant terms of each lease. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Lease terms may include an option to extend or terminate a lease if it is reasonably certain that the Company will exercise such options. The Company has elected the practical expedient to not separate lease components from non-lease components, and also has elected not to record a right-of-use asset or lease liability for leases which, at inception, have a term of twelve months or less. Variable lease payments are recognized in the period in which the obligation for those payments is incurred.

(17) Segment information

The Company operates through two divisions, Surge and Challenge. The Company's Chief Operating Decision Maker ("CODM") is the Chief Executive Officer. The CODM reviews financial information for Surge and Challenge separately in order to assess performance and allocate resources.

Each division acquires and distributes substantially similar products that are sold to similar customer types and operate within the same economic environment. The divisions share similar production processes, distribution methods, and regulatory environments. Accordingly, although financial information is reviewed separately by the CODM, the Company has determined that Surge and Challenge meet the aggregation criteria under ASC 280, *Segment Reporting*, and are aggregated into a single reportable segment.

Because the Company has one reportable segment, segment disclosures required under ASC 280 consist of the following entity-wide disclosures. Revenue by geographic regions is reported in Note M. Long-lived assets are primarily located within the US and Hong Kong.

<u>NOTE C – FIXED ASSETS</u>

Fixed assets consist of the following:

---

| | | |
|:---|:---|:---|
|  | **November 30,**<br>**2025** | **November 30,**<br>**2024** |
| Furniture and Fixtures | $329186 | $329186 |
| Leasehold Improvements | 1142385 | 1078985 |
| Computer Equipment | 589262 | 530712 |
| Less-Accumulated Depreciation | (1898800) | (1828156) |
| Net Fixed Assets | $162033 | $110727 |

---

Depreciation and amortization expense for the years ended November 30, 2025 and November 30, 2024 was $70,603 and $70,384, respectively.

**SURGE COMPONENTS, INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

<u>NOTE D – LOANS PAYABLE</u>

In February 2017, the Company obtained a line of credit with a bank for up to $3,000,000 (the "Credit Line"). Borrowings under the Credit Line are due upon demand and accrue interest at the greater of the prime rate or the LIBOR rate plus two percent (and may be increased by three percent in the event the Company fails to (i) repay all amounts due on the Credit Line upon demand or (ii) comply with any terms or conditions relating to the Credit Line). The Credit Line is collateralized by substantially all the assets of the Company. As of November 30, 2025, the balance on the Credit Line was $0. As of November 30, 2025, the Company was in compliance with the covenant for the debt service coverage ratio for the Credit Line. Effective July 1, 2023, the use of the LIBOR rate was discontinued and replaced with the secured overnight financing rate (SOFR).

<u>NOTE E – ACCRUED EXPENSES</u>

Accrued expenses consist of the following:

---

| | | |
|:---|:---|:---|
|  | **November 30,**<br>**2025** | **November 30,**<br>**2024** |
| Commissions | $253898 | $242515 |
| Preferred stock dividends | 176569 | 171569 |
| Other accrued expenses | 216972 | 274556 |
|  | $647439 | $688640 |

---

<u>NOTE F – RETIREMENT PLAN</u>

In June 1997, the Company adopted a qualified 401(k) retirement plan for all full-time employees who are twenty-one years of age and have completed twelve months of service. The plan allows total employee contributions of up to fifteen percent (15%) of the eligible employee's salary through salary reduction. The Company makes a matching contribution of twenty percent (20%) of each employee's contribution for each dollar of employee deferral up to five percent (5%) of the employee's salary. Net assets for the plan, as estimated by Axa Equitable, Inc., which maintains the plan's records, were approximately $2,540,000 at November 30, 2025. Pension expense for the years ended November 30, 2025 and November 30, 2024 was $56,783 and $47,989, respectively.

**SURGE COMPONENTS, INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

<u>NOTE G – SHAREHOLDERS' EQUITY</u>

[1] <u>Preferred Stock</u>:

In February 1996, the Company amended its Certificate of Incorporation to authorize the issuance of 1,000,000 shares of preferred stock in one or more series. In August 2010, the number of preferred shares authorized for issuance was increased to 5,000,000 shares.

In November 2000, the Company authorized 100,000 shares of preferred stock as Non-Voting Redeemable Convertible Series C Preferred Stock ("Series C Preferred"). Each share of Series C Preferred is automatically convertible into 10 shares of our common stock upon shareholder approval. If the Series C Preferred were converted into common stock on or before April 15, 2001, these shares were entitled to cumulative dividends at the rate of $.50 per share per annum commencing April 15, 2001 payable on June 30 and December 31 of each year. In November 2000, 70,000 shares of the Series C Preferred were issued in payment of financial consulting services to its investment banker and a shareholder of the Company.

Dividends aggregating $176,569 have not been paid for the semi-annual periods ended December 31, 2001 through the semi-annual payment due June 30, 2025. The Company has accrued these dividends. At November 30, 2025, there are 10,000 shares of Series C Preferred issued and outstanding.

In October 2016, the Company authorized 75,000 shares of preferred stock as Voting Non-Redeemable Convertible Series D Preferred Stock ("Series D Preferred"). None of the Series D Preferred Stock is outstanding as of November 30, 2025.

[2] <u>Incentive Stock Plans</u>

In November 2015, the Company adopted and the shareholders ratified, the 2015 Incentive Stock Plan ("2015 Stock Plan"). The 2015 Stock Plan provides for the grant of options to officers, employees, directors or consultants to the Company to purchase an aggregate of 1,500,000 common shares.

In April 2021, a total of 26,786 shares were issued to the Company's officers as a part of their 2021 bonus compensation under the 2015 stock plan. The Company recorded a cost of $75,000 relating to the issuance of these shares in the second quarter of 2021.

In March 2022, a total of 26,000 shares were issued to the Company's officers as part of their bonus compensation under the 2015 stock plan. The Company recorded a cost of $97,500 relating to the issuance of these shares in the second quarter of 2022.

In March 2022, the Company granted stock options to (a) four non-employee directors to each purchase 20,000 shares of common stock, (b) one non-employee-director to purchase 30,000 shares of common stock, and (c) two Company officers to each purchase 40,000 shares of common stock at an exercise price of $3.55 per share, the market price of the common stock on the date of the grant. These options vest immediately and expire five years from the grant date. The Company recorded a cost of $492,132 related to the granting of these options.

In April 2023, a total of 28,179 shares were issued to the Company's officers as part of their bonus compensation under the 2015 stock plan. The Company recorded a cost of $97,500 relating to the issuance of these shares in the second quarter of 2023.

In April 2024, a total of 5,085 shares were issued to one of the Company's officers as part of their bonus compensation under the 2015 stock plan. The Company recorded a cost of $15,000 relating to the issuance of these shares in the second quarter of 2024.

In November 2024, the Company adopted and the shareholders ratified, the 2024 Incentive Stock Plan ("2024 Stock Plan"). The 2024 Stock Plan provides for the grant of options to officers, employees, directors or consultants to the Company to purchase an aggregate of 1,000,000 common shares. No grants were made under the 2024 Plan in 2024.

In April 2025, a total of 14,659 shares were issued to one of the Company's officers as part of his bonus compensation under the 2015 stock plan. The Company recorded a cost of $32,250 relating to the issuance of these shares in the second quarter ended May 31, 2025.

**SURGE COMPONENTS, INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

<u>NOTE G – SHAREHOLDERS' EQUITY (Continued)</u>

[2] <u>Incentive Stock Plans (continued)</u>

In May 2025, the Company granted stock options from the 2024 Incentive Stock Plan to (a) four non-employee directors to each purchase 30,000 shares of common stock, at an exercise price of $2.20 per share, the closing market price of the common stock on the date of the grant which vest immediately and expire five years from the grant date; (b) two Company officers to each purchase 50,000 shares of common stock, at an exercise price of $2.42 per share, one hundred and ten percent of the market price of the common stock on the date of the grant: (c) seventeen employees to purchase 285,000 shares of the Company's common stock at an exercise price of $2.20, the closing market price of the common stock on the date of the grant A total of 160,000 of these options vest immediately, 115,000 options will vest over a two year period and 10,000 options vest over a three year period and all options discussed herein will expire in five years from the date of grant. The Company recorded a cost of $538,361 related to the granting of these options in 2025

The weighted-average assumptions used in the Black-Scholes option pricing model were as follows:

---

| | |
|:---|:---|
|  | **Year Ended**<br>**November 30, <br> 2025** |
| Expected volatility | 65% |
| Expected term | 5 years |
| Risk-free interest rate | 4.11% |
| Expected dividend yield | 0.00% |

---

The Company estimates volatility using historical volatility of its common stock

Activity in the Company's stock plans for the period ended November 30, 2025 is summarized as follows:

---

| | | |
|:---|:---|:---|
|  | **Shares** | **Weighted<br> Average<br> Exercise<br> Price** |
| Options outstanding December 1, 2024 | 340000 | $2.59 |
| Options issued in the fiscal year ended November 30, 2025 | 505000 | $2.25 |
| Options exercised in the fiscal year ended November 30, 2025 | (185000) | $1.41 |
| Options cancelled in the fiscal year ended November 30, 2025 | (15000) | $1.41 |
| Options outstanding at November 30, 2025 | 645000 | $2.59 |
| Options exercisable at November 30, 2025 | 645000 | $2.68 |

---

The intrinsic value of the exercisable options at November 30, 2025 totaled $434,000. At November 30, 2025 the weighted average remaining life of the stock options is 3.64 years. At November 30, 2025, the unrecognized compensation cost related to the stock options granted under the plan totaled $101,289.

[3] <u>Compensation of Directors</u>

Compensation for each non-employee director is $3,000 per month (and $4,000 per month for a non-employee director that serves as the chairman of more than two committees of the Board of Directors).

<u>NOTE H – INCOME TAXES</u>

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes using the enacted tax rates in effect in the years in which the differences are expected to reverse.

**SURGE COMPONENTS, INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

<u>NOTE H– INCOME TAXES (Continued)</u>

The Company's deferred income taxes are comprised of the following:

---

| | | |
|:---|:---|:---|
|  | **November 30,**<br>**2025** | **November 30,**<br>**2024** |
| Deferred Tax Assets |  |  |
| &nbsp;&nbsp;&nbsp;Depreciation | $35837 | $43847 |
| &nbsp;&nbsp;&nbsp;Allowance for bad debts | 27264 | 17493 |
| &nbsp;&nbsp;&nbsp;Inventory | 68696 | 84450 |
| &nbsp;&nbsp;&nbsp;Facilities rental | 40876 | 39668 |
| &nbsp;&nbsp;&nbsp;Other | 56539 | 75398 |
| &nbsp;&nbsp;&nbsp;Total deferred tax assets | 229212 | 260856 |
| &nbsp;&nbsp;&nbsp;Valuation allowance | - | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred Tax Assets | $229212 | $260856 |

---

A valuation allowance for the deferred tax assets relates principally to the uncertainty of the utilization of deferred tax assets and was calculated in accordance with the provisions of ASC 740, which requires that a valuation allowance be established or maintained when it is "more likely than not" that all or a portion of deferred tax assets will not be realized.

The Company's income tax expense consists of the following:

---

| | | |
|:---|:---|:---|
|  | **Years Ended** | **Years Ended** |
|  | **November 30,<br> 2025** | **November 30,<br> 2024** |
| Current: |  |  |
| Federal | $335985 | $301928 |
| States | 106672 | 127573 |
|  | 442657 | 429501 |
| Deferred: |  |  |
| Federal | 22784 | (14912) |
| States | 8860 | (4616) |
|  | 31644 | (19528) |
| Provision for income taxes | $474301 | $409973 |

---

The Company files a consolidated income tax return with its wholly-owned subsidiaries. A reconciliation of the difference between the expected income tax rate using the statutory federal tax rate and the Company's effective rate is as follows:

---

| | | |
|:---|:---|:---|
|  | **Years ended** | **Years ended** |
|  | **November 30,**<br>**2025** | **November 30,**<br>**2024** |
| U.S Federal Income tax statutory rate | 21% | 21% |
| State income taxes | 8% | 9% |
| Other | 0% | 3% |
| &nbsp;&nbsp;&nbsp;Effective tax rate | 29% | 33% |

---

**SURGE COMPONENTS, INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

<u>NOTE I – OPERATING LEASE COMMITMENTS</u>

The Company leases its office and warehouse space through 2030 from a corporation that is partly owned by officers/shareholders of the Company ("Related Company"). Annual minimum rental payments to the Related Company approximated $194,000 for the year ended November 30, 2025, and increase at the rate of two per cent per annum throughout the lease term.

Pursuant to the lease, rent expense charged to operations differs from rent paid because of scheduled rent increases. Accordingly, the Company has recorded deferred rent. Rent expense is calculated by allocating to rental payments, including those attributable to scheduled rent increases, on a straight line basis, over the lease term.

The Company has a lease to rent office space and a warehouse in Hong Kong through November 2027. Annual minimum rental payments for this space are approximately $77,097.

The Company has a lease to rent additional warehouse space in Hong Kong through November 30, 2027. Annual minimum rental payments for this space are approximately $79,564.

The Company's future minimum rental commitments at November 30, 2025 are as follows:

---

| | |
|:---|:---|
| Twelve Months Ended November 30, |  |
| 2026 | $367033 |
| 2027 | 371241 |
| 2028 | 218872 |
| 2029 | 223250 |
| 2030 | 189132 |
| 2031 and after | - |
|  | $1369528 |
| Less interest portion | 292553 |
| Present value of lease liabilities | 1076975 |
| Current portion | 367033 |
| Noncurrent portion | $709942 |

---

Net rental expense for the years ended November 30, 2025 and November 30, 2024 were $437,913 and $452,019 respectively, of which $286,937 and $282,894 respectively, was paid to the Related Company.

The remaining weighted average lease term is 4.48 years at November 30, 2025. The weighted average discount rate is 5.14% at November 30, 2025.

<u>NOTE J – EMPLOYMENT AND OTHER AGREEMENTS</u>

In February 2016, the Company entered into revised employment agreements with two officers of the Company. Pursuant to these agreements, the base salary for one officer is $275,000 and the base salary for the other officer is $225,000. The agreements continue until terminated by either party. In April 2021, the base salaries for the two officers were amended to $300,000 for one officer and $250,000 for the other officer. In April 2024, the employment agreements for Ira Levy and Steven Lubman were amended to increase the base salary to $330,000 and $275,000, respectively.

The Company's compensation committee may award these officers with bonuses and will review the base salary amounts for each of the officers on an annual basis to determine if any changes to the base salary amounts need to be made and may also award these officers with annual bonuses. Pursuant to the employment agreements, the officers are prohibited from engaging in activities which are competitive with those of the Company during their employment with the Company and for one year following termination. If the agreement is terminated other than for cause, the officer would be entitled to all base salary earned through the date of termination, accrued but unused vacation, all vested equity, and bonus amounts payable to the officer through the date of termination. The officers would also be entitled to receive an additional thirty-six months of annual compensation equal to the average of his base salary and bonus for the three calendar years prior to the date of termination, payable in accordance with the Company's regular payroll practice over a 52-week period.

**SURGE COMPONENTS, INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

<u>NOTE K – MAJOR CUSTOMERS</u>

The Company had two customers who respectively accounted for 18% and 14% of net sales for the year ended November 30, 2025 and two customers who accounted for 19% and 15% of net sales for the year ended November 30, 2024. The Company had two customers who accounted for 29% and 12% of accounts receivable at November 30, 2025 and one customer who accounted for 34% of accounts receivable at November 30, 2024.

<u>NOTE L – MAJOR SUPPLIERS</u>

During the years ended November 30, 2025 and November 30, 2024 there was one foreign supplier accounting for 28% and 28% of total inventory purchased.

The Company purchases substantially all of its products overseas. For the year ended November 30, 2025, the Company purchased 30% of its products from Taiwan, 19% from Hong Kong, 47% from elsewhere in Asia and less than 1% overseas outside of Asia. The Company purchases the balance of its products in the United States.

<u>NOTE M – EXPORT SALES</u>

The Company's export sales were as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Years Ended** | **Years Ended** | **Years Ended** | **Years Ended** |
|  | **November 30,** | **November 30,** | **November 30,** | **November 30,** |
|  | **2025** | **2025** | **2024** | **2024** |
| Canada |  | 3952515 |  | 3563825 |
| China |  | 10637067 |  | 8577535 |
| Other Asian Countries |  | 1217543 |  | 773311 |
| South America |  | 75520 |  | 86193 |
| Europe |  | 2483586 |  | 1459678 |
| Mexico |  | 33540 |  | 43860 |

---

Revenues are attributed to countries based on location of customer.

<u>NOTE N - RECENT TAX LEGISLATION</u>

On July 4, 2025, the President signed into law the "One Big Beautiful Bill" (OBBB), which makes significant changes to U.S. federal corporate income tax laws. The legislation is generally effective for tax years beginning after December 31, 2024. Because the Company's fiscal year ends November 30, 2025, the enactment date falls within the current fiscal year.

As a result, the Company's fiscal 2025 federal income tax provision is subject to blended rules. In accordance with Internal Revenue Code Section 15, taxable income for the fiscal year ending November 30, 2025 will be prorated between the portion of the year before January 1, 2025 and the portion after that date, with the applicable tax rates and provisions applied to each period.

Key provisions of the OBBB impacting the Company include:

● Expensing and bonus depreciation – Permanently extends the full expensing of the cost of qualified property acquired after January 19, 2025.

● Net Operating Losses and Credits: Net operating loss carryforward/carryback rules and certain business credit provisions were revised under the OBBB.

These changes will apply prospectively to losses and credits generated after January 1, 2025.

In accordance with ASC 740, the Company remeasured its deferred tax assets and liabilities as of July 4, 2025, the date of enactment, to reflect the new tax rates and provisions. The effect of this remeasurement has been recorded in the income tax expense for the year ended November 30, 2025 and was not material.

## Exhibit 23.1

**Exhibit 23.1**

**CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

We consent to the incorporation by reference in the Registration Statement on Form S-8 (File Nos. 333-203491, 333-287721 and 333-211921) of Surge Components, Inc. of our report dated February 27, 2026 on our audits of the consolidated financial statements as of November 30, 2025 and 2024 and for each of the years then ended, which report is included in this Annual Report on Form 10-K.

/s/ Seligson & Giannattasio CPAs PC

Seligson & Giannattasio CPAs PC

White Plains, New York

February 27, 2026

## Ex-31

**Exhibit 31**

**CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER**

**AND PRINCIPAL FINANCIAL OFFICER**

**PURSUANT TO SECTION 302 OF THE**

**SARBANES-OXLEY ACT OF 2002**

I, Ira Levy, certify that:

1. I have reviewed this Annual report on Form 10-K of Surge
Components, Inc.;

2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;(a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which
this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;(b) Designed such internal control over financial reporting,
or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;(c) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;(d) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;(b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant's internal control over financial reporting.

---

| | | |
|:---|:---|:---|
| Date: February 27, 2026 | By: | /s/ Ira Levy |
|  |  | Ira Levy |
|  |  | Chief Executive Officer |
|  |  | (Principal Executive Officer and |
|  |  | Principal Financial Officer) |

---

## Ex-32

**Exhibit 32**

**CERTIFICATION PURSUANT TO**

**18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

In connection with the Annual Report of Surge Components, Inc. (the "Company") on Form 10-K for the period ended November 30, 2025 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Ira Levy, Chief Executive Officer (principal executive officer and principal financial officer) of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

&nbsp;&nbsp;&nbsp;&nbsp;(1) The
Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

&nbsp;&nbsp;&nbsp;&nbsp;(2) The
information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.

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| | | |
|:---|:---|:---|
| Date: February 27, 2026 | By: | /s/ Ira Levy |
|  |  | Ira Levy |
|  |  | Chief Executive Officer |
|  |  | (Principal Executive Officer and |
|  |  | Principal Financial Officer) |

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